{"id":"crs_R44268","pid":"crs_R44268_0","input":"\tOverview\n\nDuring the Vietnam War, the U.S. military conducted Operation Ranch Hand, a program that sprayed an estimated 18-20 million gallons of herbicides\u2014including approximately 11-12 million gallons of Agent Orange \u2014over about 12,000 square miles of southern Vietnam between 1961 and 1971. A contaminant of the manufacture of Agent Orange (as well as two other herbicides used, Agent Pink and Agent Purple) was 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD), a developmental toxicant and a probable human carcinogen according to the U.S. Environmental Protection Agency.\nEnvironmental surveys conducted in Vietnam have identified a number of dioxin \"hot spots,\" including the airbases at Bien Hoa, Danang, and Phu Cat, that are contaminated with TCDD well above internationally acceptable levels (see Figure 1 ). In addition, the A Luoi (or A Shau) Valley, south of Quang Tri and west of Danang, was considered an important segment of the Ho Chi Minh Trail, a key supply route used by North Vietnamese forces and their allies, and was therefore heavily sprayed. The former U.S. military base in the A Luoi Valley has been identified as another \"hot spot.\"\nIn recent years, U.S. response to the environmental damage and health problems caused by Agent Orange and its associated dioxin in Vietnam has been viewed as helping to advance bilateral relations between the two nations. After a meeting with President Tran Dai Quang in May 2016, President Obama stated the following:\nWith regard to security, the United States will continue to do our part to address the painful legacy of war.... We'll continue to help remove unexploded landmines and bombs. And now that our joint effort to remove dioxin\u2014Agent Orange\u2014from Danang Airport is nearly complete, the United States will help in the cleanup at Bien Hoa Air Base.\nThe joint statement issued after that meeting included the following statements:\nVietnam welcomed cooperation leading to the successful conclusion of the first phase of dioxin remediation at Danang International Airport, with the final phase underway. The United States committed to partnering with Vietnam to make a significant contribution to the clean-up of dioxin contamination at Bien Hoa Air Base.\nThe Trump Administration has continued the past commitment to provide assistance to Vietnam to address the Agent Orange\/dioxin issue. Following their meeting in May 2017 in Washington, DC, President Trump and Prime Minister Nguyen Xuan Phuc released a joint statement, which stated:\nThe two sides committed to work together to address war legacy issues, including through such joint efforts as dioxin remediation, taking note of the progress that has been made at Da Nang Airport and intent to discuss continued collaboration at Bien Hoa Airport, and the removal of unexploded ordnances.\nOn November 10, 2017, Under Secretary of State Thomas Shannon and Senior Lieutenant General Nguyen Phuong Nam held a ceremony to celebrate the completion of the environmental remediation of Danang Airport. On January 23, 2018, the two governments signed a Memorandum of Intent (MOI) to begin the process of dioxin decontamination of Bien Hoa. \nFrom 2007 to the present, Congress has appropriated a total of $254.8 million for the environmental remediation of Agent Orange\/dioxin and health and disability programs in areas of Vietnam sprayed with Agent Orange or otherwise contaminated by dioxin. Starting with the 112 th Congress, the legislation has appropriated separate amounts for these two purposes, generally with more funds appropriated for environmental remediation than for health and disability programs. All of the amounts appropriated by Congress are subject to the provisions of Section 653(a) (22 U.S.C. \u00a72413(a)) of the Foreign Assistance Act of 1961, as amended (P.L. 87-195; 22 U.S.C. \u00a72151 et seq.). As a consequence, the actual amount available for such assistance may be less than the amount specified in the various laws and their accompanying reports. \nIn addition, the 115 th Congress, under Section 1052 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ), authorized the Secretary of Defense to transfer \"not more than $15,000,000\" in FY2019 to the Secretary of State, for use by USAID, \"to be used for the Bien Hoa dioxin cleanup in Vietnam.\" Any funds transferred are to be taken from the Department of Defense's \"Operation and Maintenance, Defense-wide\" account. \nThe appropriated funds for environmental remediation generally have been allocated under the State Department's Economic Support Fund account (ESF), while the funds for health and disability programs have been allocated under the Development Assistance account (DA). In general, the funds appropriated under both accounts have been made available for two fiscal years. The State Department has delegated responsibility for the administration and obligation of the appropriated funds to the U.S. Agency for International Development (USAID). \nTo date, most of the environmental remediation effort has been focused on the cleanup of the Danang airport, while the funds appropriated for health and disability programs have been used primarily for disability support programs in Danang and other parts of Vietnam. The cleanup of Danang airport has been completed, and U.S. and Vietnamese officials have made arrangements for joint dioxin removal operations at the airbase in Bien Hoa. In addition, the two governments are discussing the appropriate manner to address health and disability problems among Vietnamese nationals that may be attributable to dioxin exposure. \nThe programs and projects funded by the appropriated funds have been administered by the State Department and USAID, in cooperation with various ministries and agencies within the Vietnamese government. In 1999, Vietnam's central government created the Office of the National Steering Committee on Overcoming Consequences of Agent Orange\/Dioxin in Vietnam (Office 33, or Committee 33), an interministerial body, to oversee and coordinate its government's policy on Agent Orange and dioxin. Office 33 includes representatives from Vietnam's Ministry of Natural Resources and Environment (MONRE, where Office 33 is administratively located); Ministry of Finance (MOF); Ministry of Foreign Affairs (MOFA); Ministry of Health (MOH); Ministry of Labour, Invalids, and Social Affairs (MOLISA); Ministry of National Defence (MND); Ministry of Planning and Investment (MOPI); and Vietnam Academy of Science and Technology (VAST). \nCongressional interest has generally focused on two issues. The first issue is determining the amount to allocate for the environmental remediation of dioxin \"hot spots\" in Vietnam and health and disability programs in areas of Vietnam sprayed with Agent Orange or otherwise contaminated by dioxin. The second issue is oversight to ascertain if the State Department and USAID are effectively and appropriately obligating and expending the available funds. In particular, Congress has paid attention to the rate at which USAID has obligated the funds Congress appropriated for use on health and disability activities. \n\n\tCongressional Appropriations Since 2007\n\nThe appropriation of funds explicitly to address the Agent Orange\/dioxin issue in Vietnam started in May 2007, when the 110 th Congress passed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ). That act appropriated $3 million \"for the remediation of dioxin contaminated sites in Vietnam, and to support health programs in communities near those sites.\" After more than a year of internal consultation, the State Department decided that the administration and obligation of the $3 million would be handled by USAID, setting a precedent for the handling of future appropriations for Agent Orange\/dioxin assistance to Vietnam. \nThe 111 th Congress in three separate pieces of legislation appropriated a total of $18 million for dioxin cleanup in Vietnam and related health services (see Table 1 ). In March 2009, the 111 th Congress appropriated $3 million for Agent Orange\/dioxin remediation and health care assistance in the vicinity of the Danang \"hot spot\" in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). In December 2009, Congress passed the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), which included $3 million for dioxin cleanup and related health services in Vietnam. In July 2010, Congress included $12 million \"to support the remediation of dioxin contamination at the Danang Airport, which poses extreme risks to human health and welfare, and related health activities\" in the Supplemental Appropriations Act, 2010 ( P.L. 111-212 ). In addition, the State Department and USAID allocated $1.9 million in Development Assistance funds for FY2010 for environmental remediation at Danang airport.\nThe conference report accompanying P.L. 112-74 also endorsed language in a Senate report associated with an earlier reported to Senate version of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2012 ( S. 1601 ) directing USAID, in consultation with the Senate Appropriations Committee, the Department of State, the Government of Vietnam, and \"other interested parties,\" to develop a \"comprehensive, multiyear plan\" for Agent Orange-related activities in Vietnam within 180 days after the enactment of the law.\nThe 113 th Congress continued to appropriate funds for the environmental remediation of Agent Orange\/dioxin in Vietnam and related health services. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), which superseded P.L. 112-175 , renewed the appropriation levels contained in P.L. 112-74 for FY2013, subject to sequestration requirements. Similarly, P.L. 113-46 and P.L. 113-73 renewed appropriations for FY2014 until being superseded by the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), which appropriated $22.0 million for environmental remediation and $7.0 million for \"health and disability programs in areas sprayed with Agent Orange or otherwise contaminated by dioxin.\" Section 7043(h) of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) states the following:\nFunds appropriated by this Act under the heading \"Economic Support Fund\" shall be made available for remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes, and funds appropriated under the heading \"Development Assistance\" shall be made available for health\/disability activities in areas sprayed with Agent Orange or otherwise contaminated with dioxin.\nThe act's accompanying \"Explanatory Statement\" specifies that $7.5 million is to be provided under \"Development Assistance\" for \"Vietnam health\/disability programs\" and $15.0 million is to be provided under \"Economic Support Fund\" for \"Vietnam (Environmental remediation of dioxin).\"\nIn Section 7043(g) of P.L. 114-113 , the 114 th Congress appropriated funds under the Economic Support Fund for \"remediation of dioxin contaminated sites in Vietnam\" and under Development Assistance for \"health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment and\/or cognitive or developmental disabilities.\" S.Rept. 114-79 , which accompanied P.L. 114-113 , provided \"not less than $25 million\" for environmental remediation and $7 million for \"health\/disability programs in areas sprayed with Agent Orange or otherwise contaminated by dioxin, to address the mobility, psycho-social, vocational, and other needs of persons with severe upper and lower body mobility impairment and\/or cognitive or developmental disabilities.\" The report continued with the statement, \"In order to minimize administrative costs and maximize impact in the field, the Committee intends that, to the maximum extent practicable, health\/disability funds shall be implemented by Vietnamese organizations and entities.\"\nFunding for FY2017 was included in the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). Section 7043(h) states:\n(1) DIOXIN REMEDIATION\u2014Notwithstanding any other provision of law, of the funds appropriated by this Act under the heading `Economic Support Fund', not less than $20,000,000 shall be made available for activities related to the remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes.\n(2) HEALTH AND DISABILITY PROGRAMS\u2014Of the funds appropriated by this Act under the heading 'Development Assistance', not less than $10,000,000 shall be made available for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment and\/or cognitive or developmental disabilities. \nThe act permits, for the first time since the United States has funded dioxin environmental remediation in Vietnam, the provision of assistance to the Government of Vietnam. It also reiterates that health and disability programs are to be in areas sprayed with Agent Orange or otherwise contaminated with dioxin.\nIn March 2018, the 115 th Congress appropriated in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) \"not less than $20 million\" for \"activities related to the remediation of dioxin contaminated sites in Vietnam.\" The act also provided that the funds \"may be made available for assistance for the Government of Vietnam, including the military, for such purposes.\" In addition, the act appropriated \"not less than $10 million\" for \"health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities.\"\nIn February 2019, 116 th Congress appropriated in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) \"not less than $20,000,000\" for \"activities related to the remediation of dioxin contaminated sites in Vietnam and may be made available for assistance for the Government of Vietnam, including the military, for such purposes.\" The Act also appropriated \"not less than $12,500,000 \u2026 for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities.\"\n\n\tUSAID Obligations\n\nThe State Department has designated USAID as the responsible agency for the obligation of the appropriated funds for Agent Orange\/dioxin-related activities in Vietnam . Table 2 lists the amounts USAID has obligated of funds appropriated over FY2007 to FY2017 by type of activity, implementing partner, and fiscal year. As of May 2018, USAID has obligated 81% of the $127 million appropriated for FY2011-FY2017 for environmental remediation projects, and 63.5% of the $44.3 million appropriated for FY2011-FY2017 for health- and disability-related services. Of the $21 million appropriated for FY2007-FY2011 for either environmental remediation or health- and disability-related services, USAID has obligated $20.3 million, or 96.9%.\nThe manner in which USAID has obligated the appropriated funds has, at times, been an issue with Congress. While the rate of obligations for environmental remediation activities generally has not been a matter of concern, how USAID has obligated appropriations for health and disability activities has drawn some congressional attention. The two main concerns about the health and disability obligations are the seemingly slower pace of utilization (when compared to the environmental remediation funds), and the types of programs being funded. \nSince Congress began appropriating funds specifically for Agent Orange\/dioxin-related activities in Vietnam in FY2007, it generally has designated that the health and disability services are to be provided in locations near Agent Orange\/dioxin-contaminated areas. The $3 million appropriated in FY2007 in P.L. 110-28 was \"to support health programs in communities near those sites,\" according to the accompanying Senate report. The joint committee print accompanying P.L. 111-8 stipulated that \"$3,000,000 is provided to continue environmental remediation of dioxin contamination at the Danang Airport and related health activities in nearby communities in Vietnam.\" H.Rept. 112-331 , which accompanied P.L. 112-74 , stated, \"The conferees recommend not less than $5,000,000 under this heading be made available for health\/disability activities in areas in Vietnam that were targeted with Agent Orange or remain contaminated with dioxin.\" It is unclear if the State Department and USAID have in all cases obligated these funds in accordance with this locational guidance.\nBased on the information provided by USAID, funds for health- and disability-related services in FY2007-FY2009 were obligated to programs in Danang. However, for FY2010 to FY2013, the appropriated health and disability funds were largely obligated to Development Alternatives, Inc. (DAI) for a disability support program that was designed to \"broadly address the needs and improve the lives of persons with disabilities,\" without explicit reference to Agent Orange\/dioxin \"hot spots.\" According to USAID, this three-year program ended in January 2016. \nFollowing consultations with the Ministry of Labour, Invalids, and Social Affairs (MOLISA), Congress, and other interested parties, as of FY2014, USAID reportedly returned to directly obligating funds for health- and disability-related services in smaller amounts and increased its outreach to Vietnamese nongovernmental organizations. This shift to smaller direct program funding is reflected in Table 1 . For more about USAID's disability programs in Vietnam, see \" Disability Programs \" below.\n\n\tDanang Airport Environmental Remediation Project\n\nOne of the main activities financed by congressional appropriations related to Agent Orange\/dioxin in Vietnam is the environmental remediation project at Danang Airport. Since its beginnings in 2008, when the U.S. and Vietnamese governments started plans for the environmental remediation of Danang airport, the project has experienced delays in implementation, unexpected increases in the amount of material requiring decontamination, and rising costs. While USAID's initial intent was to complete the project by October 2013, a November 2014 U.S. government audit indicated that the estimated completion date for the project was March 31, 2017. The decontamination was completed in August 2017. During the life of the project, the amount of material to be decontaminated rose from an estimated 61,700 cubic meters (m 3 ) to approximately 90,000 m 3 , plus an additional 60,000 m 3 of \"lower risk material.\" The estimated cost of the project increased from $33.7 million to over $110 million.\nThe joint military\/civilian airport in Danang was a major operational hub for the U.S. military's Operation Ranch Hand. One study of Danang airbase found soil concentrations of \"TCDD toxic equivalents\" (TEQ) of up to 365 parts per billion (ppb)\u2014365 times the international maximum level of 1.0 ppb . Seventeen out of the 23 soil samples taken at Danang airbase exceeded the international maximum standard. \nWork on the project began in December 2009, when the State Department and Vietnam's Ministry of Natural Resources and the Environment (MONRE) signed a memorandum of understanding (MOU) setting the framework for implementing environmental health and remediation programs in Danang. The MOU designated USAID and Office 33 as the implementing agencies. According to a State Department press release, the MOU covered $6.0 million in funds appropriated in FY2007 and FY2009. Among the activities included in the MOU was a grant to CDM International, Inc., in association with Hatfield Associates, to design an environmentally sound engineering approach to dioxin containment at Danang airport. \nIn June 2010, USAID completed an Environmental Assessment (EA) of Danang airport that recommended the use of thermal desorption to decontaminate an estimated 61,700 m 3 of contaminated material in six separate \"hotspots\" at the airport. The EA estimated that the decontamination would take two years to complete at a cost of $33.7 million, but noted that implementation would present \"challenges\" that could increase the cost by 50%. \nUSAID and Vietnam's Ministry of National Defence (MND) signed a Memorandum of Intent in Hanoi on December 30, 2010, with the goal of starting the remediation project in the summer of 2011 and completing the project by October 2013. The Prime Minister approved the remediation of Danang airport by in-pile thermal desorption (IPTD) in February 2011, and MND approved the project in April 2011. \nUSAID posted a Request for Proposals (RFP #486-11-028) in May 2011 for bids on the project. In July 2012, USAID awarded two contracts for the environmental remediation of Danang airport by IPTD. CDM Smith, a U.S. firm headquartered in Massachusetts, was granted $8.37 million for project oversight and construction management. Tetra Tech, Inc., headquartered in California, was awarded $17 million for the excavation and construction components of the project. A ceremony to launch the Danang airport environmental remediation project was held at Danang airport on August 9, 2012; onsite work began on August 20, 2012. \nAn internal USAID audit of the remediation project conducted in November 2014 indicated that six contracts have been awarded for the environmental assessment and remediation project at Danang airport, plus an assessment of Bien Hoa airbase (see Table 3 ). Three of the awarded contracts correspond to the amounts provided by USAID in Table 2 , but three do not, probably reflecting work beyond FY2013.\nThe thermal desorption of the contaminated soil was done in two phases, due to the amount of material involved. The gradual heating of Phase 1, which involved the treatment of approximately 45,000 m 3 of soil contained in an area 70 meters wide and 100 meters long (about the size of a football field) and 8 meters (26 feet) high, began in April 2014. The cooling down of Phase 1 started in April 2015, after soil sampling revealed that more than 95% of the dioxin had been removed. Excavation for Phase 2, which involved the draining of three small lakes and the removal of the exposed lake beds, began in January 2015. The treatment of 45,000 m 3 of Phase 2 soil began in November 2016, and was completed in August 2017. \nProgress on the decontamination of Danang airport was delayed by several factors. Weather during Vietnam's rainy season (September to December) hampered progress on the excavation of soil and the construction of the thermal treatment area. Soil testing following the drainage of the small lakes determined more soil and sediment would require decontamination than previously estimated. The secondary treatment facility was shut down in July 2014 to change the filtering system. It also took more time than anticipated to raise the ambient temperature of the Phase 1 soil to the target 335\u00b0C. \nUSAID's Office of Inspector General conducted an internal audit of the environmental remediation project in November 2014, and noted several potential risks that could delay the project and, by extension, raise its overall cost, including the problems associated with inclement weather and cooling the treated soil. The audit particularly noted the lack of a formal risk management plan to address some of the project risks identified by USAID and the project's contractors, and recommended that a formal risk management plan be implemented. The audit also cited CDM for providing inaccurate performance data and not fulfilling its obligations to provide training to Vietnamese officials, and recommended that more training be provided and better data documentation procedures be adopted. USAID agreed with all of the audit's recommendations. \nOn November 7, 2018, the two governments held a ceremony to mark the completion of the Danang Airport environmental remediation project. The completed project took more than twice as long and cost more than three times as much as initially projected by USAID. According to Pham Quang Vu, head of Vietnam's Air Force and Air Defense Military Science Division, the higher cost and greater time was due to underestimating the contamination at the airport, indicating that 162,500 cubic meters of soil\u2014not 72,900 cubic meters\u2014were contaminated. Anthony Kolb, chief of USAID's environmental remediation unit, stated that the dioxin had percolated three meters deeper than expected.\n\n\tDisability Programs\n\nUSAID has, in general, utilized the funds Congress appropriated for health\/disability activities in areas sprayed with Agent Orange or otherwise contaminated with dioxin as part of its overall program to provide support for persons with disabilities in Vietnam, regardless of the cause of the disability or proximity to Agent Orange \"hot spots.\" According to USAID, starting in 1989 with a program financed by the Leahy War Victims Fund, the U.S. government has provided over $60 million in assistance to disabled Vietnamese, regardless of the cause of the disability. This assistance includes funds specifically appropriated for health services in areas located near Agent Orange\/dioxin-contaminated sites and other sources of developmental or health assistance. \nBetween FY2007 and FY2010, the State Department and USAID utilized the funds appropriated for health services for grants to various agencies to offer programs to improve the quality of life for persons with disabilities in Danang. A December 2010 USAID assessment of these grants noted the \"many accomplishments\" of these programs, but also noted that the three-year time period was \"very short for meeting program objectives.\" \nIn 2012, USAID approved a three-year, nationwide Persons with Disability Support Program (PDSP) to be jointly implemented with Development Alternatives, Inc. (DAI) and Vietnam Assistance for the Handicapped (VNAH). The request for applications (RFA) for the project indicated that the program was intended to \"build on the accomplishments of the previous USAID assistance to people with disabilities (PWD) living in communities in Danang, as well as include additional relevant public health activities.\" The project's geographic focus was to be primarily in Danang, and \"to some extent other areas, proposed by the Recipient, where there is a high disability burden, the need is the greatest, and in regions where dioxin hot spots are located.\" The RFA specifically calls for a needs assessment to be conducted in Bien Hoa and Phu Cat. Funding for PDSP was initially set at $9 million. \nAs part of PDSP's cooperative agreement, DAI was to award grants to local partners and organizations providing assistance to persons with disabilities, including health services, rehabilitation therapy, vocational training, and community awareness. In addition, USAID provided assistance to VNAH to work on disability policy and legal framework needs of the Government of Vietnam.\nThe PDSP program was headquartered in Danang, and initially operated in the provinces of Binh Dinh, Danang, and Dong Nai\u2014where the three dioxin \"hot spots\" of Phu Cat, Danang, and Bien Hoa (respectively) are located. According to a June 2015 USAID update, the PDSP program has been extended to the provinces of Quang Nam, Tay Ninh, and Thua Thien-Hue. According to the Aspen Institute, all three provinces were heavily sprayed with Agent Orange during the Vietnam War, but have not been identified as \"hot spots.\" A USAID summary of the program after two years reported that \"nearly US$900,000 in grants to 14 local partners and organizations\" had been awarded.\nIn June 2014, USAID adopted a new approach to the provision of assistance to persons with disabilities in Vietnam. According to the USAID statement, one of the key objectives of USAID assistance to Vietnam is to foster expanded opportunities to vulnerable populations, such as persons with disabilities. To that end, USAID aims \"to address key challenges for persons with disabilities through provision of direct assistance to improve health, independence, and participation in economic and social life.\"\nIn addition to continuing to support changes in Vietnam's disability policies, USAID will finance the provision of physical, occupational, and speech therapies to persons with disabilities, as well as provide training to Vietnamese practitioners and technicians in the delivery of such services. Target areas for these programs are to be locations \"where disability prevalence and poverty rates are high.\" Among the identified locations are the provinces of Binh Dinh, Binh Phuoc, Dong Nai, Quang Nam, Tay Ninh, Thai Binh, and Thua Thien-Hue. All these provinces have been identified by the Aspen Institute as heavily sprayed areas, except Thai Binh. USAID, in consultation with various Vietnamese agencies, will directly administer the new approach. \n\n\tBien Hoa Airbase\n\nWith the environmental cleanup of Danang airport completed, the two governments have begun jointly to explore undertaking a similar cleanup of the dioxin \"hot spot\" located at the Bien Hoa airbase. Bien Hoa airbase was the airport used for the most Agent Orange spraying missions during the war, and is where the most herbicide was stored and used by the U.S. military. One study of soil samples from the Bien Hoa airbase found a sample with a TEQ concentration at over 1,000 ppb\u2014higher than typical samples at the Danang airbase, and 1,000 times higher than the international limit. \nThe Vietnamese government has already conducted some mitigation measures to contain the dioxin contamination at Bien Hoa. A passive landfill (in which the contaminated soil is left untreated) containing 43,000 m 3 of contaminated soil excavated from the herbicide storage area was completed in 2009. However, the airbase has several other distinct dioxin \"hot spots\" that have not been addressed, according to a study conducted by a private consulting firm, Hatfield Consultants, hired by Office 33. The study also determined that contaminated soil had spread from the \"hot spots\" into nearby lakes, ponds, creeks, and drainage ditches, increasing the amount of soil and sediment that will require treatment. \nThe United Nations Development Programme (UNDP) has been working with Office 33 and MONRE for five years to map out the dioxin contamination at Bien Hoa airbase, and develop a master plan for dioxin remediation. According to their joint investigation, released in 2014, approximately 250,000 m 3 of soil would require decontamination with an estimated cost of at least $250 million. \nIn September 2013, USAID contracted CDM International Inc. to conduct an environmental assessment of the Bien Hoa airbase to examine a number of dioxin remediation alternatives. CDM International Inc. partnered with Hatfield Consulting on the project. In May 2016, USAID released the final environmental assessment report.\nThe report determined that an estimated 408,500 to 495,300 m 3 of contaminated soils and sediments are located on or nearby the airbase, or about four to five times as much as is being treated at Danang airport. Five different treatment methods were considered, ranging from containment to in-pile thermal desorption (as was used in Danang). The estimated costs of the five methods ranged from $137 million (for containment in a landfill) to $794 million (using incineration and ex situ thermal treatment). The report noted, however, that these estimated costs may vary from 40% less to 75% more than the stated amounts, expanding the possible range to between $82 million and $1.4 billion. According to USAID, over $3.7 million has been obligated so far to assess the possible environmental remediation of Bien Hoa Airbase.\nIn September 2017, Vietnam's Ministry of National Defence announced work on infrastructure construction for the dioxin decontamination of Bien Hoa airport. The construction, with a reported budget of $11.8 million, included demining operations, road construction, and removing facilities from contaminated areas. \nOn January 23, 2018, USAID and Vietnam's Ministry of National Defence signed a memorandum of intent (MOI) to begin the decontamination of Bien Hoa airport. U.S. Ambassador to Vietnam Daniel J. Kritenbrink reportedly said at the MOI signing ceremony, \"The United States looks forward to working with the Ministry of National Defence on this important initiative, deepening our partnership further, and building a prosperous future for both our countries.\" The MOI commits the two nations to work together to design a remediation program for the Bien Hoa airport. \nUSAID and the Ministry of National Defence signed a five-year, $183 million nonrefundable aid agreement on May 11, 2018, for the decontamination of Bien Hoa airport. At the time of the signing of the agreement, the project was projected to take 10 years at an estimated cost of $390 million. Approximately 500,000 cubic meters of soil, or nearly 50 hectares (123 acres) of land, are to be decontaminated. \nIn September 2018, the Ministry of National Defence signed a memorandum of understanding with the Japanese general contractor, Shimizu Corporation, to construct a decontamination factory at Bien Hoa airport. The factory reportedly will decontaminate the soil by a filtered sponge technique, and be capable of decontaminating 40 tons of soil per hour. The new technique is expected to cost about half as much as the in-pile thermal desorption used at Danang airport. \nU.S. Secretary of Defense Jim Mattis visited Bien Hoa airport on October 17, 2018. During his tour of the former Agent Orange storage site, Secretary Mattis reportedly said, \"We had promised to help \u2026 so this is America keeping her promise to remediate some of the past.\" He also reportedly stated prior to the visit, \"I just want to get eyes on [the site] so when I go back and talk to Congress, I can tell them my impression with actually having seen the site.\" \n\n\tIssues Before Congress\n\nCongressional interest in Agent Orange\/dioxin in Vietnam has largely been focused on two issues. The first issue is determining the appropriate amount and type of assistance to provide to address the environmental damage and the health effects of dioxin contamination in Vietnam. The second issue is oversight of how such assistance has been utilized by the State Department and USAID.\n\n\t\tFunding Assistance\n\nCongress and the Obama Administration demonstrated a common interest in providing assistance to address the environmental remediation of Agent Orange and dioxin in Vietnam; the Trump Administration has indicated its support for the Agent Orange projects in Vietnam. The State Department regularly has requested funding for decontamination of dioxin \"hot spots\" in Vietnam in its budget request to Congress. \nAs described above, Congress has generally appropriated funds for health and disability services for persons residing in areas sprayed by Agent Orange and otherwise contaminated with dioxin. The State Department and USAID have utilized those funds for various programs for persons with disabilities regardless of the cause. In many, but not all, cases, those programs were conducted in locations near known Agent Orange \"hot spots.\" President Obama's budget requests to Congress did not include funding requests explicitly for health and disability assistance programs for areas sprayed with Agent Orange or otherwise contaminated with dioxin. The Obama Administration budget requests were for disability programs and\/or \"vulnerable groups.\" \nThe Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) continues the past practice of designating funds for health and disability services for places contaminated with Agent Orange\/dioxin. Section 7043(h)(2) of the act, states\nOf the funds appropriated by this Act under the heading 'Development Assistance', not less than $12,500,000 shall be made available for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin, to assist individuals with severe upper or lower body mobility impairment or cognitive or developmental disabilities.\nThe Victims of Agent Orange Relief Act of 2019 ( H.R. 326 ) would \"direct the Secretary of State, the Secretary of Health and Human Services, and the Secretary of Veterans Affairs to provide assistance for individuals affected by exposure to Agent Orange, and for other purposes.\" Section 3 would require the Secretary of State to \"provide assistance to address the health care needs of covered individuals. Such assistance shall include the provision of medical and chronic care services, nursing services, vocational employment training, and medical equipment.\" \"Covered individuals\" is defined as Vietnamese residents affected by health issues related to their exposure to Agent Orange between January 1, 1961, and May 7, 1975, or is \"the child or descendant of an individual\" who was exposed to Agent Orange during the designated time period. \nUnder Section 3, the Secretary of State would also be required to provide assistance \"to repair and rebuild substandard homes in Vietnam for covered individuals and the families of covered individuals.\" Section 4 would require the Secretary of State and the Secretary of Veterans Affairs to \"identify and provide assistance to support research relating to health issues of individuals affected by Agent Orange.\"\nSection 3 also would require the Secretary of State to provide assistance to \"institutions in Vietnam that provide health care for covered individuals,\" and to \"remediate those geographic areas of Vietnam that the Secretary determines contain high levels of Agent Orange.\" The section further states, \"the Secretary of State shall give priority to heavily sprayed areas, particularly areas that served as military bases where Agent Orange was handled, and areas where heavy spraying and air crashes resulted in harmful deposits of Agent Orange.\" \nSection 8 states, \"Not later than 30 days after the last day of each fiscal quarter beginning on or after 18 months after the date of the enactment of this Act, the Secretary of State, the Secretary of Health and Human Services, and the Secretary of Veterans Affairs shall each submit to Congress a report on the implementation of the provisions of this Act applicable to such Secretary during the immediately preceding fiscal quarter.\"\n\n\t\tOversight of Assistance\n\nBeyond determining the level of funding for environmental remediation and the provision of health services to Agent Orange\/dioxin-contaminated locations in Vietnam, Congress has overseen the utilization of appropriated funds. With regard to environmental remediation, congressional oversight has focused on the rising cost of the cleanup effort at Danang airport, and the potential implications for funding for the proposed cleanup of Bien Hoa. With regard to USAID's provision of related health services, congressional oversight has focused on what some Members perceive to be a slow pace at which available funds are being obligated and changes in USAID's approach to administering those funds. \nAs noted above, the estimated total cost of the environmental remediation of Danang airport rose from $33.7 million in 2010 to $116 million. Members could point to cost overruns at Danang airport when Congress looks ahead to possibly funding a similar environmental remediation project at Bien Hoa airport, where a USAID study indicated that approximately 500,000 m 3 of soil\u2014about four to five times the amount at Danang\u2014is contaminated. \nAlthough the Danang airport cleanup experienced rising costs and delays, USAID was able to keep the project going and the funding flowing. USAID has not been as successful in utilizing the funds provided for health services to areas contaminated with Agent Orange\/dioxin. According to information provided by USAID, 63.5% of the funds appropriated in FY2011 to FY2017 have been obligated. In addition, USAID's approach to utilizing health services funds has shifted from direct obligation by USAID, to establishing a cooperative agreement to administer the funds, and back again to direct obligation by USAID. Some observers question whether the health services funds are being used effectively, and in accordance with congressional priorities. The specific language in Section 7043(h)(2) of Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) and H.R. 326 regarding health and\/or disability assistance to Vietnam may in part reflect congressional dissatisfaction with State Department and USAID management of previously appropriated funds.\n\n\t\t\tAppendix. Text of Public Laws Appropriating Funds for Environmental Remediation and Health and Disability Services in Vietnam\n\nCongress has included language in legislation indicating that it is appropriating funds for environmental remediation and health and disability services in Vietnam. The precise amounts appropriated, however, in most cases have been stipulated in either an accompanying report or explanatory statement. The table below provides the relevant text in the public law, as well as the associated language in the accompanying report or explanatory statement.","output":"U.S. assistance to Vietnam for the environmental and health damage attributed to a dioxin contained in Agent Orange and other herbicides sprayed over much of the southern portion of the country during the Vietnam War remains a major bilateral issue. Between fiscal years (FY) 2007 and 2019, Congress appropriated nearly $255 million to address these two issues. In addition, the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) authorized the transfer of up to $15 million to the U.S. Agency for International Development (USAID) for the dioxin cleanup of the Bien Hoa Airbase.\nMost of the appropriated funds have been used by USAID for the environmental cleanup of Danang airport, one of the major airbases used for storing and spraying the herbicides between 1961 and 1971. A lesser amount of the appropriated funds have been used by USAID for assistance to Vietnam's persons with disabilities, generally, but not always in the vicinity of Danang or other dioxin-contaminated areas.\nCongressional interest in Agent Orange\/dioxin in Vietnam has largely been focused on two issues. The first issue is determining the appropriate amount and type of assistance to provide to address the environmental damage and the health effects of dioxin contamination in Vietnam. The second issue is oversight of how such assistance has been utilized by the State Department and USAID.\nIn November 2017, the United States and Vietnam completed the environmental remediation of approximately 90,000 cubic meters (118,000 cubic yards) of contaminated soil and 60,000 cubic meters (78,000 cubic yards) of lower risk materials at Danang airport by a process known as in-pile thermal desorption (IPTD). Restoration and project closure operations were completed in November 2018. The project took six years, with an estimated overall cost of $116 million.\nField studies have identified a number of other areas in Vietnam contaminated with the dioxin associated with Agent Orange, including the airports near Bien Hoa and Phu Cat, as well as sections of the A Luoi Valley. In January 2018, U.S. and Vietnamese governments signed a memorandum of intent (MOI) to begin the cleanup of the Bien Hoa airport. According to a USAID study, the environmental cleanup of Bien Hoa airport could cost an estimated $137 million to $794 million, depending on what form of remediation is used.\nThe provision of health-related assistance to areas contaminated with Agent Orange\/dioxin has raised questions about how USAID has utilized appropriated funds. By May 2017, USAID had obligated less than two-thirds of the appropriated funds for FY2011-FY2017. The funds have generally been used for disability assistance programs regardless of the cause of the disability, rather than for both health and disability programs targeting populations residing near Agent Orange\/dioxin \"hot spots.\"\nWhile the obligations for environmental remediation activities generally have not been a matter of congressional concern, how USAID has obligated appropriations for health and disability activities has drawn some attention.\nThe Consolidated Appropriations Act, 2019 (P.L. 116-6) appropriated \"not less than $20 million\" for environmental remediation and \"not less than $12.5 million \u2026 for health and disability programs in areas sprayed with Agent Orange and otherwise contaminated with dioxin.\" The Victims of Agent Orange Relief Act of 2019 (H.R. 326) would require the Secretary of State to provide assistance to individuals in Vietnam with health issues related to exposure to Agent Orange, as well as \"to institutions in Vietnam that provide health care for covered individuals.\" The act would also require the Secretary of State to provide assistance \"to remediate those geographic areas of Vietnam that the Secretary determines contain high levels of Agent Orange.\""}
{"id":"crs_R43315","pid":"crs_R43315_0","input":"\tIntroduction\n\nWater infrastructure issues, particularly regarding funding, continue to receive attention from some Members of Congress and a wide array of stakeholders. Localities are primarily responsible for providing wastewater and drinking water infrastructure services. According to the most recent estimates by states and the U.S. Environmental Protection Agency (EPA), expected capital costs for such facilities total $744 billion over a 20-year period. While some analysts and stakeholders debate whether these estimates understate or overstate capital needs, most agree that the affected communities face formidable challenges in providing adequate and reliable water infrastructure services.\nCapital investments in water infrastructure are necessary to maintain high quality service that protects public health and the environment, and capital facilities are a major investment for local governments. The vast majority of public capital projects are debt-financed (i.e., they are not financed on a pay-as-you-go basis from ongoing revenues to the water utility). The principal financing tool that local governments use is the issuance of tax-exempt municipal bonds. At least 70% of U.S. water utilities rely on municipal bonds and other debt to some degree to finance capital investments. Beyond municipal bonds, federal assistance through grants and loans is available for some projects but is insufficient to meet all needs. Finally, public-private partnerships (P3s), which are long-term contractual arrangements between a public utility and a private company, currently provide only limited capital financing in the water sector. Although they are increasingly used in transportation and some other infrastructure sectors, especially P3s that involve private sector debt or equity investment in a project, most P3s for water infrastructure involve contract operations for operation and maintenance. Numerous drinking water utilities are privately owned and make significant private capital investments in water infrastructure, unlike the wastewater sector, in which facilities are generally owned by municipalities. \nIn recent years, Congress has considered several legislative options to help finance water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment facilities. Some Members have offered proposals that would amend, supplement, and\/or complement the existing clean water and drinking water State Revolving Fund (SRF) programs. Other proposals would address water infrastructure issues outside the framework of the SRF programs.\nIn 2014, Congress established the Water Infrastructure Finance and Innovation Act (WIFIA) program, which creates a new mechanism of providing financial assistance for water infrastructure projects. The first section of this report provides an overview of the WIFIA program, including its origins, scope, and applicability. The second section describes WIFIA program appropriation levels and estimates of the amount of credit assistance the federal funding would provide. The third section discusses EPA's implementation of the WIFIA program, including recent developments. The fourth section identifies selected issues that may be of interest to policymakers. \n\n\tProgram Overview\n\nThe WIFIA approach for supporting investment in water infrastructure is modeled after the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which was established in 1998 (see textbox below for further details). As the name suggests, only transportation projects are eligible for TIFIA assistance. The TIFIA program generated interest in creating a similar program for water infrastructure.\nAs discussed below, the Water Resources Reform and Development Act of 2014 (WRRDA 2014) established and authorized appropriations for the WIFIA program. Congress provided the first appropriations for EPA to offer credit assistance, such as direct loans, under the WIFIA program in FY2017. In 2018, America's Water Infrastructure Act of 2018 (AWIA) reauthorized appropriations for the program and amended certain WIFIA provisions. \n\n\t\tWRRDA 2014\n\nWRRDA 2014 established a five-year WIFIA pilot program. The act authorized (1) EPA to provide credit assistance (loans or loan guarantees) for a range of drinking water and wastewater projects and (2) the U.S. Army Corps of Engineers to provide similar assistance for water resource projects, such as flood control or hurricane and storm damage reduction. \nCongress provided appropriations to EPA to administer the WIFIA program in FY2014. Congress has not appropriated analogous funds to the Corps (nor has the Administration requested funds for a Corps WIFIA program) that would enable the Corps to implement a WIFIA program as laid out in WRRDA 2014. Regardless, this section identifies WIFIA provisions relating to both EPA and the Corps.\nTo implement the program, the act authorized appropriations of $175 million over five years to both EPA and the Corps (beginning with $20 million for each agency in FY2015 and increasing to $50 million in FY2019). Project costs must generally be $20 million or larger to be eligible for credit assistance. For projects in less populous communities (defined by WIFIA as populations of 25,000 or less), project costs must be $5 million or more. WIFIA credit assistance is available to \nstate infrastructure financing authorities; a corporation; a partnership; a joint venture; a trust; or a federal, state, local, or tribal government (or consortium of tribal governments). \nIn the case of projects carried out by private entities, such projects must be publicly sponsored. To meet this requirement, WIFIA allows a project applicant to demonstrate to the EPA or the Corps that the affected state, local, or tribal government supports the project. The maximum amount of a loan is 49% of eligible project costs, but the act authorizes EPA or the Corps to make available up to 25% of available funds each year for credit assistance in excess of 49% of project costs. Except for certain projects in rural areas, the total amount of federal assistance (i.e., WIFIA and other sources combined) may not exceed 80% of a project's cost.\nActivities eligible for assistance under the WIFIA pilot program include project development and planning, construction, acquisition of real property, and carrying costs during construction. Categories eligible for assistance by EPA include\nprojects eligible for assistance through the clean water state revolving fund (CWSRF) and drinking water state revolving fund (DWSRF) programs (i.e., wastewater treatment and community drinking water facilities); enhanced energy efficiency of a public water system or wastewater treatment works; repair or rehabilitation of aging wastewater and drinking water systems; desalination, water recycling, aquifer recharge, or development of alternative water supplies to reduce aquifer depletion; prevention, reduction, or mitigation of the effects of drought; or a combination of eligible projects. \nCategories eligible for assistance by the Corps include\nflood control or hurricane and storm damage reduction projects, environmental restoration, coastal or inland harbor navigation improvement, or inland and intracoastal waterways navigation improvement. \nThe EPA Administrator or Secretary of the Army, as appropriate, determines project eligibility based on creditworthiness and dedicated revenue sources for repayment. Selection criteria include\nthe national or regional significance of the project, extent of public or private financing in addition to WIFIA assistance, use of new or innovative approaches, the amount of budget authority required to fund the WIFIA assistance, the extent to which a project serves regions with significant energy development or production areas, and the extent to which a project serves regions with significant water resources challenges. \nResponding to concerns from some groups that WIFIA could impair and diminish support for clean water and drinking water SRF programs under the Clean Water Act and Safe Drinking Water Act (see discussion below), the act requires the EPA Administrator, when the agency receives applications for WIFIA assistance, to notify state infrastructure financing authorities and give them the opportunity to commit funds to the project.\nWIFIA-assisted projects must use American-made iron and steel products. Projects must also comply with the prevailing wage requirements of the Davis-Bacon Act in the same manner that they would under the SRF provisions of the Clean Water Act.\nIn addition, the act directed EPA and the Corps to provide information on a website concerning applications and projects that have received assistance, and the Government Accountability Office must report to Congress (four years after enactment, i.e., June 10, 2018) on the program and provide recommendations for continuing, changing, or terminating the WIFIA program. As discussed below, AWIA extended the deadline for this report.\n\n\t\tAWIA 2018\n\nAWIA, enacted on October 23, 2018, amended WIFIA in several ways:\nIt removed WIFIA's designation as a pilot program. It authorized appropriations of $50.0 million for each of FY2020 and FY2021 for EPA program implementation. It authorized EPA to administer the WIFIA program for relevant agencies (through an interagency agreement), specifically directing EPA to enter into such an agreement with the commissioner of the Bureau of Reclamation within the Department of the Interior. It required the Government Accountability Office to prepare a report for Congress by October 23, 2021. \nIn addition, AWIA authorized an additional $5 million in WIFIA appropriations to provide credit assistance to state finance authorities to support combined projects eligible for assistance from the CWSRF and DWSRF. This additional appropriation authority is available for FY2020 and FY2021 and is available only if (1) Congress appropriates funding for both the CWSRF and the DWSRF at FY2018 levels or 105% or more of the previous year's funding, whichever is greater, and (2) EPA receives at least $50.0 million in WIFIA appropriations. State financing authorities may use funding from WIFIA appropriations to cover 100% of project costs, in contrast to the 80% federal financial assistance cap that applies to most WIFIA-financed projects.\n\n\tAppropriations\n\nFor each of FY2015 and FY2016, Congress provided $2.2 million for EPA to hire staff and design the new water infrastructure assistance program. In FY2017, Congress provided the first appropriations to cover the subsidy cost of the program, thus allowing implementation of WIFIA (i.e., making project loans). Congress provided a total of $30 million for the WIFIA program for FY2017 through two appropriations acts:\nThe Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), enacted on December 10, 2016, provided the first appropriation of funds to cover the subsidy cost of the program. P.L. 114-254 appropriated $20 million to EPA to begin making loans and allowed the agency to use up to $3 million of the total for administrative purposes. The act authorized EPA to use these appropriations to subsidize costs to provide credit assistance not to exceed $2.1 billion. The Consolidated and Further Continuing Appropriations Act, 2017 ( P.L. 115-31 ), enacted on May 5, 2017, provided an additional $8 million for EPA to apply toward loan subsidy costs and $2 million for EPA's administrative expenses. The act authorized EPA to use funds to guarantee as much as $976 million in direct loans.\nFor FY2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), provided $63 million for the WIFIA program (including $8 million for administrative costs). The act authorized EPA to use funds to guarantee as much as $6.71 billion in direct loans. EPA estimated that its budget authority ($55 million) would provide approximately $5.5 billion in credit assistance.\nFor FY2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided $68 million for the WIFIA program, including $8 million for administrative costs. The act authorized EPA to use funds to guarantee as much as $7.31 billion in direct loans. EPA estimated that its budget authority ($60 million) would provide approximately $6 billion in credit assistance.\n Figure 1 illustrates the WIFIA appropriations for administrative purposes and for loan subsidy costs between FY2017 and FY2019. The appropriations acts for FY2017 through FY2019 state that the appropriations for the subsidy costs would be available until expended. In contrast, fiscal year appropriations for WIFIA administrative costs are not available after specific dates. \nAs discussed above, WRRDA 2014 authorized a parallel program for water resources projects to be administered by the Corps. Congress has not yet appropriated funds (nor has the Administration requested funds for a Corps WIFIA program) that would enable the Corps to begin preparations or begin making WIFIA loans under the authority in the 2014 statute. \n\n\tEPA Implementation\n\nEPA began preparing for implementation of the WIFIA program, including through a series of public listening sessions in several U.S. cities, in 2014. The intended audience was municipal, state, and regional water utility officials; private sector financing professionals; and other interested organizations and parties. The purpose was to discuss project ideas, potential selection and evaluation criteria, and numerous other implementation issues. \nIn 2016, EPA issued two rules intended to explain and clarify some provisions of the program and establish guidelines for the application process. One was an interim final rule that sets guidelines for the application and selection of projects, defines the requirements for credit assistance, and defines reporting requirements and a fee collection structure. In this rule, EPA said that it would initially give funding priority to four types of projects: \n1. adaptation to extreme weather and climate change; 2. enhanced energy efficiency of wastewater treatment works and public water systems; 3. green infrastructure; and 4. repair, rehabilitation, and replacement of infrastructure and conveyance systems. \nThrough the second rulemaking, EPA proposed a fee structure for WIFIA (application fee, credit processing fee, and servicing fee). EPA finalized this rule in June 2017. WIFIA authorizes EPA to charge fees to recover all or a portion of the agency's costs administering the program. EPA's final rule requires a nonrefundable fee for each project that is invited to submit a full WIFIA application. The application fee is $100,000, or $25,000 for projects serving small communities. The fees are not required in connection with submission of letters of interest but would be required for projects that EPA expects might reasonably proceed to closing on a credit assistance agreement. Enacted December 16, 2016, the Water Infrastructure Improvements for the Nation (WIIN) Act ( P.L. 114-322 , Section 5008(c)) amended WIFIA to allow fees to be financed as part of the loan at the request of an applicant. In 2018, AWIA amended WIFIA to clarify that state financing authorities cannot pass along application fees on to the parties that utilize WIFIA assistance. \nAfter EPA received its first appropriations to cover loan subsidy costs, it announced its first round of funding for the WIFIA program in January 2017. Additional rounds of funding have followed with each fiscal year's enacted appropriations. \n Table 1 provides details for each of EPA's funding rounds, including the project priorities EPA listed in its annual funding notices, the number of letters of interest submitted, selected projects, and loans closed. \n\n\tSelected Issues\n\n\t\tSubsidy Amount for Credit Assistance\n\nFrom the federal perspective, an advantage of the WIFIA program is that it can provide a large amount of credit assistance relative to the amount of budget authority provided. In federal budgetary terms, WIFIA assistance has less of an impact than a grant, which is not repaid to the U.S. Treasury.\nThe volume of loans and other types of credit assistance that the program can provide is determined by the size of congressional appropriations and calculation of the subsidy amount. WIFIA defines the \"subsidy amount\" as follows:\nThe amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).\nThe subsidy amount, which is often expressed in percentage terms or as a ratio (i.e., subsidy rate), largely determines the amount of credit assistance that can be made available to project sponsors. For example, if a project's subsidy rate is 10% and is the only charge against available budget authority, a $20 million budgetary allocation could theoretically support a $200 million loan. A lower subsidy rate would support a larger loan amount. \nAs a reference point, the Office of Management and Budget (OMB) identified a TIFIA subsidy rate of 6.30% for direct loans in FY2020. Proponents of WIFIA have argued that loans for water projects are likely to be less risky than transportation projects, because water utility collections for services (i.e., water rates) provide an established revenue stream and repayment mechanism; thus the subsidy cost would be lower and the amount of credit assistance higher (per dollar of budget authority). Adding caution, however, analysts note that, even with stable revenue mechanisms, some communities and water utilities have recently experienced problems with borrowing and bond repayments, so repayment of a WIFIA loan is not a certainty.\nIn the Trump Administration's FY2020 budget proposal, OMB estimated a 0.91% subsidy rate for WIFIA. This equates to a 1:110 ratio. At this subsidy rate, a $10 million appropriation could support a direct loan (or loans) totaling $1.10 billion. However, this subsidy rate is an estimate for budgetary purposes. In the context of WIFIA implementation, subsidy rates are project-specific. EPA stated that the subsidy rate \nis used for budgetary purposes and provides an estimate for what will be available for loans each year based on the anticipated riskiness of the future loan portfolio. The actual ratio will be determined for each project at the time of loan obligation. Project A with a higher credit quality would consume less of the credit subsidy than Project B with a lower credit quality, even if the projects are otherwise identical. Each applicant will be scored independently.\n\n\t\tLoan Interest Rates and Default Risk\n\nThe WIFIA program provides capital at a low cost to the borrower, because even though the interest on 30-year Treasury securities is taxable, Treasury rates can be less expensive than rates on traditional tax-exempt municipal debt. Moreover, WIFIA financing may be characterized as patient capital, because loan repayment does not need to begin until five years after substantial completion of a project, the loan can be for up to 35 years from substantial completion, and the amortization schedule can be flexible. In addition, there is less perceived investment risk, because the project has been determined to be creditworthy (i.e., there is a revenue stream for repayment).\nAdditionally, the WIFIA program has the potential to limit the federal government's exposure to default by relying on market discipline through creditworthiness standards and encouraging private capital investment. \nOn the other hand, the Congressional Budget Office (CBO) has argued that the federal government underestimates the cost of providing credit assistance under such programs because it excludes\nthe cost of market risk\u2014the compensation that investors require for the uncertainty of expected but risky cash flows. The reason is that the [Federal Credit Reform Act] requires analysts to calculate present values by discounting expected cash flows at the interest rate on risk-free Treasury securities (the rate at which the government borrows money). In contrast, private financial institutions use risk-adjusted discount rates to calculate present values.\nIn an effort to encourage nonfederal and private sector financing, WIFIA funding assistance generally cannot exceed 49% of project costs. In addition, WIFIA limits all sources of federal assistance to no more than 80% of a project's cost. \n\n\t\tInteractions with Existing Water Financing Programs\n\nIn general, the WIFIA program is designed to support larger infrastructure projects with eligible costs exceeding $20 million. For this reason, some have argued that the WIFIA program complements existing water infrastructure financing tools\u2014SRF programs under the Clean Water Act and Safe Drinking Water Act\u2014which are often used for smaller-scale projects. \nPolicymakers set a lower minimum threshold for project costs ($5 million) for WIFIA projects in communities with populations less than 25,000. One of 12 projects selected in the FY2017 funding round is located in a less populous community (Morro Bay, CA). Two of the 39 projects in the FY2018 funding round are located in less populous communities (Frontenac, KS, and Cortland, NY).\nGenerally, the level of interest from less populous communities in WIFIA financing is uncertain, particularly considering the other financing options that may be available. The U.S. Department of Agriculture has a variety of water and waste disposal programs to provide loans and grants for wastewater and drinking water infrastructure in rural communities (10,000 people or fewer). In addition, both of the SRF programs authorize states to provide subsidized financial assistance\u2014such as principal forgiveness, negative interest loans, or a combination\u2014under certain conditions. Appropriations acts in recent years have required states to use minimum percentages of their federal grant amounts to provide additional subsidization. The FY2019 appropriations act requires 10% of the CWSRF grants and 20% of the DWSRF grants to be used \"to provide additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest loans, or grants (or any combination of these).\" \nWIFIA financing can potentially support smaller projects by grouping, or aggregating, them through a single application for financial assistance. For example, during the first round of WIFIA funding (FY2017), one of the 12 entities selected to submit a loan application was the Indiana Finance Authority, which administers the clean water and drinking water SRF programs in Indiana. Indiana's prospective WIFIA loan would provide $436 million to support multiple projects in the state. \nA major source of debate among opponents and proponents has been and continues to be potential impacts of WIFIA on funds for the Clean Water Act and Safe Drinking Water Act SRF programs. Several groups representing state environmental officials opposed the establishment of a WIFIA program (in the 113 th Congress). They argued that WIFIA funding could result in reduced spending on the SRF programs, which are capitalized by federal appropriations. States are concerned that WIFIA would likely be funded (through congressional appropriations) to the detriment of the SRF programs. \nOn the other hand, water utility groups that support WIFIA have argued that it would complement, not harm, existing SRF programs. In their view, WIFIA will provide a new funding opportunity for large water infrastructure projects that are unlikely to receive SRF assistance. As described above, in part to address concerns about impacts of WIFIA on the SRF programs, WIFIA requires EPA to notify state infrastructure financing authorities about WIFIA application and gives state infrastructure financing authorities an opportunity to commit funds to the project. Nevertheless, some states and environmental advocacy groups remain concerned that WIFIA will compete with SRFs for congressional funding and that WIFIA will not prioritize public health or affordability, as the SRFs can. The 2016 Water Infrastructure Improvements for the Nation Act includes a \"sense of the Congress\" that WIFIA funding should be in addition to robust funding for the SRFs.\n\n\t\tPotential Federal Revenue Loss from Tax-Exempt Bonds\n\nEnacting the WIFIA program raised a federal budgetary and revenue issue. Legislation reported by congressional committees is typically scored by the CBO for the effects on discretionary and mandatory, or direct, spending and by the Joint Committee on Taxation (JCT) for effects on revenue. The initial CBO cost estimate for S. 601 , as approved by the Environment and Public Works Committee in April 2013, concluded that the WIFIA provisions would cost $260 million over five years. In addition, it would result in certain revenue loss to the U.S. Treasury; thus, pay-as-you-go procedures would have applied to the bill. CBO cited the JCT estimate that enactment of the bill would reduce revenues by $135 million over 10 years, because states would be expected to issue tax-exempt bonds for water projects in order to acquire additional funds not covered by WIFIA assistance. To avoid the pay-as-you-go requirement in the bill, the committee added a provision to S. 601 to prohibit recipients of WIFIA assistance from issuing tax-exempt bonds for the non-WIFIA portions of project costs. CBO re-estimated the bill and concluded that, because the change would make the WIFIA program less attractive to entities, most of which rely on tax-exempt bonds for project financing, the cost of the bill would be $200 million less over five years. CBO also said that the bill would have no impact on revenues, because the demand for federal credit would be lower without the option of using tax-exempt financing. WRRDA 2014 retained the bar on tax-exempt financing for WIFIA-assisted projects. Thus, the apparent solution to one issue in the legislation\u2014potential revenue loss to the U.S. Treasury\u2014raised a different kind of issue for entities seeking WIFIA credit assistance, because tax-exempt municipal bonds are the principal mechanism used by local governments to finance water infrastructure projects. \nThe restriction was widely criticized by potential users of WIFIA assistance. In their view, the bond financing restriction in WRRDA 2014, together with the provision that caps WIFIA assistance at 49% of project costs, would make it very difficult to finance needed projects. Congressional interest in addressing the tax-exempt bond restriction was soon evident. For example, H.R. 1710 in the 114 th Congress proposed to make an exception from the limitation on use of tax-exempt bonds for WIFIA loans made to finance water infrastructure projects in states in which the governor has issued a state of drought emergency declaration.\nMore generally, in July 2015, the Senate passed H.R. 22 , a bill to reauthorize highway and transportation programs for six years. It included repeal of the provision in P.L. 113-121 that limits any project receiving federal credit assistance under the WIFIA program from being financed with tax-exempt bonds. However, repeal of the provision raised similar revenue questions to those that arose in connection with P.L. 113-121 . CBO's report on S. 1647 (the Senate Environment and Public Works Committee's bill, which was the basis of Senate-passed H.R. 22 ) stated that the Joint Committee on Taxation (JCT) estimated that repealing the WIFIA limitation would increase states' issuance of tax-exempt bonds for water projects and would decrease federal revenues by $17 million over the FY2016-FY2025 period. Further, CBO estimated that the change would increase demand for federal credit under the WIFIA program, resulting in additional spending stemming from the appropriation levels authorized in P.L. 113-121 . Consequently, CBO estimated that implementing the WIFIA program would cost $146 million over the FY2016-FY2025 period.\nThe issue of identifying offsets, or \"pay-fors,\" for the estimated federal revenue loss was addressed in the conference agreement on H.R. 22 , the FAST Act ( P.L. 114-94 ). CBO estimated that the conference agreement included offsets to fully cover the cost of the bill by reducing spending or raising revenues. Thus, the enacted bill retained the provision repealing the tax-exempt bond financing restriction on WIFIA assistance.","output":"The Water Infrastructure Finance and Innovation Act (WIFIA) program provides financial assistance for water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment systems. Congress established the WIFIA program in the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121).\nThe WIFIA concept is modeled after a similar program that finances transportation projects, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Proponents of the WIFIA approach, including water utility organizations, cite several potential benefits:\nWIFIA provides credit assistance to large water infrastructure projects that may otherwise have difficulty obtaining financing. WIFIA provides credit assistance, namely direct loans, at U.S. Treasury rates, potentially lowering the cost of capital for borrowers. WIFIA assistance has less of a federal budgetary effect than conventional project grants that are not repaid, because only the subsidy cost of a loan (representing the presumed default rate on loans) is required to be appropriated. WIFIA support limits the federal government's exposure to default, because projects must be found creditworthy with a revenue stream for repayment to be eligible for assistance.\nOn the other hand, opponents of the WIFIA approach, including organizations that represent state environmental agency officials, have cited several concerns:\nFederal funding for a WIFIA program could have a detrimental effect on federal support for established State Revolving Fund (SRF) programs that provide the largest source of water infrastructure assistance today. If WIFIA funding resulted in a decrease in SRF assistance, smaller projects may face financing challenges. The Congressional Budget Office has warned that the future costs of a WIFIA program to the federal budget may be underestimated.\nAmerica's Water Infrastructure Act of 2018 (AWIA; P.L. 115-270), enacted on October 23, 2018, removed the pilot designation from the WIFIA program, reauthorized appropriations, and revised provisions related to program administration.\nAppropriations for the WIFIA program have increased since its inception, allowing EPA to provide increasing amounts of credit assistance each year:\nFY2017 appropriations totaled $30 million. FY2018 appropriations totaled $63 million. FY2019 appropriations totaled $68 million.\nOn April 5, 2019, EPA announced a third round of WIFIA funding, inviting prospective borrowers to submit letters of interest to EPA. From these submittals, the agency will select projects for funding. EPA estimated that its budget authority would provide approximately $6 billion in credit assistance."}
{"id":"gao_GAO-18-22","pid":"gao_GAO-18-22_0","input":"\tBackground\n\nStatutory and Executive requirements assert broad principles and require  agencies to consider alternative ways of regulating and preferred  regulatory designs, such as performance standards rather than means- based design standards. Further, these requirements and directives urge  agencies to consider alternative approaches to eliciting compliance, such  as alternative reporting methods or delaying compliance dates.\nThe Regulatory Flexibility Act (RFA) requires federal agencies to  examine the impact of proposed, final, and existing rules on small  businesses, small organizations, and small governmental jurisdictions,  and to solicit the ideas and comments of such entities for this  purpose. Among other requirements, the RFA requires that agencies  consider regulatory alternatives that accomplish the stated objectives  of a proposed rule while minimizing any significant impact on small  entities. However, the RFA does not mandate any particular outcome  in rulemaking.\nExecutive Order 12866 (E.O. 12866), issued in 1993, promotes a  regulatory philosophy and set of principles that, to the extent  permitted by law and where applicable, encourages agencies to  assess costs and benefits of their proposed and final regulations. It  also directs agencies to consider available regulatory alternatives in  all regulations, including the alternative of not regulating, and  generally select those alternatives that maximize net benefits, to the  extent permitted by statute. Alternatives to direct regulation include  providing economic incentives to encourage the desired behavior  (such as user fees or marketable permits) or providing information  upon which choices can be made by the public. If an agency  determines that direct regulation is necessary, the Executive Order  directs the agency, to the extent feasible, to specify performance  objectives, rather than specifying the behavior or manner of  compliance that regulated entities must adopt. Subsequent executive  orders across administrations have reaffirmed this philosophy and  these principles.\nCircular A-4, issued by OMB in 2003, provides guidance and best  practices to federal agencies for determining the potential effects of  new regulations. A-4 directs agencies to consider a number of  regulatory alternatives, including market-oriented approaches rather  than direct controls, performance standards rather than design  standards, informational measures, and different compliance dates  and enforcement methods, among others.\nThe RFA, specific statutes, and multiple executive orders have also  emphasized the importance of regulatory lookbacks, also referred to as  retrospective reviews, in which agencies evaluate how existing  regulations work in practice:\nStatutory requirements: The RFA\u2019s Section 610 requires agencies  to review all regulations that have or will have a significant impact on  small entities within 10 years of the publication of the rule to  determine whether such rules should be continued without change, or  should be amended or rescinded, consistent with the stated objectives  of applicable statutes, to minimize impacts on small entities. Congress  also established other requirements for agencies to review the effects  of regulations issued under specific statutes, such as the Clean Air  Act.\nExecutive Order 13771, issued in January 2017, requires executive  agencies to identify at least two existing regulations to be repealed  whenever they publicly propose or otherwise promulgate a new  regulation, unless prohibited by law. Agencies must also annually  provide their best approximation of the total costs or savings  associated with each new regulation or repealed regulation to OMB.  Finally, the order requires that the total incremental cost of all new  regulations, including the savings for regulations that have been  repealed, be no greater than zero for fiscal year 2017, unless  otherwise required by law or consistent with advice provided in writing  by the OMB Director.\nExecutive Order 13777, issued in February 2017, requires agencies  to designate an agency official as its Regulatory Reform Officer.  Regulatory Reform Officers oversee the implementation of regulatory  reform initiatives to ensure that agencies effectively carry out  regulatory reforms, consistent with applicable law. Agencies must also  establish Regulatory Reform Task Forces to evaluate existing  regulations and make recommendations regarding their repeal,  replacement, or modification, consistent with applicable law.\n\n\tSelected Agencies Reported Using Statutory and Executive Requirements and Regulatory Objectives in Their Decision- Making Processes\n\n\t\tAgencies Have Multiple Regulatory Design Options Available to Achieve Their Objectives Depending on Statutory Discretion\n\nWhen agencies determine that they may need to regulate, they generally  have multiple regulatory designs available to achieve their objectives.  Agencies are directed by statute and Executive requirements to assess  alternatives to regulatory action\u2014including not issuing new regulations\u2014 and different ways of regulating. Available regulatory designs range from  prescriptive regulations that specify the adoption of a certain technology  or action to designs that generally provide regulated entities with more  discretion and options for compliance, and in some instances hybrid  designs that incorporate both prescriptive and less prescriptive elements.  Alternatives to prescriptive regulations provide regulated entities with  greater flexibility. For example, performance-based regulations require a  certain outcome but allow regulated entities discretion to determine how  they will achieve that outcome, while market-based regulations use  tradeable permits or fees to influence behavior.\nTable 2 highlights the regulatory designs identified through our literature  review and corroborated by subject matter specialists and agency  officials. The table includes selected examples of applicable regulations  implemented by our case study agency subcomponents.\nStatutes give agencies varying degrees of discretion to consider multiple  designs as they develop regulations to meet their objectives. In some  instances, Congress directs agencies by statute to implement specific  regulatory designs. For example, the Occupational Safety and Health Act  directs the Occupational Safety and Health Administration (OSHA), when  promulgating a standard, to either (1) adopt existing scientific and  industry consensus standards for workplace health and safety, or (2)  explain why the standard adopted by the agency better protects workers  than the national consensus standard. In addition, requirements dealing  with exposures to toxic materials must be formulated in the terms of  \u201cobjective criteria and the performance desired\u201d whenever practicable.  The Clean Air Act provides EPA\u2019s Office of Air and Radiation (OAR) with  varying degrees of discretion to consider different regulatory designs  when developing its regulatory programs. For example, the Clean Air  Act gave the office broad authority to establish a tradable emissions  allowance system\u2014commonly referred to as cap and trade\u2014with a  market-based design for its Acid Rain Program, but to promulgate specific  prescriptive regulations for the National Emission Standards for  Hazardous Pollutants program.\n\n\t\tSelected Agencies Stated a Preference for Less Prescriptive Designs to Achieve Regulatory Objectives\n\nOfficials at selected agencies reported a general preference for less  prescriptive regulations in accordance with E.O. 12866, Circular A-4, and  other Executive requirements, which encourage agencies to consider less  prescriptive regulatory design options for achieving their objectives. For  example, DOT officials told us that, when choosing among regulatory  design options, they prefer performance-based regulations over means- based regulations. Officials from DOT\u2019s Pipeline and Hazardous Materials  Safety Administration (PHMSA) told us that performance-based  regulations\u2014as implemented for classifying and packaging hazardous  material\u2014allow them to accommodate innovations among regulated  entities, adapt to technological advances, and promote the  competitiveness of U.S. firms in global markets without having to  subsequently revise the regulations.\nThe following examples illustrate how some selected subcomponents  have (1) encouraged the development of less prescriptive design options  for new regulatory programs, and (2) updated or replaced existing  regulations to incorporate more flexible designs.\nDeveloping trainings to encourage less prescriptive designs:  Two selected subcomponents produced training materials to promote  the consideration of all options for designing effective regulation,  including less prescriptive regulations where appropriate. EPA\u2019s Office  of Enforcement and Compliance Assurance developed a workbook  and supplemental training course that present principles and tools to  help rule drafters consider the relative effectiveness of different  designs for achieving regulatory objectives, including how the degree  of prescriptiveness can either promote or hinder compliance. The  Federal Aviation Administration\u2019s (FAA) \u201cPerformance-Based  Regulations Training\u201d course uses real world examples and team  exercises to teach rule drafters (1) the concepts that inform  performance-based designs, (2) the relationship between prescriptive  and less prescriptive regulatory approaches, and (3) considerations  for developing and assessing performance-based regulations.\nUpdating or replacing existing regulations to incorporate flexible  designs: FAA\u2019s 2016 airworthiness standards for small airplanes  replaced some prescriptive design requirements with more flexible  performance-based standards. Agency officials told us that they  expect the new regulation will improve safety and cost-effectiveness  (such as by reducing compliance costs) while facilitating future  technological innovations. Animal and Plant Health Inspection Service  (APHIS) officials told us that increased international demand for cattle  exports put pressure on their inspection infrastructure and prompted  them to replace their formerly prescriptive standards with  performance-based regulations that officials described as more  flexible and easier to adapt to changing circumstances. Food Safety  and Inspection Service (FSIS) officials told us that their Hazardous  Analysis and Critical Control Points (HACCP) Rule represented a shift  from FSIS\u2019s traditional means-based regulations (which mandated  specific food production standards) to a mixed performance- and  management-based regulatory program (which monitors food safety  plans and production outcomes).\n\n\t\tAgencies Reported that Regulatory Objectives May Require Prescriptive Designs or Use of Multiple Designs\n\nDespite a general preference for less prescriptive designs among  selected agencies, officials from nine selected subcomponents told us  that their regulatory objectives sometimes required a prescriptive  regulation or that in some instances regulated entities expressed a  preference for prescriptiveness.\nMine Safety and Health Administration (MSHA) officials told us that  their regulations were often necessarily prescriptive to implement and  enforce the mine health and safety standards required by statute.  For example, based on data from the National Institute for  Occupational Safety and Health, MSHA determined that requiring  more frequent respirable dust sampling for mining occupations known  to have high dust levels and requiring the use of certain monitoring  devices to measure respirable coal dust exposure are necessary to  limit exposure to respirable coal mine dust and thus reduce  occupational lung diseases.\nBureau of Industry and Security (BIS) officials told us that their export  licensing regulations are necessarily prescriptive to narrowly target  specific items as unacceptable for export due to national security or  commercial sanctions against certain countries.\nFood and Drug Administration (FDA) officials told us that, while they  try to achieve a balance between prescriptive and less prescriptive  regulatory designs, in some instances prescriptive regulations are the  only means of ensuring public health and safety.\nOfficials from EPA\u2019s Office of Chemical Safety and Pollution  Prevention (OCSPP) told us that, when given non-prescriptive  regulatory options, small businesses generally prefer prescriptive  regulations with clear compliance requirements to minimize  uncertainty.\nAn EPA OAR official told us that, during the update of a recent  regulation on refrigerants, the agency considered including a provision  allowing operators of pollutant-emitting facilities the option to either (1)  set a corporate-wide budget for leaks covering all facilities, or (2)  comply with a prescriptive regulation for individual appliances  susceptible to leakage. Based on feedback from regulated entities  and EPA enforcement officials, who voiced a need for predictability  and ease of monitoring, EPA officials said that they ultimately chose  to promulgate the more prescriptive regulation instead of the more  flexible, but challenging to implement, corporate-wide approach.\nTen selected subcomponents incorporated multiple design elements into  their regulations\u2014what we refer to as hybrid designs\u2014that offer more  flexibility or, conversely, more clarity to meet the needs of different  regulated entities.\nPHMSA officials told us that their special permits programs for  hazardous materials and pipelines allow regulated entities the  flexibility to determine their own means of satisfying transportation  safety requirements if they achieve the same level of safety  prescribed by regulation.\nFAA officials told us that most of their safety standards are  necessarily prescriptive to ensure clarity and uniformity. However,  they said that they often encourage the use of multiple designs in their  rulemakings that allow for both performance-based and means-based  regulations\u2014as with the 2016 airworthiness standards for small  airplanes.\nOSHA officials told us that they provide employers with multiple  options for achieving regulatory compliance that incorporate both  prescriptive and less prescriptive design elements. For example,  OSHA\u2019s health standards regulating crystalline silica exposure among  construction site workers provides employers both a performance- based option (which allows regulated entities discretion in determining  how to meet permissible exposure limits), and a means-based option  (in which regulated entities implement specified exposure mitigation  measures for designated tasks).\nFDA and FSIS have both implemented voluntary programs to promote  the adoption of practices among regulated entities that align with the  agencies\u2019 regulatory objectives. FSIS encourages regulated food  facilities to develop voluntary food defense plans as a means of  mitigating potential health hazards and strengthening food safety.  FDA officials told us they issued voluntary food labeling standards for  raw fruits and vegetables to assist in establishing an industry  standard, and achieved 80 percent compliance among regulated  entities.\n\n\t\tSelected Agency Processes Included Practices for Considering and Assessing Regulatory Design Options\n\nAll selected agencies told us their processes for drafting regulations  incorporated internal discussions to consider available regulatory design  options. For example, Employee Benefits Security Administration (EBSA)  officials told us that the agency\u2019s process encourages rule drafters to  solicit input from internal and external stakeholders to inform the  consideration of all possible regulatory design options available to  achieve statutory objectives. BIS officials told us that proposals for  broadly applicable regulations\u2014including available design options\u2014are  discussed and vetted with multiple stakeholders, including (1) BIS  subcomponent officials, (2) Office of General Counsel staff, (3) agency  engineers, and (4) external technical advisory committees.\nHowever, some selected subcomponents\u2019 processes for drafting  proposed regulations also included documentation of identified design  options for achieving objectives and assessments of risk or enforcement  and compliance implications of identified design options. These practices  for identifying and assessing regulatory designs are described in the  following examples.\nDocumenting the assessment of design options for achieving  regulatory objectives: EPA uses an Analytical Blueprint to identify  the range of regulatory design options considered throughout the  Action Development Process (ADP)\u2014the agency\u2019s process for  developing and responding to public comments on new regulatory  proposals. FSIS officials told us that rule drafters develop an \u201coptions  paper\u201d to identify and assess alternative approaches to achieving  regulatory objectives based on multiple inputs, including (1) data  analyses, (2) subject matter expertise, and (3) stakeholder feedback.  FAA officials told us that rule-drafting groups discuss regulatory  design options when developing a Rulemaking Action Plan and  present these alternatives in briefing documents to the principal  agency managers, referred to as \u201cprincipals briefs.\u201d FDA officials told  us that rule-drafting groups generally develop a concept paper or  other summary document to determine the optimal means of  achieving a regulatory goal, including considerations of multiple  design options.\nAssessing the risk associated with identified regulatory design  options: Three selected subcomponents incorporated assessments  of risk into their rule-drafting procedures. DOT\u2019s Rulemaking  Requirements direct agency officials to \u201cconsider, to the extent  reasonable, the degree and nature of the risks posed [by agency  action]\u201d and \u201chow the agency action will reduce risks to public health,  safety, and the environment\u201d per Executive Order 12866. EPA\u2019s ADP  specifies that Analytic Blueprints identify, assess, and discuss the risk  management implications of proposed regulatory design options.  USDA\u2019s Regulatory Decisionmaking Requirements direct rule drafters  to conduct a comparison of risks for regulatory design options and  provide a description of the level of uncertainty and unknowns  associated with each design.\nAssessing the enforcement and compliance implications of  identified regulatory design options: An official from FSIS told us  that representatives from its Office of Field Operations or Office of  Investigation, Enforcement, and Audit often participate in rule-drafting  groups to provide an enforcement perspective. A BIS official told us  that rule drafters solicit informal feedback from enforcement officials to  ensure the practicability of regulatory standards during both the  development of prospective regulations and the initial implementation  of new regulations.\nEPA\u2019s procedures require that enforcement officials participate in  EPA\u2019s ADP rule-drafting groups for rules involving \u201cprecedent-setting  policy implications\u201d and \u201cextensive cross-agency participation,\u201d and  EPA officials told us that enforcement officials also are often involved  in the drafting of other rules. Further, EPA Office of Enforcement  and Compliance Assistance\u2019s training and guidance materials  encourage rule drafters to incorporate compliance principles\u2014such as  clarity, consistency, and transparency\u2014into their decision making and  consider how regulatory design choices can influence later  compliance and need for enforcement.\nConsidering compliance and enforcement implications while making  regulatory design decisions is important because agency officials  stated that different design choices have implications for future  compliance and enforcement resources. For example, PHMSA  officials told us they create an implementation plan for any proposed  regulation with an expected impact on enforcement resources.  Officials from OSHA and EPA Office of Land and Emergency  Management (OLEM) told us that management-based regulations\u2014 such as OSHA\u2019s Process Safety Management requirements for oil  refineries and chemical facilities and OLEM\u2019s Risk Management  Program for facilities that use hazardous chemical substances\u2014can  be resource-intensive to enforce because of the greater technical  expertise needed to review highly individual and technical plans  among heterogeneous regulated entities to ensure compliance. An  EPA OAR official told us that the design of its cap-and-trade system\u2014 tradeable allowances that require regulated entities to monitor and  report their emissions to EPA\u2014limits the need for enforcement  resources to only those entities that do not comply with monitoring,  reporting, and allowance-holding requirements.\n\n\tSelected Agencies Reported Using Multiple Tools and Approaches for Allocating Resources to Elicit Compliance\n\n\t\tTo Elicit Compliance, Agencies Generally Have Flexibility to Use a Mix of Available Tools\n\nWhen regulations are promulgated, agency officials must determine how  they will promote compliance with their regulations and deter  noncompliance. Agencies generally have the flexibility to tailor their  compliance and enforcement strategies to encourage voluntary  compliance and inform regulated entities of regulatory requirements.  Agency officials decide on the appropriate mix of compliance assistance  together with monitoring and enforcement efforts to achieve regulatory  outcomes.\nBased on our review of relevant academic literature, there are multiple  tools available to agencies to elicit compliance, although agencies  traditionally use two tools to achieve their objectives. The first,  compliance assistance, helps regulated entities understand and meet  regulatory requirements. For example, an agency may consider providing  assistance through educational materials and outreach to promote  compliance among regulated entities. The second, the use of monitoring,  enforcement, and data reporting, ensures that regulations are followed  and deters noncompliance. Agencies may also supplement these  traditional approaches with options that provide more accommodating  and flexible opportunities to promote compliance among regulated  entities, such as developing cooperative programs or providing onsite  consultation services. Table 3 identifies some of the options by which  agency officials may accomplish their regulatory goals.\nAs described in table 3, agencies use compliance assistance tools, such  as education and consultation, to ensure that regulated entities  understand regulatory requirements and provide examples of how to  comply. One way that agencies do this is by providing regulatory  guidance to regulated entities in the forms of Frequently Asked  Questions, tools, or factsheets. We reported in 2015 that agencies used a  wide variety of guidance to interpret new regulations and clarify policies in  response to questions or compliance findings. However, we have also  recommended that selected agencies could further help regulated entities  comply, and agencies have implemented those recommendations by  offering further clarifications and guidance. The selected  subcomponents that we reviewed employed a variety of compliance  assistance activities. For example:\nFSIS provides compliance guidance and makes training materials  available to its regulated entities, such as meat, poultry, and egg  product plants, and maintains help desks to provide technical  assistance to its regulated community.\nBIS holds domestic and international seminars, provides online and  in-person trainings, responds to inquiries submitted online, issues  industry advisory opinions, and works with other federal agencies to  provide immediate error alerts to filers using their Automated Export  System.\nFDA provides web-based, in-person, and telephone education and  outreach; hosts webinars, public meetings, and stakeholder meetings;  and posts training videos and blogs. For example, the agency  established a central source of information for questions related to its  2011 Food Safety Modernization Act rules, programs, and  implementation strategies.\nRegulatory agencies also engage in enforcement activities such as  inspections, monitoring reported data, and issuing fines when  noncompliance is identified. The selected agencies we reviewed reported  using criteria such as data, compliance history, and trends in  noncompliance to identify risks and more efficiently target enforcement  activities. For example:\nOSHA conducts two types of inspections\u2014\u201cun-programmed\u201d and  \u201cprogrammed\u201d\u2014to target resources for the 8 million workplaces it  regulates. Un-programmed inspections respond to specific complaints  or injuries, while programmed inspections target resources towards  specific high-risk industries and employers.\nFSIS officials analyze noncompliance trends for its food safety  process control regulations at meat, poultry, and egg processing  facilities and send inspection officials \u201cearly warning\u201d alerts when the  establishments they inspect reach certain noncompliance rates.\nAPHIS\u2019s Animal Care program uses its Risk Based Inspection System  to conduct more frequent and in-depth inspections at facilities with a  higher risk of animal welfare concerns, and fewer at those that are  consistently compliant. The system uses criteria, such as past  compliance history and the seriousness of documented  noncompliance, to determine minimum inspection frequencies for  licensed and registered facilities.\nThe selected agencies also reported supplementing traditional  compliance assistance and enforcement approaches with other tools,  including:\nCooperative programs: OSHA uses multiple cooperative programs  to recognize employers who have introduced health and safety  initiatives at their worksites that exceed requirements. OSHA\u2019s  Voluntary Protection Program rewards employers that exceed worker  safety requirements through an exemption from routine inspections  while they maintain their status in the program. Participating  employers are reevaluated every 3 to 5 years. OSHA uses its  Challenge Program to partner successful employers as mentors for  employers who are attempting to improve their safety and health  programs. The Centers for Medicare and Medicaid Services\u2019 (CMS)  Skilled Nursing Home Facilities Value Based Purchasing Program is  authorized to use incentive payments to recognize nursing homes that  exceed minimum standards of quality.\nOnsite consultation services: OSHA works with state governments  to provide onsite consultation services to small- and medium-sized  businesses. These consultations assist employers to identify potential  hazards and improve their injury and illness prevention programs.  MSHA offers compliance assistance and outreach through \u201cwalk and  talks\u201d during which MSHA inspectors and education outreach staff  provide mine operators and miners with information on hazardous  tasks and conditions, as well as offer best practices to prevent  accidents, injuries, and fatalities.\nVoluntary disclosures: FAA implements a number of voluntary  reporting programs. For example, its Flight Operational Quality  Assurance program allows commercial airlines and their employees to  anonymously report incident information. The agency then uses this  information to monitor trends and target resources. BIS encourages  parties who believe they may have violated its export regulation to  self-disclose. Officials then review the disclosure to determine if a  violation has occurred and to identify the appropriate corrective action.  BIS views a self-disclosure as an indicator of a party\u2019s intent to  comply with its requirements. EBSA\u2019s Voluntary Fiduciary Correction  Program and Delinquent Filer Voluntary Correction Program  encourage voluntary compliance by allowing plans and plan  fiduciaries to self-correct certain violations and by offering relief from  higher civil penalty assessments.\nThird-party certification: EPA OCSPP\u2019s formaldehyde emissions  rules require foreign and domestic wood mills to receive a third party  certification that certain wood products meet defined standards. EPA  must approve the third parties that certify the products.\n\n\t\tSelected Agencies Reported Considering Multiple Factors and Take Different Approaches to Allocating Resources to a Mix of Compliance and Enforcement Tools\n\nAgencies generally have flexibility in making decisions on and allocating  resources for a mix of compliance assistance and enforcement strategies.  However, some selected agencies reported that statutory requirements,  programmatic constraints, and changing priorities affected how they  allocated resources for compliance and enforcement activities. For  example:\nMSHA must prioritize available resources to fund inspections because  they are required by law to inspect every underground mine four times  a year and every surface mine twice each year. Once those  resources have been allocated for inspection, any additional  resources may then be used for compliance related activities.\nFSIS\u2019 allocation of resources is similarly constrained because it is  statutorily required to be present at every meat, poultry, and egg  product facility whose product enters into commerce in order for the  facility to operate.\nAPHIS is programmatically constrained in allocating resources  between enforcement and compliance assistance because another  federal department enforces some of their promulgated regulations,  and thus determines compliance resources and approaches. The  agency\u2019s Agricultural Quarantine Inspection program inspection  activities are performed by Customs and Border Protection within the  Department of Homeland Security.\nThe type and behavior of regulated entities also affects selected agency  decisions on strategies to achieve compliance. The characteristics of  regulated entities\u2014such as the hetero- and homogeneity of the regulated  community and frequency of interaction with agency officials\u2014may inform  agency compliance assistance and enforcement resource decisions.  Some of the selected agencies described frequent interaction with  regulated entities that were homogeneous or easily identified. As a result,  officials said it is easier for their agencies to ensure that regulated entities  are aware of applicable requirements, and that there may be less need to  invest in compliance assistance. For example, the operators of the  pipelines PHMSA regulates are a small and well known community.  Similarly, FSIS inspectors must be present at each meat, poultry, or egg  products facility, at frequencies determined by the type of operation being  conducted, for it to function. MSHA inspects a fixed number of mines, and  its inspectors are often onsite; however, MSHA officials stated that some  mines are better at complying with health and safety standards than other  mines.\nIn contrast, large and heterogeneous communities present different  needs and considerations that may inform agencies\u2019 compliance  assistance and enforcement resource decisions. When regulated entities  are less likely to engage with inspectors or other federal officials,  agencies\u2019 decisions on allocating resources to ensure all regulated  entities understand requirements and to elicit voluntary compliance are  important. As previously discussed, OSHA regulates and monitors a large  and diverse community of regulated entities. EBSA monitors  approximately 685,000 private retirement plans and 2.2 million health  plans, and similar numbers of other welfare benefit plans. CMS regulates  more than 15,000 large and small nursing home facilities across the  country. In contrast to its pipeline-related regulations, PHMSA also  regulates a broad spectrum of transportation operators and hazardous  materials, requiring a different approach to disseminating information and  providing outreach.\nAt the selected agencies we reviewed, agency officials told us that the  main objective of their regulatory enforcement efforts is to achieve  compliance with regulatory requirements. The selected agencies we  reviewed took different approaches to achieve compliance, and used  compliance and enforcement tools to escalate pressure to get regulated  entities to comply. For example, FDA officials told us that when the  agency identifies noncompliance, it may not immediately sanction a  regulated entity. Rather, the agency may begin with a meeting or call with  the regulated entity to address the noncompliance, and gradually  implement more serious regulatory compliance measures (such as a  negative inspection report or warning letter) or even seek an injunction  from the relevant court(s) if it cannot resolve the noncompliance.\nAPHIS also uses a range of compliance assistance activities to promote  compliance and reserves its enforcement authority for the most serious  situations and noncompliance. For example, APHIS officials told us it  offers facilities struggling to maintain compliance the opportunity to work  with trained compliance specialists to develop options and plans to  promote future compliance. PHMSA officials told us the agency uses the  Systems Integrity Safety Program as a non-adversarial tool that provides  compliance assistance to regulated entities not currently in compliance.  They said that the agency generally will not initiate enforcement actions  against regulated entities enrolled in this program, but will pursue them if  there are violations that PHMSA believes to be willful, and where a safety  violation presents an imminent hazard.\nDespite a common objective to elicit compliance, selected agency  approaches to resource allocations for compliance and enforcement  differ. While some agencies consider allocations for compliance and  enforcement to implement each individual regulation, others allocate  resources across regulations and regulatory programs. For example,  Labor allocates compliance assistance and enforcement resources for  individual regulations depending on multiple factors, such as the nature of  the regulation and underlying subject matter. In contrast, EPA allocates  resources across regulations, programs, and regions. Its Office of  Enforcement and Compliance Assurance works with each regional office  to allocate enforcement and compliance assistance resources for the  various programs across EPA.\nIn addition, certain agencies we reviewed distinguish between compliance  assistance and enforcement activities, while others view these activities  as a joint effort. For example, EBSA allocates its resources between  benefits advisors, who provide compliance assistance, and their  enforcement staff. Conversely, OSHA inspectors provide compliance  assistance to regulated entities in addition to their enforcement roles,  supplementing onsite outreach and education provided by compliance  assistance specialists located in regional offices.\nTo appropriately allocate their enforcement and compliance resources,  selected agencies we reviewed also collect and review data to identify  noncompliance trends. For example:\nOSHA uses collected data to identify national and local special  emphasis programs to highlight specific workplace health and safety  issues as the focus of targeted outreach and enforcement efforts.\nEBSA\u2019s national office annually establishes enforcement priorities\u2014 and shifts resources to respond with new emphases\u2014through its  guidance outlined in its Enforcement Program Operating Plan. In  preparing this guidance, EBSA assesses current enforcement  activities, identifies recent enforcement trends, analyzes available  information regarding industry activities and areas of noncompliance,  and reviews current policy considerations to identify possible areas of  potential risk within the employee benefit plan industry.\nEPA officials told us they use their National Enforcement Initiatives to  prioritize resources to compliance concerns that are particularly  entrenched or problematic. Further, EPA initiated its Next Generation  Compliance (NextGen) strategy to structure regulations and permits  with new monitoring and information technology, expanded  transparency, and innovative enforcement activities. NextGen was  designed to increase transparency and real time information made  possible by electronic reporting and advanced monitoring, and allows  the agency and its stakeholders the opportunity to experiment with  innovative approaches. Furthermore, EPA stated that it and its  stakeholders are better able to identify and solve environmental  issues, and address large regulated communities with approaches  that go beyond traditional single facility inspections and enforcement.\n\n\t\tSelected Agencies Have Made Efforts to Make Compliance Data Transparent and Accessible\n\nTransparency and availability of data are important to promoting  compliance and achieving regulatory objectives. The selected agencies  that we reviewed have made efforts to make compliance and  enforcement information more transparent and accessible to the public,  including:\nAll the Labor subcomponents we reviewed made efforts to make data  and information more publically accessible. MSHA developed online  compliance tools that allow the public to monitor a mine\u2019s compliance  with key safety and health standards by providing a broad range of  mine safety and health data, including information about mine  inspections, accidents, injuries, illnesses, violations, employment,  production totals, and air sampling. One of these tools is the \u201cRules to  Live By Calculator,\u201d which focuses on the 49 safety standards most  often associated with fatal mining accidents and serious injuries.\nEPA\u2019s Enforcement and Compliance History Online (ECHO) database  provides integrated compliance and enforcement data for over  800,000 regulated facilities on air emissions, surface water  discharges, hazardous waste, and drinking water systems. The  database includes EPA, state, local, and tribal environmental agency  compliance and enforcement records that are reported into national  databases. ECHO also incorporates EPA environmental data sets to  provide additional context for analyses.\nCMS created a \u201cNursing Home Compare\u201d website to assist  consumers in comparing information about nursing homes. The  website contains detailed information on the quality of care and  staffing information for more than 15,000 Medicare- and Medicaid- participating nursing homes including a five-star scale of quality  ratings of overall and individual performance on health inspections,  quality measures, and hours of care provided per resident by staff  performing nursing care tasks.\n\n\tSelected Agencies Reported They Evaluated Regulatory Decisions by Collecting Feedback, and Responses to Identified Noncompliance Varied\n\n\t\tSelected Agencies Supplement Feedback on Effectiveness of Regulatory Design and Enforcement Approaches with Evaluations\n\nWhile agency officials receive feedback on their regulations during  rulemaking, they also have opportunities to receive feedback during  implementation of the regulation and as part of later retrospective review  efforts. In 2007 and 2014, we reported on retrospective reviews of  individual regulations, which agencies use to evaluate how existing  regulations work in practice. As mentioned previously, two executive  orders issued in 2017 also emphasize the importance of retrospective  review, and officials from two agencies told us that they are currently  examining their regulatory evaluation processes in response to these  directives. To supplement retrospective review efforts, officials told us that  they collect feedback from both internal and external stakeholders on the  effectiveness of their regulatory design and enforcement decisions. This  feedback may occur during rulemaking or during implementation, and  might prompt changes. For example:\nEPA officials told us they provide opportunities for regulated entities to  give feedback, and that they may reconvene the initial Regulatory  Working Group for a rule if they heard complaints or concerns.\nAt DOT, FAA officials told us they collect feedback about potential  needs to update or change rules through requests for exemptions and  through their various advisory committees. According to PHMSA  officials, advisory committee inputs or petitions are two ways they  evaluate the success of their regulations.\nMSHA officials told us that in response to comments received during  rulemaking, they changed their rule on proximity detection systems for  continuous mining machines, which protects miners from being struck  by such machines. MSHA initially proposed specifying certain  requirements for a technology but used a performance-based  approach in its final rule. This experience subsequently informed  MSHA\u2019s proposed design for its new rule for proximity detection  systems for mobile machines, in which the agency proposed a  performance standard from the outset of the rulemaking.\nA BIS enforcement official told us that his office requested a revision  to an existing regulation that was difficult to enforce because it did not  provide clear requirements for how companies could determine when  a government-identified \u201cred flag\u201d\u2014a party on BIS\u2019 Unverified List\u2014 could be resolved. BIS received similar feedback from advisory  committees and revised the regulation for clarity.\nAccording to APHIS officials, they evaluate the effectiveness of their  compliance and enforcement activities by tracking compliance rates  under the Animal Welfare Act and through feedback from their  regulated entities. USDA officials also stated that interactions with  inspectors and listening sessions provide the department\u2019s agencies  with feedback.\nSelected agency officials cited concerns about changing the design of  established regulatory programs and the resources required for the rulemaking process. Two of our selected agencies mitigated these  concerns by piloting new regulatory designs. USDA implemented an  ongoing project\u2014the HACCP Inspection Models Project\u2014to assess the  viability of applying potential performance-based regulations to ensure  food safety at hog and poultry processing facilities. After assessing  inspection findings for the poultry pilot project and in response to public  comments on the program, they ultimately determined that the regulation  should be broadened to additional facilities. FAA used feedback from  pilot studies, in which more than 30 public-use airports participated, to  inform a proposed rule for Airport Safety Management Systems.\nAgencies also typically have flexibility to continue to change and adjust  their compliance and enforcement strategies in response to feedback and  evaluation without going through the rulemaking process to amend a final  regulation. As previously mentioned, agencies assess the effectiveness of  their enforcement and compliance efforts by collecting data to target their  enforcement efforts. In addition, selected agencies identified evaluations  of their enforcement and compliance efforts, including:\nDOL\u2019s Chief Evaluation Office officials told us they work with Labor  components to (1) develop and implement research studies, (2)  address how collected information is used to assess effectiveness,  and (3) support data analysis to inform management decision making.  For example, the office worked with OSHA to pilot changes to issuing  and following up citations to increase employer responsiveness. The  study, which began in 2015, found that employers who were part of  the new citation process, which included elements such as a handout  during inspections, postcard reminders, and a follow-up call, were 3.9  percentage points more likely to engage with OSHA.\nEPA\u2019s Office of Enforcement and Compliance Assistance wrote a  guide for EPA managers and staff on their integrated strategic  approach to effectively eliciting compliance, focusing on compliance  assistance, incentives, monitoring, enforcement, and other tools.  EPA has also conducted research on what makes a regulation more  likely to be complied with and identified principles and tools to aid in  writing more effective regulations. For example, EPA directs rule  drafters to use clear and objective regulatory requirements and  applicability criteria, to structure regulations to make compliance  easier than noncompliance, and to leverage regulated entities and\/or  third parties to assess compliance and prevent noncompliance. It also  encourages agency officials to leverage accountability and  transparency through e-reporting to government and public access to  data on websites.\nAccording to PHMSA officials, they developed formal enforcement  goals, strategies, and metrics after reviewing leading practices for  enforcement, including reviewing the compliance strategies at other  DOT subcomponents. They analyzed data to identify commonalities  between violations that are causal to incidents, as well as those that  increased the severity of incidents. They also reviewed enforcement  data to identify guidance that needs to be improved, provide feedback  to inspectors, and ultimately provide ideas for improved rulemaking  and regulatory design.\n\n\t\tSelected Agency Responses to Continued Widespread Noncompliance Varied\n\nSelected agencies responded differently when they identified continued  widespread noncompliance through their evaluations or monitoring of  compliance data. Some agencies told us they view a record of  noncompliance as a fault in the regulation and may update their  regulatory design, while others may change compliance strategies. FSIS  officials told us they use enforcement data to analyze the effectiveness of their regulations, and may make changes to their regulations based on  trends in noncompliance. According to PHMSA officials, they analyze  enforcement data in several ways, including identifying regulations with  the highest rates of noncompliance to understand weaknesses in  individual regulations.\nMSHA officials told us that when an Inspector General audit found that its  enforcement actions were not strong enough for repeat violators, the  agency updated its Pattern of Violations regulation to better attain  compliance. Conversely, OSHA officials told us that they view persistent  noncompliance or workplace injuries and illness as indicating a need to  revisit and readdress how compliance assistance is being provided and  enforcement applied, rather than as a reason to adjust the regulation.  EPA officials told us that they will update an existing regulation to solve  an ongoing compliance problem only as a last resort due to the large  resource investment required and disruption to regulated entities to adapt  to changes in regulatory design.\n\n\tKey Considerations Could Strengthen Agency Regulatory Design and Enforcement Decisions\n\nWe built upon current statutory and executive requirements and selected  agencies\u2019 current practices to identify key considerations to strengthen  agency processes for regulatory design and enforcement decisions. As  agency officials craft regulations, they are guided by high-level statutory  requirements, economic principles in executive orders, and OMB  directives and resources. In accordance with those directives, our  selected agencies have implemented varied practices to facilitate their  regulatory design and enforcement decisions. Based on our review of  those directives and the selected agencies\u2019 processes, as well as  academic and practitioner research, past IG work and our own past work,  and existing criteria and resources for federal managers, we identified key  considerations for regulatory design and compliance to aid decision  makers in designing\u2014or redesigning\u2014their regulations and determining  how best to elicit compliance.\nThe following key considerations for regulatory design and compliance in  figure 1 are intended to serve as a resource to supplement existing  directives and guidance. We identified these considerations to bridge the  gap between high-level directives and current agency practices. These  considerations can provide criteria for decision makers to identify, assess,  and evaluate options for achieving their regulatory objectives. Further, we  have offered elements for each consideration as concrete questions that  agencies can ask themselves as they design their regulatory approaches  to elicit compliance within statutory authority and available resources. Not  all considerations are applicable in every instance. We recognize there  are tradeoffs inherent in any choice, but we believe that these key  considerations can strengthen agency decision making, resulting in more  informed designs, plans for evaluations, and ongoing changes to  compliance and enforcement approaches.\nWe provided a draft of this report to the Secretaries of Agriculture,  Commerce, Health and Human Services, Labor, and Transportation, the  Administrator of the Environmental Protection Agency and the Director of  the Office of Management and Budget for comment. The Departments of  Agriculture, Health and Human Services, and Labor and the  Environmental Protection Agency provided technical comments that were  incorporated as appropriate. The Departments of Commerce and  Transportation and the Office of Management and Budget did not provide  comments.\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 send copies to the appropriate  congressional committees, the Secretaries of Agriculture, Commerce,  Health and Human Services, Labor, and Transportation; the Administrator  of the Environmental Protection Agency; the Director of the Office of  Management and Budget; and other interested parties. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-6806 or krauseh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II.\n\nAppendix I: Objectives, Scope, and Methodology\n\nYou asked us to review how agencies make key decisions related to  regulatory design, compliance and enforcement, and updating of  regulations. This report describes how selected agencies report (1)  making decisions on regulatory designs among available options, (2)  making decisions to designate resources among available compliance  and enforcement activities, and (3) evaluating those decisions, and also  identifies (4) key considerations for decision makers related to regulatory  design and enforcement.\nTo describe agency experiences and decisions regarding regulatory  design and compliance and how they evaluate those decisions, we  reviewed regulatory processes at 6 departments and 13 subcomponents  within those departments. To illustrate a wide range of regulatory designs  and resulting compliance activities, we selected the six executive branch  departments\u2014excluding the Department of Defense\u2014that promulgated  the most significant regulations between September 1, 2011 and August  31, 2016. These departments were the United States Departments of  Agriculture (USDA), Commerce (Commerce), Health and Human  Services (HHS), Labor (Labor), and Transportation (DOT), and the  Environmental Protection Agency (EPA). Among other inputs, the  selected departments were also among those that most often  promulgated regulations that were anticipated to affect small entities  (such as small businesses, nonprofits, and governments) during the same  time period. We used reginfo.gov to identify the number of significant  regulations. We assessed the reliability of those data by reviewing  relevant documentation, interviewing knowledgeable agency officials, and  electronically and manually testing the data for missing values, outliers,  and invalid values, and we found the data to be sufficiently reliable for the  purpose of identifying selected departments. The experiences of these  selected executive branch departments are illustrative and  nongeneralizable.\nFrom these departments, we selected subcomponents for  nongeneralizable case studies. These subcomponents were selected  based on information provided by department officials engaged in  regulatory activities on their departmental subcomponents\u2019 use of a  variety of regulatory designs and any experience making changes to their  regulatory design or compliance strategies based on new information  (such as evaluations) or new circumstances (such as evolving  technologies or changes in agency resources for compliance). We also  asked department officials about subcomponents\u2019 use of compliance  activities other than traditional compliance assistance and enforcement.  To further inform our selection of subcomponents, we reviewed past  Inspector General and our own work on types of regulatory designs and  compliance strategies. We did not include independent regulatory  agencies in our scope as they are not subject to directives from the Office  of Management and Budget\u2019s (OMB) Office of Information and Regulatory  Affairs. Furthermore, many independent agencies promulgate and  administrate financial regulations, which present different considerations  and have been the focus of other work we performed. In reviewing  enforcement strategies used by agencies, we did not review federal  regulatory programs for which enforcement has been delegated to states  or localities.\nTo illustrate how our selected agencies make decisions regarding  regulatory design and compliance and how they evaluate those decisions,  we reviewed agency written procedures and interviewed department and  subcomponent officials on their practices for making these decisions. To develop themes and examples from our documentary and testimonial  evidence, we analyzed information from relevant documents and  interviews to identify and confirm common patterns as well as differences  across selected agencies. These experiences illustrate how the selected  agencies currently make these decisions, the outcomes of those decision- making processes, and their evaluation practices.\nTo identify key considerations for decision makers related to regulatory  design and enforcement, we reviewed existing criteria documents,  including (1) elements of the Regulatory Flexibility Act; (2) applicable  executive orders and guidance such as Executive Order 12866 and OMB  Circulars A-4, A-11, and A-123; and (3) resources for federal managers,  and leading practices we had previously reported on for enterprise risk  management.\nTo ensure that our considerations incorporated applicable academic and  government research and findings we conducted a literature review. Our  literature review incorporated searches of several academic, literature,  and government sources\u2014including bibliographic databases such as  ProQuest, Scopus, Academic OneFile, Public Affairs Information Service,  and LexisNexis\u2014for articles or studies published from January 2011  through August 2016. The team searched for articles using several  combinations of relevant key words such as: \u201cregulatory design,\u201d  \u201cregulatory structure,\u201d \u201cregulatory compliance,\u201d and \u201cregulatory  enforcement.\u201d We then identified the articles that were relevant to our  objectives based on the independent review of two team analysts. In  addition, we searched our own and selected federal Inspector General  websites for any reports relevant to our objectives. These searches were  not meant to be a comprehensive search of all available literature on the  topic, but rather conducted to identify relevant work to inform our  identification of key regulatory design and enforcement considerations for  decision makers.\nWe developed a data collection instrument for each of the academic and  government literature search sources and our own reports. To analyze  and summarize the results of the academic literature search, two analysts  independently reviewed each relevant record in the search results to  document information that was relevant to our objectives and to identify  key themes to inform our key considerations. We reviewed all relevant  articles and reports and summarized information in the data collection  instrument that related to the following topics: regulatory design;  regulatory design principles; enforcement and compliance; enforcement  and compliance principles; regulatory or subject matter area; and general  observations that were relevant to the engagement\u2019s objectives. In  addition, we reviewed the annotated citations and references in selected  articles to identify additional articles to include in the literature review and  ensure that we were not omitting key literature related to regulatory  design and enforcement.\nAfter applying identified criteria\u2014including key practices and elements of  those practices\u2014to decision making about regulatory design and  compliance, we obtained input on those considerations with officials from  our selected agencies and with subject matter specialists. We initially  selected and interviewed relevant specialists based on the results of our  literature review (i.e., the authors of relevant articles or books included in  our review). Based on suggestions from those individuals, we expanded  our list of specialists and conducted a second round of interviews,  ultimately speaking with 14 specialists. These considerations were also  refined by the current practices and approaches of the selected agencies  we reviewed.\nWe conducted this performance audit from August 2016 to October 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nHeather Krause at (202) 512-6806 or krauseh@gao.gov.\n\n\tAcknowledgments\n\nIn addition to the contact named above, key contributors to this report  were Tim Bober, Assistant Director, Alexandra Edwards, Danny Berg,  and Travis Hill. In addition, John Hussey, Timothy Guinane, Andrea  Levine, Kayla Robinson, Robert Robinson, and Cynthia Saunders  provided key assistance.","output":"Why GAO Did This Study\n\nWithin the limits of their statutory authority, agencies may design their regulations in different ways to achieve intended policy outcomes. Agencies also decide how they will promote compliance with their regulations and ensure that regulated entities are informed of regulatory requirements.\nGAO was asked to review how agencies make regulatory design and enforcement decisions. This report describes how selected agencies report (1) making decisions on regulatory designs among available options, (2) making decisions to designate resources among available compliance and enforcement activities, and (3) evaluating those decisions, and also identifies (4) key considerations for decision makers related to regulatory design and enforcement. To describe how agencies make and evaluate these decisions, GAO reviewed regulatory processes and spoke with officials at six executive departments\u2014the Departments of Agriculture (USDA), Commerce, Health and Human Services (HHS), Labor (Labor), and Transportation and the Environmental Protection Agency (EPA)\u2014based on volume of significant rulemaking, and 13 subcomponents within those departments. To identify key considerations for regulatory decision makers, GAO reviewed existing criteria, including statutory and Executive requirements, conducted a literature review, and obtained input on identified considerations with subject matter specialists.\nGAO is not making any recommendations in this report. USDA, HHS, Labor, and the EPA provided technical comments that were incorporated as appropriate.\n\nWhat GAO Found\n\nAgencies have multiple available regulatory designs. Selected agency processes for choosing among them are informed by statutory and Executive requirements, regulatory objectives, and statutory discretion. Officials reported a preference for \u201cperformance\u201d designs that establish an outcome but allow flexibility in how to achieve it, but stated that in some cases their objectives could require use of more prescriptive \u201cdesign-based\u201d regulations that specify a certain required technology or action. Officials at all selected agencies stated that they discuss potential regulatory designs internally, but some agency processes also included practices such as documentation of identified design options and assessments of the options' risks and enforcement implications.\nSelected agencies used multiple tools and approaches for allocating resources to elicit compliance. Agencies generally have flexibility to use a mix of tools, including providing compliance assistance to help regulated entities understand requirements, and monitoring and enforcement through inspections. Selected agency processes to allocate compliance resources vary, and agencies reported using collected data to target enforcement resources to address risks.\nSelected agencies supplemented feedback on effectiveness of their regulatory design and enforcement approaches with evaluations, which agency officials said could prompt changes. When agencies identify noncompliance, selected agencies may update their regulation or their compliance strategy.\nGAO identified key considerations to strengthen agency decisions related to regulatory design and enforcement (see figure). These build on current directives, academic research, and the experiences of selected agencies and are intended to serve as a resource for decision makers in designing\u2014or redesigning\u2014their regulations and determining how best to elicit compliance."}
{"id":"crs_R44668","pid":"crs_R44668_0","input":"\tIntroduction\n\nThe Temporary Assistance for Needy Families (TANF) block grant was created by the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ). It replaced the program of cash assistance for needy families that dated back to the New Deal, Aid to Families with Dependent Children (AFDC), and some of its related programs. The enactment of the 1996 welfare reform law was the culmination of a debate about how to overhaul programs providing cash assistance to needy families with children\u2014specifically, those headed by single mothers\u2014that spanned four decades: from the 1960s to the 1990s.\nThe 1996 welfare law provided both program authority and funding (appropriations) for TANF through the end of FY2002. Most of the legislative activity on TANF since 2002 has been to extend the program funding and financing authority for TANF. Most of these extensions did not change TANF policy, though policy changes were included in extensions enacted in 2006, 2010, and 2012. The TANF Extension Act of 2019 ( P.L. 116-4 ) extended TANF funding through June 30, 2019.\nThis report will begin with a brief overview of the history of the AFDC program and the welfare reform debates of the 1960s to the 1990s. That overview will be followed by a summary of the 1996 welfare reform law and the changes made since 1996. The report concludes with a detailed chronology of TANF legislation.\n\n\tBrief History of AFDC and the Welfare Reform Debates\n\nThe modern form of cash assistance for needy families with children dates back to the Progressive Era of the early 1900s, and state- or locally funded mothers' pensions for \"fatherless\" families. The purpose of these programs was to permit these mothers to stay at home and care for their children. \nFederal funding for these programs was first provided in the Social Security Act of 1935 (P.L. 74-271) through the Aid to Dependent Children (ADC) program, later renamed the Aid to Families with Dependent Children program (AFDC). Many of the later changes, and the welfare reform debates of the 1960s to the 1990s, focused on issues of work and whether providing cash to nonworking single mothers served as disincentives for both work and marriage. \nHowever, the history of the ADC\/AFDC program touched many other facets of the well-being of children and their families. ADC\/AFDC provided federal funding for social services, medical assistance, child care, and foster care. These were later spun off into separate programs, with dedicated federal funding. While much of the focus of the welfare reform debates was on the single mother (custodial parent), ADC\/AFDC policy also touched on noncustodial parents. The Child Support Enforcement (CSE) program was created, in great part, to reimburse states and the federal government for the costs of providing assistance to single mothers, and making noncustodial fathers responsible for these costs. CSE has evolved into a program that distributes child support payments collected from noncustodial parents to custodial parents, mostly to families that have never received or are no longer receiving cash assistance.\n\n\t\tThe Early Years: 1930s to mid-1950s\n\nThe Social Security Act of 1935 (P.L. 74-271) created the social insurance programs of Old Age Benefits and unemployment compensation, where workers earned protection against lost wages because of old age and involuntary unemployment. It also created federal funding for state programs providing assistance for low-income aged persons, blind persons, and programs for needy families with children where one parent (usually the father) was unable to support the family. \nThe ADC program provided grants to the states to help finance programs to assist children who were \"deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent\" and who lived with the other parent or a relative. States ran the program and determined eligibility for its benefits. The federal government provided funding for a portion of the expenditures made in state ADC programs. \nThe legislative history of the 1935 act explicitly stated that the purpose of ADC payments was to permit mothers to stay at home rather than work:\nThe very phrases \"mothers' aid\" and \"mothers' pensions\" place an emphasis equivalent to misconstruction of the intention of these laws. These are not primarily aids to mothers but defense measures for children. They are designed to release from the wage-earning role the person whose natural function is to give her children the physical and affectionate guardianship necessary not alone to keep them from falling into social misfortune, but more affirmatively to rear them into citizens capable of contributing to society. \nThe 1935 Social Security Act left administration and many decisions about eligibility to the states. States also determined ADC benefit amounts.\nIn the early years, families receiving ADC benefits were often headed by a widow or had a disabled father. However, over time the natures of both the program and the families it aided changed. The Social Security Amendments of 1939 (P.L. 76-379) added \"survivor\" benefits to the program of old age benefits, renaming it Old Age and Survivors Insurance. Survivor benefits, like old age benefits, were social insurance benefits earned through work in a covered job and paid to spouses and children upon the death of a worker or retiree. This provided an alternative, and more universal, means of aiding widows and their children. The Social Security Amendments of 1956 (P.L. 84-881) added Disability Insurance to Old Age and Survivor Insurance, with the combined program now commonly referred to as Social Security. The 1956 amendments also expanded the types of jobs covered by Social Security. These changes, too, provided more universal means of aiding the types of families that were originally assisted by ADC.\nThe families receiving ADC increasingly were families where the father was alive but absent. The caseload also became increasingly nonwhite.\n\n\t\tThe mid-1950s to the 1960s: Self-Sufficiency and Work\n\nThe issue of whether single mothers should work was also much debated. The intent of ADC to allow single mothers to stay home and raise their children was often met with resistance at the state and local levels. It was also contrary to the reality that low-income women, particularly women of color, were sometimes expected to, and often did, work. Further, the increase in women's labor force participation in the second half of the 20 th century\u2014particularly among married white women\u2014eroded support for payments that permitted single mothers to remain at home and out of the workforce.\nThe Social Security Amendments of 1956 (P.L. 84-881) added the goals of creating \"self-sufficiency\" and strengthening family life to ADC, along with funding for services that would seek to achieve these goals. \nP.L. 87-31, enacted in 1961, first made cash assistance benefits available to families headed by two able-bodied parents at state option. This authority was temporary at first (in response to an economic downturn), but was later made permanent. In 1962, the program was renamed Aid to Families with Dependent Children. The 1962 amendments, the Public Welfare Amendments of 1962 (P.L. 87-543), also established a community work and training program for adult AFDC recipients, largely intended for men in two-parent families.\nThe Social Security Amendments of 1967 (P.L. 90-248) enacted both financial incentives for adult recipients to work and, for the first time, requirements for AFDC mothers to work. These amendments required states to disregard from a family's countable income some earnings when determining its \"need\" and benefits. The amendments also created a new work program under AFDC\u2014the Work Incentive Program (WIN)\u2014that expanded the population served by an AFDC-related work program to women.\n\n\t\tThe Late 1960s and 1970s: Negative Income Tax and Guaranteed Incomes\n\nThe late 1960s marked the beginning of the welfare reform debates, with proposals put to Congress to completely replace AFDC with a different type of program. This occurred as AFDC's costs and the number of families receiving its benefits increased. In 1964, fewer than 1 million families received AFDC. By 1973, the AFDC rolls had increased to 3.1 million families.\nFor the decade beginning in 1969, these proposals were based on the \"negative income tax\" (NIT) concept. The NIT proposals would have provided a guaranteed income to families who had no earnings (the \"income guarantee\" that was part of these proposals). For families with earnings, the NIT would have provided for a gradual reduction in the benefit as earnings increased. \nPresident Nixon proposed to replace AFDC with an NIT-type program in 1969, the Family Assistance Plan (FAP). This proposal also would have nationalized the program, with the federal government paying the income guarantee and states able to supplement the federal guarantee with their own funds. This legislation was not enacted; it passed the House twice but never passed the Senate. In 1972, the Senate Finance Committee proposed to guarantee jobs\u2014rather than income\u2014for parents of school-age children. That proposal, too, did not ultimately pass. \nPresident Carter also proposed an NIT-based cash assistance program coupled with a public service job program in 1977. President Carter's proposals died in committee (they were never reported to either the full House or Senate). A less ambitious proposal from President Carter in 1979 passed the House but did not pass the Senate.\n\n\t\tThe 1980s: Devolution and Early Experiments\n\nThe proposals to change AFDC made by President Reagan at the beginning of his Administration differed sharply from the earlier welfare reform proposals. They emphasized devolution to the states in decisionmaking, rather than nationalization. They also emphasized requirement to work, rather than work incentives. The Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) limited the earnings disregard that was enacted in 1967, ending benefits for many who were on the rolls and working. It also gave states expanded authority to require recipients to engage in community service or work experience programs (unpaid work) in exchange for their AFDC benefit. In 1982, President Reagan proposed to completely devolve cash assistance for families with children. That proposal did not pass.\nIn the 1980s, there was increasing attention to \"welfare dependency.\" Research at that time showed that while many mothers were on cash assistance for a short period of time, a substantial minority of mothers remained on the rolls for long periods. Additionally, policymakers began to focus on the possibility that a single mother who left welfare for work might be financially worse off than if she did not work and continued to collect benefits. Such a single mother, who might command relatively low wages in the labor force, risked losing medical assistance from Medicaid for herself and her children and faced work-related costs such as child care. \nThe Family Support Act of 1988 ( P.L. 100-485 ) established in AFDC the notion of mutual responsibility between the cash assistance recipient and the state. It created the Job Opportunities and Basic Skills (JOBS) Training program, which provided employment services, education, and training for cash assistance recipients. The Family Support Act also mandated that states provide benefits for two-parent families, though it was on more restrictive terms than those for single-parent families. \nThe Family Support Act also established the Transitional Medical Assistance (TMA) program that continued Medicaid coverage for a period of time for those who otherwise would have lost eligibility for Medicaid when moving from welfare to work. Further, it guaranteed child care for AFDC recipients engaged in work activities and provided time-limited (transitional) child care for those who left AFDC for work. Subsequent legislation, enacted in 1990, further expanded child care by creating a new block grant for those without a connection to AFDC, new matching funds to subsidize child care for those \"at risk\" of receiving AFDC, and a major expansion of the Earned Income Tax Credit (EITC).\nAdditionally, an era of experimentation on \"welfare-to-work\" initiatives began in the 1980s. President Reagan proposed legislation in 1987 that would have authorized states to conduct demonstration projects that could have included AFDC and any other low-income assistance programs. These demonstrations would have been overseen at the federal level by an Interagency Low-Income Opportunity Board. Though the proposed legislation was not enacted, the Reagan Administration, and subsequently the Administrations of George H. W. Bush and Bill Clinton, issued waivers of AFDC requirements under another provision of law. The experimentation on \"welfare-to-work\" initiatives found that requiring participation in work or job preparation activities could effectively move single mothers off the benefit rolls and into jobs.\n\n\t\t1992 to 1996: \"Ending Welfare As We Know It\"\n\nThe number of families receiving cash assistance had been fairly stable during the period from 1982 to 1988. However, beginning in the summer of 1989 the number of families receiving cash assistance began to increase once again.\n\n\t\t\tPresident Clinton's Proposal\n\nDuring the 1992 presidential campaign, then-candidate Bill Clinton promised to \"end welfare as we know it.\" He stressed time-limited aid and expanded financial supports for those who did go to work. The 1993 tax bill further expanded the EITC. \nPresident Clinton made his welfare reform proposal in June 1994. It would have phased in a two-year limit on AFDC receipt without work, followed by required participation in a wage-paying work program after two years. It would also have expanded funding for training within the first two years. It was estimated to increase child care costs for participants in the JOBS program or the wage-paying work program. The proposal would have barred AFDC to unwed minor mothers.\nPresident Clinton's proposal was never considered by either the House or the Senate. However, during the period before the enactment of the 1996 welfare reform law, the Administration granted waivers of AFDC law to 43 states allowing them to engage in \"welfare reform\" demonstration projects. Some of these waivers were for small-scale demonstrations, but some were for statewide demonstrations of state-designed cash assistance and work programs. \n\n\t\t\tThe Contract with America\n\nWelfare reform was one of 10 legislative initiatives that was included in the \"Contract with America,\" developed by Republicans for the 1994 congressional campaign. The welfare proposal in the Contract with America would have required recipients to work after two years of AFDC (like the Clinton Administration proposal), but it also would have imposed a lifetime five-year limit on benefits. It would have barred AFDC to unwed minor mothers and would have imposed a \"family cap,\" not increasing benefits for new babies born into AFDC families. Funding for AFDC and child care would have been capped, with states given the option to receive AFDC as a block grant. \n\n\t\t\tA Block Grant for Temporary Assistance to Needy Families\n\nH.R. 4 , as introduced at the start of the 104 th Congress, was the Contract with America proposal. However, immediately following the 1994 congressional election, House Republicans worked with several Republican governors to craft an alternative proposal that would block grant funding for AFDC and other social programs. The welfare reform legislation considered by House committees reflected the block grant proposals rather than the original H.R. 4 legislation. Legislation reported from the House committees was bundled into an omnibus welfare reform bill that included the end of AFDC and its replacement with TANF. That bill, the Personal Responsibility Act, substituting for the original text of H.R. 4 , passed the House on March 24, 1995. \nH.R. 4 , as passed by the House, formed the basis for all later welfare reform bills considered and passed by the 104 th Congress. It would have\nreplaced AFDC and related programs of Emergency Assistance, and the work and training program for AFDC recipients, with a block grant to the states for Temporary Assistance for Needy Families; allotted TANF basic block grant funds to states based on recent expenditures in AFDC and related programs; allowed states to spend their TANF grants on a broad range of benefits and services; gradually phased in a requirement that 50% of the caseload be either working or engaged in activities, but limited the ability of states to count education and training toward that target; the requirement could also be met, fully or partially, through caseload reduction (i.e., the caseload reduction credit); established a five-year lifetime limit on cash assistance; prohibited unwed minor parents from receiving cash assistance; prohibited states from increasing cash benefits when a new baby was born to a family already on the rolls (the family cap); and limited need-tested benefits for noncitizens in need-tested programs, including requiring that noncitizens be in the United States for five years before being eligible for TANF. \nThe House-passed bill also consolidated AFDC-related child care funding with the block grant created in 1990, and it increased funding for child care. However, it ended the guarantee that those transitioning from welfare-to-work be provided child care.\nThe Senate Finance Committee ordered H.R. 4 reported in May 1995. The Finance Committee bill adopted a similar structure to the House bill. Different from the House bill, however, the Senate Finance Committee bill \nwould have continued a separate employment and training program; did not include a family cap; and did not include the prohibition on benefits to unwed minor parents. \nDisputes about the committee-reported measure over items such as the distribution of funds held up consideration of the bill until August and September of 1995. Negotiations between party leaders in the Senate, Senator Robert Dole for the Republicans and Senator Thomas Daschle for the Democrats, produced an accord that also adopted the basic structure of the House bill but made some substantial modifications. The compromise bill included\na requirement that states continue to spend some of their own funds (a \"maintenance of effort,\" or MOE requirement) in order to receive their full block grant funds; supplemental grants to states with high rates of population growth and\/or low historical welfare spending per poor child; a contingency fund for states experiencing economic need; a provision to allow aid to unwed minor parents who were living in an adult supervised setting; and \"charitable choice\" provisions to permit increased participation of faith-based organizations in the delivery of welfare services.\nThe Senate passed its version of H.R. 4 on September 19, 1995.\n\n\t\t\tWelfare Reform Added to the 1995 Budget Bill\u2014First Veto of Welfare Reform\n\nFollowing passage of welfare reform legislation in the Senate, both the House and Senate began the process of crafting legislation to implement the budget adopted for FY1996. On October 17, 1995, the House Budget Committee reported its budget reconciliation bill ( H.R. 2491 ), which included the end of AFDC and its replacement with TANF. It passed the House on October 26, 1995. The Senate version of the budget reconciliation bill also generally included the Senate-passed version of the TANF proposal, and it passed on October 28, 1995. Conferees came to an agreement on the budget reconciliation bill\u2014including the welfare reform provisions\u2014on November 17, 1995. The House- and Senate-approved conference agreement was vetoed by President Clinton on December 6, 1995. President Clinton's veto message highlighted his opposition to cuts to Medicare, Medicaid, the EITC, and child nutrition programs. The President said:\nOn welfare reform, I strongly support real welfare reform that strengthens families and encourages work and responsibility. But the provisions in this bill, when added to the EITC cuts, would cut low-income programs too deeply.\n\n\t\t\tFinal Agreement on H.R. 4 and Second Veto of Welfare Reform\n\nWith the veto of the budget reconciliation bill, attention turned toward finalizing House-Senate agreements on the stand-alone welfare reform bill ( H.R. 4 ). A final conference report on H.R. 4 was filed on December 20, 1995. The final agreement included many of the modifications to TANF that were adopted in the Senate, including\na compromise maintenance of effort requirement; supplemental grants to states with high population growth and\/or low historical spending per poor child, but with limited funding; and a state option to impose a family cap.\nPresident Clinton vetoed H.R. 4 on January 9, 1996. In vetoing the bill, the President remarked:\nThe final welfare reform legislation should provide sufficient child care to enable recipients to leave welfare to work; reward States for placing people in jobs; restore the guarantee of health coverage for poor families; require States to maintain their stake in moving people from welfare to work; and protect States and families in the event of economic downturn and population growth.\nThe President also objected to budget cuts not related to the TANF proposal, such as provisions that would have cut spending in food stamps (now the Supplemental Nutrition Assistance Program), benefits for disabled children, benefits for noncitizens, school lunches, and foster care and adoption assistance.\n\n\t\tLegislation Action in 1996\n\nWith welfare reform twice vetoed, the National Governor's Association (NGA) in February 1996 adopted a policy position asking for additional child care funds, additional contingency funds for recessionary periods, and bonus payments for states that meet certain employment outcomes. In May 1996, House and Senate Republicans introduced bills that reflected the policies of the vetoed H.R. 4 and provided additional funding for child care, the TANF contingency fund, and performance bonuses.\nH.R. 3734 , the budget reconciliation bill for that year, included these welfare reform provisions together with a proposal to revise Medicaid. H.R. 3734 passed the House on July 18, 1996. The Senate made a key modification to the bill by dropping its Medicaid provisions. The welfare reform provisions remained in H.R. 3734 , and it passed the Senate on July 23, 1996. A conference agreement on the bill was filed July 30, 1996; it passed the House on July 31, 1996, and the Senate on August 1, 1996. \nPresident Clinton signed the legislation, known as the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ), into law on August 22, 1996.\n\n\tMajor Differences Between AFDC and TANF\n\nThe 1996 welfare reform law repealed AFDC and some of its related programs and replaced it with the TANF block grant. Funding for the AFDC-related child care programs was consolidated into a separate funding stream dedicated to child care. Some things did not change with the 1996 law. As was the case with AFDC, TANF programs are run by states (and sometimes localities), and they determine the maximum benefits under the programs and set the income eligibility thresholds. \n Table 1 summarizes some of the major differences between AFDC and TANF. It should be noted that at the time of enactment of the 1996 law many states were operating under waivers of the AFDC rules that related to cash assistance. These waivers imposed time limits, set different rules for counting earnings than did the AFDC federal rules, and set different rules for work or participation in job activities. TANF permitted states to continue programs operated under waivers, even if the provisions of the waiver were inconsistent with TANF rules. The last of these waivers expired in 2007.\n\n\tOverview of Post-1996 TANF Legislation\n\n\t\tBalanced Budget Act of 1997\n\nThe Balanced Budget Act of 1997 (BBA97, P.L. 105-33 ), enacted one year after the 1996 welfare reform law, made a number of changes to TANF. It created a program providing additional funding dedicated to financing work activities. The Welfare-to-Work Grant program (WTW) provided $3 billion for two years, FY1998 and FY1999. Under the program, funding was divided, with 75% provided to states and local workforce areas through a formula and 25% dedicated to competitive grants. The program was originally targeted at the hardest to serve population on TANF and similarly disadvantaged noncustodial parents. The WTW grant program was administered by the Department of Labor (DOL), not the Department of Health and Human Services (HHS), which administers TANF. Subsequent legislation relaxed requirements for targeting services to the hardest to serve, and as funds were spent more slowly than anticipated, the deadline for expenditures was extended.\nThe BBA97 made several other permanent changes to TANF, including\npermitting a greater percentage of recipients to be counted as engaged in work through education and training, but retaining a limit on counting such participation; setting a statutory limit on transfers from TANF to the Social Services Block Grant at 10%; and making technical corrections to the 1996 welfare reform bill, including technical corrections to TANF.\n\n\t\tAttempts at Reauthorization: 2002-2005\n\nIn February 2002, President George W. Bush made proposals for the reauthorization of the TANF block grant and related welfare reform proposals. The document, Working for Independence, outlined a five-year reauthorization that would have \nfunded the basic TANF block grant at the same level provided from FY1997 through FY2002 for an additional five years; provided mandatory child care funding through FY2007 at its FY2002 level (with no inflation or other adjustment over the period FY2003-FY2007); provided dedicated funding for grants to promote healthy marriage; raised the work participation standard to a minimum of 70% of families with a \"work-eligible individual\" that must be working or engaged in activities; required 40 hours per week of work or engagement in activities for full credit toward meeting the standard, but allowed for partial credit for hours less than 40 hours per week; allowed states to count rehabilitative activities for three months on the rolls, but narrowed the activities that counted after three months to work or community service or work experience; and ended the caseload reduction credit against the work standards, replacing it with a credit for recipients who left the rolls for work.\nThe Bush Administration proposals were incorporated (with some modifications) into bills that passed the House in 2002 and 2003: H.R. 4737 (107 th Congress) and H.R. 4 (108 th Congress). A major difference between the Bush Administration proposal and the House proposals of 2002 and 2003 was that the House proposals retained the caseload reduction credit and provided extra credit to states that had large historical caseload reductions. Following House action, the Senate Finance Committee reported substantially differing versions of each bill. The Senate Finance Committee bills did not narrow the activities that could be counted toward the work participation standard after three months, and they expanded the ability of states to count participation in rehabilitative activities toward the TANF work participation standard. The Senate Finance Committee bills would have replaced the caseload reduction credit with a credit based on employed leavers, families diverted from the rolls, and families receiving work supports. The full Senate never acted on either of the Senate Finance Committee-reported bills.\nIn the absence of reauthorization legislation, TANF program and funding authority was extended on a temporary basis 13 times from 2002 to 2006.\n\n\t\tThe Deficit Reduction Act of 2005\n\nThe early part of 2005 again saw committee action on legislation to reauthorize TANF. On March 9, 2005, the Senate Finance Committee ordered reported legislation that became S. 667 (109 th Congress). The following week, the House Ways and Means Committee's Subcommittee on Human Resources considered H.R. 240 and sent it to the full committee. However, further action on TANF reauthorization did not occur until the fall of 2005, when the House and Senate began considering legislation under the budget reconciliation process.\nThe House passed as part of their reconciliation bill (the House amendment to S. 1932 ) the TANF reauthorization bills that essentially incorporated the proposals passed by the House in 2002 and 2003 and were contained in H.R. 240 . The Senate version of the reconciliation bill contained no TANF provisions.\nThe conference report on the budget reconciliation bill included TANF provisions different from those that passed the House. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) included (1) a long-term extension of TANF funding, through the end of FY2010; (2) the elimination of performance bonuses to states; (3) the establishment of a $150 million fund for research and competitive grants on healthy marriage and responsible fatherhood, with $100 million per year for healthy marriage initiatives and $50 million per year for responsible fatherhood initiatives; and (4) changes to TANF work rules, such as counting caseload reduction only from 2005 (rather than 1995) toward the work participation standards, requiring HHS to define specific work activities that may count for each listed statutory work activity, and requiring that states verify work activities of recipients. The DRA also included an increase in mandatory child care funding from $2.717 billion per year to $2.917 billion per year.\nThe conference report on the DRA passed the House on December 19, 2005. Congress finished reconciling differences between the two chambers in February 2006. President Bush signed the DRA into law as P.L. 109-171 on February 8, 2006.\n\n\t\tAmerican Recovery and Reinvestment Act of 2009\n\nThe economy entered into a recession after December 2007, with a major financial crisis and accelerating job loss occurring in late 2008. In response, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) passed Congress and was signed by President Obama. ARRA included tax cuts; unemployment insurance provisions; and extra funding for programs, including provisions to provide fiscal relief to states. \nARRA also included $5 billion for a new TANF Emergency Contingency Fund (ECF) available to be spent in FY2009 and FY2010. The ECF supplemented funding for the regular TANF contingency fund, which itself was depleted in early FY2010. The ECF reimbursed states for 80% of the cost of increased expenditures for basic assistance, short-term emergency aid, and subsidized employment. ARRA also temporarily froze the TANF caseload reduction credit at prerecession levels, through its application to the FY2011 work participation standards.\n\n\t\tTANF Legislation from 2010 to 2019\n\nThe long-term extension of TANF enacted in the DRA expired at the end of FY2010 (September 30, 2010). Since then, Congress continued TANF program authority and funding through a series of short-term extensions. TANF extensions have been incorporated into stop-gap continuing resolutions or omnibus appropriations bills to fund all or most of the government, added to tax bills, added to unrelated legislation, or passed as stand-alone legislation. (As used in this report, stand-alone legislation represents laws enacted that addressed only TANF and related programs.) There were two gaps in funding for TANF during this period. Funding lapsed during broader \"government shutdowns\" in October 2013 and beginning in December 2018. States were permitted to draw on unspent, previously appropriated TANF funds to finance their TANF activities during the shutdown. \nWhile many of the short-term extensions of TANF funding did not make changes to TANF policy, three extension laws did\nThe Claims Resolution Act of 2010 (CRA, P.L. 111-291 ), a bill to settle claims against the federal government for certain Indian tribes, included a TANF extension through the end of FY2011. It also altered funding for the healthy marriage and responsible fatherhood programs, splitting the combined $150 million appropriation for them at $75 million for healthy marriage and $75 million for responsible fatherhood (it had previously been $100 million for healthy marriage and $50 million for responsible fatherhood). Additionally, the CRA required special one-time reports from the states on how they spend funds and on individuals with no reported hours of work participation. The CRA also provided funding for TANF supplemental grants only through June 30, 2011 (rather than September 30, 2011, the end of the fiscal year). Supplemental grants were not funded for the last quarter of FY2011, nor any fiscal year thereafter. The Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) extended TANF through the end of FY2012, and also permanently amended TANF law to require states to act to prevent cash assistance recipients from withdrawing their benefits at Automated Teller Machines (ATMs) at strip clubs, casinos, and liquor stores. The FY2017 Consolidated Appropriations Act ( P.L. 115-31 ) extended funding for the TANF block grant for the remainder of FY2017 and for FY2018. It also financed TANF-related research through a set-aside of 0.33% of the TANF basic block grant appropriation. This reduced the TANF basic block grant to each state by 0.33%. \nIn 2018, the House Ways and Means Committee reported legislation ( H.R. 5861 , 115 th Congress) that would have reauthorized and funded TANF for five years; revised TANF's work rules to measure employment outcomes rather than participation; required all assistance recipients to have an individualized plan; required that all TANF funds be spent on families with incomes at or below 200% of poverty; and required a minimum percentage of TANF funds to be spent on assistance, work activities, or short-term economic aid. The bill was not considered by the full House.\n\n\tDetailed Legislative Chronology\n\n\t\t1996\n\nP.L. 104-193 , enacted August 22, 1996, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, established the block grant of Temporary Assistance for Needy Families. Funds for most TANF grants were appropriated through FY2002; supplemental grants and the TANF contingency fund were appropriated through FY2001. States were required to implement TANF, and accept their block grant funding, by July 1, 1997, though they could opt to implement earlier. \nP.L. 104-327 , enacted October 19, 1996, amended the transition rule from the pre-TANF programs to TANF that limited total FY1997 federal funding for TANF and pre-TANF programs. It changed the limit on funding to the states for FY1997 from an amount equal to their basic block grant to an amount equal to their basic block grant plus, if they qualified, what they would have received from the TANF contingency fund. \n\n\t\t1997\n\nP.L. 105-33 , enacted August 5, 1997, the Balanced Budget Act of 1997, raised the cap limiting the counting of education as work from 20% to 30% of those considered engaged in work, and temporarily removed from that cap teen parents engaged in education through FY1999; set the maximum allowable TANF transfer to Title XX social services at 10% of the block grant (rather than one-third of total transfers); and made technical corrections to P.L. 104-193 . P.L. 105-33 also established the Welfare-to-Work (WTW) grant program within TANF (funded at $3 billion over two years, FY1998 and FY1999), but administered by the Department of Labor at the federal level, with local administration by state workforce investment boards and competitive grantees. \nP.L. 105-89 , enacted November 19, 1997, the Adoption and Safe Families Act, reduced the contingency fund appropriation by $40 million. \n\n\t\t1998\n\nP.L. 105-178 , enacted June 9, 1998, the Transportation Act for the 21 st Century, permitted the use of federal TANF funds as matching funds for reverse commuter grants. It also set the statutory limit on TANF transfers to Title XX social services at 4.25% of the block grant. (Note that subsequent annual appropriation bills restored the 10% limit on TANF transfers to SSBG.) \n\n\t\t1999\n\nP.L. 106-113 , enacted November 29, 1999, an omnibus appropriations act, broadened eligibility for recipients to be served by the WTW grant program and added limited authority for vocational education or job training to be WTW activities. \n\n\t\t2000\n\nP.L. 106-554 , enacted December 21, 2000, an omnibus appropriation act, gave grantees two more years to spend WTW grant funds (for a total of five years from the date of the grant award). \n\n\t\t2002\n\nP.L. 107-147 , enacted March 9, 2002, the Job Creation and Worker Assistance Act, extended the TANF supplemental grants and contingency funds, both of which had expired on September 30, 2001, through FY2002. Supplemental grants were extended at FY2001 levels. \nP.L. 107-229 , enacted September 30, 2002, a short-term continuing resolution, extended TANF basic grants, supplemental grants, bonus funds, and contingency funds (and other related programs) through December 20, 2002.\nP.L. 107-294 , enacted November 22, 2002, a short-term continuing resolution, extended TANF and related funding through March 30, 2003.\n\n\t\t2003\n\nP.L. 108-7 , enacted February 20, 2003, an omnibus appropriations act, extended TANF and related funding through June 30, 2003.\nP.L. 108-40 , enacted June 30, 2003, a stand-alone bill, extended TANF and related funding through September 30, 2003. \nP.L. 108-89 , enacted October 1, 2003, a multipurpose bill, included an extension of TANF and related funding through March 31, 2004. \n\n\t\t2004\n\nP.L. 108-199 , enacted January 23, 2004, a consolidated appropriations bill, rescinded all remaining unspent WTW formula grant funds, effectively ending the WTW grant program.\nP.L. 108-210 , enacted March 31, 2004, a stand-alone bill, extended TANF and related funding through June 30, 2004.\nP.L. 108-262 , enacted June 30, 2004, a stand-alone bill, extended TANF and related funding through September 30, 2004.\nP.L. 108-308 , enacted September 30, 2004, a stand-alone bill, extended TANF and related funding through March 31, 2005.\n\n\t\t2005\n\nP.L. 109-4 , enacted March 25, 2005, a stand-alone bill, extended TANF and related funding through June 30, 2005.\nP.L. 109-19 , enacted July 1, 2005, a stand-alone bill, extended TANF and related funding through September 30, 2005.\nP.L. 109-68 , enacted September 21, 2005, allowed states to draw upon contingency funds to assist those displaced by Hurricane Katrina, allowing directly affected states to receive funds from the loan fund, with repayment of the loan forgiven, and suspending penalties for failure to meet certain requirements for states directly affected by the hurricane. It also temporarily extended TANF grants through December 30, 2005.\nP.L. 109-161 , enacted December 30, 2005, a stand-alone bill, extended TANF grants through March 30, 2006.\n\n\t\t2006\n\nP.L. 109-171 , enacted February 8, 2006, the Deficit Reduction Act of 2005, extended most TANF grants through FY2010 (supplemental grants were extended through the end of FY2008), eliminated TANF bonus funds, established competitive grants within TANF for healthy marriage and responsible fatherhood initiatives, revised the caseload reduction credit, and required HHS to issue regulations to define specific activities that count toward the TANF work participation standards as well as verify work and participation in activities.\n\n\t\t2008\n\nP.L. 110-275 , enacted July 15, 2008, the Medicare Improvements and Patients and Providers Act of 2008, included an extension of TANF supplemental grants through the end of FY2009.\n\n\t\t2009\n\nP.L. 111-5 , enacted February 17, 2009, the American Recovery and Reinvestment Act, established a $5 billion Emergency Contingency Fund (ECF) to reimburse states for increased costs associated with the Great Recession for FY2009 and FY2010. The fund reimbursed states, territories, and tribes for 80% of the increased costs of basic assistance, nonrecurrent short-term benefits, and subsidized employment. The law also permitted states to freeze caseload reduction credits at prerecession levels, allowed states to use TANF reserve funds for any benefit or service (it was previously restricted to assistance), and extended supplemental grants through the end of FY2010.\n\n\t\t2010\n\nP.L. 111-242 , enacted September 30, 2010, a short-term continuing resolution, extended TANF funding through December 3, 2010.\nP.L. 111-290 , enacted December 4, 2010, a short-term continuing resolution, extended TANF funding authority through December 18, 2010.\nP.L. 111-291 , enacted December 8, 2010, the Claims Resolution Act of 2010, extended basic TANF funding through the end of FY2011 (September 30, 2011) but provided supplemental grants only through June 30, 2011. It also altered funding for the healthy marriage and responsible fatherhood programs, splitting the combined $150 million appropriation for them at $75 million for healthy marriage and $75 million for responsible fatherhood. The act required some additional reporting on work activities and TANF expenditures.\n\n\t\t2011\n\nP.L. 112-35 , enacted September 30, 2011, the Short-Term TANF Extension Act, extended basic TANF funding for three months, through December 31, 2011. No funding was provided for TANF supplemental grants.\nP.L. 112-78 , enacted December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011, extended basic TANF funding for two months, through February 29, 2012.\n\n\t\t2012\n\nP.L. 112-96 , enacted February 22, 2012, the Middle Class Tax Relief and Job Creation Act of 2012, extended basic TANF funding for the remainder of FY2012 (to September 30, 2012). It also prevented electronic benefit transaction access to TANF cash at liquor stores, casinos, and strip clubs; states would be required to prohibit access to TANF cash at ATMs at such establishments. It also required states to report TANF data in a manner that facilitates the exchange of that data with other programs' data systems.\nP.L. 112-175 , enacted September 28, 2012, a continuing resolution providing funding for the first six months of FY2013, extended TANF funding through March, 2013.\n\n\t\t2013\n\nP.L. 112-275 , enacted January 14, 2013, the Protect Our Kids Act of 2012, appropriated $612 million to the TANF contingency fund for FY2013 and FY2014, and reserved $2 million from each of the two years' appropriations for the activities of a commission to examine child welfare fatalities.\nP.L. 113-6 , enacted March 26, 2013, an omnibus appropriations bill, extended TANF funding through the remainder of FY2013.\nP.L. 113-46 , enacted October 17, 2013, a short-term continuing resolution , extended TANF funding through January 15, 2014. (T h is resolution ended the government shutdown and a TANF funding gap from October 1, 2013, through October 16, 2013.)\n\n\t\t2014\n\nP.L. 113-73 , enacted January 15, 2014, a short-term continuing resolution, extended TANF funding through January 18, 2014. \nP.L. 113-76 , enacted January 17, 2014, a consolidated appropriations act, extended TANF funding for the remainder of FY2014 (through September 30, 2014).\nP.L. 113-164 , enacted September 19, 2014, a short-term continuing resolution, extended TANF funding through December 11, 2014. \nP.L. 113-202 , enacted December 12, 2014, a short-term continuing resolution, extended TANF funding through December 13, 2014. \nP.L. 113-203 , enacted December 13, 2014, a short-term continuing resolution, extended TANF funding through December 17, 2014. \nP.L. 113-235 , enacted December 16, 2014, an omnibus appropriations act, extended TANF funding through September 30, 2015.\n\n\t\t2015\n\nP.L. 114-53 , enacted September 30, 2015, a short-term continuing resolution, extended TANF funding through December 11, 2015. \nP.L. 114-96 , enacted December 11, 2015, a short-term continuing resolution, extended TANF funding through December 16, 2015.\nP.L. 114-100 , enacted December 16, 2015, a short-term continuing resolution, extended TANF funding through December 22, 2015.\nP.L. 114-113 , enacted December 18, 2015, a consolidated appropriations act, extended TANF funding for the remainder of FY2016 as part of an omnibus appropriations act.\n\n\t\t2016\n\nP.L. 114-223 , enacted September 29, 2016, a short-term continuing resolution, extended TANF funding through December 9, 2016. \nP.L. 114-254 , enacted December 10, 2016, extended TANF funding through April 28, 2017.\n\n\t\t2017\n\nP.L. 115-30 , enacted April 28, 2017, extended TANF funding through May 5, 2017.\nP.L. 115-31 , the Consolidated Appropriation Act, 2017, enacted May 5, 2017, extended TANF funding for the remainder of FY2017 and through the end of FY2018. It provided that 0.33% of the funding in the TANF basic block grant pay for TANF-related research activities. This reduced the basic TANF block grant for each state by that percentage (0.33%). The act also required the Department of Health and Human Services, in consultation with the Department of Labor, to develop a database named \"What Works Clearinghouse of Proven and Promising Projects to Move Welfare Recipients into Work,\" to consist of research projects that deliver services to move TANF recipients into work.\n\n\t\t2018\n\nP.L. 115-245 , enacted September 28, 2018, a short-term continuing resolution, extended TANF funding through December 7, 2018.\nP.L. 115-298 , enacted December 7, 2018, a short-term continuing resolution, extended TANF funding through December 21, 2018.\n\n\t\t2019\n\nP.L. 116-4 , the TANF Extension Act of 2019, enacted January 24, 2019, a stand-alone TANF bill, extended TANF funding through June 30, 2019. (This legislation ended a TANF funding gap that occurred after the expiration of P.L. 115-298 on December 21, 2018.)","output":"The Temporary Assistance for Needy Families (TANF) block grant was created in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193). It was born out of the welfare reform debates that spanned four decades, from the 1960s through the 1990s. These debates focused on the Aid to Families with Dependent Children (AFDC) program, which provided federal funding for state-run programs delivering assistance to needy families with children, with most families receiving assistance historically being headed by single mothers who were not working. The welfare reform debates focused on whether and how much single mothers should be expected to work, and whether the program itself contributed to dependency by providing disincentives to work and raise children in two-parent families.\nIn 1992, then-candidate Bill Clinton promised to \"end welfare as we know it.\" President Clinton submitted his welfare reform proposal to Congress in June 1994, but Congress did not take any action on it. A welfare reform proposal was included in the House Republican \"Contract with America\" document during the 1994 congressional campaign. This proposal would have altered, but not replaced, AFDC. Immediately after the 1994 congressional campaign, with Republicans taking control of both the House and the Senate, the new House leadership and Republican governors crafted a proposal to end AFDC and replace it with the TANF block grant. This proposal passed Congress as part of two separate pieces of legislation in 1995, but President Clinton vetoed both.\nIn 1996, a revised proposal was offered and passed Congress. On August 22, 1996, President Clinton signed the 1996 welfare reform bill that ended AFDC and replaced it with TANF, a broad-purpose block grant to the states that helps fund a wide range of benefits, services, and activities to address the effects of, and root causes of, child poverty and economic disadvantage. Reflecting its origins in the welfare reform debates, most TANF policy revolves around the state programs of cash assistance and work programs that the block grant helps fund.\nMost TANF policies in effect in 2019 date back to the 1996 welfare reform law. The original funding provided in that law for TANF expired at the end of FY2002 (September 30, 2002), and most of the legislative activity since then has been to continue funding on a short-term basis. From FY2002 to FY2006, TANF was funded by a series of short-term extensions. There was one long-term extension of TANF funding\u2014The Deficit Reduction Act of 2005 (DRA, P.L. 109-171)\u2014which extended it from FY2006 through the end of FY2010. The DRA also made some changes to TANF work rules and established a program of competitive grants mostly to community-based organizations for healthy marriage and responsible fatherhood initiatives. Since the end of FY2010, TANF has again been funded by a series of short-term extensions. Most recently, it was extended through June 30, 2019, by the TANF Extension Act of 2019 (P.L. 116-4)."}
{"id":"gao_GAO-18-491","pid":"gao_GAO-18-491_0","input":"\tBackground\n\n\t\tTraining Is Important for Effective Grants Management\n\nIn fiscal year 2017, the federal government awarded approximately $675  billion in grants to state and local governments. As shown in figure 1,  approximately 80 percent of the grant dollars awarded by the federal  government in fiscal year 2017 came from the three agencies we  reviewed for this report\u2014HHS, USDA, and Education.\nA range of skills are needed to manage the various tasks associated with  the grants lifecycle. For example, during the award phase, grant staff at  federal grant-making agencies are to send all grantees a grant award  notification that provides details about the grant, including the amount of  the award; and the general terms and conditions of the grant, including  statutory and regulatory requirements. Figure 2 below illustrates the four  distinct phases of the grants lifecycle.\nGiven the billions of dollars in federal grants funding that are awarded  every year, effective training could help provide grants managers with the  skills and competencies they need to better manage and oversee those  dollars. As one example of the importance of rigorous grants  management and training, in April 2017 we found that Education grants  staff inconsistently documented key required monitoring activities and, as  a result, about $21 million in discretionary grants lacked the correct  documentation of grantee performance. We recommended that  Education establish and implement detailed written supervisory review  procedures for official grant files to provide reasonable assurance that  grant staff perform and document key monitoring activities. Education officials agreed with the recommendation and said they would develop a  department-wide standard operating procedure (SOP) that will, among  other things, provide standards for timeliness of documenting key  monitoring and administrative activities and require the periodic review of  grant files. Officials expect to complete the SOP by September 30, 2018.\nIn 2011, OMB established the Council on Financial Assistance Reform  (COFAR), an interagency group of executive branch officials with the  stated aim of creating a more streamlined and accountable structure to  coordinate financial assistance, including grants. In 2012 and again in  fiscal years 2016 and 2017, COFAR identified the need to develop a  qualified and professional workforce as one of six priorities to guide its  work on grants management reform. According to OMB staff, they  disbanded COFAR on June 15, 2017 as part of OMB\u2019s efforts to reduce  grants-related requirements once COFAR had recommended policies and  actions to effectively deliver financial assistance. COFAR\u2019s  recommendations resulted in the Uniform Administrative Requirements,  Cost Principles, and Audit Requirements for Federal Awards, which is  intended to improve performance, transparency, and oversight for federal  awards.\nMoving forward, the responsibility of coordinating financial assistance  priorities was given to the Chief Financial Officers Council (CFOC), a  group of 24 agency chief and deputy chief financial officers that work  together to improve financial management in the U.S. government.  According to OMB staff, the controller of OMB\u2019s Office of Federal  Financial Management is the chair of the CFOC. In addition, OPM is  responsible for providing leadership and guidance over federal agency  training to ensure the effective promotion and coordination of federal  agency training programs and operations. Further, the President\u2019s  Management Agenda established \u201cresults-oriented accountability for  grants\u201d as a cross-agency priority goal to \u201cmaximize the value of grant  funding by applying a risk-based, data-driven framework that balances  compliance requirements with demonstrating successful results for the  American taxpayer.\u201d\n\n\t\tCertification Standards for the Grants Workforce\n\nIn 2013, we examined grant workforce and training issues and found  there were no specific government-wide training requirements for the  federal grants workforce. As of June 2018, this continued to be the  case. By contrast, there are government-wide training requirements for  the acquisitions workforce intended to help ensure its quality and  effectiveness. For example, OMB\u2019s Office of Federal Procurement Policy  (OFPP) provides government-wide guidance on managing the  acquisitions workforce. The Federal Acquisition Institute, which  coordinates with the OFPP, promotes the development of the civilian  acquisitions workforce. Further, OFPP has developed Federal  Acquisition Certification requirements for acquisition professionals serving  as contracting staff, contracting officer\u2019s representatives, and  program\/project managers. Notably, in fiscal year 2017, the federal  government spent approximately $166 billion more on grants to state and  local governments than it did on federal acquisitions. OMB staff explained that the acquisitions workforce faces more requirements  because contracts have more uniform requirements and are specified in  law. They stated that grants, on the other hand, are diverse and are  established by individual statutes with varying conditions.\nOur work in the acquisitions area identifies the importance of providing  reasonable assurance of an appropriately trained staff through  certification. Certification programs are designed to ensure that  individuals attain the knowledge and skills required to perform in a  particular occupation or role by establishing consistent standards. For  example, for the acquisition workforce, OFPP requires a minimum set of  career-specific courses, along with education and experience  requirements, to obtain certification. To ensure acquisition professionals  remain current on acquisition policies and practices, OFPP also requires  the acquisition workforce to meet continuing learning requirements. See  appendix I for a comparison of training for the federal acquisition  workforce versus the federal grants workforce.\nEducation, HHS, and USDA delegate the decision to their various sub- agencies of whether grants employees should obtain professional grants  certifications. Of the 11 sub-agencies we reviewed, 3 at HHS\u2014the  Centers for Medicare and Medicaid Services Discretionary Grants Office,  the Health Resources and Services Administration, and the National  Institutes of Health\u2014and 2 at Education\u2014the Office of Special Education  and Rehabilitative Services and the Office of Post-Secondary  Education\u2014required certification of some of their grants employees.  Officials at the remaining 6 sub-agencies offered certification to their  grants employees on an optional basis. USDA sub-agency officials said  they often recommend the certificate program to their grants employees,  and Education\u2019s sub-agency officials at the Office of Elementary and  Secondary Education said they nominate staff to take the grants  certificate program whom they believe would benefit the office most by  receiving the training.\nWhile COFAR officials explored the possibility of establishing certification  standards for the grants workforce by September 2015, OMB staff said  they determined that certification was not the most appropriate course of  action for the grants workforce for several reasons including risk  management and internal control concerns and the need for a variety of  skills for the grants workforce. As previously mentioned, OMB disbanded  COFAR in June 2017, and CFOC took over COFAR\u2019s responsibilities.  When we spoke with OMB staff in the fall of 2017, they said their focus  had shifted from establishing certification standards for the grants  workforce to providing guidance on needed competencies and enabling  the grants workforce to obtain them.\n\n\tOPM, OMB, and CFOC Have Taken Some Steps to Help Provide Grants Training but Have Opportunities for Further Improvements\n\n\t\tOPM, OMB, and CFOC Developed a Grants Competency Model Among Other Steps\n\nOPM, in consultation with OMB and the CFOC, took several steps to  ensure the federal grants management workforce has access to grants  management competencies and training. For example, OPM identified  grants management competencies that could be used in agency efforts  for workforce planning, training and development, performance  management, recruitment, and selection. After establishing grants  management competencies, OPM officials told us they established the  1109 job series partly because OMB and CFOC staff requested a new  grants management job series in response to the increased grant awards  and staffing needs created because of the 2009 American Recovery  Act. Figure 3 illustrates the timeline of the main steps taken by OPM,  OMB, and CFOC over the last decade.\nIn 2008, OPM initiated a government-wide study to identify critical  competencies for grants management work. After the government-wide  study was completed, OPM issued a memorandum to all federal agencies  announcing a grants management competency model that included  general competencies such as accountability, writing, and computer  skills. OPM also included technical competencies such as grants  management, financial analysis, and compliance. In our prior work, we  found that grants management competency models can be used to  establish an overall framework to guide agencies\u2019 training efforts.\nBefore OPM established the 1109 job series in 2010, no other agency- specific job classification series existed for the many federal employees  responsible for carrying out managerial and administrative tasks related  to grants, including ensuring compliance with OMB and agency policies  and procedures. In the absence of a specific job classification, we  reported in 2013 that officials at selected agencies told us they had  classified these employees under a variety of other job series that did not  focus on grants, such as general, administrative, and subject-matter job  titles.\nAccording to OPM officials, the agency\u2019s development of the \u201cPosition  Classification Flysheet for the Grants Management Series (1109)\u201d  leveraged the competencies and tasks from the Competency Model for  Grants Management and input from federal agencies\u2019 subject matter  experts on grants management work.The Flysheet includes a job series  definition, a basic job title, general occupational information, and a link to  the position classification standard. The 1109 job series manage,  supervise, lead, or perform administrative business, policy, and analytical  work involving the: (1) management, award, or obligation of funds for  grants; (2) competitive or non-competitive evaluation of grants proposals;  and\/or (3) administration or termination, and\/or closeout of grants and\/or  grants assistance and agreement awards. The work requires knowledge  of laws, regulations, rules, policies, procedures, and financial methods to  help ensure accountability of the grant funds.\nAs of fiscal year 2016, grant-making agencies reported 2,035 federal  employees in the 1109 job series, and HHS reported 38 percent of those  employees (see figure 4). We used fiscal year 2016 data to determine the  agency-wide numbers of 1109 job series employees because this was the  most recent set of full year data available at the time of our analysis.\nThe federal grants workforce also includes a wide range of employees in  other non-1109 job series positions. OPM does not collect data on grants  workforce employees in these other job series positions as they span a  large number of different job series that can vary by agency. Non-1109  employees working on grants typically possess expert knowledge in the  specific area necessary to meet a grant\u2019s goals (e.g., announcing the  terms and conditions of a grant, recommending potential grantees, and  monitoring grantees\u2019 progress in achieving the grants goals). Reflecting  the wide variety of federal programs that grants support, these individuals  typically possess expertise in a specialized program or subject.\nA number of factors affect usage of the 1109 job series within agencies.  According to OMB staff, various agency employees have told them that  many agency employees would rather be classified as a subject matter  specialist, such as a scientist, rather than a grants management specialist  whose primary tasks are grants management under the 1109 job series.  In addition, OMB staff said that some agencies preferred recruiting staff  using a more general non-1109 job series classification. OMB staff also  said that some agencies indicated their grants workforce employees do  not want to be classified as grants specialists because the other job  series are more general and are a better fit in terms of the needed subject  matter expert skills and duties.\nWe found that one of our selected agencies, Education, does not use the  1109 job series at all because, according to Education sub-agency  officials, they require grants employees to have specialized grant program  content knowledge in the field of their grant program focus, such as  rehabilitation, special education, behavior science, and other areas (e.g.,  standards and assessments, state accountability systems). The sub- agency officials said that 1109 grants management specialists would not  have the specific content knowledge and experience associated with the  specific educational grant programs that Education requires. We also  found that over 61 percent of HHS grants workforce employees and over  90 percent of the USDA grants workforce was not part of the 1109 job  series.\nOPM officials told us that, in April 2017, they started a government-wide  Grants Management Post Classification Implementation Study that may  change the Grants Management Classification Flysheet and revalidate  the Competency Model for Grants Management Work. OPM officials  developed the study after meeting with grant-making agency HHS and  will include a survey of the grants management workforce government- wide. OPM officials also stated they are in the final stages of developing  and clearing the government-wide survey and anticipate issuing it in the  fall of 2018. They said the study will take several additional months to  complete because the team must review the results of the government- wide survey and update competencies, job classifications, and  compliance policy\/requirements.\n\n\t\tOMB and CFOC Have Provided Some Grants Training and Guidance, but Use Has Been Limited Among Selected Agencies\n\nOMB\u2019s role with the grants management workforce includes issuing  government-wide guidance and providing a framework that enables  agencies to take actions to align their grants training with OMB\u2019s internal  control standards. In this role, OMB has taken some actions to provide  grants guidance for federal agencies that include the Career Roadmap  Report, Career Roadmap Builder, and Grants Training 101. However, we  found that almost all of the officials we interviewed at the 11 selected sub- agencies were not familiar with the Career Roadmap Report and Career  Roadmap Builder. Additionally, almost all of them did not mention using  Grants Training 101 as part of their grants workforce training.\n\n\t\t\tFinancial Assistance Career Roadmap\n\nOMB, in collaboration with the CFOC, COFAR, and federal awarding  agencies, developed the Financial Assistance Career Roadmap Report in  June 2017. OMB staff said that the Career Roadmap Report is one  vehicle used to address grants training for the federal agency grants  workforce. It is a tool for federal agencies to identify and document the  competencies needed for successful job performance of federal financial  assistance management professionals. According to the CFOC, the  competencies and related elements outlined in the Career Roadmap  Report are to be used to identify and prioritize training needs for the  federal financial assistance management workforce. This is an optional  tool for the federal grants workforce and may be customized to reflect an  organization\u2019s unique requirements and specifications. That workforce  includes the grants management 1109 job series employees, as well as  employees performing grants responsibilities as program, finance, and  audit experts who are classified under other job series.\nDuring the initial development of the Career Roadmap Report, a team  consisting of OMB staff and industrial and organizational psychologists  collected financial assistance research and documentation from OMB,  federal awarding agencies, and OPM. The team analyzed this information  to identify foundational competencies and create a draft competency  model which OMB reviewed. The team also facilitated two workshops  with specialists on financial assistance management to gather feedback  on the Career Roadmap Report. Figure 5 below shows the 14 different  competencies from the Career Roadmap Report that are divided into two  types of competencies: functional and leadership.\nAfter the report\u2019s release, CFOC developed and released an interactive  version called the Career Roadmap Builder available to the public  online. This version allows users to build their own customized financial  assistance management Career Roadmap based on their specific mission  and needs. To obtain a custom Career Roadmap Report, users complete  several steps in the Career Roadmap Builder involving selection of one or more of nine functional competencies; one or more of three job levels (foundational, practitioner, or one of three proficiency levels for each functional competency  (basic, intermediate, or advanced); an option to include a leadership competency; and one of three different leadership levels (entry, mid, or senior) and  a leadership proficiency rating (basic, intermediate, or advanced).\nThe user then receives a customized report with relevant competencies,  career levels, a sample of the associated developmental experiences and  recommended training courses.\nDepartment-level officials we spoke with at HHS, USDA, and Education  were familiar with the Career Roadmap Report. However, almost all of the  officials we interviewed at the 11 selected sub-agencies were not aware  the Career Roadmap Report was available to them.\nAll but one of the officials we spoke with at four HHS sub-agencies  said they were unaware of the Career Roadmap Report and grants  management competencies.\nWhile USDA\u2019s agency-wide Federal Financial Assistance Committee  received a copy of the Career Roadmap Report in August 2017 and  discussed it at their monthly meetings, almost all of the officials at the  four USDA sub-agencies we reviewed said they had not received it.  However, three sub-agency officials were familiar with the report  because they had been involved with agency-wide efforts to provide  grants management competency support and information. All other  USDA sub-agency officials with whom we spoke were unfamiliar with  the Career Roadmap Report or the grants workforce competencies.\nAlmost all of the officials we interviewed at three Education sub- agencies were unaware of the Career Roadmap Report. However,  one official from one sub-agency was familiar with the Career  Roadmap Report as he had been part of the Career Roadmap Report  development process.\nOMB staff stated they publicized the report by sending a \u201cController Alert\u201d  on July 3, 2017 to agency chief financial officers and to members of the  Financial Assistance Committee for E-Government notifying them of its  availability and OMB\u2019s future plans to map it to existing training  resources, place it on OPM\u2019s website, and develop an online interactive  tool including position competencies. However, we found it difficult to  locate the \u201cController Alert\u201d on the COFC website as it is not located on  the same tab where the Career Roadmap Report is published but instead  in a news section that users may not know to search. Further, OMB\u2019s  \u201cController Alert\u201d states that it \u201cdoes not constitute official guidance or  prescribe specific tasks for agencies beyond consideration of appropriate  steps to address the issue.\u201d OMB did not issue any official government- wide memorandums to explain that it supported the Career Roadmap  Report, or that the report included updated competencies for both the  1109 and non-1109 job series workforce.\nOur internal control standards state that management should internally  communicate the necessary quality information to achieve the entity\u2019s  objectives. However, if all levels of an agency are not aware of  government grants workforce competencies and guidance, the agency  may not be able to ensure that grants workforce employees have the  training resources needed to develop and maintain skills to achieve the  objectives of grant awards.\n\n\t\t\tOMB Grants Training 101\n\nOMB also worked with federal grant-making agencies, COFAR, and the  CFOC to establish Grants Training 101, a set of five online training  modules designed to provide federal officials a basic knowledge of grants  and cooperative agreements. According to OMB staff, the Grants Training 101 webpage states that the training is not designed to provide detailed  administrative, accounting, and audit requirements specific to statutory  provisions, agency regulation, and guidance because agencies need to  have flexibility in designing grants training programs to meet those grant- specific statutory requirements. OMB staff said they designed the training  modules in response to a request from the federal grants community for a  government-wide grants management training resource to ensure some  level of consistent training among grant-awarding agencies. In addition,  OMB staff said it was optional for agencies to incorporate Grants Training  101 into established grants training and that each agency is responsible  for the means by which they conduct grants management training.\nOnly one of the agencies we reviewed had plans to include OMB\u2019s Grants  Training 101 as part of its grant-training program. HHS officials said they  are developing an internal online grants 101 course and plan to  incorporate parts of OMB\u2019s Grants Training 101. However, most agency  and sub-agency officials we spoke with did not use OMB\u2019s Grants  Management 101 as part of their grants workforce training. OMB staff  said that Grants Management 101 modules cover the grant lifecycle and  the requirements of the Uniform Guidance, and are intended to  complement other trainings that agencies provide to their grants  managers. OMB staff said that agencies make the decision whether to  use the Grants Training 101 modules and can integrate parts of the  training modules into their agency- specific training requirements. For  example, officials at one of the agencies\u2014Education\u2014stated they cover  many of OMB\u2019s Grants Training 101 learning objectives through their  cross-cutting grant training program courses as well as sub-agency  specific training. Furthermore, OMB staff said that each agency would  have to internally monitor grants employees\u2019 completion of the grants  training modules.\n\n\t\tOMB and CFOC Do Not Collect Detailed User Data or Feedback to Determine Usefulness of Grants Training and Guidance\n\nOMB staff told us that OPM initially had the responsibility of hosting the  first two modules of Grants Training 101 on the OPM website while the  remaining three modules were under development. After these remaining  modules were completed, all five of the modules were moved to the  CFOC webpage. In addition, OPM was responsible for collecting the  Grants Training 101 user and completion data. OMB provided us the  Grants Training 101 data which totaled 1,277 users registered between  December 2015 and November 2017; however, we found that the data  were incomplete due to missing data fields.\nOMB staff stated that the Grants 101 training website was moved to the  CFOC webpage so the general public can access it. The CFOC will not  collect data on the access dates, the agency names, or the number of  Grants Training 101 users; however, the CFOC will collect data on the  number of visitors that go to the Grants Training 101 website. OMB staff  also said that agencies can decide to track Grants Training 101 users  internally because OMB and the CFOC will not collect specific data on  users. In addition, OMB staff said OMB and CFOC have not collected any  formal Grants Training 101 feedback from users and have no plans to do  so. OMB reported that a total of 175 visitors went on the Career Roadmap  Report website between September 2017 and January 2018.\nOur Standards for Internal Control in the Federal Government advise  management to process data into quality information that is appropriate,  current, complete, accurate, accessible, and provided on a timely basis.  It further states that management should also evaluate the processed  information and revise when necessary so that it can be used to make  informed decisions. In addition, our 2004 Human Capital Guide states  that it is increasingly important for agencies to be able to evaluate their  training and development programs to demonstrate how these efforts  help develop employees and improve the agencies\u2019 performance. As  part of this approach, the Human Capital Guide also states that assessing  training and development efforts should consider feedback from  employees.\nOMB, CFOC, and COFAR devoted time and multiple resources to  developing the Career Roadmap Report to identify and document the  competencies needed for successful job performance of federal financial  assistance management professionals. Obtaining more detailed user  information and regular feedback from federal agencies on the usefulness  of the Career Roadmap Report and the online Career Roadmap Builder  could help OMB and CFOC to evaluate the effectiveness of these grant  training tools. In addition, obtaining user information and feedback from  federal agencies on the usefulness of Grants Training 101 can also help  OMB and CFOC evaluate its effectiveness.\n\n\tHHS, USDA, and Education Vary in Following Selected Leading Training Practices\n\nIn 2004, we issued a framework of principles and key questions that  federal agencies can use to ensure that their training and development  investments are targeted strategically and are not wasted on efforts that  are irrelevant, duplicative, or ineffective. Our framework identifies four  components of the training and development process: (1) Planning, (2)  Design and Development, (3) Implementation, and (4) Evaluation. Within  each component, the guide identifies leading practices and questions for  agencies to consider when assessing each of these four components. We  compared current grants training practices at the selected agencies and  sub-agencies with selected leading training practices from the guide. We  found variation among sub-agencies in following those selected training  practices.\nPlanning: skills and competencies assessment. In our guide, we  stated that effective workforce planning and training begins with a skills  and competency assessment. A leading practice under this component is  that agencies use an organization-wide knowledge and skills inventory  and industry benchmarks to help identify performance problems in their  workforces. We stated that workforce planning should entail the  collection of valid and reliable data on such indicators as distribution of  employees\u2019 skills and competencies.\nOfficials we interviewed at all the selected sub-agencies explained that  grants training needs are primarily identified by grants management  supervisors or self-identified by grants workforce employees. The training  needs are identified on an ad hoc basis during (1) manager evaluations or  observations of employee performance, (2) annual and semiannual  performance assessments, and (3) employee career individual  development plans.\nWhen it came to implementing a more rigorous process involving a  knowledge and skills inventory or the collection of valid and reliable data,  we found varied use among the 3 agencies and 11 sub-agencies with  only some employing such a method.\nThe four HHS sub-agencies we reviewed assess new grants  workforce employees\u2019 knowledge, skills, and abilities by identifying  skills gaps when onboarding new grants workforce employees,  through supervisor observation of employee performance, or  employee feedback.\nIn fiscal year 2015, USDA\u2019s Food and Nutrition Service (FNS)  sub-agency started holding monthly meetings with its Regional  Grants Management Division Directors to identify national training  needs for its grants management staff. In fiscal year 2017, FNS  also conducted a nationwide qualitative survey of its grants  employees to identify training gaps and needs. The remaining  three sub-agencies we reviewed informally identify skills gaps and  training needs through ongoing discussions between supervisors  and grants employees and during annual performance  evaluations.\nOfficials from Education\u2019s central Learning and Development  office stated they issue a department-wide competency  assessment and training needs assessment to the various  department sub-agencies annually or bi-annually. Officials from  Education\u2019s Office of Elementary and Secondary Education sub- agency told us they also conduct their own grants workforce  learning needs assessment examining grants tasks, content  knowledge, and general skills. Officials at the other two Education  sub-agencies told us they assess skills gaps and training needs  through ongoing discussions between supervisors and grants  employees, supervisor observation of employee performance, and  also during annual performance evaluations.\nWithout a formal knowledge and skills inventory or collection of valid and  reliable data on the grants workforce\u2019s skills and competencies, some  sub-agencies may be limited in identifying performance problems,  competency gaps, and training needs in their grants workforce.\nDesign and development: using a mix of approaches, sources, and  delivery. Design and Development involves identifying specific training  and development initiatives that the agency will use, along with other  strategies, to improve individual and agency performance. One of the  leading practices under this component is choosing the most appropriate  mix of centralized and decentralized management of training programs;  internal and external training sources; and training delivery mechanisms  (e.g., classroom, computer-based, on the job, etc.). All three agencies  provide the majority of their grants training at the sub-agency level. In  most cases, the sub-agencies use a mix of training sources and delivery  methods in developing and implementing their grants training programs,  including identifying training needs and training content, as detailed in  appendix III.\nHHS and USDA primarily use decentralized approaches to grants training  while Education uses a hybrid approach of centralized and decentralized  grants training.\nAlthough there is no overarching grants training program across  HHS, the department\u2019s central offices provide topic-specific  training to Chief Grants Management Officers (CGMO) within  each sub-agency on an ad hoc basis as new grant policies or  requirements are developed. CGMOs then decide how to  disseminate this information within their respective sub-agencies  (e.g., through webinars, teleconferences, or ad hoc trainings). An  HHS council comprised of CGMOs also meets on a quarterly or  biannual basis to discuss new grants policy and requirements.  Further, HHS\u2019s central grants offices are developing a  foundational \u201cGrants 101\u201d course to help standardize a baseline of  grants knowledge across all of HHS\u2019s sub-agencies, which they  expect to complete by November 2018. Currently, the sub- agencies provide the majority of grants-specific training, which  focuses on grants topics and mission requirements relevant to  their specific areas.\nUSDA\u2019s Office of Chief Financial Officer (OCFO) provides some  required training courses across the agency such as suspension  and debarment and federal appropriations law training; however,  these trainings are not specific to just the grants workforce  employees. The sub-agencies provide all grants-specific training.\nOf the three selected agencies, Education provides the most  central office training. For example, Education\u2019s OCFO provides  agency-wide training on discretionary and formula grants financial  and budgetary courses; Learning and Development provides  introductory grant courses; and Risk Management Services  provides risk-based grants training covering topics including cost  analysis, budgetary review, monitoring grants, and uniform  guidance. Additionally, Education\u2019s sub-agencies provide mission-  and program-specific grants training to augment the centrally  provided trainings.\nCentralized and decentralized training approaches may present different  advantages for agencies and sub-agencies. On the one hand, efficiencies  may be achieved by centralizing the design and delivery of some grants  training that has widespread applicability throughout the agency.  Additionally, if each sub-agency is responsible for implementing its own  grants training program, the potential exists for inconsistent grants  workforce training across the agency. On the other hand, each sub- agency is able to tailor the training to its own needs when it manages and  provides the training itself. In making this decision, it is important for  agencies to carefully analyze and consider trade-offs.\nImplementation: establishing agency-level accountability.  Implementation involves ensuring effective and efficient delivery of  training and development opportunities in an environment that supports  learning. One of the leading training practices under this component is an  agency organization that is held accountable, along with the line  executives, for the maximum performance of the workforce. According to  our Human Capital Guide, there are different ways of ensuring  accountability, including establishing clear lines of authority in agency  policies, issuing agency-wide guidance to ensure consistency, and  establishing a central oversight office, among others.\nWe found variation among the three selected agencies in following this  leading training practice with HHS and Education having some agency  level of accountability but USDA having less.\nHHS\u2019 central Office of Grants Policy, Oversight, and Evaluation  assigns desk officers to work with sub-agency CGMOs in helping  them understand available training resources and needs. HHS  also has an Executive Committee for Grants Administration Policy  Council that meets quarterly to discuss regulations, policies, and  grants administrative requirements. This committee is made up of  CGMOs from each HHS sub-agency. HHS describes the roles of  officials involved in overseeing grants management in an agency- wide grants policy manual.\nUSDA has not defined roles for central offices to hold them  accountable for grants training. While its central OCFO provides  some guidance on federal financial assistance policies and grants  terms and conditions, and ensures department-wide training  requirements are met, USDA has no agency-wide grants training  guidance, no agency-wide grants manual, or a central office that  oversees grants training at the component level.\nEducation officials stated that the agency has two agency-wide  grants policy manuals and some Education offices have roles in  overseeing grants training. For example, the central Learning and  Development office provides some oversight of employee  development, training programs, and providers. Further,  Education officials stated that Risk Management Services  oversees Education\u2019s licensure training program across the sub- agencies, and OCFO provides agency-wide training on financial  management of grants.\nHolding a central office accountable for grants training can provide  agencies with reasonable assurance that training is being delivered  efficiently and effectively and that grant staff have sufficient  developmental opportunities. In this way, agencies can better ensure the  maximum performance of the grants workforce.\nEvaluation: using data to assess training results. Evaluation involves  assessing the extent to which training and development efforts contribute  to improved performance and results. A selected leading training practice  under this component is the use of performance data (both qualitative and  quantitative measures) to assess the results achieved through training  and development efforts.\nThe three agencies we reviewed primarily conduct evaluation at the sub- agency level. The sub-agencies vary as to how they carry out their  evaluations and few use any quantitative performance measures to  determine if training was successful.\nHHS officials stated the central offices do not measure the  effectiveness of training, nor is there centralized information  sharing on how well training works. Officials at the HHS sub- agencies we reviewed told us they primarily use informal feedback  such as ongoing conversations between employees and  supervisors after training completion and supervisor observations  of employee performance to determine if grants training is  successful. Officials at HHS\u2019 Health Resources and Services  Administration also said they receive data regarding employee  scores on required grants training courses. Some HHS sub- agencies use an external vendor for some grants training and  employees complete a survey at the end of each of these courses,  but HHS officials do not see those results. HHS officials rely on  employee feedback after training completion to determine if  external vendor training is effective.\nOfficials at the USDA sub-agencies we reviewed told us they  primarily use informal feedback through supervisory review of  employee performance and employee individual development  training plans; internal local level reviews and audits of grant  processes; and some course completion surveys.\nOfficials at Education\u2019s central Learning and Development office  told us they conduct electronic course evaluation surveys. Officials  at the Education sub-agencies we reviewed told us they primarily  use informal feedback from employees, supervisor observation of  an employee\u2019s progress after training, and some course  evaluations.\nWhile informal, qualitative feedback from employees taking grants training  is useful, it is not quantifiable or measurable. Using a balanced approach  that reflects feedback from employees as well as organizational results is  more effective in terms of evaluating the usefulness of grants training  efforts.\nMany of the issues discussed above regarding following leading training  practices stem from limited oversight of the sub-agencies, which we  describe in the next section.\n\n\t\tSelected Agencies Provide Limited Monitoring and Oversight of Sub- agencies\u2019 Grants Training Efforts Selected Agencies Cannot Readily Identify All Employees Working on Grants and Provide Limited Oversight of Sub- Agencies\u2019 Grants Training Efforts\n\nAs previously mentioned, the federal grants workforce consists of  employees in the OPM Grants Management Specialist 1109 job series as  well as employees in various other OPM job series (referred to as non- 1109s in this report). HHS and USDA both employ 1109s as well as non- 1109s in their respective grants workforces while Education only employs  non-1109s. According to HHS, USDA, and Education officials, each sub- agency is responsible for identifying its grants workforce employees and  ensuring they receive needed grants training. However, the central offices  do not have a reporting mechanism tracking sub-agencies\u2019 grants  workforce. After querying each sub-agency, at our request, officials from  the three agencies provided us with data on 1109 and non-1109 grants  personnel. As figure 6 shows, the majority of grants personnel at the  three agencies we reviewed are non-1109 employees.\nStandards for Internal Control in the Federal Government state that,  \u201cManagement should demonstrate commitment to recruit, develop, and  retain competent individuals.\u201d Furthermore, internal controls state that  \u201cmanagement evaluates competence of personnel across the entity in  relation to established policies.\u201d Since the agencies we reviewed cannot  readily identify their total grants workforce, they have limited ability to  evaluate the competence of grants personnel across the entity to ensure  they are receiving needed training.\nSince the three agencies we reviewed do not centrally monitor their sub- agencies\u2019 identification of grants employees, they cannot readily identify  the agency\u2019s total grants workforce. Consequently, the selected agencies  do not have reasonable assurance that all employees working on grants  across their agency are receiving needed grants training and have the  necessary knowledge, skills, and abilities to properly manage, administer,  and monitor grants.\nCentral offices at HHS, USDA, and Education provide limited oversight of  the types of training sub-agencies provide to their grants workforce. Our  Human Capital Guide identifies having an agency organization that is  held accountable, along with the line executives, for the maximum  performance of the workforce as a leading practice. Further, the guide  states that the agency\u2019s training organization and line executives should  work together to establish control mechanisms to ensure that agency  employees successfully complete required and assigned training and  development. Additionally, the guide states that agencies must assign  authority and delegate responsibility to the proper personnel and  establish clear accountability for maximizing workforce performance.\nHowever, as mentioned earlier, there is no overarching office responsible  at the selected agencies for overseeing the types of grants training sub- agencies provide. Additionally, the central offices at the selected agencies  do not evaluate sub-agency grants training efforts. We found variation  among the 11 sub-agencies\u2019 grants training programs (as shown in  appendix III), which highlights the importance of central office oversight  for making sure the training variation is appropriate. As a result of these  issues, the selected agencies do not have assurance that grants training  provided across the various sub-agencies is sufficient in meeting the  needs of the various employees working on grants.\nSince there is no overarching central office at any of the three agencies  we reviewed actively being held accountable for sub-agency grants  training programs, HHS, USDA, and Education cannot ensure that all of  the sub-agencies working on grants are sufficiently training their grants  employees. Without central agency oversight and accountability across  sub-agency grants training programs, not all grants employees may be  sufficiently trained on grants processes and procedures, which could  affect grant oversight in terms of grants employees monitoring grants  properly.\n\n\tConclusions\n\nGiven the importance of grants as a tool to achieve federal objectives and  the large outlays the federal government makes to fund them each year, it  is critical that the people who manage these grants\u2014the federal grants  workforce\u2014be well-trained to handle their responsibilities. To help  provide training to this workforce, OPM, OMB, and CFOC created grants  management competencies, a grants job series, some grants training,  and a career roadmap. However, they have not widely publicized the  roadmap and some sub-agencies we reviewed were unaware of it.  Moreover, OMB and the CFOC are not collecting detailed data on users  or feedback, which limits their ability to determine how useful these  resources are to the federal grants workforce.\nThe selected agencies varied in following selected leading training  practices and they provided limited monitoring and oversight of their sub- agencies\u2019 grants training efforts. Without sufficient monitoring and  oversight, the agencies cannot have reasonable assurance that their sub- agencies are sufficiently training their grants workforce so they have the  necessary knowledge, skills, and abilities to properly manage, administer,  and monitor the billions of dollars that the federal government spends on  grants annually.\n\n\tRecommendations for Executive Action\n\nWe are making a total of five recommendations, including two to OMB  and one to each of the selected agencies in our review. Specifically:  OMB\u2019s Office of Federal Financial Management\u2019s Controller (the CFOC  chair) should ensure CFOC formally publicizes the Career Roadmap  guidance among the 24 CFO agencies through memorandums, briefings,  trainings, regular CFOC meetings, or technical assistance and clearly  posts its \u201cController Alert\u201d on the CFOC website with the Career  Roadmap Report. (Recommendation 1)\nThe Director of OMB, working with CFOC, should (1) collect data metrics  regularly on the Career Roadmap Builder online tool and Grants Training  101 to determine how widely the resources are being used, and (2) obtain  periodic feedback from federal agencies on the usefulness of these tools  and any needed improvements. (Recommendation 2)\nThe Secretary of HHS should establish a process to monitor and evaluate  HHS\u2019s grants training at the central office level. This process should  include (1) a method for identifying all employees working on grants  across the agency, and (2) oversight procedures to evaluate the  sufficiency of sub-agencies\u2019 grants training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 3)\nThe Secretary of USDA should establish a process to monitor and  evaluate USDA\u2019s grants training at the central office level. This process  should include (1) a method for identifying all employees working on  grants across the agency, and (2) oversight procedures to evaluate the  sufficiency of sub-agencies\u2019 grant-training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 4)\nThe Secretary of Education should establish a process to monitor and  evaluate Education\u2019s grants training at the central office level. This  process should include (1) a method for identifying all employees working  on grants across the agency, and (2) oversight procedures to evaluate  the sufficiency of sub-agencies\u2019 grants training efforts including the  incorporation of leading practices related to assessing competencies,  training approaches, accountability, and training results.  (Recommendation 5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to Education, HHS, OMB, OPM, and  USDA for review and comment. In written comments reproduced in  appendixes IV and V respectively, HHS concurred and Education  generally concurred with our findings and recommendations directed at  them. Both agencies described the steps they were taking to implement  our recommendations. In an email, the Chief Learning Officer said that  USDA concurred with our findings and recommendation. In an email, a  Management Analyst said that OPM had no comments on the draft  report.\nOMB staff provided us with oral comments stating that the agency  partially concurred with our first two recommendations. Specifically, for  our first recommendation, OMB generally agreed with our finding that the  Career Roadmap guidance should be better publicized. However, OMB  believes this is not its responsibility but rather the responsibility of federal  agencies. OMB stated that federal agencies could incorporate a method  into their improvement plans to ensure that sub-agencies are made aware  of the Career Roadmap Guidance. We believe that, as the federal  government\u2019s central management agency and developer of the Career  Roadmap, OMB has a responsibility for ensuring that federal agencies  are aware of the Career Roadmap guidance by formally publicizing it  through memorandums, briefings, trainings, regular CFOC meetings, or  technical assistance.\nFor the portion of our first recommendation that discusses clearly posting  the \u201cController Alert,\u201d OMB stated it will look at the alert\u2019s placement on  the CFOC website to see if the agency can make it more prominent. We  continue to believe that the \u201cController Alert\u201d should be easily accessible  to anyone visiting the website and should be located on the same page  as the Career Roadmap, where it would have greater visibility.\nFor our second recommendation, OMB agreed that user feedback data  regarding the Career Roadmap Builder and Grants Training 101 is useful.  However, OMB stated that while it will continue to collect data on the  number of users, it believes that federal agencies should be responsible  for collecting specific, detailed user data if they are using those  resources. We continue to believe that OMB and CFOC would benefit  from collecting specific, detailed user data on these tools, which they  devoted time and multiple resources to developing. Collecting detailed  data metrics that go beyond the number of users can help OMB and  CFOC to better evaluate the effectiveness of these grants training tools.  Additionally, OMB stated the agency is committed to working with CFOC  to review the Grants Training 101 module to determine how useful it is  and if any improvements or adjustments are needed.\nAll five agencies provided technical comments on the report draft, which  we incorporated where appropriate.\nWe are sending copies of this report to the Secretaries of Education,  HHS, and USDA and to the Directors of OMB and OPM. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov. If you or your staff have any questions about this  report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov.  Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix VI.\n\nAppendix I: Comparison of Federal Acquisition Training and Grants Workforce Training\n\nAppendix II: Grants Workforce by Job Series for Health and Human Services, Agriculture, and Education as of March 2018\n\nAppendix III: Grants Training Programs at the Departments of Health and Human Services, Agriculture, and Education\n\nThe Department of Health and Human Services (HHS). HHS is a large  agency with 11 sub-agencies administering a wide variety of health and  human services that takes a decentralized approach to training its grants  workforce. While HHS\u2019 central Assistant Secretary for Financial  Resources (ASFR) office provides grant policy and regulatory guidance  updates to HHS sub-agencies, ASFR officials said they leave the decision  on how to implement grants training to each of those sub-agencies. The  selected sub-agencies we reviewed\u2014the Administration for Children and  Families, Centers for Medicare and Medicaid Services, Health Resources  and Services Administration, and National Institutes of Health\u2014all  implement their own grants training programs and procedures.\nThe four sub-agencies at HHS that we reviewed take different  approaches in how they implement their respective grants training  programs. For example, some sub-agencies require that grant personnel  take required courses while others make them optional; some provide  internal grants training while others also use the services of an external  training vendor; and some require certification while others make it  optional. Table 3 highlights some of the grants training programs\u2019  characteristics at the four HHS sub-agencies we reviewed.\nThe Department of Agriculture (USDA). USDA is made up of 29  agencies and offices at more than 4,500 locations across the country and  abroad. While its central Office of the Chief Financial Officer (OCFO)  provides some guidance on federal financial assistance policies and  grants terms and conditions, and ensures department-wide training  requirements are met, it, like HHS, leaves the decision on how to  implement grants training to each of its sub-agencies. The selected sub- agencies we reviewed\u2014the Food and Nutrition Service, Forest Service,  National Institute of Food and Agriculture, and Rural Development\u2014all  implemented their own respective grants training programs and  procedures. Table 4 highlights some of the grants training programs\u2019  characteristics at the four USDA sub-agencies we reviewed.\nThe Department of Education (Education). Education approaches  grants training by combining both centralized and decentralized  approaches for its eight principal offices that conduct grant work.  Education\u2019s central OCFO offers broad financial grants training such as  Oversight of Financial Management of Ed Formula\/Discretionary Grants  and Discretionary Grant Budget Reviews. Education\u2019s central Learning  and Development office offers broad introductory grants training such as  Introduction to Grants and Cooperative Agreements, Uniform  Administrative Guidance, and Cost Principals. According to Education  officials, Education\u2019s Risk Management Services (RMS) offers risk  management-based grants training including Discretionary Grants  Overview, Conducting a Cost Analysis and Budget Review, Monitoring  Grants, Suspension and Debarment, and Risk Assessment and Risk  Mitigation. RMS also manages Education\u2019s licensing program and  oversees training for new license holders geared towards grants  administration.\nIn addition to these central office trainings, each Education sub-agency  also provides specific training tailored for its mission as verified by the  three Education sub-agencies we reviewed\u2014the Office of Special  Education and Rehabilitative Services (OSERS), the Office of Elementary  and Secondary Education (OESE), and the Office of Post-Secondary  Education. For example, according to Education officials, OSERS trains  grant staff on the Individuals with Disabilities Education Act grant  application review process, and OESE recently identified a need for and  developed and taught a course on improving the grantee communication  process. Table 5 highlights some of the grants training programs\u2019  characteristics at the three Education sub-agencies we reviewed.\n\nAppendix IV: Comments from the Department of Health and Human Services\n\nAppendix V: Comments from the Department of Education\n\nAppendix VI: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Tom James (Assistant Director),  Jyoti Gupta (Analyst-in-Charge), Benjamin Adrian, Dawn Bidne, Jeff  DeMarco, Karin Fangman, Joseph Fread, Robert Gebhart, Shirley  Hwang, Serena Lo, Sharon Miller, Meredith Moles, Steven Putansu,  Kayla Robinson, Robert Robinson, Cynthia Saunders, Stewart Small, and  Dan Webb made key contributions to this report.","output":"Why GAO Did This Study\n\nIn fiscal year 2017, the federal government awarded approximately $675 billion in grants to state and local governments. GAO was asked to review the federal grants workforce training. GAO reviewed (1) OPM's, OMB's, and the CFOC's actions to address the grants workforce's training needs; (2) the extent to which grants workforce training at selected agencies is consistent with leading practices; and (3) how selected agencies monitor and oversee training of their grants workforce. GAO selected HHS, USDA, and Education and several of their sub-agencies based on their grants spending and numbers of grants management specialists. GAO reviewed OPM and OMB memorandums and guidance, compared selected agency training practices against leading training practices, and interviewed officials.\n\nWhat GAO Found\n\nThe Offices of Personnel Management (OPM) and Management and Budget (OMB) and the Chief Financial Officers Council (CFOC) have taken some steps to help ensure the federal grants workforce receives training. For example, OMB worked with the CFOC to issue five basic grants training modules and a \u201cCareer Roadmap\u201d for grants managers; however, they did not widely publicize the resources. Many of the officials with whom GAO spoke at selected sub-agencies at the Departments of Health and Human Services (HHS), Agriculture (USDA), and Education (Education) were unfamiliar with the Career Roadmap and made limited use of the training resources. Further, OMB and CFOC do not collect detailed user data or feedback, limiting their abilities to determine the usefulness of these resources.\nGAO found that sub-agencies at HHS, USDA, and Education vary in following leading training practices for planning, designing, implementing, and evaluating their grants training programs. Additionally, HHS, USDA, and Education could not readily identify grants management specialists\u2014the 1109 job series\u2014or employees in other job series working on grants without querying each sub-agency. These agencies cannot do so because their central offices do not have a reporting mechanism tracking their sub-agencies' grants workforce. Further, agency central offices do not evaluate sub-agency grants training efforts. Without sufficient monitoring and oversight, the agencies cannot have reasonable assurance that their sub-agencies are sufficiently training their grants workforce so they have the necessary knowledge, skills, and abilities to properly manage, administer, and monitor the billions of dollars that the federal government spends on grants annually.\n\nWhat GAO Recommends\n\nGAO is making five recommendations including that OMB, working with the CFOC, should (1) publicize the Career Roadmap and (2) collect data metrics and user feedback on its use. HHS, USDA, and Education should establish processes to centrally monitor and evaluate their grants training, including identifying the grants workforce and ensuring consistency with leading practices. HHS and USDA concurred, Education generally concurred, and OMB partially concurred with our recommendations. OPM had no comments on the report."}
{"id":"gao_GAO-18-99","pid":"gao_GAO-18-99_0","input":"\tBackground\n\nNNSA\u2019s strategic materials programs include a broad range of activities.  The programs often include (1) building unique new facilities, (2)  modifying and repairing existing facilities and equipment, and (3)  developing and deploying new technologies for processing and producing  strategic nuclear materials. The programs may involve multiple NNSA  and DOE sites and multiple facilities at a given site. For example, since  the days of the Manhattan Project, a large portion of the nation\u2019s uranium  mission has been executed at the Y-12 National Security Complex in Oak  Ridge, Tennessee, with uranium production and associated operations  housed in several nuclear facilities within the complex. These facilities are  in some cases more than 60 years old. NNSA\u2019s uranium program is  coordinating efforts to build the UPF, invest in the infrastructure of  existing facilities to extend their lives, and develop and deploy several  new technologies that are expected to increase the efficiency and  effectiveness of uranium processing. Collectively, these uranium program  activities may take more than 2 decades to implement and cost several  billion dollars.\nNNSA\u2019s 2017 future-years nuclear security program estimate projected  that NNSA would need about $1.4 billion in fiscal year 2018 to carry out  its annual activities associated with the management of these strategic  materials programs (see table 1). NNSA documents indicate that the  agency expects to spend about $7.7 billion over the next 5 years on  activities related to managing its strategic materials. This spending, which  would represent about 12 percent of the approximately $63 billion NNSA  expects to spend on all weapons activities over this same time period,  includes: $4.8 billion for costs related to construction of facilities and other  capital equipment purchases that will be used to support the strategic  materials mission; and $2.9 billion for program costs related to general activities such as  reducing risk and ensuring sufficient supply, as well as the  consolidation, disposition, tracking, and accounting of nuclear  materials.\nProgram managers are an important part of the federal government\u2019s  workforce. They interact with the managers of individual projects to  provide support and guidance on those projects but also must take a  broad view of the overall objectives of programs and an agency\u2019s  organizational culture. According to leading practices outlined by the  Project Management Institute, organizations develop program plans,  capture and understand stakeholder needs, and establish processes for  maintaining program management oversight, among other activities.  Recognizing the importance of improving program management, in  December 2016 the President signed the \u2018\u2018Program Management  Improvement Accountability Act\u201d that required the Office of Management  and Budget to, among other things, adopt and oversee implementation of  government-wide standards, policies, and guidelines for program and  project management for executive agencies and assess the quality and  effectiveness of program management for these agencies. We have  previously reported on DOE\u2019s and NNSA\u2019s program management  challenges.\nIn March 2009, we found that NNSA and the Department of Defense  (DOD) established unrealistic schedules, did not establish consistent  cost baselines, and did not effectively manage technical risks in some  of their nuclear weapon life extension programs. These problems  resulted in delays, additional expenditures, difficulties tracking the  cost of the programs, and difficulties in meeting all of NNSA\u2019s and  DOD\u2019s technical objectives. We recommended that NNSA develop  and use consistent budget assumptions and criteria for the baseline to  track costs over time, among other actions. NNSA agreed with our  recommendations and made changes to its cost estimating  procedures.\nIn November 2014, we found that the lack of requirements for  programs meant that DOE could not ensure that it was developing  fully credible cost estimates for programs. We recommended that  DOE revise its program management directives to require that  programs develop life-cycle cost estimates in accordance with our 12  cost-estimating best practice steps. DOE agreed with our  recommendation but has not yet incorporated the best practice steps  into its program management directives.\nIn February 2016, we found that the B61-12 life extension program,  the most complex such program NNSA has undertaken to date, faces  ongoing management challenges in some areas, including staff  shortfalls and an earned value management system that has yet to be  tested. We did not make any recommendations but reiterated  previous recommendations such as those already mentioned.\nIn November 2016, we found that DOE and NNSA had not  established organization-wide policies or practices addressing leading  practices related to program management, and we recommended that  DOE do so. DOE did not agree or disagree with this  recommendation. NNSA, however, in late 2016 instituted a training  program for program management.\nNNSA\u2019s stockpile stewardship program has established strategic  materials as one of the major elements to sustain the nation\u2019s nuclear  weapons stockpile. According to NNSA budget documents, the strategic  materials programs help ensure the sustainment of nuclear material  processing capabilities and fund the stabilization, consolidation,  disposition, tracking, and accounting of nuclear materials. Strategic  materials are generally not available, or are available only in limited  quantities, from commercial suppliers because of their specific properties  and use in nuclear weapons or for other national security purposes.  NNSA named strategic material program managers in 2014 and 2015 to  integrate, oversee, plan, and execute material strategies for uranium  (including domestic uranium enrichment), plutonium, and tritium.\nIn addition to the general program management challenges highlighted  above, we have also reported previously on challenges facing NNSA\u2019s  strategic materials programs:  In July 2015, we found that NNSA had identified various challenges in  its lithium production strategy that may impact its ability to meet  demand for lithium in the future. These challenges included  insufficient supply of lithium material and constraints facing NNSA\u2019s  efforts to replace the aging lithium production facility. We  recommended that NNSA objectively consider all alternatives, without  preference for a particular solution, as it proceeds with its analysis of  alternatives process. NNSA neither agreed nor disagreed with our  recommendation but did undertake a formal analysis of alternatives in  2017, according to NNSA officials.\nIn August 2016, we found that NNSA had not documented important  requirements for its plutonium program at Los Alamos National  Laboratory in New Mexico. We recommended that, among other  things, NNSA should update its program requirements. NNSA outlined  actions taken and planned to address this recommendation.\n\n\tNNSA Has Defined Strategic Materials Program Requirements, Including Roles and Responsibilities for Program Managers\n\nNNSA\u2019s Office of Defense Programs has set program requirements for  the strategic materials programs and has established the roles and  responsibilities of the programs\u2019 managers. NNSA defined these program  requirements in two documents issued in 2016 and 2017. Collectively  these documents set documentation requirements as well as established  the roles and responsibilities of the strategic materials program  managers. According to NNSA officials, these requirements apply to each  of the programs, including the lithium program. These requirements are  outlined below.\nProgram Execution Instruction (2016) \u2013 In January 2016, NNSA  approved a Program Execution Instruction that defines requirements  for carrying out NNSA defense programs, such as the strategic  materials programs. This instruction outlines a series of  requirements that vary based on the categorization\u2014and therefore  the rigor\u2014of management applied to a program. Of the four  categories outlined in the instruction\u2014Standard Management,  Enhanced Management A, Enhanced Management B, and Capital  Acquisition Management\u2014NNSA has generally designated the  strategic materials programs as \u201cEnhanced Management B,\u201d the most  rigorous designation applicable to this type of program, according to  NNSA officials. The \u201cEnhanced Management B\u201d programs are  required to have the following elements documented: a program plan,  a work breakdown structure that details the work elements necessary  to organize the total work scope with cost estimates, a decision  analysis, an integrated master schedule that includes the entire scope  of work required for the program\u2019s successful execution, a  performance management approach, and a lessons learned\/best  practices review. According to the instruction, if the scope, cost, and  schedule of a program are more complex, moving to a more rigorous  program management category is often required. According to the  instruction, when enhanced complexity and risk are associated with a  program, among other things, \u201cEnhanced Management B\u201d is the  appropriate designation. The instruction also allows for programs to  \u201ctailor,\u201d or modify, the application of certain requirements depending  on risk and other factors.\nProgram Management Policy for Weapons and Strategic  Materials Programs (2017) \u2013 NNSA issued a program management  policy in January 2017 that defines general roles and responsibilities  for all four strategic materials program managers. This policy  broadly outlines the managers\u2019 authority and responsibilities for  managing the strategic materials; these responsibilities include  developing program documentation and managing risk. According to  NNSA officials we interviewed, the policy is based on NNSA\u2019s  experience in implementing the uranium program in 2014. The policy  requires each of the strategic materials programs to develop a  number of guidance documents, including a mission strategy, mission  requirements, and a technology development plan. For each program,  the policy also requires the formation of a strategic materials mission  working group that is comprised of the key stakeholders involved in  the program.\n\n\tNNSA Officials Reported Progress in Meeting Strategic Materials Program Requirements but Challenges from Staffing Shortages\n\nNNSA officials told us that they are making progress in implementing the  program requirements outlined for each of the strategic materials  programs, although some are further along than others. However, these  officials said that relatively few staff had been assigned to these  programs, which has challenged implementation efforts.\n\n\t\tProgress Reported in Implementing Program Requirements\n\nFor its two strategic materials programs established in 2014\u2014uranium  and domestic uranium enrichment\u2014NNSA officials told us that they are  generally meeting the strategic materials program management  requirements outlined in the Program Execution Instruction and the  Program Management Policy for Weapons and Strategic Materials.  NNSA officials identified documents for each program, including mission  strategy, mission requirements, program plan, and work breakdown  structure. For the other programs, according to agency officials, NNSA is  still working to meet these requirements, though the tritium program met  all requirements during the course of this review. More specifically,  according to agency officials:\nThe plutonium sustainment program has met some of the Program  Execution Instruction requirements to date, including having in place a  program plan, work breakdown structure, and decision analysis, but  not an integrated master schedule (although one is being developed,  according to agency officials). The plutonium program also has a  mission strategy in place, as called for by the Program Management  Policy for Weapons and Strategic Materials, but has not yet met the  other strategic materials program management requirements.  According to agency officials, those requirements are being  developed.\nThe tritium sustainment program has recently met the Program  Execution Instruction requirements as well, including having a  program plan, work breakdown structure, integrated master schedule,  and performance management approach in place. Additionally, the  program recently updated documentation to meet the Program  Management Policy requirements including revising its Strategic  Material Mission Working Group in 2017, according to agency  officials.\nThe lithium program is early in its development, and no program  manager has been appointed yet, pending senior NNSA leadership  decisions. NNSA has a lithium mission strategy, a mission  requirements matrix, and a technology development plan in place, as  required by the Program Management Policy for Weapons and  Strategic Materials, but the rest of the strategic materials program  management requirements are still in the process of being developed,  according to agency officials. NNSA officials said that even though the  lithium program is not subject to the same requirements, they intend  for it to meet all of the same requirements as the other strategic  materials programs.\n\n\t\tStaffing Challenges Reported\n\nOfficials from the Office of Defense Programs, including the strategic  materials program managers themselves, said that a shortage of staff has  presented a challenge in terms of implementing the requirements of the  strategic materials programs and meeting their missions. According to  NNSA officials, all of the strategic materials programs have been  assigned relatively few federal staff to implement the programs. The  officials also said that while they plan to have all five strategic materials  programs fully meet the requirements and operate as cohesive programs,  the lack of staff has hampered their efforts to do so. For example, the  plutonium manager said more staff were needed to successfully  implement the program, and the lithium lead point of contact said that at  least two full-time staff members would be required to accomplish the  work needed to make the lithium program meet program requirements.  Specifically, according to agency officials as of October 2017, in addition  to contractor support:  the uranium program had the program manager and two federal  staff assigned;  the domestic uranium enrichment program had the program  manager and one federal staff assigned;  the plutonium program had the program manager and one federal  staff member;  the tritium program had the program manager and no dedicated  staff, relying instead on staff in other programs such as a federal  program manager from a different program who acts as staff for this  program; and  the lithium program had the lead point of contact and no dedicated  staff, although a contracted senior technical advisor provides some  support.\nNNSA officials cited competing agency priorities and current perceived  staffing limits as the primary impediments to assigning more staff to these  programs. First, according to agency officials, the relative newness of the  strategic materials programs and competing agency priorities to  modernize the nuclear weapons infrastructure and modernize and extend  the lives of current nuclear weapons have meant that federal staff are in  high demand across the agency. This concern is consistent with issues  we have identified in our past work as well. For example, in April 2017,  we noted NNSA\u2019s ambitious, costly, decades-long effort to modernize the  nation\u2019s nuclear security enterprise. In addition to ongoing and planned  infrastructure modernization, some of which is associated with the  strategic materials programs, this modernization includes four ongoing  expensive weapons refurbishments and efforts to improve the agency\u2019s  research, development, testing, and evaluation capabilities by, for  example, continuing efforts in advanced modeling, simulation, and  computing. Similarly, we found in September 2016 that the competing  agency priorities for infrastructure modernization and weapons  refurbishments had negatively affected another NNSA program: the  Enhanced Surveillance Program.\nSecond, NNSA officials said that they have limited flexibility when it  comes to increasing federal staff levels. Specifically, in each year that the  total number of federal employees at NNSA exceeds 1,690, the  Administrator is required by law to submit to the congressional defense  committees a report justifying such excess. In the NNSA Administrator\u2019s  testimony before the Senate Appropriations Subcommittee on Energy and  Water Development in June 2017, he stated that since 2010, NNSA\u2019s  program funding had increased 28 percent, while its federal staffing levels  had decreased by 17 percent. He said that initial results from a yet-to-be- completed study by the Office of Personnel Management in support of the  Reform of Government Initiative indicate the need for a 20 percent  increase in federal staff at NNSA.\nWe have also previously reported that staffing shortages have affected  NNSA\u2019s efforts to improve management capability. For example, we  reported in October 2014 that NNSA determined that inadequate levels of  federal staff had contributed to management problems with the UPF  project. As a result, NNSA increased staffing levels for the UPF project  office from 9 full-time equivalents in 2012 to more than 50 as of January  2014. According to NNSA officials, the additional staff enabled NNSA to  conduct more robust oversight of the contractor\u2019s design efforts than was  previously possible. Similarly, in 2016, we found that the B61-12 life  extension program, the most costly and complex such program  undertaken to date, successfully requested that NNSA enlarge its  program office staff from 3 to 8 full-time equivalent staff to provide more  management capability. However, we found that even with this increase  in federal staff, some NNSA and DOD officials said that they believe that  NNSA needs two to three times more personnel in the federal program  manager\u2019s office to ensure sufficient federal management and oversight.\nOne area that we noted in this review is that with regard to the strategic  materials programs, NNSA has not conducted a workforce needs  assessment. Strategic materials program officials acknowledged that they  had neither specifically assessed the number or skills of staff needed to  manage the strategic materials programs, nor did they have current plans  to do such an assessment. Our prior work on strategic human capital  management has identified certain activities or practices that can help an  agency strategically manage its human capital. These activities include  determining the critical skills and competencies that will be needed to  achieve the programs\u2019 missions and developing strategies to address  gaps in the number, deployment, and alignment of staff needed. NNSA  officials said that individual offices have attempted over time to assess  resource and skill needs but that these efforts have been hampered by,  among other things, a lack of staff. By determining the critical skills and  competencies needed to achieve each strategic material program\u2019s  mission and using this determination to develop strategies to address any  gaps in the number, deployment, and alignment of staff needed, NNSA  may find it has better information to justify increased staffing levels for its  strategic materials programs.\n\n\tConclusions\n\nSince 2014, NNSA has taken steps to establish programs to maintain and  modernize the nation\u2019s nuclear weapons stockpile, including appointing  federal program managers for four of the five strategic materials  programs, as well as steps to establish and organize the programs  according to internal program management requirements. This is a  significant step given the importance, cost, and complexity of these  strategic materials programs. However, NNSA has made varying  progress implementing these strategic materials programs, in part  because these programs may not have been allotted staff and  management capacity commensurate with their cost and scope of work.\nAlthough strategic materials program officials acknowledged staffing  limitations, they have not determined the critical skills and competencies  that will be needed to meet program requirements and, ultimately,  achieve the programs\u2019 missions. By determining the critical skills and  competencies needed to achieve each strategic materials programs\u2019  missions and using that determination to develop strategies to address  any gaps in the number, deployment, and alignment of staff needed,  NNSA may find it has more information to justify increased staffing levels  for its strategic materials programs.\n\n\tRecommendation for Executive Action\n\nThe NNSA Administrator should determine the critical skills and  competencies that will be needed for the strategic materials programs  and use this determination to develop strategies for addressing  challenges, if any, related to the number, deployment, and alignment of  program staff (Recommendation 1).\n\n\tAgency Comments\n\nWe provided a draft of this report to DOE and NNSA for their review and  comment. NNSA provided written comments, which are reproduced in full  in appendix II, as well as technical comments, which we incorporated in  our report as appropriate. In its comments, NNSA agreed with our  recommendation and stated that the recommendation is consistent with  the programs\u2019 current evolution. NNSA further stated that it recognizes  the need to define the range of skills and competencies necessary to  execute the programs' critical missions and that it plans to identify the  complete set of core competencies needed for these programs by  December 31, 2018.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of the National  Nuclear Security Administration, and other interested parties. In addition,  the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\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 key contributions to this report  are listed in appendix III.\n\nAppendix I: Strategic Nuclear Materials Managed by the National Nuclear Security Administration (NNSA)\n\nAppendix I: Strategic Nuclear Materials  Managed by the National Nuclear Security  Administration (NNSA)\nNNSA has established programs for ensuring the supply of each of the  following strategic materials as well as the capability to process them:\nUranium \u2013 National security needs for uranium are met using a large  existing inventory of previously enriched uranium. Although NNSA  has estimated that stocks are sufficient for projected needs, existing  uranium needs to be purified, machined, and recovered from existing  operations. The Y-12 National Security Complex in Oak Ridge,  Tennessee, is the NNSA site for conducting enriched uranium  activities, producing uranium-related components for nuclear  warheads and bombs, and processing feedstock for nuclear fuel for  the U.S. Navy. In 2004, NNSA decided to construct a new Uranium  Processing Facility (UPF) that consolidated the functions of four  separate uranium facilities into a single building. In 2014, NNSA, on  the advice of a peer review team, decided to pursue a uranium  program that includes a smaller UPF and, among other program  elements, modifications to existing uranium buildings and capabilities  to include several new uranium processing technologies. Construction  on the UPF continues at the Y-12 site, and NNSA continues to  request funds for that project. Fiscal year 2018 funds are to be used  for construction of some related subprojects. According to NNSA  officials, the UPF is expected to be complete by 2025 and cost no  more than $6.5 billion. NNSA estimates that additional investments  needed to upgrade existing uranium facilities will cost about $20  million per year for the next 20 years.\nDomestic Uranium Enrichment \u2013 To produce tritium, the Tennessee  Valley Authority (TVA) must use unobligated uranium in certain  nuclear reactors, under an interagency agreement between  Department of Energy (DOE) and TVA. The United States has not  had a sustained uranium enrichment capability since the 2013 closure  of the Paducah Gaseous Diffusion Plant, which was originally  constructed in 1952. In 2014, NNSA created the domestic uranium  enrichment program manager position with responsibility to sustain  the agency\u2019s supply of low-enriched uranium for tritium production.\nWe currently have ongoing work reviewing the program\u2019s plan to  ensure supply through 2060. NNSA estimated that over the next 5  years alone, these activities will likely cost more than $400 million.\nPlutonium \u2013 A set of aging facilities at Los Alamos National  Laboratory provides the backbone of NNSA\u2019s plutonium work, such as  certifying the safety of existing nuclear weapons\u2019 plutonium pits and  producing new pits to extend the life of nuclear weapons in the  stockpile. NNSA conducts plutonium analysis in the Chemistry and  Metallurgy Research facility, which was built in the 1950s, but NNSA  plans to cease programmatic operations in this facility by 2019  because of its aging infrastructure and because it sits on a seismic  fault line. NNSA produces pits and conducts pit surveillance in the 38- year-old high-hazard, high-security Plutonium Facility 4 at Los  Alamos. Other important plutonium activities, such as NNSA\u2019s  plutonium disposition efforts and the processing of plutonium used to  provide heat sources for space missions, are not included in the  plutonium manager\u2019s portfolio because other program offices are  responsible for these activities, according to NNSA officials. Officials  said that these program offices coordinate capability and facility needs  with the plutonium program manager.\nIn August 2014, DOE cancelled plans to construct the nuclear facility  that was part of the overall Chemistry and Metallurgy Research  Replacement (CMRR), which was approved in 2005 to replace the  aging Chemistry and Metallurgy Research facility. In its place, DOE  approved the implementation of the first part of NNSA\u2019s new  plutonium strategy: the revised CMRR project, which includes a  subproject to remove contaminated equipment no longer in use in  Plutonium Facility 4, install new plutonium analysis equipment, and  modify an existing building to handle higher quantities of plutonium.  NNSA estimated that the CMRR project would cost from $2.4 billion to  $2.9 billion and be completed by 2024. In addition, in November 2015,  DOE approved the mission need for the implementation of the second  part of the strategy: building modular nuclear facilities to add high- hazard, high-security laboratory space at Los Alamos (the Plutonium  Modular Approach) to meet plutonium pit production requirements.  NNSA estimated that the Plutonium Modular Approach could cost  from $1.3 billion to $3.0 billion and be completed by the end of 2027.\nTritium \u2013 NNSA has relied on tritium produced many years ago;  recycling and recovery of existing tritium is currently the source of  most of the tritium in the stockpile, according to NNSA officials.  However, tritium decays relatively rapidly, and in 2015 NNSA  identified a need to produce additional tritium. To produce tritium,  lithium target rods\u2014called tritium-producing burnable absorber rods\u2014 are irradiated in TVA\u2019s reactors. The irradiated rods are transported to  DOE\u2019s Tritium Extraction Facility at the Savannah River Site in South  Carolina, where they are processed in a specialized facility to extract  and then prepare the tritium for nuclear warheads. NNSA requested  $9.8 million in design funds in fiscal year 2018 for construction of a  new tritium production capability. In its fiscal year 2018 budget  request, NNSA estimated that this facility would cost about $425  million and be approved for operations in 2027.\nLithium \u2013 Lithium is a key component of nuclear weapons and is  essential for their refurbishment. NNSA has a sufficient supply of  enriched lithium-6 (the isotope used in refurbishments and for tritium  production), but that lithium is stored in another form and must  undergo complex processing before it can be used for these  purposes. NNSA halted certain aspects of its lithium processing  operation\u2014conducted at its Y-12 site in Oak Ridge, Tennessee\u2014in  May 2013 due to the condition of the site\u2019s 72-year-old lithium  production facility. Currently, NNSA is relying on a less complex but  also less efficient process that results in a loss of approximately 50  percent of material. In 2013, NNSA developed a lithium production  strategy that proposed a new lithium production facility, which the  agency estimated would cost more than $500 million. NNSA plans to  request $30.4 million in fiscal year 2019 for construction of this facility.  This strategy includes sustaining current infrastructure and deploying  new technologies to sustain lithium production.\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 contact above, Jonathan Gill (Assistant Director), Alisa  Beyninson, Antoinette Capaccio, Jeff Larson, Cynthia Norris, and Kiki  Theodoropoulos made key contributions to this report.\n\nRelated GAO Products\n\nModernizing the Nuclear Security Enterprise: A Complete Scope of Work  Is Needed to Develop Timely Cost and Schedule Information for the  Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017.\nProgram Management: DOE Needs to Develop a Comprehensive Policy  and Training Program. GAO-17-51. Washington, D.C.: November 21,  2016.\nDOE Project Management: NNSA Needs to Clarify Requirements for Its  Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington,  D.C.: August 9, 2016.\nModernizing the Nuclear Security Enterprise: NNSA\u2019s Budget Estimates  Increased but May Not Align with All Anticipated Costs. GAO-16-290.  Washington, D.C.: March 4, 2016.\nModernizing the Nuclear Security Enterprise: NNSA Increased Its Budget  Estimates, but Estimates for Key Stockpile and Infrastructure Programs  Need Improvement. GAO-15-499. Washington, D.C.: August 6, 2015.\nDOE Project Management: NNSA Should Ensure Equal Consideration of  Alternatives for Lithium Production. GAO-15-525. Washington, D.C.: July  13, 2015.\nDOE and NNSA Project Management: Analysis of Alternatives Could Be  Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.:  December 11, 2014.\nProject and Program Management: DOE Needs to Revise Requirements  and Guidance for Cost Estimating and Related Reviews. GAO-15-29.  Washington, D.C.: November 25, 2014.\nNuclear Weapons: Some Actions Have Been Taken to Address  Challenges with the Uranium Processing Facility Design. GAO-15-126.  Washington, D.C.: October 10, 2014.\nNuclear Weapons: Technology Development Efforts for the Uranium  Processing Facility. GAO-14-295. Washington, D.C.: April 18, 2014.\nPlutonium Disposition Program: DOE Needs to Analyze the Root Causes  of Cost Increases and Develop Better Cost Estimates. GAO-14-231.  Washington, D.C.: February 13, 2014.\nNuclear Weapons: Information on Safety Concerns with the Uranium  Processing Facility. GAO-14-79R. Washington, D.C.: October 25, 2013.\nNuclear Weapons: Factors Leading to Cost Increases with the Uranium  Processing Facility. GAO-13-686R. Washington, D.C.: July 12, 2013.\nNuclear Weapons: National Nuclear Security Administration\u2019s Plans for Its  Uranium Processing Facility Should Better Reflect Funding Estimates and  Technology Readiness. GAO-11-103. Washington, D.C.: November 19,  2010.","output":"Why GAO Did This Study\n\nNNSA is responsible for ensuring a sustainable supply of strategic materials critical to the nation's nuclear security missions, as well as the capability to process these materials. NNSA estimates that strategic materials management activities will cost about $7.7 billion over the next 5 years.\nThe House Report accompanying H.R. 4909, a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review NNSA's management of its strategic materials programs. This report examines (1) the extent to which NNSA has, for these programs, defined requirements, including program manager roles and responsibilities, and (2) the progress of NNSA's implementation of those program requirements.\nGAO reviewed NNSA program management policies and documents related to its strategic materials program manager positions and interviewed NNSA officials and program managers.\n\nWhat GAO Found\n\nThe Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages strategic materials programs for uranium, plutonium, tritium, and lithium\u2014materials that are critical to national security. NNSA has set program requirements that each of the programs must follow and has established the roles and responsibilities of the program managers. NNSA has defined these requirements in two documents:\nProgram Execution Instruction (2016). Outlines requirements for program management documents, such as a program plan, cost and schedule estimates, and an integrated master schedule that includes the entire scope of work for successful execution.\nProgram Management Policy (2017). Outlines the program managers' authority and requirements for managing the strategic materials programs, such as managing risk, and requires each program to develop documents, such as a mission strategy and technology development plan.\nNNSA officials reported that the agency is making progress implementing the requirements outlined for each of the strategic materials programs, although some of the programs are farther along than others. For example:\nThe uranium and domestic uranium enrichment programs established in 2014 are the furthest along and have developed the documents needed to meet strategic program requirements.\nThe plutonium program has met some of the requirements, such as developing a program plan, work breakdown structure, and decision analysis, but does not yet have an integrated master schedule.\nThe tritium program met the requirements during the course of GAO's review.\nThe lithium program, which is the newest, has made the least amount of progress and to date has developed only a mission strategy, a mission requirements matrix, and a technology development plan.\nAccording to NNSA officials, shortage of staff assigned to the strategic materials programs has been the primary reason hampering progress in implementing the program requirements. For example, a lithium program manager has not yet been assigned, and all the other programs have identified the need for additional staff beyond the one or two staff currently assigned to each. According to officials, competing agency priorities and perceived staffing limits are the primary impediments to assigning more staff to these programs. However, GAO also found that NNSA has not determined the critical skills and competencies needed for these programs. GAO's prior work has identified certain activities or practices that can help an agency strategically manage its human capital. These activities include determining the critical skills and competencies that will be needed to achieve the program's mission and developing strategies to address gaps in the number, deployment, and alignment of staff needed. By determining the critical skills and competencies needed for the strategic materials programs and using this determination to develop strategies to address any gaps in the number, deployment, and alignment of program staff, NNSA may have the information it needs to better justify increased staffing levels for the programs.\n\nWhat GAO Recommends\n\nGAO recommends that NNSA determine the critical skills and competencies that will be needed for the strategic materials programs and use this determination to develop strategies for addressing any gaps related to the number, deployment, and alignment of program staff. NNSA agreed with GAO's recommendation."}
{"id":"gao_GAO-19-34","pid":"gao_GAO-19-34_0","input":"\tBackground\n\n\t\tFraud Risk Management\n\nFraud and \u201cfraud risk\u201d are distinct concepts. Fraud\u2014obtaining something  of value through willful misrepresentation\u2014is a determination to be made  through the judicial or other adjudicative system, and that determination is  beyond management\u2019s professional responsibility. Fraud risk exists when  individuals have an opportunity to engage in fraudulent activity, have an  incentive or are under pressure to commit fraud, or are able to rationalize  committing fraud. Although the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if actual fraud has not yet been  identified or occurred. When fraud risks can be identified and mitigated,  agencies may be able to improve fraud prevention, detection, and  response. Managers of federal programs maintain the primary  responsibility for enhancing program integrity and managing fraud risks.  Those who are effective at managing their fraud risks collect and analyze  data and identify fraud trends and use data and trends to improve fraud  risk management activities. Implementing effective fraud risk  management processes is important to help ensure that federal programs  fulfill their intended purpose, funds are spent effectively, and assets are  safeguarded.\nThe Fraud Risk Framework provides a comprehensive set of leading  practices that serve as a guide for agency managers developing or  enhancing efforts to combat fraud in a strategic, risk-based manner. The  Fraud Risk Framework is also aligned with Principle 8 (\u201cAssess Fraud  Risk\u201d) of the Standards for Internal Control. It is designed to focus on  preventive activities, which generally offer the most cost-efficient use of  resources since they enable managers to avoid a costly and inefficient  \u201cpay-and-chase\u201d model of recovering funds from fraudulent transactions  after payments have been made. The leading practices in the Fraud Risk  Framework are organized into four components\u2014commit, assess, design  and implement, and evaluate and adapt\u2014as depicted in figure 1.\n\n\t\tFRDAA Requirements\n\nLegislation and guidance has increasingly focused on the need for  program managers to take a strategic approach to managing risks,  including fraud. FRDAA was enacted to improve federal agency controls  and procedures to assess and mitigate fraud risks, and to improve  agencies\u2019 development and use of data analytics for the purpose of  identifying, preventing, and responding to fraud. FRDAA requires  agencies to establish financial and administrative controls that incorporate  the Fraud Risk Framework\u2019s leading practices, including  1.  conducting an evaluation of fraud risks and using a risk-based  approach to design and implement financial and administrative control  activities to mitigate identified fraud risks;  2.  collecting and analyzing data from reporting mechanisms on detected  fraud to monitor fraud trends, and using that data and information to  continuously improve fraud-prevention controls; and  3.  using the results of monitoring, evaluation, audits, and investigations  to improve fraud prevention, detection, and response.\nFurther, agencies are required to annually report to Congress on their  progress in implementing the act for each of the first 3 fiscal years after its  enactment.\nFRDAA required OMB, in consultation with the Comptroller General, to  establish guidelines for agencies that incorporate leading practices from  the Fraud Risk Framework as well as to establish a working group that  shares best practices in fraud risk management. In addition, the working  group is required to submit a plan to develop a federal interagency data  analytics library for fraud risk management. This working group was also  required to consult with the Offices of Inspector General and federal and  nonfederal experts on fraud risk assessments, financial controls, and  other relevant matters as well as to meet not fewer than four times per  year. See figure 2 for additional details on FRDAA\u2019s requirements and  implementation timeline.\n\n\tAgencies Have Taken Steps to Manage and Report on Fraud Risks as FRDAA Requires, but Have Identified Challenges\n\n\t\tAgencies Indicated They Are Planning or Implementing Activities to Manage Fraud Risks\n\nAgencies\u2019 steps to manage fraud risks at the agency-wide level\u2014and in  response to FRDAA\u2014are at varying stages of planning and  implementation, according to our survey of agencies subject to the act. In  our survey, we asked the 72 agencies subject to FRDAA to characterize  (1) the overall status of their efforts to plan for and implement the act as  \u201cnot started,\u201d \u201cstarted but not mature,\u201d or \u201cmature\u201d and (2) whether they  regularly undertook specific fraud risk management activities prior to and  after FRDAA\u2019s enactment. With respect to overall status, most surveyed  agencies (85 percent) indicated that they have at least started planning  how they will meet FRDAA requirements (started or mature), and about  78 percent indicated that they have also started or are mature in their  efforts to implement the requirements. Fewer agencies, however,  characterized either their planning or implementation efforts as \u201cnot  started\u201d (about 15 and 22 percent, respectively). See figure 3 for agency  responses on their FRDAA planning and implementing efforts.\nWhile most agencies indicated they have taken planning and  implementation steps, agencies varied in the extent to which they  indicated undertaking specific fraud risk management activities required  by FRDAA at the agency-wide level, according to our survey results. We  asked agencies whether they were currently performing key fraud risk  management activities at the agency-wide level. The fraud risk  management activities identified in the survey were an abbreviated  version of the FRDAA requirements for agencies to establish financial  and administrative controls, which included (1) conducting an evaluation  of fraud risks and using a risk-based approach to design and implement  financial and administrative control activities to mitigate identified fraud  risks; (2) collecting and analyzing data from reporting mechanisms on  detected fraud to monitor fraud trends and using that data and information  to continuously improve fraud-prevention controls; and (3) using the  results of monitoring, evaluation, audits, and investigations to improve  fraud prevention, detection, and response. Most agencies (about 86  percent) indicated they use the results of monitoring, evaluation, audits,  and investigations to manage fraud risk. Fewer agencies (about 63  percent) indicated they collect fraud-related data for prevention. Agencies  also varied in the frequency with which they perform certain activities. For  example, of the agencies that indicated that they collect fraud-related  data for prevention, 44 percent indicated they do so regularly, while 18  percent indicated that they do so but not on a regular basis. See figure 4  for additional information on the frequency with which agencies indicated  they perform fraud risk management activities related to FRDAA  requirements for financial and administrative controls.\nThe majority of agencies we surveyed indicated that they were engaged  in a variety of fraud risk management activities before FRDAA\u2019s  enactment, but a larger number indicated action in each of these activities  since the law was enacted. For example, 86 percent of agencies  indicated they used findings from monitoring, auditing, or evaluation of  fraud risk activities after the enactment of FRDAA, compared with 79  percent of agencies that indicated they used such findings before  FRDAA. See figure 5 for a comparison of the number of agencies  reporting that they undertook fraud risk management activities before and  after the enactment of FRDAA.\nTo identify relationships among survey responses associated with  progress implementing elements of FRDAA and fraud risk management  practices, we considered direction and strength of correlations between  those questions. Agencies that indicated that they have started  implementing FRDAA (85 percent) also reported higher use of some key  fraud risk management activities, according to our analysis of the survey  data. For example, agencies that indicated their implementation efforts  were \u201cmature\u201d or \u201cstarted but not mature\u201d indicated at higher rates that  they conduct risk-based evaluations of fraud risks and collect fraud- related data for prevention since the enactment of FRDAA. As mentioned,  these activities are FRDAA requirements and are leading practices in the  Fraud Risk Framework. These agencies also indicated at higher rates  that they incorporated fraud risk activities into broader ERM, as directed  by OMB Circular A-123. Further, while most (89 percent) agencies  indicated having a designated entity for managing fraud risk, consistent  with one leading practice identified in the Fraud Risk Framework, fewer  (74 percent) have designated an entity specifically for FRDAA  implementation. Agencies that indicated they had a designated entity for  implementing FRDAA indicated that they were at a mature stage of  FRDAA implementation more often than agencies without such an entity.\n\n\t\tAll CFO Act Agencies Reported on Their Progress Implementing FRDAA, but Reporting Varied in Completeness and Detail\n\nEach of the 24 CFO Act agencies reported on their progress  implementing FRDAA in their fiscal year 2017 annual financial reports to  Congress, as FRDAA requires, but the reporting varied in completeness  and detail. FRDAA specifies that, beginning in fiscal year 2017 and for the  following 2 fiscal years, agencies must include the following 11 elements  in their reports:\nAgencies must report their progress implementing the financial and  administrative controls required to be established by the agency,  which include (1) conducting an evaluation of fraud risks and using a  risk-based approach to design and implement financial and  administrative control activities to mitigate identified fraud risks; (2)  collecting and analyzing data from reporting mechanisms on detected  fraud to monitor fraud trends and using that data and information to  continuously improve fraud-prevention controls; (3) using the results  of monitoring, evaluation, audits, and investigations to improve fraud  prevention, detection, and response; (4) implementing the fraud risk  principle as described in the Standards for Internal Control; and (5)  implementing the OMB Circular A-123 section related to leading  practices for managing fraud risk.\nAgencies must report their progress identifying risks and  vulnerabilities to fraud. These include (6) payroll, (7) beneficiary  payments, (8) grants, (9) large contracts, and (10) purchase and  travel cards.\nAgencies must report their progress (11) establishing strategies,  procedures, and other steps to curb fraud.\nIn August 2017, OMB updated its financial-reporting guidance in Circular  A-136, Financial Reporting Requirements, with a section on FRDAA  reporting requirements, including the reporting elements specified in the  act. While the reporting requirements in FRDAA and OMB\u2019s guidance  list three categories of information, as noted above, we broke out the  unique requirements in each category for our assessment. As a result,  our analysis of the completeness of agencies\u2019 annual financial reports is  based on whether they contain each of 11 specific reporting elements.  See appendix I (table 2) for additional information about these reporting  elements.\nThe 24 CFO Act agencies each included fraud-reduction sections in their  annual financial reports as FRDAA requires but, at times, the  completeness and detail of reporting was limited because some reports  did not completely address all of the elements specified in the act. Four  agencies reported on all of the specified elements, 19 agencies reported  on more than half of the specified elements, and 1 agency reported on  fewer than half of the specified elements, according to our analysis. For  example, each of the 24 CFO Act agencies reported on their progress in  establishing financial and administrative fraud controls required by  FRDAA and OMB Circular A-123, but 7 agencies did not report on  progress in implementing the fraud risk principle in the Standards for  Internal Control. In addition, some agencies did not report on their  progress in identifying risks and vulnerabilities with respect to payroll,  beneficiary payments, and other elements specified in the act.  Specifically, 12 of the CFO Act agencies did not report on payroll, 11 did  not report on beneficiary payments, 5 did not report on grants, 9 did not  report on large contracts, and 7 did not report on purchase and travel  cards. See figure 6 for an analysis of the inclusion of required FRDAA  reporting elements in agency reports.\nVariation in reporting on progress in identifying specific risks and  vulnerabilities could result from some agencies\u2019 determinations about  their applicability to the agency. For example, some agencies that  participated in our roundtable discussion noted that grant risks are not  applicable to their agency because they do not have grant programs.  However, this would not explain some areas of risk that are applicable to  all agencies, but were not reported, such as payroll. As discussed later in  this report, variation in reporting on progress in identifying specific risks  and vulnerabilities may also be partly due to some agencies\u2019 uncertainty  about what information must be reported.\nThe reports also varied in terms of detail provided about agencies\u2019 efforts,  including specific actions taken to implement elements of FRDAA. For  example, one agency reported that its efforts to comply with the fraud risk  principle in the Standards for Internal Control included implementing  enterprise risk management (ERM) and establishing a policy for having a  common risk assessment tool to ensure consistency across the agency  and to determine appropriate mitigation strategies for risks identified in all  programs. Conversely, another agency reported that it updated an annual  entity-level control assessment to comply with this principle, but the  agency did not describe how this update achieved compliance. Without  this detail in the report, it is not possible to determine the extent of the  agency\u2019s implementation progress, as we describe later in the report.\nFurther, most (16 of the 24 CFO Act agencies) included details about  financial fraud risks but did not address nonfinancial fraud risks. For  example, one agency reported it had low fraud risk and, as such, did not  implement any new controls in response to FRDAA. As support, the  agency provided examples of identifying no or limited financial fraud risks,  and concluded that it did not have fraud risks to address. The agency did  not discuss nonfinancial fraud. However, a 2016 GAO report identified  this agency as having vulnerabilities to nonfinancial fraud that present  national security risks. In addition, a 2017 report recommended that two  agencies responsible for a program with national security\u2013related  responsibilities conduct joint fraud risk assessments to obtain  comprehensive information on inherent fraud risks that may affect  program integrity; provide reasonable assurance that their controls  mitigate those risks; and ensure that fraud-prevention efforts target the  areas of highest risk. However, one of these agencies did not mention  nonfinancial fraud in its report. Further, neither agency identified this  program in their report. As mentioned in the Fraud Risk Framework,  nonfinancial fraud, such as fraudulently obtained credentials, can  potentially facilitate other crimes related to national security such as  international terrorism and drug trafficking. In addition, a leading practice  of the Fraud Risk Framework is that managers consider nonfinancial  effects of fraud, such as those related to the program\u2019s reputation and  compliance with laws, regulations, or standards. As discussed later in this  report, these limitations in agency reporting may be partly due to limited  guidance provided by OMB to agencies regarding the level of detail and  type of information that should be included in the reports.\n\n\t\tAgencies Identified Challenges Undertaking Fraud Risk Management Activities\n\nAgencies identified challenges undertaking some fraud risk management  activities required by FRDAA, according to our analysis of survey and  roundtable responses. Top identified challenges were generally related to  staffing and resources, among other things. These challenges may affect  agencies\u2019 ability to implement leading practices from the Fraud Risk  Framework. Some roundtable participants also noted strategies for  mitigating some of these challenges. The factors agencies most  frequently indicated as great or moderate challenges in undertaking fraud  risk management activities include the following:\nAvailability of resources. Agencies most frequently noted the  availability of resources, such as staffing and funding to conduct fraud  risk management activities, as a challenge to managing fraud risk.  About 75 percent of agencies indicated in their surveys that this was a  great or moderate challenge. Agencies that participated in our  roundtable discussion identified similar \u201cbandwidth\u201d concerns related  to staffing. For example, one agency noted the ability of staff to  manage multiple responsibilities\u2014such as conducting fraud risk  management activities in addition to daily program-related activities\u2014 as a top challenge, especially within smaller units of the agency.  Some agencies at the roundtable discussion told us that having the  authority to use program-integrity funding for fraud risk management  would help provide necessary resources to undertake fraud risk  management activities required by FRDAA. However, one agency  noted that this may not be a viable solution for all agencies, since not  all agencies may receive additional program-integrity funding to  conduct fraud risk management activities.\nLimited tools and techniques for data analytics. Most agencies  (about 68 percent) indicated that limitations in having and using tools  and techniques for data analytics were a great or moderate challenge,  according to our survey. Using data analytics to manage fraud risk is  a leading practice in the Fraud Risk Framework. While one agency at  our roundtable discussion told us that the agency does not have  software to assist staff in performing data analytics, other agencies  suggested leveraging free or existing resources to gain access to and  use data tools. For example, one agency representative described the  usefulness of the Department of the Treasury\u2019s Do Not Pay Business  Center. This agency representative noted that the Department of the  Treasury can proactively analyze agency data it has received and  share it with agencies. Another agency suggested that agencies ask  their shared service providers to provide data analytics, provide  insight, and benchmark against other agencies.\nLack of available expertise. The availability of staff with expertise to  conduct fraud risk management activities also presents challenges for  agencies. Leading practices in the Fraud Risk Framework include  designating an antifraud entity that serves as the repository of  knowledge on fraud risks and controls and increasing managers\u2019 and  employees\u2019 awareness of potential fraud schemes through training  and education. About 56 percent of agencies we surveyed, however,  identified availability of staff expertise as a great or moderate  challenge. Agencies that identified this as a challenge also more  frequently indicated that they experience some other challenges  associated with FRDAA implementation, such as understanding  FRDAA requirements and implementation time frames; reporting on  implementation progress in the annual financial reports; and  sufficiency of other information or tools to aid in implementation.  During the roundtable discussion, some agencies also described  having a staffing gap where data-analytic skills were concerned. In  response to this challenge, one agency moved its centralized  antifraud unit to a newly created, more-experienced unit within the  agency to increase the antifraud unit\u2019s capacity to conduct data- analytics reviews.\nAccess to data and information. A majority of agencies also  identified having access to data to look for fraud or fraud indicators as  a challenge. About 55 percent of agencies indicated that access to  data is a great or moderate challenge to their ability to implement  fraud risk activities. Agencies that participated in our roundtable  discussion also told us that access to data is a key challenge  associated with implementing FRDAA requirements. For example,  one agency stated that the Privacy Act presents a challenge to data  matching that may limit agencies\u2019 ability to share data with one  another, such as Social Security numbers involved in potentially  fraudulent activity that could cut across multiple agencies. This  challenge is not new. In our July 2013 report on using data analytics  for oversight and law enforcement and in our March 2017 report on  using data analytics to address fraud and improper payments, we  reported on similar perceived challenges from other agencies and  organizations regarding data sharing among agencies.\nSome agencies at the roundtable discussion also stated that they did  not receive information from their respective Office of Inspector  General that would help them manage fraud risks and implement  FRDAA. The Fraud Risk Framework highlights the role of the Office of  Inspector General in agencies\u2019 fraud risk management activities.  According to the framework, the Office of Inspector General itself  should not lead or facilitate fraud risk assessments, in order to  preserve its independence when reviewing the program\u2019s activities.  However, the framework notes that program managers and their  Office of Inspector General should collaborate and communicate to  help improve understanding of fraud risks and identify emerging fraud  risks, in order to proactively enhance fraud-prevention activities. While  one agency at the roundtable discussion identified the lack of  information from their Office of Inspector General limiting their ability  to address fraud risks, some agencies appear to be reaching out to  their respective Offices of Inspector General for this information. We  spoke with the Council of the Inspectors General on Integrity and  Efficiency, which comprises representatives of Offices of Inspector  General in the executive branch. During the Council of the Inspectors  General on Integrity and Efficiency meeting, representatives from  three agency Inspectors General told us that their agencies reached  out to them to discuss fraud, such as how an agency can use  databases to look for fraud. At least one representative expected to  coordinate with the representative\u2019s agency to strengthen internal  controls as the agency continues to implement FRDAA.\n\n\tOMB Established Guidelines and a Working Group as Required by FRDAA, but Limited Details and Coordination Hindered Agencies\u2019 Implementation of the Act\n\nOMB has taken steps to establish guidelines and a working group for  agencies, as required by FRDAA, but limited guidelines and working- group coordination hindered some agencies\u2019 implementation of the act.  Specifically, OMB issued guidelines for agencies to implement FRDAA\u2019s  requirement to establish controls and report on their progress and has  established a FRDAA working group, but agencies indicated the need for  additional guidance and involvement in working-group activities. Our  analysis of survey responses, roundtable discussion results, and  agencies\u2019 annual financial reports indicates that (1) agencies had mixed  perspectives on the usefulness of OMB\u2019s guidelines for agencies to  establish controls; (2) limited details in OMB\u2019s reporting guidelines  contributed to CFO Act agencies\u2019 incomplete and insufficiently detailed  annual financial reports; and (3) agencies had challenges implementing  FRDAA in part due to their lack of involvement in and lack of  communication from the working group. In addition to FRDAA, OMB has  issued guidance on other government-wide reform and burden-reduction  initiatives that could shape how agencies address FRDAA  implementation, such as reforms that may change the structure of  agencies and related programs or how agencies collect data used in  managing fraud risks. While it is still too early to determine the effect of  these broader initiatives on agencies\u2019 efforts to implement FRDAA, we  have previously reported that broader reform efforts can be leveraged by  OMB and agencies to address the high-risk areas and government-wide  challenges that present vulnerabilities to fraud, waste, abuse, and  mismanagement.\n\n\t\tOMB Updated Existing Guidelines to Meet FRDAA Requirements, but Agencies Have Mixed Perspectives on the Guidelines\u2019 Usefulness\n\nTo comply with FRDAA, OMB updated existing guidelines for agencies to  establish financial and administrative controls to manage fraud risks, but  agencies indicated having challenges with the usefulness of these  guidelines, according to our survey and roundtable discussion results.  Specifically, OMB incorporated guidelines to meet FRDAA requirements  into its July 2016 update of Circular A-123, Management\u2019s Responsibility  for Enterprise Risk Management and Internal Control, within 90 days of  enactment, as required by the act. This particular update of Circular  A-123 introduced requirements for agencies to implement ERM and  integrate with existing internal control capabilities to improve mission  delivery, reduce costs, and focus corrective actions on key risks. The  update to Circular A-123 also included a discussion of the Fraud Risk  Framework and aligned internal control processes with the 2014 update  to the Standards for Internal Control\u2014such as the reference to the fraud  risk principle (Principle 8)\u2014which OMB staff stated provided agencies  with a broad context for why fraud risk management is expected of  agencies.\nAccording to OMB staff, including the reference to the Fraud Risk  Framework in the circular met the FRDAA requirement to issue guidelines  for agencies to establish financial and administrative controls to identify  and assess fraud risks. The guidelines have a section on \u201cManaging  Fraud Risks in Federal Programs\u201d that encourages agencies to develop  the same financial and administrative controls that are listed in FRDAA  requirements. This section also directs agencies to adhere to the leading  practices described in the Fraud Risk Framework as part of their efforts to  effectively design, implement, and operate an internal control system that  addresses fraud risks. However, based on our review of the guidance,  because FRDAA is never mentioned in the guidelines, there is a risk that  agencies may not be aware that the guidelines directly apply to  implementing FRDAA\u2019s requirement to establish financial and  administrative controls. In addition, OMB\u2019s guidelines provide limited  information related to steps that agencies should take to implement  FRDAA\u2019s requirement to establish financial and administrative controls,  according to our review of the guidelines.\nAgencies indicated having mixed views on the sufficiency of OMB\u2019s  guidelines. For example, 65 percent of the agencies surveyed indicated  that OMB\u2019s Circular A-123 guidelines were moderately or very useful.  However, 40 percent of the agencies surveyed also identified the  sufficiency of OMB\u2019s guidelines as a great or moderate challenge in  implementing the act. Among other things, these challenges included  agencies\u2019 uncertainty about how ERM and FRDAA requirements differ,  given that OMB included the guidelines for managing fraud risk as a  subsection of ERM requirements. These challenges contributed to  agencies\u2019 lack of clarity, among other things, on the actions they should  take to implement FRDAA, as described below.\nChallenges using OMB guidelines to implement FRDAA\u2019s  requirement to establish controls. Some agencies indicated that using  OMB guidelines for FRDAA implementation was a challenge, according to  our analysis of survey responses. Specifically, 40 percent of agencies  indicated the sufficiency of the guidelines was a great or moderate  challenge to their implementation efforts. CFO Act agencies reported  this challenge more often than non\u2013CFO Act agencies (61 and 30  percent, respectively).\nSelected Agency Officials\u2019 Perspectives on  Office of Management and Budget (OMB)  Fraud Reduction (FRDAA) and Data  Analytics Act of 2015 Guidelines  \u201cWhat does compliance mean specifically  when it comes to FRDAA?\u201d  \u201caving looked at other guidance that\u2019s  come out of OMB, particularly like the DATA  Act or even ERM [enterprise risk  management], there was lots of guidance. . . .  In this particular case I think it has not been  as robust\u201d\nLack of guidance and unclear requirements were also identified as top  challenges in our roundtable discussion on implementation of FRDAA  required controls. For example, some roundtable participants stated that  clearer requirements, such as information on what activities would be  considered compliant with the act, would be helpful to better implement  FRDAA. In particular, two agencies identified grants and contracts as an  area where additional guidance on managing fraud risks would be helpful.\nIn contrast, a theme of the roundtable discussion was that there were  trade-offs in having clarity on the objectives and having the flexibility to  tailor requirements to different programs. One roundtable participant said that agencies had different definitions of fraud and that it would be difficult  to create standardized tools that met every agency\u2019s needs. In order to  better understand what steps they should take to implement the controls  required by FRDAA, two roundtable participants sought out alternative  sources of information to determine whether they were complying with  Circular A-123, such as a previously issued GAO report on the Fraud  Risk Framework. Other roundtable participants described using non-OMB  guidance to implement FRDAA, such as the ERM playbook developed by  the CFO Council and Performance Improvement Council, and materials  developed by the Association of Certified Fraud Examiners. While relying  on other sources of information can be helpful, agencies that do not have  knowledge of or access to additional resources such as these may not  have sufficient information to effectively implement the act. This point is  underscored by the 40 percent of agencies that identified the sufficiency  of OMB\u2019s guidance as a great or moderate challenge to their  implementation of FRDAA.\nSelected Agency Officials\u2019 Perspectives on  Office of Management and Budget Fraud  Reduction and Data Analytics Act of 2015  (FRDAA) Guidelines  \u201cI would like some clarification on the intent of  , like what will it achieve that the  other  A-123 or ERM [enterprise risk  management] is not achieving?\u201d\nUncertainty about the difference between ERM and FRDAA  requirements. Many agencies are leveraging existing ERM processes to  implement fraud risk activities, according to our survey results, but OMB  guidelines were unclear on the relationship between FRDAA and ERM  requirements, according to our review of the guidelines and roundtable  discussion responses. Under ERM, agencies are required to assess the  full spectrum of an organization\u2019s risks, and identify those that are  enterprise-level risks. For enterprise risks, agencies are expected to rate  those risks in terms of impact and build internal controls to monitor and  assess the risk developments at various time points and incorporate risk  awareness into the agencies\u2019 culture and operations. Our survey results  indicate that more agencies (56 percent) are currently incorporating fraud  risk activities into broader ERM compared with before FRDAA enactment  in June 2016 (34 percent). Additionally, some roundtable participants  stated that they leveraged their existing ERM process and teams to  implement FRDAA\u2019s control requirements. While Circular A-123 directs  agencies to assess fraud risks as part of a broader assessment of  enterprise risk, it does not provide information on how ERM and fraud risk  management requirements differ. For example, it does not clarify that  FRDAA encompasses a broad set of actions that agencies must take to  manage fraud risks, regardless of whether the fraud risk is identified as  an enterprise risk.\nAdditionally, Circular A-123 does not specify how to implement the  strategies identified in the Fraud Risk Framework within the context of  ERM. According to the circular, managers should adhere to the leading  practices identified in the framework and are responsible for determining  the extent to which the leading practices are relevant to their program.  Managers are also responsible for tailoring the practices to align with the  program\u2019s operations. While the Fraud Risk Framework does state that  the leading practices can be tailored, it enumerates four components and  overarching concepts that are necessary for an effective risk  management approach. These four components of the framework\u2014 commit, assess, design and implement, and evaluate and adapt\u2014 collectively encompass the control activities for managing fraud risks and,  as outlined in the framework and Standards of Internal Control, should be  present in some form to be effective. Therefore, even if agency officials  identify fraud risks in a particular program that are not determined to be  enterprise-level risks, the officials are still responsible for designing and  implementing controls to address them and evaluating and adapting  improvements to these controls over time, in line with the Fraud Risk  Framework requirements. However, OMB staff informed us that if a fraud  risk does not rise to the level of an enterprise risk for an agency in the  ERM process, the agency may not go through all of the steps outlined in  the Fraud Risk Framework or required by FRDAA to assess and respond  to that risk. The Fraud Risk Framework acknowledges that agencies may  use initiatives like ERM efforts to assess their fraud risks, but it does not  eliminate the separate and independent fraud risk management  requirements of FRDAA.\nIn response to our draft report, OMB staff stated that other parts of  Circular A-123 helped to fulfill their requirement to establish guidelines for  agencies to establish financial and administrative controls. According to  OMB, if agencies identify fraud risks that are not discussed in ERM, they  will still be addressed by the broader risk management requirements in  Circular A-123. These other sections of Circular A-123 existed prior to  FRDAA and therefore, were not developed in response to FRDAA\u2019s  requirement that OMB establish guidelines for agencies. However, our  review of Circular A-123 found that there are some references to  managing fraud risks that are in alignment with the spirit of the financial  and administrative controls identified in FRDAA. For example, other sections of Circular A-123 describe requirements for agencies to develop  a risk profile and state that agency risk profiles must include an  operational objective related to administrative and major program  operations, including financial and fraud objectives. Further, agencies  should identify the existing management process that will be used to  implement and monitor proposed actions to address the risks. However,  according to Circular A-123, these sections of the document define  management\u2019s responsibilities for ERM, which is focused on enterprise  level risks. Further, these sections of Circular A-123 do not encourage  agencies to incorporate the leading practices outlined in the Fraud Risk  Framework to manage their fraud risks, as required by FRDAA.\nAccording to OMB staff, if agencies identify fraud risks that are not  discussed in ERM, they will still be addressed by the broader risk  management requirements in Circular A-123. These other sections of  Circular A-123 existed prior to FRDAA and therefore were not developed  in response to OMB\u2019s requirement to provide guidance on FRDAA.  However, our review of Circular A-123 found that there are some  references to managing fraud risks that are in alignment with the spirit of  the financial and administrative controls identified in FRDAA. For  example, other sections of Circular A-123 describe requirements for  agencies to develop a risk profile and state that agency risk profiles must  include an operational objective related to administrative and major  program operations, including financial and fraud objectives. Further,  agencies should identify the existing management process that will be  used to implement and monitor proposed actions to address the risks.  However, according to Circular A-123, these sections of the document  define management\u2019s responsibilities for ERM, which is focused on  enterprise-level risks. Further, these sections of Circular A-123 do not  encourage agencies to incorporate the leading practices outlined in the  Fraud Risk Framework to manage their fraud risks, as required by  FRDAA.\nIn addition, OMB staff stated that they believe that, along with Circular  A-123, the Standards for Internal Control and the Fraud Risk Framework  provide all the guidance that agencies need to implement and comply  with FRDAA. However, based on the results of our survey and  roundtable, we informed OMB that agencies reported experiencing  confusion about the similarities and differences between FRDAA and  other requirements, including ERM. According to OMB staff, Circular A- 123 and its focus on ERM is the appropriate place for the FRDAA  guidelines because fraud is one type of risk an agency might face.  However, OMB staff noted that it is the agencies\u2019 responsibility to  determine how to implement the act\u2019s requirements in a way that aligns  with the agency\u2019s mission, and accordingly does not have immediate  plans to update Circular A-123 to provide more-detailed guidelines for  agencies to implement the financial and administrative controls required  by FRDAA.\nThe Standards for Internal Control state that management should  implement control activities through policies. Documentation of  responsibilities through policies and periodic review of control activities  contribute to the design, implementation, and operating effectiveness of  control activities. In addition, management should externally communicate  the necessary quality information to achieve the entity\u2019s objectives. These  standards are practices that can assist any entity that is providing  guidance to agencies with ensuring that intended objectives are  accomplished. To better understand the type and level of detail in  guidance that agency managers need to implement management  controls, OMB and other similar oversight bodies often seek input and  comments from agencies on draft guidance. In this case, OMB staff has  not provided evidence that it consulted with agencies on whether the  update to Circular A-123 met their needs in implementing FRDAA. While  OMB staff stated they held three solicitations for agency comments on a  draft update of Circular A-123 prior to FRDAA\u2019s enactment, they did not  obtain input from agencies on whether the updates provided the guidance  agencies needed to implement the controls in FRDAA\u2019s final enacted  requirements.\nWithout input from agencies, OMB does not have the information it needs  to determine what additional guidance agencies need to effectively  implement the controls required by the act. In addition, without clarifying  that FRDAA\u2019s requirements must be addressed for all fraud risks\u2014 including those that agencies may have assessed and determined are not  enterprise-level risks\u2014agencies may not follow through on the additional  steps of designing, implementing, evaluating, and improving controls for  their remaining fraud risks. Lastly, without additional detailed guidelines  for implementing FRDAA\u2019s control requirements, agencies will continue to lack clarity on the actions they should take to effectively implement the  act.\n\n\t\tOMB\u2019s Guidelines on FRDAA Reporting Requirements Lack Information Needed for Agencies to Produce Complete and Detailed Reports\n\nOMB updated existing guidelines to include a section on FRDAA  reporting requirements, but did not include enough information to  effectively assist agencies in producing complete and detailed reports,  according to our analysis of annual financial reports and survey and  roundtable responses. FRDAA directs agencies to report to Congress  on the progress of FRDAA implementation in their annual financial reports  for each of the 3 fiscal years after enactment. Although FRDAA does not  require OMB to establish guidelines for agencies to comply with the act\u2019s  reporting obligations, OMB generally provides guidance to support  agencies\u2019 annual financial-reporting requirements in Circular A-136,  Financial Reporting Requirements, and accordingly updated this  guidance to include a section on FRDAA reporting requirements first in  August 2017 and again in July 2018. There were no significant changes  to the FRDAA section of Circular A-136 in the July 2018 update.\nAgencies are to include in their annual financial reports to Congress their  progress in: (1) implementing the financial and administrative fraud  controls as required by FRDAA, the fraud risk principle in the Standards  for Internal Control, and the OMB Circular A-123 section related to  leading practices for managing fraud risk; (2) identifying risks and  vulnerabilities to fraud, including with respect to payroll, beneficiary  payments, grants, large contracts, and purchase and travel cards; and (3)  establishing strategies, procedures, and other steps to curb fraud.  However, as previously discussed, our analysis of the 24 CFO Act  agencies\u2019 annual financial reports found that many reports issued in  2017\u2014the first year of reporting\u2014were incomplete and lacked detail.  Some agencies did not report on their progress in identifying risks and  vulnerabilities with respect to payroll, beneficiary payments, and other  elements specified in the act and did not address nonfinancial fraud risks.  In addition, according to our survey results, some agencies considered  reporting on implementation progress in the annual financial reports a  challenge. Specifically, 31 percent of agencies indicated that reporting  was a great or moderate challenge, see figure 7.\nFurther, some of our roundtable participants indicated that they needed  more detailed guidance on what should be reported to comply with  FRDAA. In the absence of more-detailed guidance from OMB, some  agencies turned to each other for help. For example, some roundtable  participants indicated that they looked at other agencies\u2019 annual financial  reports to see what they were reporting. While relying on other agencies\u2019  reports can be helpful, agencies may be reviewing incomplete information  based on our review of the annual financial reports, and may not have  appropriate examples of how FRDAA information should be reported.\nOMB\u2019s guidance to agencies on FRDAA reporting did not include  information on the level of detail agencies should report. The FRDAA  section of Circular A-136 is a near-exact replication of the reporting  elements listed in FRDAA and specifies the period in which agencies are  to report on their progress implementing FRDAA. According to OMB  staff, they included the content of FRDAA verbatim in Circular A-136  because the reporting requirements are outlined in the act. However, the  act provides high-level information on what should be included in agency  reports, not operational guidance on how to address the reporting  requirements, which is typically outlined in executive guidance to  agencies. Further, OMB staff informed us that they instructed agencies to  provide a status update of fraud-reduction efforts undertaken in the final  quarter of fiscal year 2016 through fiscal year 2017, but did not provide  agencies with any specific guidance on how detailed that reporting should  be in their annual financial reports. The Standards for Internal Control  state that management should implement control activities through  policies and documentation and externally communicate the necessary  quality information to achieve the entity\u2019s objective. Until OMB provides  additional guidelines directing agencies to report more-complete and  more-detailed information related to their progress on both financial and  nonfinancial risks, some agencies may continue to report incomplete  information on their full range of fraud risks and activities they are  performing to manage these risks.\nOn the basis of the limitations we identified in agencies\u2019 annual financial  reports, Congress and OMB do not have complete and detailed  information about agencies\u2019 progress implementing FRDAA\u2019s  requirements to establish fraud controls as intended by the act. For  example, as previously mentioned, 12 of the 24 CFO Act agencies did not  report on payroll fraud risks, which are applicable to all agencies, and 16  did not report on nonfinancial risks such as effect on reputation and  compliance with laws, regulations, or standards. The agency reporting  requirement was intended to help Congress monitor the progress made  by agencies in addressing and reducing fraud risk, including the success  or failures of the guidelines created by OMB as a result of the act.  Similar to reporting requirements for improper payments, agencies\u2019  reports on their progress implementing FRDAA serve as important  oversight tools that can be used to evaluate agency efforts to make  needed changes to their processes and policies. In the absence of  additional OMB guidelines that include more-complete and more-detailed  information for reporting on both financial and nonfinancial risks, some  agencies may continue to produce incomplete information on their full  range of fraud risks and fraud risk management activities. However, as  noted, OMB did not make changes to the FRDAA section in its July 2018  update of Circular A-136, which might have informed agencies\u2019 2018  reporting efforts.\nOn the basis of FRDAA\u2019s requirements, Congress sought 3 years of  reporting on FRDAA implementation, and therefore agencies\u2019 obligation  to report on their progress expires after fiscal year 2019. Even if OMB  makes changes to its guidelines in 2019 to support more-complete and  more-detailed reporting, agencies would report only one time after that\u2014 in their 2019 annual financial reports, due in November 2019. We have  previously reported on the importance of reporting information that helps  facilitate proper stewardship of federal resources, congressional  oversight, transparency, and public accountability, among other things.  Without an extension of reporting requirements, Congress will not have  access to useful information through this reporting mechanism to support oversight and accountability of agencies\u2019 progress implementing the fraud  risk management practices required by FRDAA.\n\n\t\tOMB Established a Working Group, but Agencies Identified Involvement and Information Sharing as Challenges\n\nOMB established a working group of agencies as required by FRDAA, but  has not met all of the requirements for the working group, such as those  related to member composition, and meeting frequency. As a result of  these and other working-group limitations, agencies identified a lack of  involvement in and limited information sharing from the working as two of  the top challenges to implementing the act. As required, OMB established  a working group within 180 days of enactment to improve the sharing of  financial and administrative controls and other best practices for  detecting, preventing, and responding to fraud, including improper  payments, and the sharing and development of data-analytics techniques.  OMB also submitted to Congress\u2014but not within 270 days of  enactment\u2014a plan for the establishment and use of a federal interagency  library of data analytics and data sets to facilitate fraud risk management.  However, OMB did not initially include the CFO of each agency in earlier  working-group meetings, or, according to OMB, meet four times per year  in 2017 as required. The working group also did not effectively facilitate  the sharing of controls, best practices, and data-analytics techniques,  according to our survey results and roundtable discussion. OMB  encountered challenges that limited its ability to fulfill some of these  requirements, but did not take the necessary actions to implement others.\nPlan for data library. In May 2017, OMB submitted a letter to Congress  describing the working group\u2019s plan to use a phased approach to  establish a federal interagency library of data analytics and data sets, as  required by FRDAA. However, OMB did not do so within 270 days of  enactment, as required by FRDAA. According to OMB\u2019s letter, the  working group is taking a phased approach to develop the plan to  establish an interagency data library and took some steps, but identified  challenges in the process. When developing the plan, the working group  identified two challenges to developing the interagency data library: (1)  standardizing how agencies define fraud in their programs, and (2)  developing a fraud taxonomy to accurately compile fraud risks and  categories. According to the letter, to address these challenges, the  working group is creating a fraud-classification system that leverages the  existing Association of Certified Fraud Examiners fraud-classification  system. OMB\u2019s letter also states that the working group performed an  initial inventory of existing tools and materials that will be used to  populate the first phase of the library, which is currently located in the  OMB MAX Information System. According to the letter, the working  group is partnering with agencies to identify a permanent location for the  library as well as to develop future enhancements based on the needs of  agencies. OMB stated in the letter that it plans to provide Congress  additional information once the next phase of the library is implemented.\nWorking-group composition. FRDAA requires the working group to  include the CFO of each agency. OMB, in its role as Chair, did not involve  all of the relevant agencies in the working group by inviting them to  participate or otherwise providing access and input into the working group  as required by FRDAA, according to agencies we surveyed and our  assessment of OMB documents. In addition to the statutory  requirement, we have previously reported that early outreach to  participants to identify shared interests is a key practice for enhancing  interagency collaboration. However, OMB\u2019s initial working-group efforts  in particular did not include some CFO Act agencies or most non\u2013CFO  Act agencies subject to FRDAA, representing missed opportunities to  share practices and collaborate on ways to advance federal efforts to  reduce fraud, waste, and abuse. While the May 2017 letter to Congress  states that the CFO from every agency was invited to participate in the  working group, OMB staff later noted that only the 24 CFO Act agencies and the Small Agency Council representative from the CFO Council were  invited to the working-group meetings. OMB staff indicated that they did  not independently reach out to non\u2013CFO Act agencies to invite them to  participate because they believed the Small Agency Council  representative was responsible for communicating this information to its  members. Nevertheless, FRDAA requires the working group to include  the CFO of each agency subject to the act, as well as other parties  determined to be appropriate by OMB.\nAccording to our survey results, about half of the agencies subject to  FRDAA were not at all familiar with the working group and about two- thirds did not have an entity responsible for participating in it. Non\u2013CFO  Act agencies indicated these responses more often than CFO Act  agencies. Specifically, 71 percent of non\u2013CFO Act agencies indicated  they were not at all familiar with the working group compared with 21  percent of CFO Act agencies. In addition, 90 percent of non\u2013CFO Act  agencies indicated they did not have a designated person or entity  participating in the working group, compared with 29 percent of CFO Act  agencies (see fig. 8).\nSimilarly, two roundtable participants stated that they thought the working  group was geared towards the CFO Act agencies. Most of the CFO Act  agencies that participated in our discussion noted that they had been  involved in the FRDAA working group. In contrast, almost all of the non\u2013 CFO Act agencies that participated in our discussion stated that they  were not aware of the working group.\nSelected Non\u2013Chief Financial Officers  (CFO) Act Agency Officials\u2019 Perspectives  on Lack of Communication from and  Participation in the Working Group  \u201cThere\u2019s been nothing that I\u2019m aware  at   Small Agency Council level that\u2019s had  meetings or anything to give extra guidance  \u2026 and I think that would have been very  helpful. In most things in small agencies we  wait for things to trickle down from the larger  agencies if OMB [Office of Management and  Budget] doesn\u2019t give us guidance, and we just  haven\u2019t gotten any sort of feedback.\u201d\nIt is also unclear how many and which CFO Act agencies attended the  working-group meetings. In particular, OMB and agencies provided  conflicting information about which agencies attended the working-group  meetings. For example, according to one CFO Act agency roundtable  participant, the representative was invited to the first meeting and not  invited to the next. The participant further stated that the agency recently  started to receive information from OMB. However, the information OMB  provided about this agency\u2019s involvement in working-group meetings  conflicted with this participant\u2019s description of the agency\u2019s attendance at  the first four meetings.\nAgencies identified the lack of involvement in the working group as one of  the top challenges to implementing FRDAA. Most CFO and non\u2013CFO Act  agencies indicated that their lack of involvement was a moderate or great  challenge to implementing FRDAA (see fig. 9). Agencies that indicated  having these challenges also more frequently reported challenges with  sharing best practices and data-analytics techniques about fraud with  other agencies, which was the purpose of the working group. The need  for this coordination underscores the importance of identifying shared  interests and developing collaborative solutions to help achieve  outcomes.\nOMB and the working group did consult with the Offices of Inspector  General on fraud risk matters, as required by FRDAA, by including them  in working-group meetings. In OMB\u2019s May 2017 letter to Congress, the  agency reported that the working group coordinated with the Council of  the Inspectors General on Integrity and Efficiency and other interagency  working groups to discuss and share best practices in mission-specific  areas. In addition, two agencies\u2019 Offices of Inspector General are listed as  having attended the first four working-group meetings. This coordination  between the working group and Inspectors General\u2014who often identify  and investigate instances of fraud in agencies\u2014is a positive step for the  working group. Inspectors General may be able to provide agencies with  information that can assist the agencies in analyzing data for potential  fraud, such as fraud indicators. In addition, we have previously reported  that if collaborative efforts, like the working group, do not consider the  input of all relevant stakeholders, important opportunities\u2019 for achieving  outcomes may be missed.\nFrequency of meetings. The working group did not meet the FRDAA  requirement to hold at least four meetings per year. OMB staff stated that  there have been eight working-group meetings to date\u2014one in 2016,  three in 2017, and four in 2018\u2014but these meetings do not meet the  FRDAA requirement to meet at least four times per year in 2017. As of  October 2018, OMB has shown improvements towards meeting this  particular FRDAA requirement in 2018. Specifically, the working group  has met at least four times in fiscal year and calendar year 2018, as of  October 2018.\nVacant appointment positions at OMB and the agencies have slowed  efforts to establish the working group, according to OMB staff. FRDAA  requires the OMB Controller to serve as the chairperson of the working  group, but as of October 2018 the Senate has not made a confirmation  for this position. During the roundtable discussion, one participant shared  that there was a period when there was no OMB leadership and the  working group was largely silent for months. According to OMB staff, it  has also been difficult to establish agency membership of the working  group due to the lack of confirmed CFOs at some of the 24 CFO Act  agencies. As of September 2018, 7 of the 24 CFO Act agencies did not  have a CFO. However, OMB and the working group could have held the  required minimum number of meetings regardless of OMB and agency  vacancies, as evidenced by the seven meetings that were held in the  midst of these vacancies. Further, according to OMB staff, aside from the  first meeting led by the former Controller, all working-group meetings  have been led by the Deputy Controller and other OMB staff, while the  Controller position was vacant.\nInformation sharing about controls, best practices, and data- analytics techniques. It is unclear whether OMB, as chair of the working  group, documented working-group meetings or any work products that  were developed to facilitate sharing information about financial and  administrative controls, best practices for fraud management, and data- analytics techniques. OMB staff stated that they do not have documented  minutes or notes from working-group meetings, but in August 2018 stated  that they uploaded work products to the FRDAA federal community site  on the MAX Information System website. However, apart from two  screenshots of the MAX website provided to us in February 2018, which  indicated that a fraud taxonomy was among the materials produced by  the working group, we were not able to obtain documentation of these  work products. We have previously reported that one key practice for  enhancing and sustaining agency collaboration is using plans and reports  to reinforce accountability for collaborative efforts. Without documented  discussions, plans, or reports for these collaborative meetings, OMB is  unable to share the lessons learned from the meetings with those who  cannot attend, and does not have a record of the plans and actions that  the working group has agreed to take. This documentation is also  important to maintaining the continuity of the working group\u2019s initiatives  when leadership changes occur within the agencies and OMB.\nWith respect to the information that was shared at some of the initial  working-group meetings, roundtable participants stated that the topics  discussed were related to the interagency data library and the working- group plan required to be submitted to Congress, as OMB described in  the May 2017 letter. For example, some participants confirmed that the  first few meetings were spent discussing ways to establish a standard  definition of fraud, the implementation plan due to Congress, and the  difficulties agencies experience in sharing data. Our survey results  indicate that most agencies identified the sufficiency of information  coming from the working group as a great or moderate challenge in their  efforts to implement FRDAA (see fig. 10).\nRoundtable participants also identified data access and sharing, and  inter- and intra-agency communication and collaboration, as top  challenges for implementing FRDAA. We have previously reported that  collaborative mechanisms can be used for a range of purposes such as  information sharing. Without participation in appropriately recurring  working-group meetings and documentation to facilitate information  sharing, agencies will continue to miss opportunities to learn from each  other\u2019s experiences and share solutions for establishing financial and  administrative controls to prevent, detect, and respond to fraud risks in  their programs.\n\n\t\tFRDAA Implementation during Broader Reforms\n\nOMB has recently issued guidance on other government-wide reform and  burden-reduction initiatives that could shape how agencies address  FRDAA implementation, such as reforms that may change the structure  of agencies and related programs or how agencies collect data used in  managing fraud risks. These changes may present challenges and  opportunities in establishing the fraud risk management practices outlined  in the FRDAA. As examples of these recent reforms, in March 2017 the  President issued an executive order requiring a proposed plan to  reorganize executive branch agencies. In April 2017, OMB provided  guidance to federal agencies for developing their reform and workforce- reduction plans, as required by the President\u2019s executive order. Executive  Order 13781\u2014Comprehensive Plan for Reorganizing the Executive  Branch\u2014and other recent administration actions prompted OMB to issue  a memorandum (M-17-22), that required agencies to submit an agency  reform plan to OMB by September 2017. These reform plans were part  of the agencies\u2019 fiscal year 2019 budget submission to OMB that included  long-term workforce reductions. In addition, OMB issued a memorandum  (M-17-26) that required agencies to streamline reporting requirements\u2014 an initial effort at removing duplicative, outdated reporting requirements,  with the goal of making the federal government more efficient and  effective.\nIn March 2018, OMB released the President\u2019s Management Agenda,  which provided updated information on the status of government  reorganization efforts and is connected with these reform efforts. The  President\u2019s Management Agenda also identified a set of cross-agency  priority goals, required under the GPRA [Government Performance and  Results Act] Modernization Act of 2010, to target those areas where  multiple agencies must collaborate to effect change and report progress  in a manner the public can easily track. One of these collaborative  efforts is focused on reducing the amount of dollars lost to taxpayers  through improper payments, including payments resulting from fraud. In  addition to the President\u2019s Management Agenda, OMB was required by  the March 2017 executive order to develop a comprehensive  government-wide reform plan, including, as appropriate,  recommendations for both legislative proposals and administrative  actions based on agency reform plans, OMB-coordinated crosscutting  proposals, and public input.\nIn June 2018, OMB released the government-wide reform plan, which  consists of government-wide reorganization and reform proposals with  the goal of increasing focus on integrated mission, service, and  stewardship delivery. While it is too early to tell whether or how all of  these reforms will affect agencies\u2019 efforts to implement FRDAA, we have  previously reported that OMB and agencies can leverage these broader  reform efforts to address the high-risk areas and government-wide  challenges that present vulnerabilities to fraud, waste, abuse, and  mismanagement, or are in need of transformation. We surveyed the 72  agencies about whether their plans to implement reforms have had an  effect on their efforts to implement FRDAA. About 83 percent of the  agencies surveyed reported that they did not address aspects of their  fraud risk management in their agency reform plans. Further, OMB  reported to us that these plans are still evolving, and have not yet been  finalized. However, as we have previously reported, OMB and agencies  can consider whether (1) the agency has addressed ways to decrease  the risk of fraud, waste, and abuse of programs as part of its proposed  reforms and (2) the size of the workforce or resources dedicated to fraud  risk management activities may be affected by any of the organizational  reforms or efforts to reduce burden, and to make decisions with these  considerations in mind.\n\n\tConclusions\n\nFraud is one contributor to financial and nonfinancial risks that cost  taxpayers dollars, threaten national security, or put consumers at risk.  Therefore, agencies must take a more-rigorous preventive approach to  managing the risk of fraud in their programs. Compliance with FRDAA  provisions can support these efforts. We recognize that effective  implementation of the act will take time, and each program and agency  may evolve at a different pace. While a small number of agencies  reported being mature in their implementation of FRDAA activities, most  are in the process of developing key fraud risk activities, and others have  yet to start developing them. Wherever agencies fall on this spectrum, it is  important that they continue taking actions to enhance their ability to  prevent, detect, and respond to fraud risks in their programs and  operations.\nOMB plays an important role in supporting agencies\u2019 efforts to manage  fraud risks by providing clear guidelines and facilitating agencies\u2019  involvement with the working group. OMB has taken steps to assist  agencies, such as updating ERM guidelines and chairing working-group  meetings, but improvements to these efforts could better facilitate  agencies\u2019 abilities to implement the act. Specifically, agencies reported  the need for additional guidance and clarity on the actions they should  take to effectively establish the required controls and report their progress  on implementation of the act\u2019s requirements, uncertainty about the  difference between ERM and FRDAA requirements, and the need for  more involvement and information from the working group. With  enhanced guidelines from OMB and improvements to collaboration,  agencies would be better positioned to improve controls and procedures  to assess and mitigate fraud risks, as FRDAA intends.\nPromoting the oversight and accountability of agency fraud risk activities  through reporting is an important aspect of congressional oversight, as  agencies enhance their fraud risk management controls. However, the  progress reports submitted by agencies as part of their annual financial  reports were incomplete and lacked detailed information to effectively  inform Congress of agencies\u2019 implementation status. Further, agencies  are only required to report their progress in implementing the  requirements of FRDAA through fiscal year 2019. However, it is not clear  that more-complete information will be reported by then. Until OMB  provides additional guidelines directing agencies to report more-complete  and more-detailed information related to both financial and nonfinancial  risks, agencies may continue to produce incomplete information on their  fraud risk management activities. Requiring agencies to report on the  progress of their implementation efforts beyond 2019 could better position  Congress to ensure oversight and accountability.\n\n\tMatter for Congressional Consideration\n\nWe are making the following matter for congressional consideration.\nCongress should consider extending the requirement in FRDAA for  agencies to report on their implementation of fraud controls, identification  of fraud risks, and strategies for mitigating them, beyond the current 2019  expiration. (Matter for Consideration 1)\n\n\tRecommendations for Executive Action\n\nWe are making the following three recommendations to OMB:\nThe Director of OMB should enhance the guidelines for agencies  to establish the controls required by FRDAA, by clarifying the  difference between FRDAA and ERM requirements, and through  collaboration with agencies to determine what additional  information agencies need to implement the controls.  (Recommendation 1)\nThe Director of OMB should enhance FRDAA reporting guidelines  by directing agencies to report complete and detailed information  on each of the reporting elements specified by FRDAA, which  should include information related to financial and nonfinancial  fraud. (Recommendation 2)\nThe Director of OMB should ensure the working group\u2019s  composition meets FRDAA requirements by involving the CFO of  all agencies subject to the act by inviting them to participate or  otherwise providing access and input into the working group, and  ensure that mechanisms to share controls, best practices, and  data-analytics techniques are in place. (Recommendation 3)\n\n\tAgency Comments and our Evaluation\n\nWe provided a draft of this report to OMB for review and comment. OMB  staff provided oral comments that disagreed with our three  recommendations, which we summarize below. OMB staff also provided  technical comments that we incorporated as appropriate.\nOMB disagreed with our first recommendation that it should enhance the  guidelines for agencies to establish the controls required by FRDAA by  clarifying the difference between FRDAA and ERM requirements, and  through collaboration with agencies to determine what additional  information agencies need to implement the controls. According to OMB  staff, Circular A-123 incorporates all of the guidance that agencies need  to implement FRDAA and, outside of the current guidance in Circular A- 123 which OMB staff stated incorporates both GAO\u2019s Standards for  Internal Control and GAO\u2019s Fraud Risk Framework, agencies are in the  best position to make decisions about how they should implement  FRDAA.  Further, OMB staff stated that they did not believe that our  survey of the 72 agencies and the roundtable with the 14 agencies  provided sufficient evidence that a change in their guidance is needed  because these responses are based on agencies\u2019 opinions.\nWhile Circular A-123 contains a section on Managing Fraud Risks in  Federal Programs, we identified important limitations to that section of  guidance in our report. In its comments on our report, OMB staff stated  that other parts of Circular A-123 provide guidance on FRDAA  requirements. These sections of Circular A-123 existed prior to FRDAA  and therefore, were not developed in response to FRDAA\u2019s requirement  that OMB establish guidelines for agencies. Our review of Circular A-123  found that there are some references to managing fraud risks that are in  alignment with the financial and administrative controls identified in  FRDAA, and therefore we incorporated that additional information into our  report. However, as we reported, agencies stated that they needed  additional guidance on how to effectively establish the controls required  by FRDAA. OMB was required by FRDAA to establish guidelines.  Specifically, lack of guidance and unclear requirements were identified as  top challenges during the roundtable discussion, and the sufficiency of  OMB\u2019s guidelines was a challenge for 40 percent of the agencies we  surveyed. OMB staff stated that they did not believe that our survey and  roundtable results are sufficient evidence to warrant a change in their  guidance because these responses are based on agencies\u2019 opinions.  However, because the purpose of OMB\u2019s guidance is to assist agencies  in implementing the administrative controls required by FRDAA, agencies\u2019  experiences and perspectives on the sufficiency of the guidance is an  essential part of assessing its effectiveness. Therefore, we reiterate the  positions expressed by many agencies that they do not have sufficient  guidance on implementing FRDAA requirements related to the  establishment of financial and administrative controls. As a result, our  recommendation on improving this guidance is still warranted.\nOMB also disagreed with our second recommendation that it should  enhance FRDAA reporting guidelines by directing agencies to report  complete and detailed information on each of the reporting elements  specified by FRDAA, which should include information related to financial  and nonfinancial fraud. According to OMB staff, Circular A-136 is  sufficient guidance because it includes the requirements stated in  FRDAA, and incorporating this guidance into Circular A-136 was not a  requirement of the act. Although not required by FRDAA, OMB\u2019s  guidance to agencies on FRDAA reporting is important because these  reports can be used to evaluate agency efforts to make changes to their  processes and policies. OMB Circular A-136 establishes reporting  guidance for executive branch entities required to submit agency financial  reports, among other things. Agencies were required to report on their  progress implementing FRDAA in these reports. However, FRDAA  provides high-level information on what should be included in agency  reports, not operational guidance on how to address the reporting  requirements, which is typically outlined in executive guidance to  agencies. Consequently, the initiative that OMB took to provide guidance  on FRDAA in Circular A-136 was an important step in the right direction.  However we found that the 24 CFO Act agencies\u2019 annual financial reports  for 2017 were incomplete and lacked details, which can be attributed in  part to the limited guidance provided by OMB. We found that 31 percent  of surveyed agencies indicated that reporting on FRDAA progress was a  great or moderate challenge. The agency reporting requirement was  intended to help Congress monitor the progress made by agencies in  addressing and reducing fraud risks, including the success and failures of  the guidelines created by OMB as a result of the act. Therefore, our  recommendation to improve OMB\u2019s reporting guidelines is still  appropriate.\nOMB also disagreed with our third recommendation that it should ensure  that the FRDAA working group\u2019s composition meets the act\u2019s  requirements by involving the CFO of all agencies subject to the act by  inviting them to participate or otherwise providing access and input into  the working group, and ensuring mechanisms to share controls, best  practices, and data-analytics techniques are in place. According to OMB  staff, they disagreed because they believe that OMB provided an  opportunity for all agencies to attend the working group meeting and they  have held four working group meetings in 2018. However, evidence  submitted by OMB throughout our review and agencies\u2019 responses to our  survey indicate that not all agencies had the opportunity to participate in  the working group. The working group was required to include the CFOs  of every agency subject to FRDAA, including those that are not subject to  the CFO Act. However, 71 percent of non\u2013CFO Act agencies were not at  all familiar with the working group, and ninety percent did not have a  designated person or entity that participated in the working group,  according to our survey. Moreover, 21 percent of CFO Act agencies,  which represent the largest federal agencies, were not at all familiar with  the working group, and 29 percent did not have a designated person or  entity that participated in it, according to our survey results, as of March  2018. To ensure that we obtained information from the right contacts  regarding agency participation, we surveyed the CFO or the CFO\u2019s  designee of each agency subject to FRDAA. During our audit, OMB  indicated that it did not have a list of CFO contacts for all agencies  subject to the act, and requested that we share our list of contacts. We  have agreed to do so consistent with our protocols, upon public release of  the report. Given our findings, our recommendation for OMB to ensure  that every agency is then given the opportunity to participate is still  warranted.\nOur survey results also indicated that most agencies identified the  sufficiency of information coming from the working group as a great or  moderate challenge in their efforts to implement FRDAA. Further, OMB  staff stated that they do not have documented minutes or notes from  working-group meetings. As we stated in our report, without documented  discussions, plans, or reports for these collaborative meetings, OMB is  unable to share the lessons learned from the meetings with those who  cannot attend, and does not have a record of the plans and actions that  the working group has agreed to take. This documentation is also  important to maintaining the continuity of the working group\u2019s initiatives  when leadership changes occur within the agencies and OMB. As we  previously noted, without participation in working-group meetings and  documentation to facilitate information sharing, agencies will continue to  miss opportunities to learn from each other\u2019s experiences and share  solutions for establishing financial and administrative controls to prevent,  detect, and respond to fraud risks in their programs. Therefore, we  believe that our recommendation on ensuring mechanisms are in place to  share controls, best practices, and data-analytics techniques is still  warranted. Finally, although OMB did not hold the required number of  meetings per year in 2017, it has done so for fiscal year and calendar  year 2018, as of November 2018. Therefore, we modified our  recommendation to reflect the new actions taken.\nWe are sending copies of this report to appropriate congressional  committees and OMB. In addition, the report is available at no charge on  the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  Rebecca Shea at (202) 512-6722 or shear@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report reviews agencies\u2019 and the Office of Management and  Budget\u2019s (OMB) efforts to implement the Fraud Reduction and Data  Analytics Act of 2015 (FRDAA). Specifically, it examines (1) federal  agencies\u2019 progress and challenges in implementing fraud risk  management practices, including those required by FRDAA, and (2) the  extent to which OMB has taken steps that complied with FRDAA  requirements and that facilitated agencies\u2019 implementation of the act. To  address both of these objectives, we developed and implemented a  government-wide survey of agencies subject to the act, conducted a  roundtable discussion with selected agencies, reviewed the 24 Chief  Financial Officer (CFO) Act agencies\u2019 annual financial reports,  interviewed staff from OMB, the CFO Council and the Council of the  Inspectors General on Integrity and Efficiency, and reviewed relevant  OMB circulars and documents.\n\n\tSurvey\n\n\t\tDetermination of Executive Branch Agencies Subject to FRDAA\n\nTo determine which agencies were subject to FRDAA and subsequently  surveyed, we first sent information requests to 93 federal executive  branch entities to determine whether their organization met the definition  of \u201cagency\u201d in 5 U.S.C. \u00a7 551(1). FRDAA requires the CFO of each  agency to be a member of the FRDAA working group. Therefore we  identified each entity\u2019s CFO or equivalent using publicly available  websites. We sent an email to the 93 entities\u2019 CFO or equivalent and  GAO liaison, if present, to notify the agency that we planned to administer  a government-wide survey related to the act and requested that an official  from the entity\u2019s Office of the General Counsel confirm whether the entity  is an \u201cagency\u201d as defined in 5 U.S.C. \u00a7 551(1). If the CFO was not the  official who was most appropriate to answer our survey about activities  related to the act, we requested that the agency identify who should  receive our survey. Of these 93 entities, 72 indicated they met this  definition of agency, 20 reported that they did not, and 1 entity, the  Central Intelligence Agency, did not respond. See table 1 for a list of the  72 executive branch agencies that identified themselves as being subject  to the act.\n\n\t\tSurvey Questionnaire Development\n\nTo improve the response rate of agencies receiving our survey, while  mitigating respondent burden and reducing total survey error, we  developed the survey using a variety of quality-assurance techniques.  Survey error can arise from population coverage, measurement,  nonresponse, and processing errors associated with questionnaire  surveys. GAO survey specialists determined survey design parameters  and developed, tested, revised, and finalized the questionnaire, in  consultation with subject-matter experts on the engagement team. The  survey design parameters included population coverage, mode of  administration, respondent communication methods, and protection from  disclosure of identifiable information.\nTo reduce measurement error, we pretested the questionnaire with  selected agency representatives using cognitive interviewing techniques,  such as nondirective probing of answers and asking respondents to think  aloud when formulating answers. This process allowed us to determine  whether questions were understood and answered as intended.  Specifically, pretests examined respondent issues related to  comprehension of the questions, ability to accurately respond to the  questions, perceptions of bias in the questions or scales, and  completeness of answer responses. For example, during pretesting we  probed respondents on whether our scales were appropriately balanced,  and whether individual questions were likely to be applicable to all  respondents. We conducted pretests over the phone with CFOs or other  FRDAA designated officials from three types of agencies for a total of six  agencies: two executive-department CFO Act agencies; two CFO Act  agencies that are not executive departments, and two non-CFO Act  agencies that are not executive departments. As a result of these  pretests, we made modifications to question wordings, scale categories,  and other response options to improve respondent comprehension,  reduce respondent burden, and mitigate risks of inaccurate or biased  responses.\nAn additional survey specialist, who had not been involved in the  development of the questionnaire, also reviewed the questionnaire. We  then modified the questionnaire based on suggestions made by the  reviewer and subject-matter experts. The final version of the  questionnaire was copy edited for grammatical and editorial errors.\nThe final questionnaire included questions designed to capture  information about FRDAA implementation government-wide and obtain a  high-level status update of agencies\u2019 implementation of the act including,  but not limited to, the steps agencies had taken since the enactment of  the act, fraud risk management activities, challenges they have  experienced implementing FRDAA, and their perspectives about OMB\u2019s  support of these efforts. It was composed of questions with  predetermined answer choices (closed-ended questions) and questions  without predetermined answer choices requiring written response (open- ended questions). See appendix II for survey questions and frequencies  of agencies\u2019 responses.\n\n\t\tSurvey Administration\n\nTo administer the survey, we emailed each agency a fillable PDF  questionnaire. We fielded the survey from January 18, 2018, through  March 27, 2018. To follow up with agencies that did not respond to the  initial notice, we emailed or called multiple times to encourage survey  participation or provide technical assistance, as appropriate. We received  usable questionnaire responses from all 72 agencies, for a response rate  of 100 percent. Because this survey was sent to all agencies that were  identified as being subject to FRDAA, there is no error as a result of  sampling, and results cover the entire population. However, the practical  difficulties of conducting any survey may also introduce other types of  errors, commonly referred to as nonsampling errors. For example,  difficulties in how a particular question is interpreted, in the sources of  information available to respondents, or in how the data were entered into  a database or analyzed can introduce unwanted variability into the survey  results. With this survey, we took a number of steps to minimize these  nonsampling errors. For example, our staff with subject-matter expertise  designed the questionnaire in collaboration with our survey specialists,  and all questions were cognitively pretested with knowledgeable  respondents. When the survey data were received from agencies and  analyzed, a second independent analyst on our staff verified the analysis  programs to ensure the accuracy of the code and the appropriateness of  the methods used for the computer-generated analysis. Since this was an  electronic survey, respondents entered their answers directly into the  questionnaire, thereby mitigating the need to have the data keyed into a  database, thus avoiding a source of data-entry error.\n\n\tRoundtable Discussion\n\nTo collect information about agencies\u2019 experiences implementing FRDAA,  we also facilitated a roundtable discussion with selected agencies subject  to FRDAA that had completed the survey. The purpose of the roundtable  discussion was to obtain agency officials\u2019 perspectives on  the strategies and activities used to establish fraud controls and  related fraud risk management activities;  the guidance and resources used to facilitate the implementation of  FRDAA;  their challenges in implementing FRDAA; and potential solutions to improve implementation of the act, including any  additional guidance or resources that may be useful to implementing  the act.\nWe randomly selected and invited a diverse group of agencies that are  subject to FRDAA. We planned for a group of agencies that were diverse  in terms of the following:  1.  agency type, such as whether the agency was a CFO Act agency, an  executive department or non\u2013executive department, and membership  in the Small Agency Council; and  2.  FRDAA implementation status as indicated by their responses to two  survey questions. These two survey questions were \u201coverall, what is  the status of your agency-wide efforts to implement FRDAA\u201d and \u201cas  of today, does your agency do the following to manage fraud risk at  the agency-wide level.\u201d We used the survey responses to divide  agencies into two groups, a more-mature implementation group and a  less-mature implementation group.\nWe invited a total of 27 agencies to participate in our roundtable, an initial  group of 20 agencies and 7 backup agencies. Fourteen agencies  attended our roundtable: six executive-department CFO Act agencies;  two CFO Act agencies that are not executive departments; and six Small  Agency Council member agencies. Agency representatives included  agency officials with responsibility for antifraud activities, including either  the agency\u2019s CFO, Chief Risk Officer, or other staff responsible for fraud  risk management activities.\nThe roundtable discussion was held March 26, 2018, and included three  sessions: an opening session, a breakout session, and a closing session.  In the opening session, all 14 of the roundtable participants were given an  overview of our researchable questions and the agenda for the day. Then  the agencies were split into two breakout groups based on their response  to our survey questions about the maturity of their implementation of  FRDAA. In the two breakout groups, roundtable participants discussed  the guidance and resources they used for implementation of the act, their  approaches used for implementation of the act, and the strategies and  challenges associated with implementation of the act. In each breakout  group, roundtable participants identified and voted on their top challenges  in implementing FRDAA. After the breakout session, GAO facilitators and  subject-matter experts on the engagement team then met to create a new  list of the top voted challenges of both groups as well as any crosscutting  challenges. Finally, in the closing session, all 14 agencies came back  together to recap the breakout discussions and have a broader  discussion about experiences of successful implementation and potential  solutions to improve implementation, including any additional guidance or  resources that may be useful to implementing the act. Roundtable  participants identified and voted on their top challenges to implementing  FRDAA. These results are not generalizable to agencies beyond the 14  that participated.\n\n\tFiscal Year 2017 Annual Financial Reports\n\nTo further assess steps that agencies have taken to implement fraud risk  management practices, as required by FRDAA, we also reviewed the  fiscal year 2017 annual financial reports for the 24 agencies subject to the  CFO Act. FRDAA required agencies to report to Congress on the status  of their efforts to implement financial and administrative controls that  incorporate leading practices from GAO\u2019s Fraud Risk Framework, identify  fraud risks, and establish strategies to mitigate fraud in these reports. We  selected these 24 agencies because they were known at the time of our  selection to be agencies that were subject to FRDAA, and are estimated  to account for over 99 percent of the government-wide improper  payments in fiscal year 2015. These agencies also are required to  submit their reports directly to GAO. We conducted a content analysis to  determine the completeness and quality of the information provided in  these reports related to these FRDAA requirements.\nBecause content analysis relies on the judgment of coders to determine  whether qualitative data reflects particular categories, we took several  steps to ensure that this judgment remained objective, accurate, and  consistent. Prior to beginning the content analysis, we worked with  subject-matter and legal experts to develop a codebook and definitions  for the different kinds of information that FRDAA requires agencies to  report, as well as supplemental coding categories related to leading  practices in fraud risk management identified in our framework. In order to  test the clarity of these codes, we had four independent analysts pretest  the content analysis on two annual financial reports, and found high levels  of interrater reliability. Specifically, each of the categories had at least 95  percent agreement between coders. As a result to this pretest, minor  changes were made to the category definitions.\nWe used two independent coders within GAO to ensure consistent  judgment of categories. For the content analysis, each of the 24 annual  financial reports was coded by two independent analysts, including one  subject-matter expert familiar with fraud risk management and another  familiar with each of the CFO Act agencies. Agreement among coders  exceeded 99 percent across all of the coding categories. On the basis of  this high level of agreement between coders, we are confident that our  content analysis represents an objective, accurate, and consistent  assignment of these coding categories. Because these coding categories  would be further reviewed in making our determinations about  completeness and detail, we decided to resolve any intercoder  disagreements by keeping all coded material for that review.\nTo assess the completeness of agencies\u2019 reporting on FRDAA  implementation, we broke out the unique requirements in each of the  three broad categories outlined in FRDAA\u2019s reporting requirements. As a  result, our analysis included an assessment of 11 coding categories,  which are listed with their definitions in table 2 below. An element was  considered present if the corresponding code was applied one or more  times in the annual financial reports, and missing if the corresponding  code was applied zero times. Each annual financial report was then  categorized into one of four categories of completeness, based on these  assessments:  1.  Fully complete: agencies with reports that contained information on all  11 elements.  2.  Mostly complete: agencies with reports that contained information on  6\u201310 elements.  3.  Partially complete: agencies with reports that contained information on  1\u20135 elements.  4.  Not at all complete: agencies with reports that contained information  on 0 elements.\nIn addition to assessing whether the annual financial report contained  these elements, as required by FRDAA, we also reviewed the content of  each of these coding categories, as well as additional categories related  to leading practices in fraud risk management. In order to demonstrate  the range of the quality and level of detail provided for each element, and  for the overall reporting on fraud risk management efforts, we reviewed  the specific coded excerpts in NVivo for each agency and summarized  the level of detail, length, and other observations specific to each  category.\nTo address our second objective, determining the extent to which OMB  has taken steps that complied with FRDAA requirements and that  facilitated agencies\u2019 implementation of the act, we reviewed relevant  documents produced to support the implementation of FRDAA. We also  assessed the extent to which the guidelines were consistent with leading  practices from the Fraud Risk Framework and the Standards for Internal  Control in the Federal Government.\nTo determine the extent to which OMB has taken steps that complied with  FRDAA requirements and facilitated agencies\u2019 implementation of the act,  we did the following:  1.  We interviewed staff from OMB\u2019s Office of Federal Financial  Management and Office of Personnel and Performance Management  regarding their development of guidelines, the working group, and any  challenges OMB may have experienced while implementing the act\u2019s  requirements, to determine the extent to which OMB\u2019s efforts to  facilitate agency implementation of the act were viewed as helpful by  agencies.  2.  We reviewed relevant memorandum, circulars, and other OMB  documents including Circular A-123, Management\u2019s Responsibility  for Enterprise Risk Management and Internal Control, and Circular  A-136, Financial Reporting Requirements, and compared these with  the requirements for OMB outlined in FRDAA.  3.  We evaluated agencies\u2019 perspectives and experiences using OMB\u2019s  guidelines and other initiatives to implement the act by assessing our  survey responses, annual financial-report analysis, and roundtable  discussion for responses related to OMB guidelines and other efforts,  and related strengths and challenges.  4.  We also interviewed officials from the CFO Council and Council of the  Inspectors General on Integrity and Efficiency to get a broader opinion  about the effectiveness of OMB and agency efforts to implement  FRDAA.\nWe conducted this performance audit from August 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix II: Results of GAO\u2019s Survey on Agencies\u2019 Implementation of the Fraud Reduction and Data Analytics Act of 2015\n\nTo obtain information about the extent to which executive branch  agencies have taken steps required by the Fraud Reduction and Data  Analytics Act of 2015 (FRDAA), we identified 72 agencies subject to the  act and surveyed these agencies about their fraud risk management  practices and related challenges. We received responses from all 72  agencies, for a response rate of 100 percent. The questions we asked in  our survey and the percentage of agencies\u2019 responses are shown below.  Our survey was composed of questions with predetermined answer  choices (closed-ended questions) and questions without predetermined  answer choices requiring written response (open-ended questions). In  this appendix, we include all survey questions and results of responses to  the closed-ended questions; we do not provide information on responses  to open-ended questions.\nThe tables below represent the percentage of agencies\u2019 responses to the  close-ended questions. The percentages we report are rounded to the  nearest whole number. For a more-detailed discussion of our survey  methodology, see appendix I.\nSurvey question 13: What other information, if any, should GAO know  about your agency\u2019s efforts to implement FRDAA or manage fraud risks?  (open-ended response)\nSurvey question 14: Do you have any additional explanations for your  answers or comments on any of the issues in this questionnaire?   (open-ended response)\nSurvey question 15: Please enter the contact information for the primary  person who completed this survey. (open-ended response)\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Latesha Love (Assistant  Director); Georgette Hagans (Analyst in Charge); Sarah Cantatore, Joy  Kim, Grant Mallie, James Murphy, Eve Nealon, Steven Putansu, Kristen  Timko, and Shana Wallace made key contributions to this report. Other  contributors include Marcus Corbin, Carrie Davidson, Colin Fallon,  Barbara Lewis, and Maria McMullen.","output":"Why GAO Did This Study\n\nFraud poses a significant risk to the integrity of federal programs and erodes public trust in government. Implementing effective fraud risk management processes can help ensure that federal programs fulfill their intended purpose, spend their funding effectively, and safeguard assets.\nFRDAA requires agencies to establish internal controls to manage their fraud risks and to report implementation progress for the first 3 years after enactment. It also directs OMB to (1) develop guidelines for agencies to establish fraud risk management controls and (2) establish a working group to share best practices in fraud risk management and data analytics.\nGAO was asked to review agencies' and OMB's efforts to implement FRDAA. This report examines steps (1) agencies and (2) OMB have taken to implement FRDAA. GAO conducted a survey of the 72 agencies subject to the act, held a roundtable discussion with 14 selected agencies, reviewed 24 selected annual financial reports, examined OMB guidelines, and interviewed OMB staff.\n\nWhat GAO Found\n\nAt varying stages, agencies have begun planning for and implementing fraud risk activities (like conducting an evaluation of fraud risks) required by the Fraud Reduction and Data Analytics Act of 2015 (FRDAA), according to GAO's survey of agencies subject to the act. Overall, most of the 72 surveyed agencies (85 percent) indicated that they have started planning how they will meet FRDAA requirements, and about 78 percent indicated that they have also started taking steps to implement the requirements.\nTo assist agencies in implementing fraud risk management activities, the Office of Management and Budget (OMB) established FRDAA-related guidelines and a working group, as required by the act. However, agencies experienced challenges with OMB's guidelines and the working group, among other things, according to GAO's survey and roundtable discussion results (see figure below).\nImplementation guidelines. To meet FRDAA requirements, OMB updated Circular No. A-123 guidelines that govern executive agencies. However, this update included limited information on the methodologies agencies can use to assess, document, and report on internal controls required by FRDAA, according to GAO's review of the guidelines. Surveyed agencies had mixed perspectives on the usefulness of OMB's guidelines for implementing FRDAA controls. Similarly, agencies identified the lack of clear requirements and guidance as top challenges in GAO's roundtable discussion with 14 selected agencies.\nReporting on implementation progress. Although not required by FRDAA, OMB updated annual financial report guidelines to include FRDAA requirements, but GAO found that the guidelines did not contain enough information to aid agencies in producing complete and detailed progress reports in 2017, the first year of reporting. Additional guidelines from OMB could help agencies produce more complete and detailed reports for 2019, the final year of required reporting. Without a longer reporting period, however, Congress may not have the useful information for continued oversight of agencies' progress.\nWorking Group. OMB has taken steps to establish the working group, but GAO found the working group did not fully meet FRDAA requirements. As Chair, OMB did not (1) involve all agencies subject to the act in the working group or (2) hold the required number of meetings in 2017. Most surveyed agencies indicated a lack of involvement with and information from the working group as challenges in implementing FRDAA.\n\nWhat GAO Recommends\n\nGAO is making three recommendations, including that OMB (1) enhance its guidelines for establishing controls, (2) enhance guidelines for reporting on agencies' progress, and (3) fully implement the working group. OMB did not concur with the need for the recommendations. GAO continues to believe the recommendations are valid, as discussed in the report. Additionally, Congress should consider extending agencies' reporting requirements."}
{"id":"gao_GAO-18-675T","pid":"gao_GAO-18-675T_0","input":"\tUnlike the United States, Most IEA Members Rely on Private Reserves to Meet Reserve Obligations and Hold Significant Proportions of Their Reserves as Petroleum Products\n\nAs we found in our May 2018 report, in terms of how they meet their IEA  90-day reserve obligations, most other IEA members differ from the  United States in two basic ways. First, as of December 2017, most other  IEA members rely at least in part on private rather than public reserves to  meet their obligations. As of December 2017, 18 of the 25 IEA members  that met their 90-day reserve obligation and had a formal process for  holding and releasing reserves relied entirely or in part on private  reserves to meet their obligations. Specifically, based on IEA data as of  December 2017, these 18 countries met their 90-day reserve obligations  through private reserves and either had no public reserves or had public  reserves of less than 90 days. Unlike the 18 countries that rely at least in  part on private reserves, as of December 2017, the United States and 6  other IEA members met the 90-day reserve obligation exclusively through  public reserves. The second way other IEA members differ from the  United States is that most hold at least a third of their reserves as  petroleum products, according to a 2014 IEA report. Holding petroleum  products can be advantageous during certain disruptions because such  reserves can be directly distributed to consumers, whereas crude oil must  first be refined and turned into products, adding response time. In  contrast, more than 99 percent of the SPR (665.5 million barrels as of  March 2018) is held as crude oil. Because of the large U.S. refining  sector, crude oil from the SPR can be domestically refined into petroleum  products to meet demand.\n\n\tDOE Has Not Identified the Optimal Size for the SPR or the Potential Need for Regional Product Reserves\n\nAs we found in our May 2018 report, DOE has not identified the optimal  size or the potential need for additional petroleum product reserves for  the SPR. In 2016, DOE completed a long-term strategic review of the  SPR after its last comprehensive examination had been conducted in  2005. The 2016 review examined the expected benefits of several SPR  sizes, but it did not identify an optimal size and was limited in several  ways. In particular, in the review, DOE did not fully consider recent and  expected future changes in market conditions, such as the implications of  projected fluctuations in net imports or the role of the private sector in  responding to supply disruptions. Recent changes have contributed to  SPR and private reserves reaching historically high levels on a net  imports basis. These changes are expected to continue to evolve\u2014 according to government projections, the United States will become a net  exporter in the late 2020s before again becoming a net importer between  2040 and 2050. In February 2005, we found that agencies should  reexamine their programs if conditions change. Without addressing the  limitations of its 2016 review and periodically performing reexaminations  in the future, DOE cannot be assured that the SPR will be sized  appropriately into the future. In May 2018, we recommended that DOE (1)  supplement its 2016 review by conducting an additional analysis that  takes into account, among other things, the costs and benefits of a wide  range of different SPR sizes and (2) take actions to ensure that it  periodically conducts and provides to Congress a strategic review of the  SPR. DOE partially agreed with the first recommendation and stated that  it will conduct an additional analysis to assess the purpose, goals, and  objectives of the SPR, taking into account private sector response, oil  market projections, and any other relevant factors, that will lead to an  evaluation of possible optimal sizes of the SPR in the future. DOE agreed  with the second recommendation.\nDOE has also not fully identified whether additional regional petroleum  product reserves should be part of the SPR. The Quadrennial Energy  Review of 2015 recommended that DOE analyze the need for additional  or expanded regional product reserves by undertaking updated cost- benefit analyses for all of the regions of the United States that have been  identified as vulnerable to fuel supply disruptions. In response, DOE  studied the costs and benefits of regional petroleum product reserves in  the West Coast and Southeast Coast, though it did not finalize or publicly  release these studies. Nevertheless, the draft studies concluded that a  product reserve in the Southeast would provide significant net economic  benefits to the region and the United States, particularly in the event of a  major hurricane, while further analyses are needed to determine the  potential benefits of a reserve on the West Coast. According to DOE  officials, the agency has no plans to conduct additional studies. Without  completing studies on the costs and benefits of regional petroleum  product reserves, DOE cannot ensure that it and Congress have the  information they need to make decisions about whether additional  regional product reserves are needed. In our May 2018 report, we  recommended that DOE conduct or complete such studies. DOE  disagreed with this recommendation, though we continue to believe that  conducting these analyses will provide Congress with needed  information.\n\n\tDOE Has Taken Steps to Update Its Modernization Plans but Is Hindered by Uncertainty Regarding the SPR\u2019s Long-term Size\n\nAs we found in our May 2018 report, DOE has taken steps to account  for the effects of congressionally mandated oil sales in its plans for  modernizing the SPR, though DOE\u2019s current plans, developed in 2016,  are based on information largely developed prior to recent  congressionally mandated sales of an additional 117 million barrels of oil.  According to DOE documents, the SPR modernization program is  focused on a life extension project to modernize aging infrastructure to  ensure that the SPR will be able to meet its mission requirements for the  next several decades. The project\u2019s scope of work has undergone several  revisions since its inception in response to changing conditions and  requirements, according to the agency. DOE has estimated that the  SPR\u2019s modernization will cost up to $1.4 billion, and according to officials,  the agency had spent $22 million as of the end of February 2018.  According to DOE officials, in March 2018, DOE commenced a study\u2014 the SPR post-sale configuration study targeted for completion in October  2018\u2014to examine potential future reserve configurations and to account  for the effects of congressionally mandated sales on the reserve and its  modernization. Information from the study will inform DOE\u2019s updates to  the SPR\u2019s modernization plans, according to DOE officials.\nAlthough the SPR had a design capacity to hold 713.5 million barrels of  oil, in January 2017, the SPR held 695 million barrels. As shown in figure  2, congressionally mandated sales will cause excess storage capacity to  grow to 308 million barrels or more by the end of fiscal year 2027\u2014 meaning that about 43 percent of the SPR\u2019s total design capacity to store  oil would be unused.\nIn its ongoing SPR post-sale configuration study, DOE plans to explore  some options to use potentially excess SPR assets, such as spare  storage capacity. In withdrawing oil to meet congressionally mandated oil  sales currently in place (290 million barrels through fiscal year 2027),  DOE could close at least one SPR site based on our analysis of projected  excess storage capacity. For example, if DOE were to close the smallest  SPR site, Bayou Choctaw in Louisiana, the agency could also explore  selling the connected pipeline and marine terminal, which are currently  being leased to a private company. DOE could also consider leasing  excess storage capacity to other countries so that they could store oil at  the SPR. DOE had not entered into any such leases with other  countries and had not considered such leases as of May 2018 because,  according to DOE, the SPR has historically lacked capacity to store  additional oil. DOE had not proposed any of these options or explored the  revenue the agency could generate by selling or leasing these assets.  However, according to DOE officials, the agency will examine the  feasibility of such options in the ongoing SPR post-sale configuration  study.\nIn the course of our work, we also identified other options for handling  potentially excess SPR assets that DOE was not planning on examining  as of May 2018, largely because DOE did not have the authority to  pursue them, according to agency officials. First, DOE could explore  leasing storage capacity to private industry. U.S. oil production has  generally increased over the last decade. As a result, the private sector  may want to lease excess SPR capacity, which may be cheaper than  above-ground storage, according to a representative of a private  company we interviewed. Fees for doing so could help defray SPR  storage or maintenance costs. However, agency officials told us that the  Energy Policy and Conservation Act gave DOE authority to lease  underutilized storage to other countries but not to the private sector.  Second, if Congress determines that the SPR holds oil in excess of that  needed domestically, DOE could explore selling contingent contracts for  the excess oil rather than selling the oil outright. Australian and New  Zealand officials told us that such contracts would help their countries  meet their IEA 90-day reserve obligations.\nAustralian officials told us that they have discussed this option with DOE.  Currently the United States and Australia have agreed, through an  arrangement, to allow Australia to contract for petroleum stocks located in  the United States and controlled by commercial entities. While the  arrangement does not cover government-owned oil in the SPR, if it did,  based on our analysis, DOE could generate up to approximately $15  million if Australia purchased the maximum allowable amount of oil  specified in an arrangement through contracts for excess SPR oil in  2018. However, although the Energy Policy and Conservation Act  allows DOE to lease underutilized storage to other countries, DOE lacks  the authority to sell contracts for the oil and does not plan to seek this  authority, according to DOE officials. DOE officials told us that they did  not plan to examine these options.\nAccording to DOE\u2019s real property asset management order, the agency is  to identify real property assets that are no longer needed to meet the  program\u2019s mission needs and that may be candidates for reuse or  disposal. Once identified, the agency is to undertake certain actions,  including determining whether to dispose of these assets by sale or lease.  As part of its SPR post-sale configuration study, DOE plans to determine  whether it is appropriate to close SPR facilities, and the relative benefit of  any closures would be informed by potential lease revenues from  maintaining sites so they could be leased, according to agency officials.  However, as mentioned previously, we identified other options for  handling potentially excess SPR assets that DOE was not planning to  examine in its study. Although DOE does not currently have the authority  to implement these options, according to officials, examining their  potential use, including possible revenue enhancement, could inform  Congress as it examines whether it should grant such authority. Without  examining a full range of options in the SPR post-sale configuration  study, DOE risks missing beneficial ways to modernize the SPR while  saving taxpayer resources. In May 2018, we recommended that in  completing its ongoing SPR post-sale configuration study, DOE should  consider a full range of options for handling potentially excess assets and,  if needed, request congressional authority for the disposition of these  assets. DOE agreed with this recommendation.\nFinally, as DOE takes steps to plan for the SPR\u2019s modernization, ongoing  uncertainty regarding the SPR\u2019s long-term size and configuration have  complicated DOE\u2019s efforts. Congress has generally set the SPR\u2019s size by  mandating purchases or sales of oil. DOE officials told us they do not  know whether Congress will mandate additional sales over the next 10  years or whether other changes may be required to the configuration of  the reserve. Any additional congressionally mandated sales would require  DOE to again revisit its modernization plans and assessments of the  potential uses of any excess SPR assets. Oil market projections also  have implications for the future of the SPR. The United States is projected  to become a net exporter by the late 2020s and would then no longer  have a 90-day reserve obligation, but it is projected to return to being a  net importer between 2040 and 2050. These projected fluctuations could  affect the desired size of the SPR in the future. Such uncertainties create  risks for DOE\u2019s modernization plans, as DOE may end up spending funds  on facilities that later turn out to be unnecessary should Congress  ultimately decide on a larger- or smaller-sized SPR than DOE anticipates.  In May 2018, we suggested that Congress may wish to consider setting a  long-range target for the size and configuration of the SPR that takes into  account projections for future oil production, oil consumption, the efficacy  of the existing SPR to respond to domestic supply disruptions, and U.S.  IEA obligations.\nIn conclusion, we found that given the constrained budget environment  and the evolving nature of energy markets and their vulnerabilities, it is  important that DOE endeavor to ensure that the SPR is an efficient and  effective use of federal resources.\nChairman Upton, Ranking Member Rush, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to answer any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff members have any questions about this testimony,  please contact Frank Rusco, Director, Natural Resources and  Environment, at (202) 512-3841 or ruscof@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. Key contributors to this testimony  included Quindi Franco (Assistant Director), Nkenge Gibson (Analyst-in- Charge), Philip Farah, Ellen Fried, Cindy Gilbert, Gregory Marchand,  Celia Mendive, Patricia Moye, Camille Pease, Oliver Richard, Dan Royer,  Rachel Stoiko, and Marie Suding.\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":"Why GAO Did This Study\n\nOver 4 decades ago, Congress authorized the SPR\u2014the world's largest government-owned stockpile of emergency crude oil\u2014to reduce the impact of disruptions in supplies of petroleum products. Since 2015, Congress has also mandated sales of SPR oil to fund the modernization of SPR facilities and other national priorities. DOE manages the SPR, whose storage and related infrastructure is aging, and has plans to modernize its facilities. As a member of the International Energy Agency, the United States is obligated to maintain reserves equivalent to at least 90 days of the previous year's net imports (imports minus exports). As of March 2018, the SPR held about 665 million barrels of crude oil, about 138 days of net imports.\nThis testimony highlights GAO's May 2018 report on the SPR, including the extent to which (1) DOE has identified the optimal size of the SPR, and (2) DOE's plans for modernizing the SPR take into account the effects of congressionally mandated crude oil sales. GAO reviewed DOE's documents and studies and interviewed agency officials.\n\nWhat GAO Found\n\nThe Department of Energy (DOE) has not identified the optimal size of the Strategic Petroleum Reserve (SPR). In 2016, DOE completed a long-term strategic review of the SPR after its last comprehensive examination was conducted in 2005. The 2016 review examined the benefits of several SPR sizes, but it did not identify an optimal size and was limited in several ways. In particular, in the review, DOE did not fully consider recent and expected future changes in market conditions, such as the implications of projected fluctuations in net imports or the role of the private sector in responding to supply disruptions. These changes have contributed to SPR and private reserves reaching historically high levels on a net imports basis. These changes are expected to continue to evolve, and according to government projections, the United States will become a net exporter in the late 2020s before again becoming a net importer between 2040 and 2050. GAO has found that agencies should reexamine their programs if conditions change. GAO recommended that DOE supplement its 2016 review by conducting an additional analysis, and take actions to ensure the agency periodically conducts a strategic review of the SPR. DOE generally agreed with these recommendations.\nDOE has taken steps to account for congressionally mandated sales of SPR crude oil in its $1.4 billion modernization plans for SPR's infrastructure and facilities. However, DOE's current plans, developed in 2016, are based on information largely developed prior to recent congressionally mandated sales of an additional 117 million barrels of oil. According to DOE officials, the agency began a study in March 2018 to assess the effects of these sales on the SPR's modernization. However, GAO reported that this study was not examining a full range of options for handling any excess SPR assets that may be created by currently mandated sales or any additional sales that may be mandated in the future, inconsistent with an agency order on real property asset management that calls for identifying excess assets. For example, according to officials, DOE does not currently have the authority to lease unused storage capacity to the private sector, and DOE was not planning to examine this option. If authorized, leasing unused SPR storage capacity could generate revenues that could help offset the costs of modernization. GAO recommended that DOE should consider a full range of options for handling potentially excess assets and, if needed, request congressional authority for the disposition of these assets. DOE agreed with this recommendation.\n\nWhat GAO Recommends\n\nGAO made four recommendations, including that DOE (1) supplement the 2016 review by conducting an additional analysis, (2) ensure it periodically reexamines the SPR, and (3) consider a full range of options for handling potentially excess assets. DOE partially agreed with the first recommendation and agreed with the other two recommendations."}
{"id":"gao_GAO-19-15","pid":"gao_GAO-19-15_0","input":"\tBackground\n\n\t\tDisability Compensation Claims Process\n\nVA pays monthly disability compensation to veterans with service- connected disabilities (i.e., injuries or diseases incurred or aggravated  while on active military duty) according to the severity of the disability.  VBA\u2019s Compensation Service sets policy and oversees the delivery of  disability compensation. VBA\u2019s Office of Performance Analysis and  Integrity analyzes performance information related to claims. VBA\u2019s Office  of Field Operations provides operational oversight to district and regional  offices. The 57 regional offices are grouped into five district offices, which  manage the regional offices in their areas. VBA staff in the Veterans  Service Centers of the regional offices process disability compensation  claims. These claims processors include Veterans Service  Representatives who gather evidence needed to determine entitlement  and review the amount of the award and authorize payment, if any, and  Rating Veterans Service Representatives who decide entitlement and the  rating percentage. Veterans may claim more than one medical  condition, and VBA assigns a rating percentage for each claimed medical  condition, as well as for the claim overall.\nAs shown in figure 1, after a veteran submits a claim to VBA, a Veterans  Service Representative reviews the claim and helps the veteran gather  the relevant evidence needed to evaluate the claim. Such evidence  includes the veteran\u2019s military service records, medical examinations, and  treatment records from Veterans Health Administration medical facilities  and private medical service providers. Also, if necessary to provide  support to substantiate the claim, VA will provide a medical examination for the veteran. Once VBA has gathered the supporting evidence, a  Rating Veterans Service Representative\u2014who typically has more  experience at VBA than a Veterans Service Representative\u2014evaluates  the claim and determines whether the veteran is eligible for benefits and,  if so, assigns a percentage rating. A Veterans Service Representative  then determines the amount of the award, if any, and drafts a decision  notice. A senior Veterans Service Representative then authorizes the  award and releases the decision notice to the veteran following a review  of both for accuracy.\n\n\t\tNational Work Queue\n\nIn May 2016, VBA completed implementation of the National Work  Queue\u2014an electronic workload management initiative that prioritizes and  distributes claims across regional offices. Previously, a veteran\u2019s claim  was generally processed from start to finish (i.e., awarding of benefits or  notification of denial) by the veteran\u2019s local regional office of jurisdiction,  and the regional office\u2019s workload generally depended on how many  claims were filed by veterans within its area of jurisdiction. Now, a claim  can be processed by multiple regional offices, and claims are distributed  based on regional office capacity (see fig. 2).\n\n\t\tNational Trends in Disability Compensation Claims Processing\n\nVBA establishes national targets and tracks performance for disability  compensation claims processing. Since fiscal year 2014, national claims  processing timeliness has improved substantially, and accuracy scores  have decreased slightly, as shown in table 1. VBA\u2019s 12-month issue- based accuracy target for fiscal year 2017 was 96 percent and its target  for fiscal year 2018 was the same. From fiscal year 2014 to 2017, VBA\u2019s  national accuracy estimate decreased from about 96 percent to about 94  percent. In addition, VBA\u2019s target for backlog claims\u2014defined by VBA  as those pending for more than 125 days\u2014for fiscal year 2017 was no  more than 15 percent of claims inventory and its target for fiscal year  2018 was no more than 21 percent of claims. In fiscal year 2017, VBA\u2019s  reported percentage of backlog claims was 23 percent, with a reduction  from 240,443 to 70,965 total reported backlog claims from fiscal years  2014 to 2017.\n\n\t\tRegional Office Performance Measures for Disability Compensation Claims Processing\n\nVBA\u2019s Office of Performance Analysis and Integrity collects a variety of  data on timeliness and accuracy, including on VBA\u2019s claims backlog, so  that VBA can monitor regional office performance. To improve timeliness  and accuracy, and reduce the claims backlog, VBA sets performance  standards for the directors of regional offices. In fiscal year 2018, regional  office performance was assessed using two primary metrics\u2014timeliness  (Time-in-Queue) and accuracy (12-month issue-based accuracy). Since  1999, VBA has assessed the accuracy of disability compensation claims  decisions at the national and regional office level using its Systematic  Technical Accuracy Review (STAR). With this tool, VBA reviews a  stratified random sample of completed claims, and certified reviewers use  a checklist to assess specific aspects of each claim.\n\n\t\tVeterans Service Organizations and Congressional Caseworkers\n\nAccording to VA, as of October 2017, 31 congressionally chartered VSOs  were recognized by VA under federal statute to help veterans navigate  the claims process. VSOs commonly are private nonprofit groups that  advocate without fees on behalf of veterans. VSOs employ individuals,  called veterans service officers, whose offices often are located at a VBA  regional office. Through a power of attorney, VSOs can represent  veterans before VA, and assist them and their families with disability  compensation claims, among other things. VSO staff are trained to help  veterans understand and apply for any VA benefits to which they may be  entitled, including disability compensation. In addition to helping veterans  submit claims to VBA, VSOs are allowed to communicate with VBA on  behalf of the veteran throughout the life of the claim, and are given up to  48 hours to review the claim decision before it is finalized (after the Rating  phase in figure 1 above). VSOs can have access to VBA\u2019s electronic  claims management system to view claims status and submit claims  documents.\nAccording to a Congressional Research Service report, as of March 2016,  919 congressional caseworkers were working for constituents on a variety  of issue areas, including veterans\u2019 disability compensation claims. Also  according to the report, congressional caseworkers cannot legally  represent veterans, but with a privacy release form from the veteran, VBA  may respond to a congressional inquiry. According to VA officials,  congressional caseworkers can then obtain certain claim-related  information from VA, such as the status of the veteran\u2019s claim. VA\u2019s  guidance on \u201cspecial controlled correspondence\u201d governs VBA\u2019s  communication with congressional caseworkers, including required time  frames for responding to congressional inquiries. Congressional  caseworkers generally work out of Congressional Members\u2019 state and  district offices.\n\n\tVBA Manages Workload and Performance through Established Processes, but Guidance for Claims with Errors Has Gaps\n\n\t\tVBA Allocates Claims Workload across Offices Based on Their Capacity, but Guidance for Processing Claims with Errors Has Gaps\n\nThe National Work Queue, which VBA uses to distribute disability  compensation claims, was designed to even out the differences in claims  workload across regional offices by having multiple offices complete parts  of a claim and allocating claims based on each office\u2019s capacity. For  example, as shown in figure 3, in fiscal year 2017, about 88 percent of all  disability compensation claims were processed by more than one office,  and over 75 percent were processed by three or more offices. This  distribution method is intended to keep all offices working at their  capacity, regardless of the volume of claims filed by veterans in each  region. While VBA officials stated that they had initially planned to  continue to have a majority of claims processed at veterans\u2019 local regional  offices, after implementation of the National Work Queue they determined  that the system operates more effectively if veteran location is a lower  priority factor for claims distribution. Thus, very few claims are processed  entirely at a veteran\u2019s local regional office, unless the veteran has a  documented hardship that may necessitate expediting the claim or face- to-face interaction.\nVBA officials added that the National Work Queue formula distributes  claims based on VBA priorities. For example, VBA prioritizes claims for  veterans with documented hardships (e.g., terminal illness, financial  hardship). In addition, the National Work Queue formula takes into  account the length of time since the claim was received and prioritizes  backlog claims\u2014defined by VBA as claims that have been open for more  than 125 days.\nOnce the National Work Queue allocates claims to a regional office, the  office has some discretion in managing the distribution of claims to its  staff and managing the claims review process. For example, while VBA  determines how the claims workload is allocated across offices, regional  office managers decide which claims within the office\u2019s queue to work  first, how to program the office\u2019s queue for distributing claims to individual  claims processors\u2019 electronic work queues, and whether any changes to  this distribution are needed throughout the day. Regional office managers  at each of the four offices we visited reported using VBA\u2019s timeliness  goals and daily data on claims processing timeliness to prioritize claims.  Managers at the offices we visited also described additional strategies to  manage their work queue, including:\nAt two of the four offices we visited, managers said that they provide a  list of claims to claims processors to prioritize, such as those that are  older or have been in the office\u2019s work queue for multiple days.\nManagers at one office said that they manually alter individual claims  processors\u2019 electronic work queues so that older claims are  processed first.\nManagers at one office stated that because they instruct claims  processors to focus on meeting timeliness targets for the office, all  claims are worked within a few days; thus, they encourage their staff  to focus on meeting the office timeliness goals rather than requiring  them to work the claims in their queue in a specified order.\nVBA officials acknowledged that regional office managers may have  different strategies for managing workload, but noted that all offices are  expected to respond to VA national priorities\u2014such as decreasing the  claims backlog\u2014while also meeting their individual office performance  goals.\nWhile VBA officials noted that having discretion in workload management  can be beneficial, such discretion can also lead to inconsistent handling  of the claims workload. In particular, we found gaps in guidance for  managing deferrals\u2014actions taken by claims processors in VBA\u2019s  electronic claims management system when they identify claims errors  that occurred earlier in the claims process. The deferral process began  with the National Work Queue since claims were, for the first time,  routinely being processed by multiple regional offices. Through deferrals,  when claims processors identify errors in a claim, they can use the  National Work Queue to return the claim for correction to the office that  made the error. According to VBA data, in fiscal year 2017, VBA claims  processors deferred claims in 450,305 instances, which represented  almost 4 percent of the total disability claims processing work  completed.\nWhile VBA officials said that claims processors who find errors are  generally expected to defer a claim, managers and claims processors at  the regional offices we visited had different perspectives regarding when  Veterans Service Representatives should do this. At all four of the  regional offices we visited, managers and claims processors said that  they generally would not defer a claim if the error could be corrected and  the claim moved forward. At one regional office, managers and claims  processors said that they would log a deferral in the electronic claims  management system, so the error would be tracked and the previous  claims processor could be notified and trained, but that they would also  correct the error themselves to move the claim forward.\nVBA provides some guidance to Rating Veterans Service  Representatives regarding the circumstances in which they should defer  claims, but does not have corresponding guidance for Veterans Service  Representatives. However, according to our analysis of VBA data from  fiscal year 2017, more than 75 percent of deferrals are logged during the  Initial Development, Supplemental Development, Award, or Authorization  phases\u2014when Veterans Service Representatives are typically processing  claims. Existing guidance for Veterans Service Representatives on  deferrals in the National Work Queue Playbook and other documents  focuses on the process for deferring a claim in the electronic claims  management system, rather than on situations that merit a deferral.  Specifically, VBA does not provide guidance on when Veterans Service  Representatives should defer a claim or consider other options, such as  correcting the error and moving the claim forward, with or without a  deferral. VBA officials stated that the policy regarding when to defer  claims is not prescriptive\u2014and they do not plan to provide additional  guidance\u2014because they want to allow regional offices the discretion to  decide what action is best for the veteran. However, federal internal  control standards state that agencies should design control activities to  achieve objectives and respond to risks. For example, a control activity  that is performed routinely and consistently generally is more precise than  one performed sporadically. As such, deferrals may not serve as an  effective control without being used consistently across VBA\u2019s regional  offices.\nVBA\u2019s lack of guidance on when to defer claims may lead to delays for  veterans and missed opportunities to train individuals who make errors. In  some cases, differences in regional office practices for when to defer  claims may lead to situations in which claims that could move forward are  instead sent back to the previous office, causing unnecessary delays for  veterans. In addition, we heard from managers or claims processors at  three offices we visited that claims may not always be deferred for  legitimate reasons and that the ability to defer claims may create  incentives for employees to defer a claim based on an insignificant error if  they want to avoid working on a complex claim. In other cases, more  significant errors may end up being fixed at a regional office without  providing feedback to the office that made the mistake. While the practice  of fixing the error rather than deferring the claim may keep the claim  moving for the veteran, it also means that claims processors who make  errors may repeat the same mistakes in the future.\n\n\t\tVBA Sets Regional Office Performance Goals and Individual Expectations and Has Developed Processes for Managing Performance\n\nVBA sets regional office goals and individual claims processor  expectations that align with national efforts to increase timeliness and  accuracy of claims decisions. VBA holds regional offices accountable for  meeting performance goals through the Director\u2019s Performance Plan. For  disability compensation claims in fiscal year 2018, VBA assessed regional  office performance using the Time-in-Queue and 12-month issue-based  accuracy measures. VBA has developed processes and tools for  communicating performance information to regional offices and for  identifying common errors. For example, VBA sets timeliness goals for  regional offices and generates daily claims processing timeliness data for  each office. At the regional offices we visited, we observed that VBA  displays these data on monitors so that managers and employees can  see how their office is performing on a daily basis. In addition, VBA has  created performance reporting tools that allow regional office managers,  claims processors, and various VBA workgroups to download regional  office performance information and analyze office performance issues at  their discretion.\nAt the regional offices we visited, quality review teams analyze claims  processing errors made by their employees, such as those identified in  STAR reviews and through the deferral process. Based on common  mistakes they identify, quality review staff at all four offices we visited said  that they incorporate topics related to the errors into training sessions, or  provide direct coaching to individual employees. VBA also conducted an  In-Process Review pilot from November 2017 through May 2018 at  selected regional offices. The pilot involved a quality review for two  phases of the claims process. The purpose of the pilot was for employees  to learn from and correct mistakes in a non-punitive setting while the  claim was being processed. VBA officials reported that VBA discontinued  the pilot in May 2018\u2014prior to its scheduled completion date\u2014because  the pilot was not demonstrating the anticipated benefit of reducing the  number of errors at pilot offices that resulted in deferrals.\nVBA also develops practices at the national level for managing individual  employee performance and, in some cases, provides regional office  managers with discretion for implementing those practices. In support of  the regional office performance standards, VBA sets individual employee  performance standards in the following five areas: (1) quality of work; (2)  timeliness of corrective actions and responsiveness to workload  assignments; (3) production (i.e., the number of transactions, or tasks,  completed within the assessment period); (4) completion of training; and  (5) organizational support. The production standards include a goal for  the number of credits, or points, that employees are expected to earn  during each pay period for their work activities. According to VBA  officials, regional office managers are held accountable for providing  feedback to employees on a regular basis and addressing performance  deficiencies appropriately and in a timely manner. In addition, according  to VBA officials, VA\u2019s policy allows regional office managers \u201cbroad  discretion\u201d in determining when a performance deficiency exists.\nEmployee performance incentive programs, which provide monetary  awards to top performers in each regional office, are also managed at the  national level. However, within regional offices, some managers told us  that they also occasionally provide small incentives or celebrations to  show appreciation for staffs\u2019 contributions.\n\n\tVBA\u2019s Timeliness and Accuracy Measures Do Not Adequately Reflect Regional Office Performance for Disability Compensation Claims Processing\n\n\t\tRegional Office Timeliness Measure Does Not Capture Performance over a Period of Time\n\nVBA uses Time-in-Queue\u2014the average number of business days that  claims have been pending at a regional office\u2014to measure overall  regional office timeliness for processing disability compensation claims.  Time-in-Queue is measured separately for each phase of the claims  process\u2014Initial Development, Supplemental Development, Rating,  Award, and Authorization\u2014and VBA has established timeliness goals for  each of these phases. VBA holds regional offices accountable for meeting  timeliness goals through the Director\u2019s Performance Plan, which rates  offices as successful if they meet Time-in-Queue standards for each  phase of the claims process in 10 out of 12 months. For this purpose, the  measure is a snapshot on the last day of each month that shows how  long, on average, claims have been pending at each office; however, it  does not capture regional office performance over a period of time.  Consequently, Time-in-Queue can provide a skewed picture for a period  of time, depending on the work that is assigned to the office toward the  end of the month and the speed with which claims are processed during  that limited time period.\nMoreover, according to VBA officials, the agency used Time-in-Queue  scores and additional factors\u2014such as space considerations and training  capacity\u2014to determine the amount of new resources to allocate to its  regional offices in May 2017, and the agency will continue to consider  such performance information when allocating resources in the future.\nHowever, federal internal control standards state that agencies should  use quality information to achieve objectives. For example, an agency  should obtain data from reliable sources in a timely manner and based on  identified requirements, and reliable sources are those that provide data  that are reasonably free from error and bias and faithfully represent what  they purport to represent. In addition, our prior work has shown that  practices for improving the usefulness of performance data include using  new methods of measurement to address data limitations, such as Time- in-Queue only capturing performance as a snapshot on 1 day.\nVBA officials acknowledged that the Time-in-Queue performance  measure does not reflect the complete timeliness of a regional office.  These officials said that the agency is exploring adding a Time-to-Exit- Queue measure that could capture regional office timeliness over a  period of time. For example, Time-to-Exit-Queue could measure the  timeliness of all claims processing work completed throughout the month  instead of work pending on the last day of the month. However, VBA has  not yet completed the development of the Time-to-Exit-Queue  performance measure. VBA has also not determined whether or when it  will replace or supplement Time-in-Queue with a new primary metric\u2014 Time-to-Exit-Queue or something else\u2014to measure regional office  timeliness. Until VBA implements a new measure to more fully assess  regional offices\u2019 timeliness, the agency will not have a complete picture of  regional office performance over time, which could impair decision- making related to regional office performance, such as decisions about  targeting resources to high- or low-performing offices.\n\n\t\tA Regional Office\u2019s Accuracy Score Does Not Always Reflect the Work Completed in That Office\n\nVBA uses the STAR 12-month issue-based accuracy score to measure  regional office accuracy in processing disability compensation claims, but  this score could provide a misleading picture of an office\u2019s performance.  VBA\u2019s accuracy measure attributes the accuracy of sampled claims to the  regional office that finishes the claim even though, under the National  Work Queue, that office may not have done all of the work on the claim.  In fiscal year 2017, about 88 percent of all disability compensation claims were processed by more than one office, and about 43 percent were  processed by five or more offices, as shown earlier in figure 3. As a  result, the scores attributed to each office may not reflect the true  accuracy of the office\u2019s work. In addition, any errors made by other offices  earlier in the claims process would not be reflected in those offices\u2019  accuracy scores. Therefore, the current regional office accuracy measure  does not reflect the accuracy of each office\u2019s work and may skew the  score negatively or positively. According to VBA officials, the agency uses  issue-based accuracy scores, among other things, to determine how to  allocate resources to regional offices. However, federal internal control  standards state that agencies should use quality information to achieve  objectives. For example, an agency obtains data from reliable sources in  a timely manner based on identified requirements, and reliable sources  provide data that are reasonably free from error and bias and faithfully  represent what they purport to represent. In addition, our prior work has  shown that practices for improving the usefulness of performance data  include using new methods of measurement to address data limitations.\nVBA officials said that they recognize the limitations of the agency\u2019s  regional office accuracy measure, but VBA officials also said it is  reasonable to hold the office that completes the claim accountable  because Veterans Service Representatives are responsible for checking  for errors in the claims process before completing the claim during the  Authorization phase. However, according to VBA officials, some areas on  VBA\u2019s accuracy checklist\u2014such as whether the claimed conditions were  correctly granted or denied, and whether the correct percentage  evaluation was assigned\u2014are beyond the scope of the Veterans Service  Representatives\u2019 review or qualifications. These tasks are completed by  Rating Veterans Service Representatives. In fiscal year 2017, these two  areas\u2014whether the claimed conditions were correctly granted or denied,  and whether the correct percentage was assigned\u2014accounted for an  estimated 28 percent of all errors nationwide. In addition, these two areas  ranged from an estimated low of about 13 percent (5 of 40) of all errors  attributed to one regional office to an estimated high of about 55 percent  (16 of 29) of all errors attributed to another regional office. In addition,  while VBA officials said that it is reasonable to hold the office that  completes the claim accountable for errors, officials also said that when  STAR errors are identified, only the regional offices that actually made the errors are told about them in order to improve staff performance. This  suggests that VBA does not view the Veterans Service Representative  who completes the claim as fully responsible for all errors in the claims  process.\nAccording to VBA officials, the agency has been exploring the  development of a new accuracy measure that would enable it to assign  error scores to the offices that actually made the errors. For example,  VBA is considering using the STAR reviews to produce a claims phase- based score that would attribute the accuracy of individual phases of the  claims process to the offices completing those phases. However,  according to VBA officials, sampling by each phase of the claims process  would be more complicated than the current system of sampling by  regional office and would require additional staff. In addition, the agency  is also exploring leveraging its existing Individual Quality Reviews\u2014 currently used to assess the accuracy of individual staff\u2019s work\u2014to create  individual regional office accuracy scores. VBA officials added, however,  that there are challenges with converting these individual accuracy scores  to office scores, such as calculating scores by claims phase instead of by  employee position since an employee may conduct work in various  phases. VBA has not determined which alternate measure, if any, to use,  and does not have a timeline for addressing the challenges it has  identified with the alternate measures being considered, or for  implementing a new accuracy measure. Until VBA implements a new  measure to assess regional offices\u2019 accuracy, it will not have an accurate  picture of individual regional offices\u2019 performance, which could impair  decision-making, such as targeting resources to high- or low-performing  offices.\n\n\tStakeholders Were Generally Satisfied with Communication at Selected Regional Offices, but VBA\u2019s Communication Policies Are Applied Inconsistently\n\n\t\tSelected Veterans Service Organizations Were Generally Satisfied with Access to Regional Office Staff, but VBA\u2019s Communication Policy and Practice Are Not Aligned\n\nDespite being generally satisfied with regional office communication,  VSOs we spoke with also expressed some frustrations. VSOs we spoke  with at all four offices reported generally being able to contact someone to  answer their questions. Moreover, VBA staff we spoke with reported  being flexible in communicating with VSOs in the manner in which they  preferred. In addition, Compensation Service and Benefits Assistance  Service site visit reports found that VSOs are generally satisfied with  regional office communication. However, VSOs at all four offices we  visited expressed some frustrations with communication, but they varied  some by offices. Examples of communication issues included:\nDiminished contact. VSOs noted that the National Work Queue  reduced personal relationships and collaboration between VSOs and  regional office staff since claims are no longer fully processed at the  local regional office, and therefore VSOs can no longer simply walk  across the office to discuss a claim.\nDelayed responses. VSOs said there sometimes are delays in  receiving responses from regional offices, with staff taking different  lengths of time to respond to an inquiry, or not responding at all.  Sometimes, once VSOs receive a response, the claim is no longer  being processed at the regional office they contacted, so the response  is no longer useful.\nDecreased notice of activity. VSOs said that with the advent of  electronic claims processing, they no longer receive paper copies of  disability ratings and other documents that VBA sends to the veteran.  VSOs have access to such information in VBA\u2019s electronic claims  management system, but the system does not notify them when VBA  has sent documents to the veteran, such as requests for information  and evidence. VSOs said it is time-consuming for them to proactively  monitor a large number of veterans\u2019 electronic claims files for new  documents.\nVSOs may communicate with a regional office throughout the life of a  claim for various purposes and, according to VBA officials, regional  offices generally have discretion in establishing local policies for handling  VSO questions or inquiries. One exception to this local discretion is  during the 48-hour review period when VSOs can review a completed  disability rating before it is finalized. A November 2016 VBA policy states  that during the 48-hour review period, VSOs may contact a regional  office\u2019s Change Management Agent. The policy also states that VSOs  should not contact the Change Management Agent for claim status  updates, evidence submission, or any other type of inquiry unrelated to a  rating decision discrepancy. According to VBA officials, the policy to  contact the Change Management Agent during the 48-hour review period  was intended to streamline the inquiry process for VSOs, provide  consistent responses to them, and minimize disruptions for claims  processors. The previous policy required VSOs to first contact the Rating  Veterans Service Representative before the Change Management Agent  during the 48-hour review period.\nVSOs at three offices we visited reported contacting the Change  Management Agent for inquiries during the 48-hour review period, but  also reported contacting the Change Management Agent at other points  during the claims process. VSOs at all four offices we visited also  reported contacting other staff, such as claims processors or their  supervisors at their local regional offices, during the 48-hour review  period, unrelated to the Change Management Agent\u2019s availability or a  particular type of claim, which VBA officials stated were reasons for which  VSOs might contact an alternate VBA official. Federal standards for  internal control state that an agency should externally communicate the  necessary quality information to achieve an entity\u2019s objectives, for  example, communicating with external parties using established reporting  lines, and periodically evaluating its communication methods.\nVBA officials told us that the November 2016 policy was intended to  address communication during the 48-hour review period, and that  regional office discretion for communication with VSOs outside of this  period was still in place, including contacting Change Management  Agents if regional offices determined this was best. However, regional  offices and VSOs do not consistently implement this policy. Moreover, the  policy states that VSOs are not to contact Change Management Agents  for claim status updates, evidence submission, or any other question  unrelated to a rating decision discrepancy. These types of inquiries  generally occur outside of the 48-hour review period, so this portion of the  policy conflicts with VBA officials\u2019 description of regional office discretion  for communication with VSOs throughout the life of a claim.\nAlthough VSO communication with Change Management Agents did not  always appear to match VBA\u2019s policy for communication during or outside  of the 48-hour review period, VSOs we spoke with seemed to value  regional offices\u2019 flexibility in communicating with them. However, it is  possible that the policy\u2019s lack of clarity or inconsistent application could  contribute to communication frustrations for VSOs, and that changes to  either the policy or its enforcement could better serve VSOs and regional  office staff. Evaluating its regional office communication policy with VSOs  and ensuring that the policy is clear, that it aligns with regional offices\u2019  practices, and that it effectively meets VSOs\u2019 communication needs,  could help VBA ensure that it is providing timely and consistent  responses to VSOs on behalf of the veterans they represent, while  minimizing disruptions to regional office staff. Such alignment could be  achieved either by adjusting the communication policy or better enforcing  the existing policy.\n\n\t\tSelected Congressional Caseworkers Were Satisfied with Communication with Regional Offices, but VBA\u2019s Communication Was Not Always Timely or Accurate\n\nCongressional caseworkers we spoke with at all four offices we visited  were satisfied with regional office communication regarding disability  compensation claims, though some regional office responses were not  timely or accurate, according to VA Inspector General reports. VBA has  congressional liaisons at each of its regional offices to answer inquiries  from congressional caseworkers. Caseworkers generally contact the VBA  liaison at their local regional office when they inquire about claims\u2014 whether the claims are being processed at the local regional office or  another regional office. Caseworkers may also contact the VBA liaison at  the office where the claim is being processed once they find out from VBA  where that is. According to regional office officials at the four offices we  visited, most congressional inquiries received at the regional offices are  by email or phone, although some are by regular mail; the congressional  inquiries are most often regarding the status of a veteran\u2019s claim.\nWhile caseworkers we spoke with were satisfied with their communication  with regional offices, VA\u2019s Office of Inspector General found that in some  instances, VBA regional offices had not provided timely or accurate  responses to special controlled correspondence, which includes  congressional inquiries. According to VBA guidance on special  controlled correspondence in fiscal year 2017, VBA liaisons are to  respond to caseworkers\u2019 inquiries within 5 business days with a full or  interim response, for example. During its inspections of regional offices  during fiscal year 2017, the Office of Inspector General found that some  offices had not provided interim responses within 5 business days and, in  a few cases, had provided inaccurate responses. At some offices, the  Office of Inspector General made recommendations for improving  regional offices\u2019 responses to inquiries and, according to its reports,  regional offices planned and implemented changes, such as providing  additional training to staff and improving oversight of correspondence.\nCaseworkers we spoke with at three offices we visited identified ways that  regional offices could improve communication with them or ways that  VBA could provide them with additional information or support. For  example, while caseworkers generally contact their local regional office  with inquiries, caseworkers at two offices said that a regularly updated  contact list of VBA liaisons at all VBA regional offices could be helpful so  that they can immediately contact another regional office if they learn that  a claim is being processed there, or if their local VBA liaison is unable to  provide sufficient specifics on a claim. Some of these caseworkers  suggested that the list could either be posted to a non-public website or  sent to VBA regional offices to distribute to local caseworkers. According  to VBA officials, the agency does maintain a list of regional office VBA  liaisons, and updates it quarterly. The list is provided upon request, both  electronically and in hard copy, and caseworkers frequently request the  list, according to VBA officials. However, the caseworkers we spoke with  at all four offices we visited were not aware of this list.\nIn September 2017, VBA developed an online toolkit for congressional  caseworkers to better assist them in serving their veteran  constituencies. The toolkit webpage provides a central location for  caseworkers to quickly locate information regarding available VA benefits  and services. For example, the toolkit provides a link to a description of  the disability compensation program and how to apply for benefits. VBA  officials reported that in September 2017, they provided information on  the toolkit to VA\u2019s Office of Congressional and Legislative Affairs for  distribution to congressional staff. However, caseworkers and VBA  liaisons at all four offices we visited were not aware of this online toolkit,  and caseworkers we spoke with at two offices we visited said that it could  have been useful to them if they had been aware of it or if it had  additional elements, such as regional office expectations for caseworker  inquiries.\nAccording to VBA officials, they have not received any feedback on the  toolkit beyond that initially provided by another VA office. This could be, in  part, because VBA does not have an outreach mechanism to actively  obtain perspectives from congressional caseworkers on their  communication with regional offices or their information or support needs,  or to determine whether the findings from the Office of Inspector General  are typical across regional offices. The Office of Inspector General  stopped performing its reviews of regional offices\u2014including evaluations  of communication with congressional caseworkers\u2014in fiscal year 2017 to  focus its efforts on VBA-wide audits, so this information is no longer  available to VBA. Federal standards for internal control state that an  agency should externally communicate the necessary quality information  to achieve an entity\u2019s objectives, for example, selecting the appropriate  methods to communicate externally, and periodically evaluating its  methods of communication so that the agency has the appropriate tools  to communicate quality information outside the agency.\nVBA officials reported an open-door policy in which caseworkers can  share concerns and requests as needed, and said that a formal outreach  mechanism is not necessary. Although caseworkers can approach  regional office staff with ideas for improvement, this informal mechanism  is not a consistent process and does not facilitate candid feedback, nor  does it include documentation of potential improvements and actions  taken. By creating an outreach mechanism to solicit periodic feedback  from congressional caseworkers, VBA could streamline the inquiry  process and enable them to provide more accurate and timely information  to veterans.\n\n\tConclusions\n\nVBA\u2019s National Work Queue has been in place for more than 2 years and  provides opportunities for a higher level of service to veterans. However,  with claims moving among regional offices, the individual performance of  regional offices remains critical to VBA\u2019s success. For example, regional  offices\u2019 inconsistent use of deferrals when claims processors identify  errors could unnecessarily delay the decision on a veteran\u2019s claim or  prevent staff from receiving needed training. In addition, VBA has  developed several practices to assess performance at regional offices,  but some of this information could be of limited use if the agency  continues using its existing measures. Specifically, VBA\u2019s two primary  performance measures for regional offices do not allow the agency to  adequately measure claims timeliness and accuracy. Finally,  communication with VSOs and congressional caseworkers could be  improved by clarifying the VSO communication policy and aligning it with  practice and VSO needs, and conducting caseworker outreach in order to  provide more consistent and timely information to VSOs and  caseworkers. Without these improvements, VSOs and caseworkers may  not be able to serve veterans in as timely a manner as possible.\n\n\tRecommendations for Executive Action\n\nWe are making the following five recommendations to VBA:\nThe Under Secretary for Benefits should clarify how Veterans Service  Representatives should handle claims when they identify an error,  including when to defer a claim and when to correct the error on their  own. (Recommendation 1)\nThe Under Secretary for Benefits should develop and implement a  new regional office performance measure that allows it to better  assess each regional office\u2019s timeliness over a period of time.  (Recommendation 2)\nThe Under Secretary for Benefits should develop and implement a  new regional office performance measure that allows it to better  measure the accuracy of each regional office\u2019s work.  (Recommendation 3)\nThe Under Secretary for Benefits should evaluate its policy for  regional office communication with VSOs to ensure that it is clear, that  it aligns with practice, and that it meets the communication needs of  VSOs. (Recommendation 4)\nThe Under Secretary for Benefits should develop and implement a  mechanism to obtain periodic feedback from congressional  caseworkers on their communication with regional offices regarding  claims and needed information or support. (Recommendation 5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Department of Veterans Affairs  for review and comment. VA provided written comments, which are  reproduced in appendix I. VA concurred with all of our recommendations  and described VBA\u2019s plans for taking action to address them. Regarding  Recommendation 1, VA stated that VBA is working to clarify guidance to  regional offices for handling claims when errors are identified. Regarding  Recommendations 2 and 3, VA stated that VBA is working to develop and  implement new performance measures for regional office timeliness and  accuracy. Regarding Recommendation 4, VA stated that VBA will review  and enhance its policy for communication with VSOs. Regarding  Recommendation 5, VA stated that VBA will review existing practices on  support for congressional caseworkers, and develop and implement  mechanisms to strengthen this support. VA also reported that regional  office managers have been directed to meet at least quarterly with  congressional caseworkers to gather feedback and resolve issues. If VBA  can demonstrate that it is consistently using such feedback mechanisms  across regional offices to identify and address caseworker concerns, this  will meet the intent of our recommendation.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, and other interested  parties. In addition, the report is available at no charge on the GAO  website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last   page of this report. GAO staff who made key contributions to this report  are listed in appendix II.\n\nAppendix I: Comments from the Department of Veterans Affairs\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Nyree Ryder Tee (Assistant  Director), Rebecca Kuhlmann Taylor (Analyst-in-Charge), Justin  Gordinas, and Martin E. Scire made significant contributions to the report.  Also contributing to the report were James E. Bennett, Alex Galuten,  Benjamin T. Licht, Liam O\u2019Laughlin, David Perkins, Almeta Spencer,  Walter K. Vance, and Kathleen van Gelder.","output":"Why GAO Did This Study\n\nEach year, VBA processes more than 1 million disability compensation claims and provides about $65 billion in benefits to veterans. The Jeff Miller and Richard Blumenthal Veterans Health Care and Benefits Improvement Act of 2016 includes a provision for GAO to review VBA's regional offices to help VBA achieve more consistent performance in processing disability compensation claims.\nThis report examines (1) how VBA manages workload and performance for the disability compensation claims process, (2) how well VBA's timeliness and accuracy measures capture its regional offices' performance in processing these claims, and (3) how well selected regional offices communicate with VSOs and congressional caseworkers about these claims. GAO reviewed VBA policies and procedures; visited four regional offices selected to represent a range of performance scores and claims processing volume in fiscal year 2017; and interviewed VBA headquarters officials and management and staff from the selected regional offices. GAO also interviewed VSOs and congressional caseworkers\u2014selected for House, Senate, and bipartisan representation\u2014to learn more about their communication with VBA.\n\nWhat GAO Found\n\nIn 2016, the Veterans Benefits Administration (VBA) centralized distribution of the disability compensation claims workload through the National Work Queue, which prioritizes and distributes claims to regional offices based on their capacity; however, there are gaps in VBA's guidance for processing claims with errors. Under the National Work Queue, multiple regional offices can work on a single claim instead of the claim remaining at one office for the duration of processing (see figure). GAO found gaps in guidance about whether a claims processor should fix an error made by another regional office, or return the claim to that office to be corrected. The former could result in missed opportunities to train staff who made the error, while the latter could result in processing delays.\nVBA primarily uses timeliness and accuracy measures to assess its regional offices' performance in processing disability compensation claims, but these measures do not adequately capture performance. The timeliness measure can be skewed because it is a snapshot of how long claims have been pending at an office on the last day of the month, and does not capture performance over a period of time. The accuracy measure is attributed to the office that finishes the claim, even though 88 percent of claims completed in fiscal year 2017 were processed at more than one office. VBA officials acknowledged that these measures are limited and said the agency is exploring alternatives, but VBA has no specific plan or time frame for determining and implementing new measures. Without measures to more accurately assess regional office performance, VBA may be limited in its ability to make efficient and effective decisions.\nVeterans service organizations (VSO) and staff working for Members of Congress (congressional caseworkers) interviewed by GAO were generally satisfied with regional office communication regarding disability compensation claims. However, VBA's policy on whom VSOs should contact during different points in the process did not always align with what occurs at the offices we visited or with VSO needs. This could result in VSOs not receiving consistent and timely responses from VBA. Evaluating this policy could help VBA assist VSOs in better serving veterans. In addition, congressional caseworkers GAO interviewed identified ways that communication could be improved or that additional support could be provided, such as a list of contacts at all regional offices for claim inquiries. VBA officials GAO interviewed described an open-door policy through which they may receive feedback from caseworkers, but the agency does not formally solicit periodic feedback from them. Without such feedback, the agency may miss opportunities to identify and address caseworker communication needs that could help them better serve veterans.\n\nWhat GAO Recommends\n\nGAO is making five recommendations to VBA to clarify guidance for correcting errors, develop and implement measures to better assess timeliness and accuracy at regional offices, and evaluate communication with VSOs and caseworkers. The Department of Veterans Affairs concurred with GAO's recommendations."}
{"id":"gao_GAO-18-409","pid":"gao_GAO-18-409_0","input":"\tBackground\n\nRoughly two-thirds of domestic energy supplies are transported through  over 2.6 million miles of pipelines throughout the United States. These  pipelines carry hazardous liquids and natural gas from producing wells to  end users (residences and businesses). Natural gas, which is  combustible, accounts for 99.8 percent of all gas distributed in the United  States. Other combustible gases transported by pipeline include  hydrogen, landfill gas, synthetic gas, and propane. Within this nationwide  system, three main types of pipelines serve different purposes and users  (see fig. 1):\nGathering pipelines. The estimated 11,500 miles of onshore gas  gathering pipelines subject to PHMSA regulation collect natural gas  from wells in production areas. These pipelines then typically  transport the gas to processing facilities, which in turn refine it and  send the gas to transmission pipelines. Gathering pipelines range in  diameter from about 2 to 12 inches and operate at pressures that  range from about 5 to 1,400 pounds per square inch (psi). These  pipelines tend to be located in rural areas but can also be located in  urban areas. PHMSA estimates that another 230,000 miles of gas  gathering pipelines are not subject to federal regulation based on their  generally rural location and low operating pressures.\nTransmission pipelines. The estimated 298,000 miles of onshore  transmission pipelines carry natural gas, sometimes over hundreds of  miles, to communities and large-volume users (e.g., factories).  Transmission pipelines tend to have the largest diameters and  pressures of any type of pipeline, generally ranging from 12 inches to  42 inches in diameter and operating at higher pressures ranging from  400 to 1,440 psi.\nDistribution pipelines. The estimated 2,170,000 miles of natural gas  distribution and service pipelines transport natural gas from  transmission pipelines to residential, commercial, and industrial  customers. These pipelines tend to be smaller, sometimes less than 1  inch in diameter, and operate at lower pressures, from 0.25 to 100 psi.\nA specific pipeline only carries one type of gas. These gases may be  colorless and odorless, which is why odorizing them may be necessary to  safely alert people of a leak.\nAll odorants used in the United States contain sulfur. According to  PHMSA officials, there are nine primary sulfur-based odorants used  domestically for transporting combustible gas, all but one contain  mercaptan\u2014a type of chemical with a distinctive sulfur smell\u2014which is  blended with other chemicals for stability. Pipeline operators select the  odorant blend that works best for their pipeline network. Distribution  pipeline operators add the odorant to their gas, usually at the \u201ccity gate\u201d,  or the place where transmission pipelines connect to a distribution  pipeline network. The odorant is transported and stored in a concentrated  liquid form that has a strong smell, is flammable, and is toxic. The odorant  is injected into the gas stream at the \u201ccity gate\u201d odorization station and  vaporizes into the gas. In its diluted form, the odorants are nontoxic.\nPHMSA, within the Department of Transportation (DOT), administers  DOT\u2019s national regulatory program to ensure the safe transportation of  natural gas by pipeline. PHMSA oversees and enforces pipeline  operators\u2019 compliance with federal odorization requirements for interstate  pipelines, which are primarily transmission pipelines. Most states have  agreements with PHMSA to oversee and enforce pipeline operators\u2019  compliance with federal requirements\u2014including odorization  requirements\u2014for intrastate pipelines, which are primarily distribution  pipelines. These states may also impose safety requirements that are  more stringent than federal requirements. Under the current regulatory  system, most gathering pipelines are not subject to federal safety  requirements, based on their location. Only gathering pipelines close to  populated areas or waterways are currently subject to federal  requirements.\nIn March 2012, we reported that land use changes have resulted in  development encroaching on existing gathering pipelines and the  increased extraction of oil and natural gas from shale deposits has  resulted in the development of new gathering pipelines, some of which  are larger in diameter and operate at higher pressure than older pipelines.  Therefore, we recommended that PHMSA collect data on gathering  pipelines to help determine whether to expand regulation of these  pipelines. In April, 2016, PHMSA issued the Gas Transmission and  Gathering Notice of Proposed Rulemaking that would: 1) require all gas  gathering pipeline operators to submit operating and accident data to  PHMSA, 2) more clearly define \u201cgathering pipeline\u201d to better identify  pipelines subject to PHMSA\u2019s requirements, and 3) increase the number  of gathering pipeline miles under PHMSA\u2019s jurisdiction. PHMSA  estimates that the new rule would increase the number of gathering  pipeline miles with reporting requirements by 344,000 and the number of  gathering pipeline miles subject to additional safety measures by almost  70,000.\nThe overall framework for federal gas pipeline regulations\u2014including  odorization requirements\u2014is designed to mitigate risk. All pipelines  regulated by PHMSA are required to meet uniform, minimum safety  standards. Regarding odorization, these minimum standards prescribe  that a combustible gas must be odorized so that at a concentration in air  of one-fifth of the lower explosive limit, the gas is readily detectable by a  person with a normal sense of smell. The proximity of pipelines to  populated areas, where leaks present the greatest risk, determines  whether or not the gas needs to be odorized. Since 1970, PHMSA has  categorized pipelines into four classes based on their proximity to  populated areas to determine the odorization requirements for gas  transported by distribution and transmission pipeline. Class 1 locations  are in rural areas and Class 4 locations are in densely populated areas  (see table 1.). All combustible gases transported by distribution pipelines  are required to be odorized because these pipelines are primarily in  populated areas. Some transmission pipelines in highly populated\u2014Class  3 and 4\u2014areas are also required to be odorized.\nIn addition, PHMSA has a supplemental risk-based regulatory program  termed \u201cintegrity management\u201d for pipelines in \u201chigh-consequence areas\u201d  where an incident would have greater consequences for public safety or  the environment. Integrity management has been a part of PHMSA\u2019s risk- based regulatory approach for natural gas transmission pipelines since  2004, and for natural gas distribution pipelines since 2011. The risk- based integrity management programs for natural gas transmission  pipelines require operators to systematically identify and mitigate risks to  pipeline segments located in high-consequence areas. For example, in  these areas operators must monitor their pipelines for signs of corrosion  and repair corroded lines within a specified period of time. High- consequence areas for natural gas pipelines include highly populated or  frequently used areas, such as parks. These areas may overlap with  Class 3 or Class 4 locations. The integrity management program for  distribution pipelines applies to all distribution pipelines due to their  proximity to populated areas.\n\n\tOfficials and Stakeholders Said That Odorizing Gas in Pipelines Improves Public Safety, but Can Impede Some Industrial Processes\n\n\t\tPipeline Gas Odorization Facilitates Early Detection, Particularly in Populated Areas\n\nAlmost all officials and stakeholders we interviewed and the state pipeline  safety officials we surveyed told us that the advantage of using sulfur- based odorants to odorize combustible gas transported by pipeline is  public safety. Sulfur-based odorants have a low-odor threshold, so are  easily detected at low concentrations. With a smell similar to that of rotten  eggs, this odor is particularly advantageous when used in distribution  pipelines that are located in areas where people congregate (e.g., homes,  businesses and hospitals). If individuals smell an odorant, they can call  emergency services and alert those nearby of a potential gas leak,  possibly helping to prevent an explosion that could result in the loss of life  and property.\nAccording to federal regulations, all local distribution companies must  conduct outreach to educate the public and others on what to do when  they smell a gas leak. To this end, the 2017 American Gas Association  Odorization Manual (manual) states that some local distribution  companies have gone beyond placing the traditional scratch-and-sniff  insert in customers\u2019 billing statements\u2014to inform them about gas leaks and odor\u2014to implementing \u201cSmell Gas Act Fast!\u201d campaigns. According  to the manual, these campaigns are designed to better educate the public  on the smell and nature of natural gas, along with the need to quickly take  action if the odor is detected. Responding immediately to the smell of  natural gas can help to prevent possible accidents. For example, when  authorities were reportedly called to a Rockville, Maryland home in  November 2017 to investigate an odor from a natural gas leak, authorities  evacuated several nearby homes as a safety precaution in the event of  an explosion, until the source of the leak could be identified and  addressed.\nWhile nearly all stakeholders we interviewed said that public safety was  the key advantage associated with odorizing combustible gases (in  particular, combustible gases transported by distribution pipeline), some  experts expressed differing opinions on the use of handheld electronic  combustible gas detection devices as an alternative to detect gas leaks.  According to one expert, these devices are better suited to detect gas at  levels much lower than an individual\u2019s sense of smell would allow. This  expert also noted that odor does not wake a sleeping individual so a gas  leak could go undetected for hours. However, a second expert noted that  during his experience with pipeline accident investigations over the past  40 years, he was aware of about 10 cases in which deceased individuals  were found after a gas leak accident holding a portable combustible gas  detector because (1) the device may not have indicated the presence of  gas in one location while a nearby location may have been explosive due  to a gas leak; or (2) the user may not have been properly trained on the  instrument\u2019s limitations to identify a safe area. Accordingly, that expert  stated that odorization is the most effective safety method for alerting the  public of a possible gas leak. Additionally, a third expert noted that (1)  electronic detectors can be difficult to place in certain areas and (2)  odorants allow the public to quickly detect gas leaks without acquiring or  maintaining external equipment.\n\n\t\tThe Primary Disadvantages Officials and Stakeholders Cited Are Odor Removal for Some Industries and False Alarms\n\nThe most common disadvantage of sulfur-based odorants cited by  officials and stakeholders we contacted is the need to remove the odorant  for some industrial processes. Officials from both federal safety regulatory  agencies we interviewed (PHMSA and NTSB); approximately half of state  pipeline safety officials surveyed; and about half of the stakeholders  interviewed reported that sulfur-based odorants used in transmission  pipelines can cause an adverse chemical reaction during processing for  some industries. For example, sulfur in natural gas can be detrimental in  the production of electricity, fertilizer, and glass because it interferes with  the catalyst used during production. PHMSA and NTSB officials and  about half of the stakeholders said that before these items are produced,  operators must remove any added (or naturally occurring) sulfur from  their combustible gas, adding another step to production. One expert and  three stakeholders told us that removing the odorant also resulted in  added cost for some operators. However, because most transmission  pipelines are in less populated areas and not odorized, many  manufacturers currently receive unodorized gas from transmission  pipelines and do not need to remove odorant, according to the industry  associations we interviewed.\nIn addition, some stakeholders warned that accidental spills of  concentrated odorant, using more odorant than needed, or releasing  excessive amounts of odorant during operators\u2019 maintenance activities  can lead to false alarm calls. One pipeline operator told us that an  employee spilled odorant on a glove and the public made several false  alarm calls due to the odorant\u2019s potent smell as the employee drove  through town with the glove on the back of a truck. Officials from PHMSA,  an official from a pipeline safety organization and representatives from  two pipeline industry associations told us that the public could get  accustomed to these types of odorant leaks and begin to ignore them or  have a false sense of security when a real gas leak does occur. For  example, the official from the pipeline safety organization told us that he  has heard of at least one location where odorant leaks frequently  occurred, and the public began to ignore the smell.\nAdditionally, under certain conditions, sulfur-based odorants can be  hazardous to human health and the environment. A few stakeholders told  us that odorants released in excessive amounts may cause health  concerns. For example, during a presentation before the Pipeline Safety  Trust, a Los Angeles County public health official stated that it appears a  sulfur-based odorant was related to public health complaints made in  2015 after a 4-month long natural gas leak from a natural gas storage  facility in California\u2019s Aliso Canyon. Many of the reported symptoms  matched those made after a 2008 natural gas storage tank leak in  Alabama, which included respiratory problems; eye, nose, and throat  irritation; headache; nausea; and dizziness. While at least one study has  been conducted and another is planned on the long-term effects of sulfur- based odorants on human health, no direct cause and effect relationships  have been established.\nFinally, a few stakeholders noted potential environmental hazards  regarding the use of odorants. For example, one stakeholder told us that  odorants can become a hazardous waste depending on the quantity used  and the amount of time the chemical remains in one location prior to use;  one expert and another stakeholder noted that sulfur-based odorants  when spilled may contaminate waterways; and four experts and two  stakeholders warned that when combusted, sulfur-based odorants can  produce acid rain. Also, according to PHMSA officials, these odorants are  both toxic and flammable in their concentrated state. However, none of  the stakeholders provided specific examples of when an odorant caused  environmental damage.\n\n\tOfficials and Stakeholders Had Mixed Views on Need to Modify Odorization Requirements\n\n\t\tMany Officials and Stakeholders Agreed That Federal Distribution Pipeline Odorization Regulations Do Not Need to be Modified\n\nGeneral consensus exists among those we spoke with (including federal  regulatory and safety officials, experts identified by the National  Academies, and industry stakeholders) that federal requirements to  odorize all gases in distribution pipelines are sufficient as written and do  not need to be modified. PHMSA and NTSB officials we interviewed and  many commenting stakeholders articulated this view. In addition, state  pipeline officials we surveyed generally did not indicate a need to change  federal regulations for odorizing distribution pipelines. Due to the  proximity of distribution pipelines to areas where people live and work,  officials, experts, and stakeholders we interviewed emphasized the  importance of odorizing gas in distribution pipelines to reduce the safety  risk to the public.\nAs we have previously reported, the operating characteristics of  distribution pipelines make odorant a key factor in reducing safety risk. In  2012 we reported that distribution pipelines operate at lower pressures,  so pipeline failures are more likely to involve slow leaks rather than  explosive ruptures. Leaking gas can accumulate in confined spaces, or  migrate away from the pipeline until it finds an ignition source and  potentially causes injury, death, and\/or property damage. These slow  leaks are difficult to see or hear, so odorants provide a critical warning to  call emergency services and inform those nearby of a potential gas leak  before it ignites.\n\n\t\tMany Officials and Stakeholders Agreed That Odorizing Gathering Pipelines Could Be Technically Challenging with Little Added Safety Benefit\n\nOf those we interviewed or surveyed, about half of stakeholders and a  third of state pipeline safety officials did not indicate a need to modify  existing regulations for odorizing gas in gathering pipelines. Further, a  few commenting experts said odorizing those pipelines would be  technically challenging. According to the experts, technological  challenges stem from the fact that gas contains natural sulfur at many of  the wells where gathering pipelines collect the raw gas. The natural sulfur  in the raw gas could counteract the added chemical sulfur odorant,  masking the smell of each and lowering the effectiveness of the odorant.  Further, one stakeholder said that odorizing gathering pipelines would be  logistically difficult and expensive given the number of wells that would  each need an odorization station. For example, according to this  stakeholder, there are roughly 500,000 gas wells nationwide and each  odorizer would cost $2,000 as a capital investment. In addition, this  stakeholder said that any safety benefit of adding odorant would be  limited because most gas wellheads and gathering pipelines are located  in sparsely populated rural areas.\nWhile the majority of stakeholders and state survey respondents did not  see a need to odorize gas in gathering pipelines, a third of the state  safety officials and three other stakeholders said all gathering pipelines  should be odorized for additional safety regardless of any technical  challenge. However, requiring all gathering pipelines to be odorized at  the federal level would have to be consistent with federal pipeline safety  regulations. According to the safety regulations, a risk assessment,  including an assessment of the benefits and costs of proposed regulatory  standards, is required to be considered in any decision on whether to  impose a new safety standard. According to PHMSA officials, they do  not have the data to report on any incidents on gathering pipelines where  odorant may have made a difference. Moreover, PHMSA officials stated  that they do not have the data to formulate an educated opinion or  viewpoint as to the need to odorize gathering pipelines. To address this  lack of data, the Pipeline Safety -Safety of Gas Gathering Pipelines  rulemaking, if approved, will provide PHMSA with more data on gas  gathering pipeline infrastructure and incident data. According to PHMSA  officials, the data collected will inform PHMSA on the best path forward  regarding further regulation of gas gathering pipelines, including the need  for odorization. Officials anticipate publishing the final rule in summer  2019.\n\n\t\tOfficials\u2019 and Stakeholders\u2019 Views Differed on Need to Odorize Transmission Pipeline Gas\n\nOfficials, stakeholders and survey respondents generally disagreed about  the need to odorize all transmission pipelines. Officials from NTSB as well  as about half of the stakeholders we contacted said the current  regulations for odorizing gas in certain transmission pipelines in  populated areas were sufficient. Additionally, NTSB officials said they  were not aware of incidents where odorants in a transmission pipeline  would have alerted the public in time to prevent the incident. These  officials and stakeholders generally said that odorizing gas in  transmission pipelines is not an effective means of reducing the risk of an  incident. For example, one stakeholder said that at the typically high  pressure at which most transmission pipelines operate, even a relatively  small hole in the pipeline would cause a rupture that would excavate the  earth around it so people would hear and see the evidence of the leak.  Some experts also said that odorizing gas in all transmission pipelines  could have increased costs and other challenges for pipeline operators or  gas end users. For example, one expert said that odorizing all gas  transported in the transmission pipeline system would require tens of  thousands of odorization facilities. This expert also said that if gas is  odorized in transmission pipelines, some industries currently receiving  unodorized gas will be affected negatively because they either must incur  the additional processing and cost of removing the odorant or find new  ways to receive gas that is not odorized.\nFurther, PHMSA officials and representatives from the Interstate Natural  Gas Association of America said that the integrity management program  for transmission pipelines provides more preventative, risk-based safety  management than odorants, which rely on reducing risk through early  detection of a leak that has already occurred. The integrity management  program requires operators to assess the integrity of their pipelines within  high consequence areas\u2014which, by definition, encompass Class 3 and 4  locations\u2014on a regular basis using any of three approved methods: (1)  running an in-line inspection tool, or \u201csmart pig\u201d, through the pipeline to  detect anomalies, such as corrosion, that can cause leaks (2) conducting  a direct assessment using data and direct examination of the pipeline  from aboveground to identify problem areas, or (3) hydrostatically testing  a portion of the pipeline by removing the gas product, replacing it with  water, and increasing the pressure of the water above the maximum  allowable operating pressure of the pipeline to test its integrity. These  inspection methods are designed to detect issues that could cause a gas  leak before the leak occurs. Following the assessments, pipeline  operators are required to prioritize and repair anomalies found during  assessments.\nWhile odorants could be added in addition to integrity management  requirements, PHMSA officials said that integrity management more  effectively helps assure an acceptable level of safety for transmission  pipelines than an odorant could because the risk assessments focus on  the potential causes of leaks and ruptures for these types of pipelines  and, therefore, are more preventative than odorizing. In a September  2006 report, we found that PHMSA\u2019s gas pipeline integrity management  program benefits public safety by incorporating risk-based management  principles into pipeline safety oversight, and in June 2013, we reported  that transmission pipeline operators were conducting periodic  assessments and making repairs to pipelines in high consequence  areas.\nTransmission pipeline operators are also required through the integrity  management program to proactively take measures to reduce the risk or  potential impact of an accident. Based on inspections of interstate  transmission operators\u2019 integrity management programs, PHMSA officials  noted that\u2014while transmission pipeline operators could opt to odorize  gas in a transmission pipeline\u2014they are not aware of any operator to  date that has concluded that odorizing transmission pipelines was  necessary to reduce risk. Instead, operators use tools such as electronic  leak detection and remotely-controlled valves to detect potential leaks  and shut down the pipeline if needed.\nWhile the preventative safety practices required under the gas  transmission pipeline integrity management program are designed to  mitigate risk without requiring the use of odorant, officials from two states  and one stakeholder questioned the sufficiency of integrity management  practices. However, as part of the ongoing two rulemakings: the Pipeline  Safety: Safety of Gas Transmission Pipelines, MAOP Reconfirmation,  Expansion of Assessment Requirements and Other Related Amendments  and the Pipeline Safety - Safety of Gas Transmission Pipelines, Repair  Criteria, Integrity Management Improvements, Cathodic Protection,  Management of Change, and Other Related Amendments Rulemaking,  PHMSA also plans to strengthen and expand requirements for the gas  integrity management program for transmission pipelines. For example,  PHMSA plans to expand the requirements for periodic assessments and  subsequent repairs to additional pipeline mileage beyond that located in  high consequence areas. PHMSA plans to publish these rulemaking in  March and June, 2019, respectively. The 2016 PIPES Act includes a  mandate for GAO to review PHMSA\u2019s gas integrity management program  as soon as PHMSA publishes the final rule.\nIn contrast to the opinions expressed above that transmission pipeline  odorization requirements are sufficient, 31 of 49 state pipeline safety  officials surveyed responded that these requirements are not stringent  enough for safety. Of these respondents, several said that exemptions  that currently apply to some operators with transmission pipelines in  Class 3 and Class 4 locations should not be allowed. There are several  exemptions, determined by the overall class location of the pipeline or  end use of the gas. For example, one class location exemption is that  when at least 50 percent of the length of the pipeline downstream from  the more populated Class 3 or Class 4 location is in a less populated  Class 1 or Class 2 location, the gas does not need to be odorized (see  fig. 2).\nEliminating the current regulatory exemptions for certain transmission  pipelines and requiring operators to odorize all gas transported by  transmission pipeline through Class 3 or Class 4 locations may not be  cost-beneficial under federal regulatory risk assessment principles, which  direct the agency to assess the benefits and costs of changes in  regulatory standards. For example, while four states cited increased  public safety as the reason to remove the existing exemption, PHMSA  and NTSB officials could not identify any incidents where odorants in a  transmission pipeline would have prevented damage. In addition, as  described above, some experts told us that removing the exemptions could have increased costs and other challenges for pipeline operators or  gas end users. PHMSA officials also said that the definition of a high- consequence area under the gas integrity management program  encompasses all Class 3 and Class 4 locations, so the risk-based  preventative measures required under that program apply to the areas  exempt from odorization requirements.\n\n\tAgency Comments\n\nWe provided a draft of this product to DOT for review and comment. DOT  provided technical comments that were incorporated, as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Transportation, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-2834 or FlemingS@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.\n\nAppendix I: Advantages and Disadvantages of Non-sulfur Based Odorants\n\nWhile our report focuses on sulfur-based odorants, which are used in the  United States, we also asked experts and stakeholders about the  advantages and disadvantages of non-sulfur based odorants. According  to a German-based manufacturer of non-sulfur odorants, these odorants  are used in some European countries, including Germany and Austria.  This manufacturer also told us that the German energy industry has  embraced using non-sulfur based odorants, in part, to meet German  emissions regulations, as these odorants do not produce sulfur dioxide  and contribute to acid rain when burned.\nMost of the experts and stakeholders that we interviewed were generally  unfamiliar with non-sulfur based odorants. Those with some familiarity  offered the following advantages and disadvantages.\n\n\tAdvantages:\n\nThree experts and stakeholders reported that non-sulfur based odorants: have less adverse impact on the environment; for example, no acid may cost less for some operators because less product may be  needed than sulfur-based odorants; and do not adversely impact some operators\u2019 processes.\n\n\tDisadvantages:\n\nFour experts noted that non-sulfur based odorants: have a smell that the American public does not associate with a gas  leak.\nTwo experts commented that non-sulfur based odorants: may be chemically unstable; and  can react with other compounds.\nTwo experts noted that non-sulfur based odorants: may have a higher level of toxicity.\n\nAppendix II: Experts and Other Industry and Safety Stakeholders Interviewed by GAO\n\nAppendix III: Contact and Staff Acknowledgements\n\n\tContact\n\nSusan Fleming, (202) 512-2834 or FlemingS@gao.gov.\n\n\tStaff Acknowledgements\n\nIn addition to the individual named above, other key contributors to this  report were Sara Vermillion, Assistant Director; Sarah Jones, Analyst in  Charge; Jennifer W. Clayborne; Timothy J. Guinane; David K. Hooper;  Delwen A. Jones; Josh Ormond; Rebecca R. Parkhurst; and Kelly L.  Rubin.","output":"Why GAO Did This Study\n\nThe nation's gas pipeline network moves about 74 billion cubic feet of combustible gas to homes and businesses daily. To alert the public of a gas leak before an explosion occurs, PHMSA has different requirements for odorizing gas. All gas transported by distribution pipelines throughout communities must be odorized. Gas transported across many miles by transmission pipelines is required to be odorized only in certain populated areas. There are no requirements to odorize gas in gathering pipelines. Congress included a provision in statute for GAO to review odor requirements for all pipelines.\nThis report presents the views of federal and state pipeline safety officials and industry and safety stakeholders on: (1) the advantages and disadvantages of odorizing combustible gases in pipelines; and (2) whether and how federal requirements for odorizing pipelines should be modified. GAO reviewed relevant regulations and reports; surveyed officials in 48 states and the District of Columbia; and interviewed PHMSA and NTSB officials. GAO also interviewed 34 stakeholders, including 14 experts identified by the National Academies, and 20 other industry and safety stakeholders.\n\nWhat GAO Found\n\nPipeline and Hazardous Materials Safety Administration (PHMSA) and National Transportation Safety Board (NTSB) officials, state officials, and stakeholders GAO contacted cited safety as the main advantage to odorizing combustible gases in pipelines, primarily for distribution pipelines in densely populated areas (see figure). Specifically, adding a chemical with a distinctive odor to gas allows the public to generally detect leaks before an explosion can occur. The most frequently cited disadvantage was that commonly used sulfur-based odorants must be removed\u2014primarily from gas in transmission pipelines\u2014before the gas can be used in certain processes, such as producing fertilizer.\nWhile federal odorization requirements follow a risk-based approach by focusing on pipelines in populated areas, the officials and stakeholders GAO contacted disagreed on the need to modify these requirements for some pipelines. Specifically, because distribution pipelines run through populated areas, everyone GAO contacted generally agreed that these pipelines should be odorized for safety, as currently required. For gathering pipelines, the majority of officials and stakeholders did not see a need to modify regulations because these pipelines would be technically challenging to odorize and are primarily located in rural areas. However, about two-thirds of state officials and about half of stakeholders said that additional transmission pipelines should be odorized for public safety.\nConversely, officials from PHMSA and NTSB and about half of the stakeholders contacted noted that, because transmission pipelines operate at high pressure and generally rupture rather than leak, it is unlikely that odorant could mitigate risk. Instead, other required safety practices\u2014such as internal pipeline inspections\u2014can provide more preventative, risk-based safety management, according to PHMSA officials. In this regard, PHMSA officials said that they plan to strengthen risk-based safety requirements for transmission and gathering pipelines as part of on-going rulemakings. PHMSA anticipates issuing these rules in 2019."}
{"id":"crs_RL33816","pid":"crs_RL33816_0","input":"\tBackground: Broadband and Rural America\n\nThe broadband loan and grant programs at RUS are intended to accelerate the deployment of broadband services in rural America. \"Broadband\" refers to high-speed internet access and advanced telecommunications services for private homes, commercial establishments, schools, and public institutions. Currently in the United States, residential broadband is primarily provided via cable modem (from the local provider of cable television service), fiber-optic cable, mobile wireless (e.g., smartphones), or over the copper telephone line (digital subscriber line or \"DSL\"). Other broadband technologies include fixed wireless and satellite.\nBroadband access enables a number of beneficial applications to individual users and to communities. These include ecommerce, telecommuting, voice service (voice over the internet protocol or \"VOIP\"), distance learning, telemedicine, public safety, and others. It is becoming generally accepted that broadband access in a community can play an important role in economic development. \nAccess to affordable broadband is viewed as particularly important for the economic development of rural areas because it enables individuals and businesses to participate fully in the online economy regardless of geographical location. For example, aside from enabling existing businesses to remain in their rural locations, broadband access could attract new business enterprises drawn by lower costs and a more desirable lifestyle. Essentially, broadband potentially allows businesses and individuals in rural America to live locally while competing globally in an online environment. A 2016 study from the Hudson Institute found that rural broadband providers directly and indirectly added $24.1 billion to the U.S. economy in 2015. The rural broadband industry supported 69,595 jobs in 2015, both through its own employment and the employment that its purchases of goods and services generated.\nGiven the large potential impact broadband may have on the economic development of rural America, concern has been raised over a \"digital divide\" between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state-of-the-art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment. For example\nAccording to the Federal Communications Commission's (FCC's) Communications Marketplace Report , \"As of year-end 2017, 94% of the overall population had coverage [of fixed terrestrial broadband at speeds of 25 Mbps\/3 Mbps], up from 91.9% in 2016. Nonetheless, the gap in rural and Tribal America remains notable: 24% of Americans in rural areas and 32% of Americans in Tribal lands lack coverage from fixed terrestrial 25 Mbps\/3 Mbps broadband, as compared to only 1.5% of Americans in urban areas. The data demonstrate, however, that the gap between urban and rural or Tribal areas has narrowed each year over the last five years.\" Also according to the FCC's Communications Market Report , rural areas continue to lag behind urban areas in mobile broadband deployment. Although evaluated urban areas saw an increase of 10 Mbps\/3 Mbps mobile LTE from 81.9% in 2014 to 92.6% in 2017, such deployment in evaluated rural areas remained relatively flat at about 70%. According to January 2018 survey data from the Pew Research Center, 58% of adults in rural areas said they have a high-speed broadband connection at home, as opposed to 67% of adults in urban areas and 70% of adults in suburban areas. A November 2017 Census Bureau survey reported by the National Telecommunications and Information Administration (NTIA) Digital Nation Data Explorer showed 72.9% of rural residents reporting using the internet, versus 78.5% of urban residents. According to NTIA, the data \"indicates a fairly constant 6-9 percentage point gap between rural and urban communities' internet use over time.\" \nThe comparatively lower population density of rural areas is likely the major reason why broadband is less deployed than in more highly populated suburban and urban areas. Particularly for wireline broadband technologies\u2014such as cable modem, fiber, and DSL\u2014the greater the geographical distances among customers, the larger the cost to serve those customers. Thus, there is often less incentive for companies to invest in broadband in rural areas than, for example, in an urban area where there is more demand (more customers with perhaps higher incomes) and less cost to wire the market area.\nThe terrain of rural areas can also be a hindrance, in that it is more expensive to deploy broadband technologies in a mountainous or heavily forested area. An additional added cost factor for remote areas can be the expense of \"backhaul\" (e.g., the \"middle mile\"), which refers to the installation of a dedicated line that transmits a signal to and from an internet backbone, which is typically located in or near an urban area.\nAnother important broadband availability issue is the extent to which there are multiple broadband providers offering competition and consumer choice. Typically, multiple providers are more prevalent in urban than in rural areas.\n\n\tRural Broadband Programs at the Rural Utilities Service\n\nBecause private providers are unlikely to earn enough revenue to cover the costs of deploying and operating broadband networks in many unserved rural areas, it is unlikely that private investment alone will bring service to these areas. In 2000, given the lagging deployment of broadband in rural areas, Congress and the Administration acted to initiate pilot broadband loan and grant programs within the Rural Utilities Service of the U.S. Department of Agriculture. While RUS had long maintained telecommunications loan and grant programs (Rural Telephone Loans and Loan Guarantees, Rural Telephone Bank, and more recently, the Distance Learning and Telemedicine Loans and Grants), none were exclusively dedicated to financing rural broadband deployment. Title III of the FY2001 agriculture appropriations bill ( P.L. 106-387 ) directed USDA\/RUS to conduct a \"pilot program to finance broadband transmission and local dial-up Internet service in areas that meet the definition of 'rural area' used for the Distance Learning and Telemedicine Program.\"\nSubsequently, on December 5, 2000, RUS announced the availability of $100 million in loan funding through a one-year pilot program \"to finance the construction and installation of broadband telecommunications services in rural America.\" The broadband pilot loan program was authorized under the authority of the Distance Learning and Telemedicine Program (7 U.S.C. 950aaa), and was available to \"legally organized entities\" not located within the boundaries of a city or town having a population in excess of 20,000.\nThe FY2002 agriculture appropriations bill ( P.L. 107-76 ) designated a loan level of $80 million for broadband loans, and on January 23, 2002, RUS announced that the pilot program would be extended into FY2002, with $80 million in loans made available to fund many of the applications that did not receive funding during the previous year.\nMeanwhile, the FY2002 agriculture appropriations bill ( P.L. 107-76 ) allocated $20 million for a pilot broadband grant program, also authorized under the Distance Learning and Telemedicine Program. On July 8, 2002, RUS announced the availability of $20 million for a pilot grant program for the provision of broadband service in rural America. The program was specifically targeted to economically challenged rural communities with no existing broadband service. Grants were made available to entities providing \"community-oriented connectivity,\" which the RUS defined as those entities \"who will connect the critical community facilities including the local schools, libraries, hospitals, police, fire and rescue services and who will operate a community center that provides free and open access to residents.\"\nThe pilot program was extended into FY2003, as the Consolidated Appropriations Resolution of 2003 ( P.L. 108-7 ) allocated $10 million for broadband grants.\nCurrently, RUS has four ongoing programs that have been established to incentivize and subsidize broadband infrastructure investment in unserved and underserved rural areas. These include the following:\nRural Broadband Access Loan s \u2014funds the costs of construction, improvement, or acquisition of facilities and equipment needed to provide service in eligible rural areas. Community Connect Grants \u2014funds broadband deployment into rural communities where it is not yet economically viable for private sector providers to deliver service. Telecommunications Infrastructure Loans and Loan Guarantees \u2014funds the construction, maintenance, improvement, and expansion of telephone service and broadband in extremely rural areas with a population of 5,000 or less. Distance Learning and Telemedicine Grants \u2014principally funds end-user equipment to help rural communities use telecommunications to link teachers and medical service providers in one area to students and patients in another.\nIn addition, a new broadband loan and grant pilot program\u2014the ReConnect Program\u2014has been established and funded at $600 million by the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ).\n Table A-1 in the Appendix shows the total amount and number of awards provided by the RUS broadband programs for each state between FY2009 and FY2016.\nIn its April 2017 report, Rural Broadband Deployment: Improved Consistency with Leading Practices Could Enhance Management of Loan and Grant Programs , GAO reported that (according to RUS data) since FY2004, RUS has approved 704 broadband projects totaling almost $8.6 billion in loans and $144.8 million in grants to deploy telecommunications or broadband infrastructure networks in rural areas.\n\n\t\tRural Broadband Access Loan and Loan Guarantee Program\n\nBuilding on the pilot broadband loan program at RUS, Section 6103 of the Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 ) amended the Rural Electrification Act of 1936 to authorize a loan and loan guarantee program to provide funds for the costs of the construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities. Section 6103 made available, from the funds of the Commodity Credit Corporation (CCC), a total of $100 million through FY2007. P.L. 107-171 also authorized any other funds appropriated for the broadband loan program. The program was subsequently reauthorized by Section 6110 of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), and by Section 6104 of the Agricultural Act of 2014 ( P.L. 113-79 ). \nBeginning in FY2004, Congress annually blocked mandatory funding from the CCC. Thus\u2014starting in FY2004\u2014the program was funded as part of annual appropriations in the Distance Learning and Telemedicine account within the Department of Agriculture appropriations bill. Every fiscal year, Congress approves an appropriation (loan subsidy) and a specific loan level (lending authority) for the Rural Broadband Access Loan and Loan Guarantee Program. Table 1 shows\u2014for the life of the program to date\u2014loan subsidies and loan levels (lending authority) set by Congress in annual appropriations bills. \nThe Rural Broadband Access Loan and Loan Guarantee Program is codified as 7 U.S.C. 950bb. On July 30, 2015, the RUS published in the Federal Register the interim rule (7 C.F.R. part 1738) implementing the Rural Broadband Access Loan and Loan Guarantee Program as reauthorized by the enactment of the Agricultural Act of 2014 ( P.L. 113-79 ), and the interim rule was made final on June 9, 2016. Entities eligible to receive loans include corporations, limited liability companies, cooperative or mutual organizations, Indian tribes or tribal organizations, and state or local governments. Eligible areas for funding must be completely contained within a rural area (or composed of multiple rural areas). Additionally, at least 15% of the households in the proposed funded service areas must be unserved, no part of the proposed service area can have three or more incumbent service providers, and no part of the proposed service area can overlap with the service area of current RUS borrowers or of grantees that were funded by RUS. \nThe latest Notice of Solicitation of Applications (NOSA) announced that RUS is now accepting applications on a rolling basis through September 30, 2019, which will give RUS the ability to request additional information and modifications to submitted applications if necessary. RUS will evaluate the submitted applications every 90 days, and anticipates at least two evaluation periods for FY2019. The minimum loan amount is $100,000, while the maximum loan amount is $25 million. The NOSA has maintained its definition of broadband service and broadband lending speed at no less than 25 Mbps download and 3 Mbps upload for both mobile and fixed services. \nThe 2018 farm bill, which was signed by the President on December 20, 2018 ( P.L. 115-334 , Agriculture Improvement Act of 2018), adds a grant component to the broadband loan program, increases the annual authorization level from $25 million to $350 million, and changes the proposed service area threshold from 15% to 50%. RUS will issue a revised regulation that implements the changes made by the 2018 farm bill. For up to one year after enactment, the Secretary shall use the previously existing rules and regulations for the broadband loan program until a final rule is issued.\nFor the latest application information, see http:\/\/www.rd.usda.gov\/programs-services\/farm-bill-broadband-loans-loan-guarantees .\n\n\t\tCommunity Connect Broadband Grants\n\nThe Consolidated Appropriations Act of 2004 ( P.L. 108-199 ) appropriated $9 million \"for a grant program to finance broadband transmission in rural areas eligible for Distance Learning and Telemedicine Program benefits authorized by 7 U.S.C. 950aaa.\" Essentially operating the same as the pilot broadband grants, the program provides grant money to applicants proposing to provide broadband on a \"community-oriented connectivity\" basis to currently unserved rural areas for the purpose of fostering economic growth and delivering enhanced health care, education, and public safety services. Funding for the broadband grant program is provided through annual appropriations in the Distance Learning and Telemedicine account within the Department of Agriculture appropriations bill. Table 2 shows a history of appropriations for the Community Connect Broadband Grants.\nEligible applicants for broadband grants include most state and local governments, federally recognized tribes, nonprofits, and for-profit corporations. \nFunded projects must serve a rural area where broadband service above a specified minimum speed does not exist, deploy free broadband service for at least two years to all community facilities, and offer broadband to residential and business customers. Up to 10% of the grant may be used for the improvement, expansion, construction, or acquisition of a community center that provides online access to the public. \nOn May 3, 2013, RUS issued a new final rule for Community Connect grants in the Federal Register . The final rule changes previous requirements related to matching funds, eligible communities, and application scoring criteria. The final rule also removes the previous definition of broadband service speed (200 kbps). A new threshold for broadband service speed and broadband grant speed (the speed the grantee must deliver) will be provided in an annual Notice of Funding Availability (NOFA) in the Federal Register . The NOFA will also specify the deadline for applications, the total amount of funding available, and the maximum and minimum amount of funding available for each grant. \nIn February 2019, RUS issued a Funding Opportunity Announcement (FOA) establishing an application window for FY2019 Community Connect grants through April 15, 2019. The FOA set a minimum threshold for speeds constituting broadband service at 10 Mbps download and 1 Mbps upload for both fixed and mobile broadband. The minimum broadband speed that an applicant must propose to deliver is 25 Mbps download, 3 Mbps upload for both fixed and mobile service to the customer. The minimum grant is $100,000 and the maximum is $3 million. Further information, including application materials and guidelines, is available at http:\/\/www.rd.usda.gov\/programs-services\/community-connect-grants . \nThe 2018 farm bill ( P.L. 115-334 ) codifies the Community Connect Grant Program and authorizes the program at $50 million for each of fiscal years 2018 through 2023. \n\n\t\tTelecommunications Infrastructure Loans and Loan Guarantees\n\nThe Telecommunications Infrastructure Loan and Loan Guarantee Program provides loans and loan guarantees for the construction, maintenance, improvement, and expansion of telephone service and broadband in rural areas. The program was first authorized in 1949 to finance rural telephone service. Since 1995, RUS has required that networks funded by this program offer broadband service as well.\nLoans and loan guarantees are available only to rural areas and towns with a population of 5,000 or less. Eligible areas are those without telecommunications facilities or areas where the applicant is the recognized telecommunications provider. Funded projects cannot duplicate existing services.\nThe program is authorized to provide several different types of financing, including\ndirect Treasury rate loans, which bear interest at the government's cost of money (or the current Treasury rate). Thus, the interest charged varies with the Treasury rate. As Treasury rates increase, so does the cost to the borrower for these loans. guaranteed loans, which are provided to borrowers of a nongovernment lender or from the Federal Financing Bank (FFB). The interest rate charged on FFB loans is the Treasury rate plus an administrative fee of one-eighth of 1%. The terms of these loans may vary significantly and allow borrowers more flexibility in meeting their financing needs. hardship direct loans, which bear interest at a fixed rate of 5% per year. These loans are intended only for borrowers with extremely high investment costs in terms of per subscriber service. These borrowers also have a very low number of subscribers for each mile of telecommunications line constructed. This low subscriber density inherently increases the cost to serve the most sparsely populated rural areas. Because of the high cost of the investment needed, these borrowers cannot typically afford higher interest rate loans. \nThe annual loan level for the Telecommunications Infrastructure Loan and Loan Guarantee Program is $690 million. Currently, the 5% hardship loans are not offered\u2014because of low interest rates, the Treasury and FFB loans can currently offer lower interest rates than the 5% offered by hardship loans.\n\n\t\tDistance Learning and Telemedicine Program\n\nThe Distance Learning and Telemedicine (DLT) Program was established by the 1996 farm bill\u2014the Federal Agriculture Improvement and Reform Act of 1996 ( P.L. 104-127 ). Though initially providing both grants and loans, since FY2009 only DLT grants have been awarded by RUS. \nDLT grants serve as initial capital assets for equipment and software that operate via telecommunications to rural end-users of telemedicine and distance learning. DLT grants do not support connectivity. Grant funds may be used for audio, video, and interactive video equipment; terminal and data terminal equipment; computer hardware, network components, and software; inside wiring and similar infrastructure; acquisition of instructional programming; broadband facilities; and technical assistance. Eligible applicants include most entities in rural areas that provide education or health care through telecommunications, including most state and local governmental entities, federally recognized tribes, nonprofits, for-profit businesses, and consortia of eligible entities.\nThe 2018 farm bill ( P.L. 115-334 ) reauthorizes the DLT program through FY2023 at $82 million per year and sets aside 20% of DLT grant funding for applications related to substance use disorder treatment services.\n\n\t\tReConnect Program\n\nAn Interagency Task Force on Agriculture and Rural Prosperity was created on April 25, 2017, by Executive Order 13790 and was charged with identifying legislative, regulatory, and policy changes to promote agriculture, economic development, job growth, infrastructure improvements, technological innovation, energy security, and quality of life in rural America. The first recommendation of the Task Force's report to the President was to expand e-connectivity in rural and tribal areas. \nTo help implement this recommendation, the Administration requested $500 million in a discretionary add-on to the FY2018 appropriation which would fund a combination grant\/loan program at USDA\/RUS to deploy broadband in rural and tribal areas. \nSection 779 of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) appropriated $600 million to RUS to \"conduct a new broadband loan and grant pilot program.\" The law states that the funding is to \"remain available until expended,\" and that\nat least 90% of the households to be served by a project receiving a loan or grant under the pilot program shall be in a rural area without sufficient access to broadband, defined for this pilot program as 10 Mbps downstream, and 1 Mbps upstream, which shall be reevaluated and redetermined, as necessary, on an annual basis by the Secretary of Agriculture; an entity to which a loan or grant is made under the pilot program shall not use the loan or grant to overbuild or duplicate broadband expansion efforts made by any entity that has received a broadband loan from RUS; in addition to other available funds, not more than 4% of the funds can be used for administrative costs to carry out the pilot program and up to 3% may be utilized for technical assistance and predevelopment planning activities to support the most rural communities; and RUS shall adhere to the notice, reporting, and service area assessment requirements previously established in the 2014 farm bill.\nThe Explanatory Statement that accompanied the FY2018 Consolidated Appropriations Act states\nThe agreement reiterates that funding should be prioritized to areas currently lacking access to broadband service, and investments in broadband shall consider any technology that best serves the goals of broadband expansion. Lastly, the agreement restates the importance of coordination among federal agencies in expanding broadband deployment and adoption and expects the Department to take caution to maximize these limited resources and not overbuild or duplicate existing broadband capable infrastructure.\nThe Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provides $550 million in FY2019 for the pilot broadband loan and grant program, now called the Ru ral eConnectivity Pilot Program, or ReConnect Rural Broadband Program. The $550 million includes $125 million in direct appropriation, plus $425 million to be reprogrammed from the cushion of credit subaccount (7 U.S.C. 940c). Division B, Section 779 direct s the Secretary of Agriculture to ensure that applicants determined to be ineligible for the ReConnect Program have a means of appealing or otherwise challenging that determination in a timely fashion. The law also directs the Secretary, in determining whether an entity may overbuild or duplicate broadband expansion efforts made by an entity that has received an RUS broadband loan, to not consider loans that were rescinded or defaulted on, or loans the terms and conditions of which were not met, if the entity under consideration has not previously defaulted on, or failed to meet the terms and conditions of, a Rural Utilities Service loan or had a Rural Utilities Service loan rescinded.\nOn December 14, 2018, RUS released the Funding Opportunity Announcement ( FOA ) and solicitation of applications for the ReConnect Program. As set forth in the statute, at least 90% of the households to be served by a project receiving a loan or grant under the pilot program shall be in a rural area without sufficient access to broadband at a minimum speed of 10 Mbps\/1 Mbps. RUS defines \"sufficient access to broadband\" as any rural area that has fixed, terrestrial broadband service delivering at least 10 Mbps downstream and 1 Mbps upstream. Mobile and satellite service will not be considered in making the determination that households in the proposed funded service area do not have sufficient access to broadband. \nWith the government shutdown delaying the rollout of the ReConnect Program, on February 25, 2019, RUS released an amendment and clarification to the December FOA , with revised application deadlines. \nApproximately $600 million has been set aside for funding opportunities under the FOA, with additional budget authority available for a reserve which may be used for additional loans or grants. Award recipients must complete projects within five years. Entities eligible for awards are states or local governments, U.S. territories, an Indian tribe, nonprofit entities, for-profit corporations, limited liability companies, and cooperative or mutual organizations. This includes telecommunications companies, rural electric cooperatives and utilities, internet service providers, and municipalities.\nFunds will be awarded for projects that have financially sustainable business models that will bring broadband to rural homes, businesses, farms, ranches, and community facilities such as first responders, health care facilities, and schools. The ReConnect Program consists of three funding categories.\n\n\t\t\t100% loan\n\nUp to $200 million is available. The maximum amount that can be requested is $50 million. Interest rate is set at a fixed 2%. Eligible areas are where 90% of households do not have sufficient access to broadband at 10 Mbps\/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps\/3 Mbps. Applications accepted on a rolling basis through July 12, 2019.\n\n\t\t\t50% loan\/50% grant combination\n\nUp to $200 million is available. The maximum amount that can be requested is $25 million for the loan and $25 million for the grant. Loan and grant amounts will always be equal. Interest rate for the loan will be set at the Treasury rate. Eligible areas are where 90% of households do not have sufficient access to broadband at 10 Mbps\/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps\/3 Mbps Applications accepted on a rolling basis through June 21, 2019.\n\n\t\t\t100% grant\n\nUp to $200 million is available. The maximum amount that can be requested is $25 million. Applicants must provide a matching contribution equal to 25% of the cost of the overall project. Eligible areas are where 100% of households do not have sufficient access to broadband at 10 Mbps\/1 Mbps. Applicants must propose to build a network capable of providing service to every premise in the proposed funded service area at a minimum speed of 25 Mbps\/3 Mbps. Applications accepted on a rolling basis through May 31, 2019.\nMore information on the ReConnect Program is available at https:\/\/reconnect.usda.gov .\n\n\tImpact of Universal Service Reform on RUS Broadband Loan Programs\n\nRUS has three programs that provide or have provided loans for broadband infrastructure projects: the Rural Broadband Access Loan and Loan Guarantee program (also known as the Farm Bill broadband loan program), the Broadband Initiatives Program (BIP under the ARRA), and the Telecommunications Infrastructure Loan Program (established in 1949 as the Rural Telephone Loan and Loan Guarantee program).\nWhereas RUS broadband loans are used as up-front capital to invest in broadband infrastructure, the Federal Communications Commission's (FCC's) Universal Service Fund (USF)\u2014specifically, the high cost fund\u2014has functioned as an ongoing subsidy to keep the operation of telecommunications networks in high cost areas profitable for providers. Many RUS telecommunications and broadband borrowers (loan recipients) receive high cost USF subsidies. In many cases, the subsidy received from USF helps provide the revenue necessary to keep the loan viable. The Telecommunications Infrastructure Loan Program is highly dependent on high cost USF revenues, with 99% (476 out of 480 borrowers) receiving interstate high cost USF support. This is not surprising, given that the RUS Telecommunications Infrastructure Loans are available only to the most rural and high cost areas (towns with populations less than 5,000). Regarding broadband loans, 60% of BIP (stimulus) borrowers draw from state or interstate USF support mechanisms, while 10% of Farm Bill (Rural Broadband Access Loan and Loan Guarantee Program) broadband borrowers receive interstate high cost USF support.\nThe FCC, in an October 2011 decision, adopted an order that calls for the USF to be transformed, in stages, over a multiyear period\u2014from a mechanism to support voice telephone service to one that supports the deployment, adoption, and use of both fixed and mobile broadband. More specifically, the high cost program is being phased out and a new fund, the Connect America Fund (CAF), which includes the targeted Mobility Fund and new Remote Areas Fund, is replacing it. \nDuring this transition, the uncertainty surrounding the FCC's proposed methodology for distributing Connect America Fund monies has led many small rural providers to postpone or cancel investment in broadband network upgrades. According to RUS, \"demand for RUS loans dropped to roughly 37% of the total amount of loan funds appropriated by Congress in FY2012,\" and \"[c]urrent and prospective RUS borrowers have communicated their hesitation to increase their outstanding debt and move forward with planned construction due to the recently implemented reductions in USF support and Inter-Carrier Compensation (ICC) payments.\"\n\n\tAppropriations\n\nThe Rural Broadband Access Loan and Loan Guarantee Program, the Community Connect Grant Program, the Telecommunications Infrastructure Loan and Loan Guarantee program, the Rural Broadband ReConnect Program, and the Distance Learning and Telemedicine grant program are funded through the annual Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. The appropriations provided to the broadband loan programs are loan subsidies which support a significantly higher loan level. Table 3 shows recent and proposed appropriations for the rural broadband programs in the Rural Utilities Service.\n\n\t\tFY2018\n\nThe Administration's FY2018 budget proposal requested the following for RUS broadband programs:\nRural Broadband Access Loans\u2014$4.5 million in budget authority to subsidize a broadband loan level of $27 million. According to the budget proposal, this funding level will provide for approximately 3 loans in FY2018. Telecommunications Infrastructure Loans\u2014$0.863 million in budget authority to subsidize a loan level of $690 million ($345 million for Treasury loans and $345 million for FFB loans). The subsidy is for Treasury loans. According to the budget proposal, this funding level will provide for approximately 40 loans in FY2018. Community Connect and DLT grants\u2014for FY2018, the Administration is proposing transferring Community Connect and DLT grants into a new $162 million \"Rural Economic Infrastructure Program,\" which will also include Rural Development Community Facilities grants and Home Repair grants. Up to $80 million will be directed toward the Appalachian region. According to the Administration, the new account \"combines the Rural Development grant programs into one account to provide the Administration with the flexibility to place resources where significant impact can be made for economic infrastructure development.\"\nOn July 12, 2017, the House Appropriations Committee approved the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2018 ( H.R. 3268 ; H.Rept. 115-232 ). The bill provided $4.521 million to subsidize a loan level of $26.991 million for the broadband loan program. Funding provided for the broadband loan program was intended to promote availability in those areas where there is not otherwise a business case for private investment in a broadband network. The committee directed RUS to focus expenditures on projects that bring broadband service to underserved households and areas.\nThe House bill provided $122.692 million for the new Rural Economic Infrastructure Account (24% below the Administration request), which would include both Community Connect and DLT grants, along with Community Facilities grants and Home Repair grants. The bill included language requiring at least 15% of the account resources ($18.4 million) be allocated to each program area. The committee noted that tribal communities continue to struggle with gaining access to broadband service, and encouraged the Secretary to provide a report that identifies the specific challenges Indian Tribal Organizations (ITOs) have in gaining access to broadband service and provide a plan for addressing these challenges, including how the Community Connect program can assist ITOs.\nRegarding telecommunications loans, the House matched the Administration proposal, providing a loan level of $690 million ($345 million in direct Treasury loans and $345 million in FFB loans) with an appropriation of $0.863 million to subsidize direct Treasury loans.\nAdditionally, the House Appropriations Committee report directed USDA to continue coordinating with the FCC, NTIA, and other related federal agencies to ensure that policies tied to one federal program do not undermine the objectives and functionality of another. The committee directed the department to prepare a report, in collaboration with the FCC and DOC, detailing areas of responsibility toward addressing rural broadband issues. The report shall include, but not be limited to, how the programs work complimentarily to one another; how they address broadband issues in unserved and underserved areas, including tribal lands; identify barriers to infrastructure investment in rural areas and tribal lands; data speeds which fixed, wireless, and mobile broadband users in rural areas and tribal lands experience; and cost estimates to increase speeds to 25 Mbps in unserved communities and communities currently being served by speeds less than 25 Mbps. \nOn July 20, 2017, the Senate Appropriations Committee approved its version of the FY2018 agriculture appropriations bill ( S. 1603 ; S.Rept. 115-131 ). The bill provided $4.53 million to subsidize a loan level of $27.043 million for the broadband loan program, $30 million for the Community Connect grant program, and $26.6 million for DLT grants. Unlike the House and the Administration request, the committee did not include funding for Rural Economic Infrastructure grants. For telecommunications loans, the Senate matched the House bill and the Administration proposal, providing a loan level of $690 million ($345 million in direct Treasury loans and $345 million in FFB loans) with an appropriation of $0.863 million to subsidize direct Treasury loans.\nRegarding the broadband loan program, the committee encouraged RUS to focus expenditures on projects that bring broadband service to currently unserved households, and directed RUS to report back to the committee on administrative efforts to eliminate duplicative or overbuilding of broadband technology. The committee also recommended that USDA explore a pilot grant program to demonstrate the use of multistrand fiber-optic cable that exists as part of electrical transmission infrastructure to provide state-of-the-art broadband services to currently underserved rural schools and medical centers within a mile of the existing cable.\nThe Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provided $5 million to subsidize a broadband loan level of $29.851 million, $30 million to Community Connect broadband grants, and $49 million for DLT grants, which included an additional $20 million to address the opioid epidemic in rural America. P.L. 115-141 also appropriated $600 million to RUS to \"conduct a new broadband loan and grant pilot program.\" \n\n\t\tFY2019\n\nThe Administration's FY2019 budget proposal requested the following for RUS broadband programs:\nRural Broadband Access Loans\u2014$4.5 million in budget authority to subsidize a broadband loan level of $23.149 million. According to the budget proposal, this funding level will provide for approximately three loans in FY2019. Telecommunications Infrastructure Loans and Loan Guarantees\u2014$0.863 million in budget authority to subsidize a loan level of $690 million ($172.6 million for Treasury loans and $517.4 million for FFB loans). The subsidy is for Treasury loans. According to the budget proposal, this funding level will provide for approximately 30 loans in FY2019. Community Connect Grants\u2014$30 million, which will support approximately 13 broadband grants in FY2019. Distance Learning and Telemedicine Grants\u2014$23.6 million, which will support approximately 72 projects in FY2019.\nOn May 16, 2018, the House Appropriations Committee approved the FY2019 Agriculture Appropriations bill ( H.R. 5961 ; H.Rept. 115-706 ). The bill would provide the following:\nRural Broadband Access Loans\u2014$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees\u2014$1.125 million in budget authority to subsidize direct Treasury loans set at a level of $465 million. Along with a loan level $225 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants\u2014$30 million. Distance Learning and Telemedicine Grants\u2014$32 million. ReConnect Program\u2014$550 million. This appropriation would continue the pilot broadband loan and grant program that was funded (at $600 million) in the FY2018 Consolidated Appropriations Act, 2018 ( P.L. 115-141 ).\nIn the committee report, the committee expressed its view that \"it is important for Departments to avoid efforts that could duplicate existing networks built by private investment or those built leveraging and utilizing other federal programs.\" As such, the committee \"directs the Secretary of Agriculture to coordinate with the Federal Communications Commission (FCC) and the National Telecommunications Information Administration (NTIA) to ensure wherever possible that broadband loans and grants issued under the pilot program are being targeted to areas that are currently unserved.\" The committee directed USDA to use the NTIA's assessment of the current state of broadband access nationwide, and to explore using all broadband technologies, including, but not limited to, fiber, cable modem, fixed wireless, and television white space.\nThe committee also noted that tribal communities continue to struggle with gaining access to broadband service, and encouraged the Secretary to provide a report that identifies the specific challenges Indian Tribal Organizations (ITOs) have in gaining access to broadband service and provide a plan for addressing these challenges, including how the Community Connect program can assist ITOs.\nOn May 24, 2018, the Senate Appropriations Committee approved its FY2019 Agriculture Appropriations bill ( S. 2976 ; S.Rept. 115-259 ). The bill would provide the following:\nRural Broadband Access Loans\u2014$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees\u2014$1.725 million in budget authority to subsidize direct Treasury loans set at a level of $345 million. Along with a loan level of $345 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants\u2014$30 million. Distance Learning and Telemedicine Grants\u2014$50 million (including $20 million to help address the opioid epidemic in rural America). ReConnect Program\u2014$425 million.\nThe committee encouraged RUS to focus expenditures on projects that bring broadband service to currently unserved households, and directed RUS to report back to the committee on administrative efforts to eliminate duplicative or overbuilding of broadband technology. The committee also recommended that USDA explore a pilot grant program to demonstrate the use of multistrand fiber-optic cable that exists as part of electrical transmission infrastructure to provide state-of-the-art broadband services to currently underserved rural schools and medical centers within a mile of the existing cable; encouraged RUS to coordinate with the FCC and other relevant federal entities when making determinations of sufficient broadband access, to ensure the most accurate and up-to-date broadband coverage data are used, while being cognizant of potential problems of overbuilding; encouraged the Secretary to utilize appropriate grant program funds to locate buried, antiquated infrastructure facilities prior to construction of new utilities infrastructure financed by RUS; and urged RUS to ensure the agency's criteria and application processes provide for fair consideration of open access projects by accounting for the unique structures and opportunities such projects present in advancing broadband deployment in unserved and underserved communities.\nOn February 15, 2019, the Consolidated Appropriations Act, 2019 was signed into law ( P.L. 116-6 ). The FY2019 appropriations and levels are as follows:\nRural Broadband Access Loans\u2014$5.83 million in budget authority to subsidize a broadband loan level of $29.851 million. Telecommunications Infrastructure Loans and Loan Guarantees\u2014$1.725 million in budget authority to subsidize direct Treasury loans set at a level of $345 million. Along with a loan level of $345 million for FFB guaranteed loans, the total loan level is $690 million. Community Connect Grants\u2014$30 million. Distance Learning and Telemedicine Grants\u2014$47 million (including $16 million to address the opioid epidemic in rural America). ReConnect Program\u2014$550 million ($125 million direct appropriation plus $425 million to be reprogrammed from the cushion of credit account).\nP.L. 116-6 also directs USDA rural development programs, including the broadband programs, to allocate (to the maximum extent feasible) at least 10% of funds to projects in persistent poverty counties. \nThe conference report ( H.Rept. 116-9 ) contains language directing USDA to avoid efforts that could duplicate existing networks built by private investment or those built leveraging and utilizing other federal programs, and directs the Secretary to coordinate with the FCC and NTIA to ensure wherever possible that broadband loans and grants are targeted to areas that are currently unserved. In particular, the conference agreement directs USDA to use the NTIA's assessment of the current state of broadband access nationwide. USDA is also directed, in implementing a strategy for broadband deployment to unserved communities, to explore using all technologies, including but not limited to, fiber, cable modem, fixed wireless, and television white space. \n\n\t\tFY2020\n\nThe Administration's FY2020 budget proposal requested the following for RUS broadband programs:\nRural Broadband Access Loans\u2014Zero funding. According to the budget proposal, the elimination of funding will be offset by continued access by most eligible borrowers to the ReConnect Program (broadband pilot loan and grants). ReConnect Program\u2014$200 million, which, according to the budget proposal, will support approximately eight loans, grants, or loan\/grant combinations in FY2020. Telecommunications Infrastructure Loans and Loan Guarantees\u2014$1.933 million in budget authority to subsidize a loan level of $690 million ($175.7 million for Treasury loans and $514.3 million for FFB loans). The subsidy is for the Treasury loans. According to the budget proposal, this funding level will provide for approximately 20 loans in FY2020. Community Connect Grants\u2014$30 million, which will support approximately 13 broadband grants in FY2020. Distance Learning and Telemedicine Grants\u2014$43.6 million, which will support approximately 90 projects in FY2020.\n\n\tPast Criticisms of RUS Broadband Programs\n\nRUS broadband programs have been awarding funds to entities serving rural communities since FY2001. Since their inception, a number of criticisms have emerged.\n\n\t\tLoan Approval and Application Process\n\nPerhaps the major criticism of the broadband loan program was that not enough loans are approved, thereby making it difficult for rural communities to take full advantage of the program. The loan application process has been criticized as being overly complex and burdensome, requiring applicants to spend months preparing costly market research and engineering assessments. Many applications are rejected because the applicant's business plan is deemed insufficient to support a commercially viable business. The biggest reason for applications being returned has been insufficient credit support, whereby applicants do not have sufficient cash-on-hand (one year's worth is required in most cases). The requirement for cash-on-hand is viewed as particularly onerous for small start-up companies, many of whom lack sufficient capital to qualify for the loan. Such companies, critics assert, may be those entities most in need of financial assistance.\nIn report language to the FY2006 Department of Agriculture Appropriations Act ( P.L. 109-97 ), the Senate Appropriations Committee ( S.Rept. 109-92 ) directed the RUS \"to reduce the burdensome application process and make the program requirements more reasonable, particularly in regard to cash-on-hand requirements.\" The committee also directed USDA to hire more full-time employees to remedy delays in application processing times.\nAt a May 17, 2006, hearing held by the Senate Committee on Agriculture, Nutrition, and Forestry, the Administrator of the RUS stated that RUS is working to make the program more user friendly, while at the same time protecting taxpayer investment:\nAs good stewards of the taxpayers' money, we must make loans that are likely to be repaid. One of the challenges in determining whether a proposed project has a reasonable chance of success is validating the market analysis of the proposed service territory and ensuring that sufficient resources are available to cover operating expenses throughout the construction period until such a time that cash flow from operations become sufficient. The loan application process that we have developed ensures that the applicant addresses these areas and that appropriate resources are available for maintaining a viable operation.\nAccording to RUS, the loan program was initially overwhelmed by applications (particularly during a two-week period in August 2003), and as the program matured, application review times have dropped. On May 11, 2007, RUS released a Proposed Rule which sought to revise regulations for the broadband loan program. In the background material accompanying the Proposed Rule, RUS stated that the average application processing time in 2006 was almost half of what it was in 2003.\n\n\t\tEligibility Criteria\n\nSince the inception of the broadband grant and loan programs, the criteria for applicant eligibility have been criticized both for being too broad and for being too narrow. An audit report released by USDA's Office of Inspector General (IG) found that the \"programs' focus has shifted away from those rural communities that would not, without Government assistance, have access to broadband technologies.\" Specifically the IG report found that the RUS definition of rural area has been \"too broad to distinguish usefully between suburban and rural communities,\" with the result that, as of March 10, 2005, $103.4 million in loans and grants (nearly 12% of total funding awarded) had been awarded to 64 communities located near large cities. The report cited examples of affluent suburban subdivisions qualifying as rural areas under the program guidelines and receiving broadband loans.\nOn the other hand, eligibility requirements have also been criticized as too narrow. For example, the limitation of assistance only to communities of 20,000 or less in population excludes small rural towns that may exceed this limit, and also excludes many municipalities seeking to deploy their own networks. Similarly, per capita income requirements can preclude higher income communities with higher costs of living (e.g., rural Alaska), and the limitation of grant programs only to underserved areas excludes rural communities with existing but very limited broadband access.\n\n\t\tLoans to Communities With Existing Providers\n\nThe IG report found that RUS too often has given loans to communities with existing broadband service. The IG report found that \"RUS has not ensured that communities without broadband service receive first priority for loans,\" and that although RUS has a system in place to prioritize loans to unserved communities, the system \"lacks a cutoff date and functions as a rolling selection process\u2014priorities are decided based on the applicants who happen to be in the pool at any given moment.\" The result is that a significant number of communities with some level of preexisting broadband service have received loans. According to the IG report, of 11 loans awarded in 2004, 66% of the associated communities served by those loans had existing service. According to RUS, 31% of communities served by all loans (during the period 2003 through early 2005) had preexisting competitive service (not including loans used to upgrade or expand existing service). In some cases, according to the IG report, \"loans were issued to companies in highly competitive business environments where multiple providers competed for relatively few customers.\" At the May 1, 2007, hearing before the House Subcommittee on Specialty Crops, Rural Development, and Foreign Agriculture, then-RUS Administrator James Andrews testified that of the 69 broadband loans awarded since the program's inception, 40% of the communities approved for funding were unserved at the time of loan approval, and an additional 15% had only one broadband provider.\nAwarding loans to entities in communities with preexisting competitive service raised criticism from competitors who already offer broadband to those communities. According to the National Cable and Telecommunications Association (NCTA), \"RUS loans are being used to unfairly subsidize second and third broadband providers in communities where private risk capital already has been invested to provide broadband service.\" Critics argued that providing loans in areas with preexisting competitive broadband service creates an uneven playing field and discourages further private investment in rural broadband. In response, RUS stated in the IG report that its policies are in accordance with the statute, and that they address \"the need for competition to increase the quality of services and reduce the cost of those services to the consumer.\" RUS argued that the presence of a competitor does not necessarily mean that an area is adequately served, and additionally, that in order for some borrowers to maintain a viable business in an unserved area, it may be necessary for that company to also be serving more densely populated rural areas where some level of competition already exists.\n\n\t\tFollow-Up Audit by USDA Office of Inspector General\n\nIn 2008, as directed by the House Appropriations Committee ( H.Rept. 110-258 , FY2008 Agriculture appropriations bill), the IG reexamined the RUS broadband loan and loan guarantee program to determine whether RUS had taken sufficient corrective actions in response to the issues raised in the 2005 IG report. The IG concluded \"the key problems identified in our 2005 report\u2014loans being issued to suburban and exurban communities and loans being issued where other providers already provide access\u2014have not been resolved.\" \nSpecifically, the follow-up IG report found that between 2005 and 2008, RUS broadband borrowers providing services in 148 communities were within 30 miles of cities with 200,000 inhabitants, including communities near very large urban areas such as Chicago and Las Vegas.\nThe IG report also found that since 2005 \"RUS has continued providing loans to providers in markets where there is already competing service.\" Of the 37 applications approved since September 2005, 34 loans were granted to applicants in areas where one or more private broadband providers already offered service. These 34 borrowers received $873 million to service 1,448 communities. The IG report found that since 2005, 77% of communities which were expected to receive service from a project financed by an approved RUS broadband loan had at least one existing broadband provider present, 59% had two or more existing providers, and 27% had three or more existing providers.\nIn an official response to the follow-up IG report, RUS fundamentally disagreed with the IG criticisms, stating that the loans awarded between 2005 and 2008 were provided \"in a way entirely consistent with the statutory requirements of the underlying legislation governing administration of the program, the regulations and guidance issued by the Department to implement the statute, and the intent of Congress.\" Specifically, RUS argued that its May 11, 2007, Proposed Rule, and the subsequent changes to the broadband loan and loan guarantee statute made by the 2008 farm bill, both addressed concerns over loans to nonrural areas and to communities with preexisting broadband providers. However, the Final Rule based on the Proposed Rule and the 2008 farm bill had not yet been released and implemented during the 2005-2008 period examined by the IG, and RUS was compelled by law to continue awarding broadband loans under the existing law and rules. \nDuring 2009 and 2010, the Rural Broadband Access Loan and Loan Guarantee program was in hiatus while RUS implemented the Broadband Initiatives Program (Recovery Act grants and loans) and developed new regulations implementing the 2008 farm bill. On March 14, 2011, the new rules were released. According to then-RUS Administrator Jonathan Adelstein, \"this regulation and other measures taken by the agency have addressed all the concerns raised by the OIG,\" and on March 24, 2011, \"the OIG notified RUS that it has closed its audits of the RUS broadband loan program.\"\n\n\t\t2014 GAO Report\n\nIn May 2014, GAO released its report, USDA Should Evaluate the Performance of the Rural Broadband Loan Program . In the report, GAO analyzed rural broadband loans awarded between the years 2003 and 2013. GAO found that of the 100 loans awarded (worth $2 billion), 43% were no longer active due to 25 loans rescinded and 18 defaulted (RUS rejected 149 of the 249 applications received); that RUS loans can help promote limited broadband deployment and economic development, but performance goals do not fully align with the program's purpose; and that FCC reforms of the Universal Service Fund and intercarrier compensation have created temporary uncertainty that may be hindering investment in broadband.\nTo address its findings, GAO made two recommendations to the Secretary of Agriculture: evaluate loans made by RUS through the broadband loan program to identify characteristics of loans that may be at risk of rescission or default; and align performance goals under the \"enhance rural prosperity\" strategic objective in the Annual Performance Report to the broadband loan program's purpose, to the extent feasible.\n\n\tBroadband Loan Reauthorization in the Farm Bill\n\nThe Rural Broadband Access Loan and Loan Guarantee program is authorized by Section 601 of the Rural Electrification Act of 1936. Since the program was established in the 2002 farm bill, it has been subsequently reauthorized and modified by the 2008 and 2014 farm bills. The 2018 farm bill seeks to again reauthorize and modify the program, as well as addressing other RUS broadband programs and issues.\n\n\t\t2008 Farm Bill\n\nThe 110 th Congress considered reauthorization of the Rural Broadband Access Loan and Loan Guarantee program as part of the 2008 farm bill. The following are some key issues which were considered during the debate over reauthorization of the RUS broadband loan and loan guarantee program.\n\n\t\t\tRestricting Applicant Eligibility\n\nThe RUS broadband program was criticized for excluding too many applicants due to stringent financial requirements (e.g., the requirement that an applicant have a year's worth of cash-on-hand) and an application process\u2014requiring detailed business plans and market surveys\u2014that some viewed as overly expensive and burdensome to complete. During the reauthorization process, Congress considered whether the criteria for loan eligibility should be modified, and whether a more appropriate balance could be found between the need to make the program more accessible to unserved and often lower-income rural areas, and the need to protect taxpayers against bad loans.\n\n\t\t\tDefinition of \"Rural Community\"\n\nThe definition of which communities qualify as \"rural\" had been changed twice by statute since the broadband loan program was initiated. Under the pilot program, funds were authorized under the Distance Learning and Telemedicine Program, which defines \"exceptionally rural areas\" (under 5,000 inhabitants), \"rural areas\" (between 5,000 and 10,000), and \"mid-rural areas\" (between 10,000 and 20,000). RUS determined that communities of 20,000 or less would be eligible for broadband loans in cases where broadband services did not already exist.\nIn 2002, this definition was made narrower by the Farm Security and Rural Investment Act ( P.L. 107-171 ), which designated eligible communities as any incorporated or unincorporated place with fewer than 20,000 inhabitants, and which was outside any standard metropolitan statistical area (MSA). The requirement that communities not be located within MSA's effectively prohibited suburban communities from receiving broadband loans. However, in 2004, the definition was again changed by the FY2004 Consolidated Appropriations Act ( P.L. 108-199 ). The act broadened the definition, keeping the population limit at 20,000, but eliminating the MSA prohibition, thereby permitting rural communities near large cities to receive loans. Thus the current definition used for rural communities is the same as what was used for the broadband pilot program, except that loans can now be issued to communities with preexisting service.\nThe definition of what constitutes a \"rural\" community is always a difficult issue for congressional policymakers in determining how to target rural communities for broadband assistance. On the one hand, the narrower the definition the greater the possibility that deserving communities may be excluded. On the other hand, the broader the definition used, the greater the possibility that communities not traditionally considered \"rural\" or \"underserved\" may be eligible for financial assistance.\nA related issue is the scope of coverage proposed by individual applications. While many of the loan applications propose broadband projects offering service to multiple rural communities, RUS identified a trend toward larger regional and national proposals, covering hundreds or even more than 1,000 communities. The larger the scope of coverage, the greater the complexity of the loan application and the larger the possible benefits and risks to taxpayers.\n\n\t\t\tPreexisting Broadband Service\n\nLoans to areas with competitive preexisting service\u2014that is, areas where existing companies already provide some level of broadband\u2014sparked controversy because loan recipients are likely to compete with other companies already providing broadband service.\nDuring reauthorization, Congress was asked to more sharply define whether and\/or how loans should be given to companies serving rural areas with preexisting competitive service. On the one hand, some argued that the federal government should not be subsidizing competitors for broadband service, particularly in sparsely populated rural markets which may be able only to support one provider. Furthermore, keeping communities with preexisting broadband service eligible may divert assistance from unserved areas that are most in need. On the other hand, many suburban and urban areas currently receive the benefits of competition between broadband providers\u2014competition which can potentially drive down prices while improving service and performance. It is therefore appropriate, others argued, that rural areas also receive the benefits of competition, which in some areas may not be possible without federal financial assistance. It was also argued that it may not be economically feasible for borrowers to serve sparsely populated unserved communities unless they are permitted to also serve more lucrative areas which may already have existing providers.\n\n\t\t\tTechnological Neutrality\n\nThe 2002 farm bill ( P.L. 107-171 ) directed RUS to use criteria that are \"technologically neutral\" in determining which projects to approve for loans. In other words, RUS is prohibited from typically valuing one broadband technology over another when assessing loan applications. As of November 10, 2008, 37% of approved and funded projects employed fiber-to-the-home technology, 17% employed DSL, 25% fixed wireless, 19% hybrid fiber-coaxial (cable), and 2% broadband over powerlines (BPL). No funding has been provided for projects utilizing satellite broadband.\nWhile decisions on funded projects were required to be technologically neutral, RUS (through the Secretary of Agriculture) had the latitude to determine minimum required data transmission rates for broadband projects eligible for funding. According to the statute, \"the Secretary shall, from time to time as advances in technology warrant, review and recommend modifications of rate-of-data transmission criteria for purposes of the identification of broadband service technologies.\" \nSome argued that the minimum speed thresholds should be raised to ensure that rural areas receive \"next-generation\" broadband technologies with faster data rates capable of more varied and sophisticated applications. On the other hand, significantly raising minimum data rates could exclude certain technologies\u2014for example, typical data transmission rates for fiber and some wireless technologies exceed what is offered by \"current generation\" technologies such as DSL and cable. Proponents of keeping the minimum threshold at a low level argued that underserved rural areas are best served by any broadband technology that is economically feasible to deploy, regardless of whether it is \"next\" or \"current\" generation.\n\n\t\t\tP.L. 110-246\n\nThe Food, Conservation, and Energy Act of 2008 became law on June 18, 2008 ( P.L. 110-246 ). Section 6110, \"Access to Broadband Telecommunications Services in Rural Areas,\" reauthorized the RUS broadband loan and loan guarantee program and addressed many of the criticisms and issues raised during the reauthorization process. The following summarizes broadband-related provisions that changed previous law.\n\n\t\t\t\tEligibility and Selection Criteria\n\nDefines rural area as any area other than (1) a city or town that has a population of greater than 20,000 and (2) an urbanized area contiguous and adjacent to a city or town with a population greater than 50,000. The Secretary may, by regulation only, consider not to be rural an area that consists of any collection of census blocks contiguous to each other with a housing density of more than 200 housing units per square mile and that is contiguous with or adjacent to an existing boundary of a rural area. Provides that the highest priority is to be given to applicants that offer to provide broadband service to the greatest proportion of households currently without broadband service. Eligible entities are required to submit a proposal to the Secretary that meets the requirements for a project to offer to provide service to a rural area and agree to complete build out of the broadband service within three years. Prohibits any eligible entity that provides telecommunications or broadband service to at least 20% of the households in the United States from receiving an amount of funds under this section for a fiscal year in excess of 15% of the funds authorized and appropriated for the broadband loan program. Directs the Secretary of Agriculture \"from time to time as advances in technology warrant,\" to review and recommend modifications in rate-of-data-transmission criteria for the purpose of identifying eligible broadband service technologies. At the same time, the Secretary is prohibited from establishing requirements for bandwidth or speed that have the effect of precluding the use of evolving technologies appropriate for use in rural areas.\n\n\t\t\t\tLoans to Communities With Existing Providers\n\nProhibits the Secretary from making a loan in any area where there are three or more incumbent service providers unless the loan meets all of the following requirements: (1) the loan is to an incumbent service provider that is upgrading service in that provider's existing territory; (2) the loan proposes to serve an area where not less than 25% of the households are offered service by not more than 1 provider; and (3) the applicant is not eligible for funding under another provision of the Rural Electrification Act. Incumbent service provider is defined as an entity providing broadband service to not less than 5% of the households in the service territory proposed in the application. Also prohibits the Secretary from making a loan in any area where not less than 25% of the households are offered broadband service by not more than one provider unless a prior loan has been made in the same area.\n\n\t\t\t\tFinancial Requirements\n\nDirects the Secretary to consider existing recurring revenues at the time of application in determining an adequate level of credit support. Requires the Secretary to ensure that the type, amount, and method of security used to secure a loan or loan guarantee is commensurate to the risk involved with the loan or loan guarantee, particularly when the loan or loan guarantee is issued to a financially healthy, strong, and stable entity. The Secretary is also required, in determining the amount and method of security, to consider reducing the security in areas that do not have broadband service. Allows the Secretary to require an entity to provide a cost-share in an amount not to exceed 10% of the amount of the loan or loan guarantee. Retains the current law rate of interest for direct loans\u2014which is the rate equivalent to the cost of borrowing to the Department of the Treasury for obligations of comparable maturity or 4%. Directs that loan or loan guarantee may have a term not to exceed 35 years if the Secretary determines that the loan security is sufficient. In case of substantially underserved trust areas (for example, Indian lands), where the Secretary determines a high need exists for the benefits of the program, the Secretary has the authority to provide loans with interest rates as low as 2% and may waive nonduplication restrictions, matching fund requirements, credit support requirements, or other regulations.\n\n\t\t\t\tLoan Application Requirements\n\nAllows the Secretary to require an entity that proposes to have a subscriber projection of more than 20% of the broadband service market in a rural area to submit a market survey. However, the Secretary is prohibited from requiring a market survey from an entity that projects to have less than 20% of the broadband market. Requires public notice of each application submitted, including the identity of the applicant, the proposed area to be served, and the estimated number of households in the application without terrestrial-based broadband. Authorizes the Secretary to take steps to reduce the costs and paperwork associated with applying for a loan or loan guarantee under this section by first-time applicants, particularly those who are smaller and start-up internet providers. Allows the Secretary to establish a preapplication process under which a prospective applicant may seek a determination of area eligibility. Provides that an application, or a petition for reconsideration of a decision on such an application, that was pending on the date 45 days before enactment of this act and that remains pending on the date of enactment of this act is to be considered under eligibility and feasibility criteria in effect on the original date of submission of the application.\n\n\t\t\t\tOther Provisions\n\nAuthorizes the Rural Broadband Access Loan and Loan Guarantee program at $25 million to be appropriated for each of fiscal years 2008 through 2012. Requires that the Secretary annually report to Congress on the rural broadband loan and loan guarantee program. The annual report is to include information pertaining to the loans made, communities served and proposed to be served, speed of broadband service offered, types of services offered by the applicants and recipients, length of time to approve applications submitted, and outreach efforts undertaken by USDA. Section 6111 provides for a National Center for Rural Telecommunications Assessment. The center is to assess the effectiveness of broadband loan programs, work with existing rural development centers to identify appropriate policy initiatives, and provide an annual report that describes the activities of the center, the results of research carried out by the center, and any additional information that the Secretary may request. An appropriation of $1 million is authorized for each of the fiscal years 2008 through 2012. Section 6112 directs the Chairman of the Federal Communications Commission (FCC), in coordination with the Secretary, to submit to Congress a report describing a comprehensive rural broadband strategy. Requires the report to be updated during the third year after enactment.\n\n\t\t\tImplementation of P.L. 110-246\n\nDuring 2009 and 2010, the Farm Bill Broadband Loan Program was on hiatus as RUS implemented the Broadband Initiatives Program (BIP) established under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). At the same time, final regulations implementing the broadband loan program as reauthorized by the 2008 farm bill were on hold and were being refined to reflect, in part, RUS experience in implementing BIP. Subsequently, on March 14, 2011, an Interim Rule and Notice was published in the Federal Register setting forth the rules and regulations for the broadband loan program as reauthorized by P.L. 110-246 . While the rule was immediately effective, RUS accepted public comment before ultimately releasing a final rule. \nMeanwhile, pursuant to Section 6112 of P.L. 110-246 , the FCC released on May 22, 2009, its report on rural broadband strategy, entitled Bringing Broadband to Rural America . The report made a series of recommendations including improved coordination of rural broadband efforts among federal agencies, states, and communities; better assessment of broadband needs, including technological considerations and broadband mapping and data; and overcoming challenges to rural broadband deployment.\n\n\t\t2014 Farm Bill\n\nOn January 27, 2014, the conference report for the Agricultural Act of 2014 was filed ( H.Rept. 113-333 ). The conference agreement was approved by the House on January 29, approved by the Senate on February 4, and signed into law ( P.L. 113-79 ) by the President on February 7, 2014.\nP.L. 113-79 amended Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to reauthorize the Rural Broadband Access Loan and Loan Guarantee Program through FY2018. P.L. 113-79 also included provisions to redefine project area eligibility with respect to existing broadband service, increase the program's transparency and reporting requirements, define a minimum level of broadband service, require a study on the gathering and use of address-level data, and establish a new Rural Gigabit Network Pilot Program. The conference agreement did not include a Senate bill proposal ( S. 954 ) to create a new grant component to the existing broadband loan and loan guarantee program, nor did the conference agreement adopt the Senate bill's broadening of the definition for eligible rural areas.\nSpecifically, Section 6104 of P.L. 113-79 made the following changes to the Rural Broadband Access Loan and Loan Guarantee program: \nProject area eligibility\u2014provides that an eligible area is one where not less than 15% of the households in the proposed service territory are unserved or have service levels below the minimum acceptable level of broadband service (which is set at 4 Mbps\/1 Mbps). Priority\u2014directs RUS to give the highest priority to applicants that offer to provide broadband service to the greatest proportion of unserved households or households that do not have residential broadband service that meets the minimum acceptable level of broadband service, as certified by the affected community, city, county, or designee; or demonstrated on the broadband map of the affected state if the map contains address-level data, or the National Broadband Map if address-level data are unavailable. RUS shall provide equal consideration to all qualified applicants, including those that have not previously received grants, loans, or loan guarantees. Also gives priority to applicants that offer to provide broadband service not predominantly for business service, but if at least 25% of customers in the proposed service territory are commercial interests. Evaluation period\u2014directs RUS to establish not less than two evaluation periods for each fiscal year to compare loan and loan guarantee applications and to prioritize loans and loan guarantees to all or part of rural communities that do not have residential broadband service that meets the minimum acceptable level of broadband service. Market survey requirement\u2014provides that survey information must be certified by the affected community, city, county, or designee; and demonstrated on the broadband map of the affected state if the map contains address-level data, or the National Broadband Map if address-level data are unavailable. Notice requirement\u2014directs RUS to maintain a fully searchable database on the internet that contains a list of each entity that has applied for assistance, the status of each application, and a detailed description of each application. For each entity receiving assistance, the database shall provide the name of the entity, the type of assistance being received, the purpose for which the entity is receiving the assistance, and each semiannual report submitted. Reporting\u2014requires semiannual reports from loan recipients for three years after completion of the project describing in detail the use of the assistance, and the progress toward fulfilling project objectives. Default and deobligation\u2014directs RUS to establish written procedures for recovering funds from loan defaults, deobligating awards that demonstrate an insufficient level of performance or fraudulent spending, awarding those funds to new or existing applicants, and minimizing overlap among programs. Service area assessment\u2014directs RUS to promptly post on its website a list of the census block groups that an applicant proposes to service. RUS will provide not less than 15 days for broadband service providers to voluntarily submit information about the broadband services that the providers offer in the groups or tracts listed so that RUS may assess whether the applications submitted meet the eligibility requirements. If no broadband service provider submits this information, RUS will consider the number of providers in the group or tract to be established by reference to the most current National Broadband Map or any other data RUS may collect or obtain through reasonable efforts. Definition of broadband service\u2014establishes \"the minimum acceptable level of broadband service\" as at least 4 Mbps downstream and 1 Mbps upstream. At least once every two years, the Secretary shall review and may adjust this speed definition and may consider establishing different minimum speeds for fixed and mobile (wireless) broadband. Terms and conditions\u2014in determining the terms and conditions of assistance, the Secretary may consider whether the recipient would be serving an area that is unserved (or has service levels below the minimum acceptable level of broadband service), and if so, can establish a limited initial deferral period or comparable terms necessary to achieve the financial feasibility and long-term sustainability of the project. Report to Congress\u2014adds requirements to the content of the annual report to Congress, including the number of residences and businesses receiving new broadband services; network improvements, including facility upgrades and equipment purchases; average broadband speeds and prices on a local and statewide basis; any changes in broadband adoption rates; and any specific activities that increase high-speed broadband access for educational institutions, health care providers, and public safety service providers. Reauthorization\u2014reauthorizes the broadband loan and loan guarantee program through FY2018 at the current level of $25 million per year. Study on providing effective data for the National Broadband Map\u2014directs USDA, in consultation with DOC and the FCC, to conduct a study of the ways data collected by RUS could most effectively be shared with the FCC to support the development and maintenance of the National Broadband Map. The study shall include a consideration of the circumstances under which address-level data could be collected by RUS and appropriately shared with the FCC. \nIn addition, Section 6105 authorized a new Rural Gigabit Network Pilot Program. Specifically, USDA was authorized to provide grants, loans, or loan guarantees for projects that would extend ultra-high-speed broadband service (defined as 1 gigabit per second downstream capacity) to rural areas where ultra-high-speed service is not provided in any part of the proposed service territory. The pilot program was authorized at $10 million per year for the years FY2014 through FY2018. However, no funding was appropriated for this pilot program over that period, and the Rural Gigabit Network Pilot Program was not implemented.\n\n\t\t\tImplementation of P.L. 113-79\n\nOn July 30, 2015, the RUS published in the Federal Register the interim rule (7 C.F.R. part 1738) implementing the Rural Broadband Access Loan and Loan Guarantee Program as reauthorized by the February 7, 2014, enactment of the Agricultural Act of 2014 ( P.L. 113-79 ). Publication of the interim rule allowed the program to go forward, initially with two application periods per year. The interim rule was made final on June 9, 2016.\n\n\t\t2018 Farm Bill\n\nWith the 2014 farm bill expiring on September 30, 2018, the 115 th Congress considered reauthorization of the RUS broadband loan and loan guarantee program and other broadband-related provisions in the 2018 farm bill.\n\n\t\t\tHouse\n\nOn April 12, 2018, H.R. 2 , the Agriculture and Nutrition Act of 2018, was introduced by Representative Conaway. Subtitle B of Title VI (\"Connecting Rural Americans to High Speed Broadband\") would reauthorize the Rural Broadband Access Loan and Loan Guarantee Program and make a number of changes to the RUS rural broadband programs. On April 18, 2018, the House Agriculture Committee approved H.R. 2 ( H.Rept. 115-661 ) with amendments. On June 21, 2018, the House passed H.R. 2 . \n\n\t\t\tSenate\n\nOn June 11, 2018, the 2018 Senate farm bill, S. 3042 , was introduced by Senator Roberts. The Agriculture Improvement Act of 2018 was approved on June 13, 2018, by the Committee on Agriculture, Nutrition, and Forestry and ordered to be reported with an amendment in the nature of a substitute favorably. On June 28, 2018, the Senate passed its version of H.R. 2 . \n\n\t\t\tKey Differences Between House and Senate Bills\n\nThe following are some key differences between the House and Senate bills with respect to the rural broadband loan and loan guarantee program.\n\n\t\t\t\tEligible Projects\n\nUnder current law, projects eligible for rural broadband loans and loan guarantees can only (with some exceptions) serve areas in which 15% or more of households are unserved or have service levels below the minimum acceptable level of broadband service. Additionally, under current law, an eligible service area can have no more than two incumbent broadband service providers. The House bill does not change the current service area eligibility threshold for rural broadband loans and loan guarantees. \nOn the other hand, the Senate bill would require that rural broadband loans, loan guarantees, and grants can only serve areas in which 90% or more of households are unserved or have service levels below the minimum acceptable level of broadband service. The Senate bill also provides that an eligible service area can have no more than one incumbent broadband service provider. \n\n\t\t\t\tGrant Authority\n\nBoth the House and Senate bills add a grant component to the current farm bill broadband loan and loan guarantee program. In the House bill, grants are only available in combination with associated loans under the rural broadband, electric infrastructure, and telecommunications infrastructure loan and loan guarantee programs. Additionally, project areas must serve hard-to-reach communities\u2014specifically areas with a density of less than 12 service points per road mile and where no incumbent provider delivers fixed terrestrial broadband service at or above the minimum broadband speed. The maximum federal share of a total project cost varies by the density of the project service area, ranging from a 25% to 75% federal share.\nIn the Senate bill, grants are subject to the same service area eligibility criteria as broadband loans and loan guarantees (no less than 90% unserved, no more than one incumbent). The maximum federal share for a grant is 50%, although USDA can adjust the federal share up to 75% if the Secretary determines that the project would serve particularly remote, unserved, and low-income areas. \n\n\t\t\t\tDefinition of Minimum Broadband Service\n\nBoth the House and Senate bills set the minimum broadband service speed at 25 Mbps (download)\/3 Mbps (upload), to be reviewed by the Secretary at least once every two years. Additionally, the House bill requires USDA to establish projections of minimum acceptable standards of broadband service for 5, 10, 15, 20, and 30 years into the future. Unless cost prohibitive, projects eligible for a rural broadband loan or loan guarantee must provide broadband service at the minimum level, and must be determined capable of meeting future minimum speed standards over the life of the loan or loan guarantee. \n\n\t\t\t\tMiddle Mile Projects\n\nThe House bill authorizes RUS to make rural broadband loans or loan guarantees to middle mile infrastructure projects, which are defined as any broadband infrastructure that does not connect directly to end user locations (including anchor institutions) and may include interoffice transport, backhaul, internet connectivity, data centers, or special access transport to rural areas. The Senate bill does not contain a middle mile infrastructure provision.\n\n\t\t\t\tReauthorization Levels\n\nFor rural broadband loans and loan guarantees, the House bill sets an authorization level of $150 million for each of fiscal years 2019 through 2023. Additionally, the House bill provides $350 million for each of fiscal years 2019 to 2023 for grants to be available in combination with associated loans and loan guarantees. \nThe Senate bill sets an authorization level for broadband loans, loan guarantees, and grants of $150 million for each of fiscal years 2019 through 2023.\n\n\t\t\tP.L. 115-334\n\nOn December 10, 2018, the conference report ( H.Rept. 115-1072 ) accompanying H.R. 2 , the Agriculture Improvement Act of 2018, was filed. The conference report was agreed to in the House and Senate on December 11 and December 12 respectively. On December 20, 2018, the President signed the bill ( P.L. 115-334 ).\nThe following summarizes the major provisions relevant to RUS broadband programs.\n\n\t\t\t\tSection 6201. Rural Broadband Access Grant, Loan, and Loan Guarantee Program\n\nAdds a grant component to the existing program, which is now authorized to provide grants, loans, loan guarantees, and loan\/grant combinations.\nPriority \u2014directs the Secretary to give the highest priority to applications proposing to serve rural communities that do not have any residential broadband service of at least 10 Mbps\/1 Mbps. Also receiving high priority are projects that provide the maximum level of broadband service to the greatest proportion of rural households in the proposed service area. Additional priority factors include rural communities with a high percentage of low-income residents, with populations under 10,000, that are experiencing outmigration, that are isolated from other population centers, or that propose to provide broadband for use in various applications of precision agriculture. Projects will also receive priority if they are developed or funded by two or more stakeholders (for example, public-private partnerships). Grant Eligibility and Cost-Sharing \u2014projects eligible for grants (including grant\/loan combinations) must be carried out in a proposed service territory in which not less than 90% of the households are unserved. Grants shall not exceed 75% of the total project cost to an area with a density fewer than 7 people per square mile, 50% to an area with a density of 7 to 12 people per square mile, and 25% to an area with a density of 12 to 20 people per square mile. However, the Secretary has the authority to adjust the federal share of a grant up to 75% for an area of rural households without any 10 Mbps\/1 Mbps broadband service, or rural communities that are under 10,000 in population, with a high percentage of low-income residents, experiencing outmigration, that are isolated from other population centers, or that are proposing broadband deployment for precision agriculture applications. Additionally, the Secretary may make modifications of the density thresholds to ensure that funds are best utilized to provide broadband service in communities that are the most rural in character. Loan Eligibility \u2014for broadband loans or loan guarantees, eligible proposed service areas must have not less than 50% of households unserved or below the minimum acceptable level (set at 25 Mbps\/3 Mbps) of fixed broadband service, whether terrestrial or wireless. P.L. 115-334 raises the previous eligibility threshold from 15% to 50%. Left unchanged is the eligibility requirement that broadband service cannot be provided in any part of the proposed service territory by three or more incumbent service providers. Broadband Buildout Requirements \u2014allows five years for applicants to complete the buildout of a project (up from three years). Requires the Secretary to set a current minimum acceptable standard of broadband service of 25 Mbps\/3 Mbps, and to establish projections of minimum acceptable standards of broadband service of a project for 5 to 10 years, 11 to 15 years, 16 to 20 years, and more than 20 years into the future. The Secretary shall review and may adjust those minimum levels at least once every two years. Projects eligible for a rural broadband loan or loan guarantee must provide broadband service at the minimum level, and must be determined capable of meeting future minimum speed standards over the life of the loan or loan guarantee. However, if an applicant shows that it would be cost prohibitive to meet the minimum acceptable level of broadband service for the entirety of a proposed service territory due to its unique characteristics, the Secretary and the applicant may agree to utilize substitute standards for any unserved portion of the project. Technical Assistance and Training \u2014the Secretary may provide to eligible applicants technical assistance and training to prepare applications, including required reports and surveys, and to improve financial management relating to the proposed project. Only applicants proposing to serve communities without residential broadband service of at least 10 Mbps\/1 Mbps are eligible for technical assistance and training. Not less than 3% and not more than 5% of the annual appropriation for the broadband grant, loan, and loan guarantee program shall be used for technical assistance and training. Guaranteed Loan Fees \u2014requires the Secretary to charge lenders of guaranteed loans a fee to offset subsidy costs. Fees shall be in such amounts as to bring down the cost of subsidies for guaranteed loans, but that do not act as a bar to participation in the program. Payment Assistance for Certain Loan and Grant Recipients \u2014allows the Secretary to award grant funding\u2014subject to agreed project milestones, objectives, and other considerations\u2014that would allow a loan recipient to receive the benefit of a subsidized loan (with reduced interest rates) or a payment assistance loan. Authorization \u2014sets an authorization level of $350 million for each of fiscal years 2019 through 2023 (up from $25 million per year), and delays the termination of authority to make loans and loan guarantees until September 30, 2023. \n\n\t\t\t\tSection 6202. Expansion of Middle Mile Infrastructure into Rural Areas\n\nAuthorizes $10 million for each of fiscal years 2018 through 2023 for grants, loans, and loan guarantees toward middle mile infrastructure projects. Middle mile infrastructure connects underserved rural areas to the internet backbone; it does not connect directly to end-user locations. A project is eligible if at least 75% of the interconnection points serve eligible rural areas. A grant cannot exceed 20% of the total project cost. \n\n\t\t\t\tSection 6203. Modifications to the Rural Gigabit Program\n\nRenames the Rural Gigabit Network Pilot Program (which was authorized in the 2014 farm bill but never funded through appropriations) as the Innovative Broadband Advancement Program, which is authorized to provide a grant, a loan, or both to an eligible entity to demonstrate innovative broadband technologies or methods of broadband deployment that significantly decrease the cost of deployment and provide substantially faster broadband speeds than are available in a rural area. The program is authorized at $10 million for each of fiscal years 2018 through 2023. \n\n\t\t\t\tSection 6204. Community Connect Grant Program\n\nCodifies the existing Community Connect Grant Program and authorizes the program at $50 million for each of fiscal years 2018 through 2023. Defines an eligible service area as having broadband service capacity less than speeds of 10 Mbps download and 1 Mbps upload.\n\n\t\t\t\tSection 6205. Outdated Broadband Systems\n\nRequires the Secretary, beginning on October 1, 2020, to consider any portion of a service territory subject to an outstanding grant agreement as unserved for the purposes of broadband loan programs if broadband service is not provided at a minimum of 10 Mbps\/1 Mbps, unless the broadband provider has begun or already constructed broadband facilities in that area which would meet the minimum acceptable broadband service standard.\n\n\t\t\t\tSection 6206. Default and Deobligation; Deferral\n\nRequires the Secretary to establish written procedures for all broadband programs to recover funds from loan and grant defaults, deobligate awards that demonstrate an insufficient level of performance or fraudulent spending, award those funds on a competitive basis to new or existing applicants, and minimize overlap among programs. The Secretary may establish a deferral period of not shorter than the buildout period established for the project in order to support the financial feasibility and long-term sustainability of the project.\n\n\t\t\t\tSection 6207. Public Notice, Assessments, and Reporting Requirements\n\nPublic Notice \u2014requires the Secretary to make available to the public a fully searchable database on the RUS website that contains information on all broadband projects provided assistance or for which assistance is sought. Service Area Assessment \u2014after giving public notice for a particular project seeking assistance, the Secretary shall provide 45 days for providers to voluntarily submit information indicating their presence in a proposed service area. If no existing provider submits such information, the Secretary may collect or obtain through reasonable efforts any other data on existing providers. In the case of applications requesting funding for unserved rural areas, the Secretary shall confirm unserved rural areas by conferring with the FCC and NTIA, reviewing any other source relevant to service data validation, and performing site-specific testing to verify the unavailability of any retail broadband service. Reporting \u2014the Secretary shall require entities receiving assistance to provide an annual report for three years after completion of the project that describes the use by the entity of the assistance and the progress toward fulfilling the objectives of the project. Middle mile project recipients are required to submit a semiannual report for five years after project completion. The recipient of assistance shall also provide complete, reliable, and precise geolocation information that indicates the location of new broadband service that is being provided. The Secretary is also required to submit an annual report to Congress that describes the extent of participation in the RUS broadband assistance programs for the preceding fiscal year.\n\n\t\t\t\tSection 6208. Environmental Reviews\n\nThe Secretary may obligate, but not disperse, funds before the completion of otherwise required environmental, historical, or other types of reviews if the Secretary determines that a subsequent site-specific review shall be adequate and easily accomplished for the location of towers, poles, or other broadband facilities in the service area of the borrower without compromising the project or the required reviews.\n\n\t\t\t\tSection 6209. Use of Loan Proceeds to Refinance Loans for Deployment of Broadband Service\n\nThe proceeds of any loan or loan guarantee may be used by the recipient for the purpose of refinancing an outstanding obligation on another telecommunications loan.\n\n\t\t\t\tSection 6210. Smart Utility Authority for Broadband\n\nAllows a recipient of grants, loans, or loan guarantees provided by the Office of Rural Development to use not more than 10% of the amount for rural broadband infrastructure projects, including both retail and nonretail activities, except for a recipient who is seeking to provide retail broadband service in any area where such service is available at the minimum broadband speeds. Additionally allows a recipient of electric grants, loans, or loan guarantees to set aside not more than 10% of the amount for retail broadband service, for use only in an area that is not being provided with the minimum acceptable level of broadband service. The funding cannot result in competitive harm to any existing grant, loan, or loan guarantee under the Rural Electrification Act of 1936.\n\n\t\t\t\tSection 6211. Refinancing of Telephone Loans\n\nClarifies that the Secretary, through the RUS telephone loan program, may refinance loans of persons furnishing telephone service in rural areas, including indebtedness of recipients on another telecommunications loan made under the Rural Electrification Act. Also strikes the current law limitation that the refinancing may not constitute more than 40% of the loan.\n\n\t\t\t\tSection 6212. Federal Broadband Coordination\n\nConsultation between USDA and NTIA \u2014USDA shall consult with NTIA to assist in the verification of eligibility for USDA broadband programs. To this end, NTIA shall make available its broadband assessment and mapping capabilities. Consultation between USDA and FCC \u2014USDA shall consult with the FCC before providing broadband assistance for a project to serve an area with respect to which another entity is receiving Connect America Fund or Mobility Fund support. The FCC shall consult with USDA before offering Connect America Fund or Mobility Fund support to serve an area with respect to which another entity has received RUS broadband assistance. Report to Congress \u2014USDA, the FCC, and NTIA shall submit to Congress a report on how best to coordinate federally supported broadband programs and activities in order to achieve various objectives regarding long-term broadband service needs of rural residents.\n\n\t\t\t\tSection 6213. Transition Rule\n\nProvides that for one year after enactment, the Secretary shall use the previously existing rules and regulations for the broadband loan and Community Connect grant program until a final rule is issued.\n\n\t\t\t\tSection 6214. Rural Broadband Integration Working Group\n\nEstablishes an interagency Rural Broadband Integration Working Group that shall consult with a wide spectrum of stakeholders to identify, assess, and determine possible actions relating to barriers and opportunities for broadband deployment in rural areas. Not later than 60 days after enactment, the Working Group shall publish a comprehensive survey of federal programs that currently support or could reasonably be modified to support broadband deployment and adoption; and all federal agency policies and rules with the direct or indirect effect of facilitating or regulating investment in, or deployment of, wired and wireless broadband networks. The Working Group will submit to the President a list of actions that federal agencies can take to support broadband deployment and adoption, including timelines to complete a list of priority actions and rulemakings.\n\n\t\t\t\tOther Broadband-Related Provisions\n\nSection 6101 sets aside 20% of DLT grant funding for applications related to substance use disorder treatment services; Section 6102 reauthorizes the DLT program through FY2023 at $82 million per year; Section 6418 requires the Secretary to collect fees on loan guarantees in amounts that when combined with any appropriated funds equal the subsidy on such guarantees. The Secretary shall charge and collect from the lender fees in such amounts as to bring down the costs of subsidies for the guaranteed loan, except that the fees shall not act as a bar to participation in the program nor be inconsistent with current practices in the marketplace; and Section 12511 establishes the Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States. The Task Force will develop policy recommendations to promote deployment of broadband on unserved agricultural land, with a goal of achieving reliable capabilities on 95% of agricultural land in the United States by 2025.\n\n\tOther Legislation in the 115th Congress\n\nAside from the 2018 farm bills and annual appropriations legislation, the following bills were introduced into the 115 th Congress seeking to impact the RUS broadband programs:\nH.R. 800 (Huffman), introduced on February 1, 2017, as the New Deal Rural Broadband Act of 2017, would establish an Office of Rural Broadband within USDA; authorize a \"Breaking Ground on Rural Broadband Program\" to make grants, loans, or loan guarantees to eligible entities for serving rural and underserved areas ($20 billion to remain available until September 30, 2022); establish a Tribal Broadband Assistance Program ($25 million for each of fiscal years 2017 through 2022); establish a broadband grant program to accompany the Rural Broadband Loan program; modify the Telecommunications Infrastructure Loan program by raising the threshold for an eligible rural area from 5,000 to 20,000 population and by permitting RUS to give preference to loan applications that support regional telecommunications development; and direct USDA to establish and maintain an inventory of any real property that is owned, leased, or otherwise managed by the federal government on which a broadband facility could be constructed, as determined by the Under Secretary for Rural Broadband Initiatives. Referred to the Committee on Agriculture, and in addition to the Committees on Natural Resources and Energy and Commerce. H.R. 1084 (Kelly of Illinois), introduced on February 15, 2017, as the Today's American Dream Act, would direct GAO to submit to Congress a report on the efficiency and effectiveness of efforts by federal agencies to expand access to broadband service, including the RUS telecommunications and broadband programs. Referred to the Committee on Ways and Means, and in addition to the Committees on Education and the Workforce, Agriculture, Financial Services, Small Business, Energy and Commerce, the Judiciary, and Oversight and Government Reform. H.R. 4232 (Pocan), introduced on November 2, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would amend Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would raise the broadband loan program authorization from $25 million to $50 million. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4291 (Stefanik), introduced on November 7, 2017, as the Precision Farming Act, would utilize Rural Utilities Service loans and loan guarantees under the rural broadband access program to provide broadband service for agricultural producers, and would provide universal service support for installation charges for broadband service for agricultural producers in order to improve precision farming and ranching. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4308 (Lujan Grisham), introduced on November 8, 2017, as the Rural Broadband Expansion Act, would authorize the Rural Utility Service's Community Connect broadband grant program at $100 million for each of fiscal years 2019 through 2023. Referred to the Committees on Agriculture and on Energy and Commerce. H.R. 5172 (O'Halleran), introduced on March 6, 2018, would assist Indian tribes in maintaining, expanding, and deploying broadband systems. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 5213 (Hartzler), introduced on March 8, 2018, would prohibit the Rural Utilities Service from providing assistance for the provision of broadband service with a download speed of less than 25 megabits per second or an upload speed of less than 3 megabits per second, and clarify the broadband loan and loan guarantee authority provided in Section 601 of the Rural Electrification Act of 1936. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 6073 (Cramer), introduced on June 12, 2018, as the RURAL Broadband Act of 2018, would prohibit USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. S. 1676 (Gillibrand), introduced on July 31, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would amend Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would raise the broadband loan program authorization from $25 million to $50 million. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 2654 (Smith), introduced on April 12, 2018, as the Community Connect Grant Program Act of 2018, would amend the Rural Electrification Act of 1936 to authorize the Community Connect Grant Program at an annual level of $50 million per year. Defines \"eligible broadband service\" as operating at or above the applicable minimum download and upload speeds established by the FCC in defining the term \"advanced telecommunications capability.\" Referred to Committee on Agriculture, Nutrition, and Forestry. S. 2970 (Daines), introduced on May 24, 2018, as the RURAL Broadband Act of 2018, would prohibit USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3080 (Murkowski), introduced on June 18, 2018, as the Food Security, Housing, and Sanitation Improvements in Rural, Remote, and Frontier Areas Act of 2018, would amend the Rural Electrification Act of 1936 to include a satellite project or technology within the definition of broadband service. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3360 (Wyden), introduced August 21, 2018, as the Broadband Internet for Small Ports Act, would establish priority for small harbors to receive RUS broadband funding. Referred to the Committee on Agriculture, Nutrition, and Forestry.\n\n\t\tAppendix. Rural Development Telecom Awards","output":"Given the large potential impact broadband access may have on the economic development of rural America, concern has been raised over a \"digital divide\" between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state-of-the-art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment.\nAccording to the Federal Communications Commission's Communications Marketplace Report, as of 2017, 24% of Americans in rural areas lacked coverage from fixed terrestrial 25 Mbps\/3 Mbps broadband, as compared to only 1.5% of Americans in urban areas. The comparatively lower population density of rural areas is likely a major reason why broadband is less deployed than in more highly populated suburban and urban areas. Particularly for wireline broadband technologies\u2014such as cable modem and fiber\u2014the greater the geographical distances among customers, the larger the cost to serve those customers.\nThe Rural Utilities Service (RUS) at the U.S. Department of Agriculture (USDA) houses three ongoing assistance programs exclusively created and dedicated to financing broadband deployment: the Rural Broadband Access Loan and Loan Guarantee Program, the Community Connect Grant Program, and the ReConnect Program. Additionally, the Telecommunications Infrastructure Loan and Loan Guarantee Program (previously the Telephone Loan Program) funds broadband deployment in rural areas. Distance Learning and Telemedicine (DLT) grants\u2014while not principally supporting connectivity\u2014fund equipment and software that operate via telecommunications to rural end-users of telemedicine and distance learning applications.\nThe Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $5.83 million to subsidize a rural broadband loan level of $29.851 million, $30 million to Community Connect broadband grants, $47 million for DLT grants, and $1.725 million in loan subsidies for a total loan level of $690 million for the Telecommunications Infrastructure Loan and Loan Guarantee Program. P.L. 116-6 also provided $550 million for the ReConnect Program, which is in addition to the $600 million provided in the 2018 Consolidated Appropriations Act.\nThe Administration's FY2020 budget proposal requested zero funding for Rural Broadband Access Loans, $200 million for the ReConnect Program, $1.933 million in budget authority to subsidize a loan level of $690 million for Telecommunications Infrastructure Loans and Loan Guarantees, $30 million for Community Connect Grants, and $43.6 million for Distance Learning and Telemedicine Grants.\nOn December 20, 2018, the President signed the 2018 farm bill (P.L. 115-334, Agriculture Improvement Act of 2018). Regarding the RUS broadband programs, the act includes provisions authorizing a grant component in combination with the broadband loan program; increasing the annual authorization level from $25 million to $350 million; raising the proposed service area eligibility threshold of unserved households from 15% to 50% for broadband loans; authorizing grants, loans, and loan guarantees for middle mile infrastructure; directing improved federal agency broadband program coordination; and providing eligible applicants with technical assistance and training to prepare applications. In the 116th Congress, appropriations will determine the extent to which these programs will be funded."}
{"id":"crs_R41506","pid":"crs_R41506_0","input":"\tIntroduction\n\nThe Longshore and Harbor Workers' Compensation Act (LHWCA) requires that private-sector firms provide workers' compensation coverage for their employees engaged in longshore, harbor, or other maritime occupations on or adjacent to the navigable waters of the United States. Although the LHWCA program is administered by the Department of Labor (DOL), most benefits are paid either through private insurers or self-insured firms.\nThe LHWCA is a workers' compensation system and not a federal benefits program. Like other workers' compensation systems in the United States, the LHWCA ensures that all covered workers are provided medical and disability benefits in the event they are injured or become ill in the course of their employment, and it provides benefits to the survivors of covered workers who die on the job. In 2016, the LHWCA paid approximately $1.41 billion in cash and medical benefits to injured workers and the families of deceased workers.\n\n\tWorkers' Compensation in the United States\n\nNearly all private- and public-sector workers in the United States are covered by some form of workers' compensation. The federal government has a limited role in workers' compensation and administers workers' compensation programs only for federal employees and several classes of private-sector workers, including longshore and harbor workers. For most occupations, workers' compensation is mandated by state laws and administered by state agencies.\nThere is no federal mandate that states provide workers' compensation. However, every state and the District of Columbia has a workers' compensation system. There are no federal standards for state workers' compensation systems. However, all U.S. workers' compensation systems provide for limited wage replacement and full medical benefits for workers who are injured or become ill as a result of their work and survivors benefits to the families of workers who die on the job.\nWorkers' compensation in the United States is a no-fault system that pays workers for employment-related injuries or illnesses without considering the culpability of any one party. In exchange for this no-fault protection and the guarantee of benefits in the event of an employment-related injury, illness, or death, workers give up their rights to bring actions against employers in the civil court system and give up their rights to seek damages for injuries and illnesses, including pain and suffering, outside of those provided by the workers' compensation laws. Workers' compensation is mandatory in all states and the District of Columbia, with the exception of Texas. In Texas, employers may, under certain conditions, opt out of the workers' compensation system, but in doing so subject themselves to civil actions brought by injured employees.\n\n\tHistory of the LHWCA\n\nPrior to the enactment of the LHWCA in 1927, longshore and harbor workers were not covered by any workers' compensation system. Although persons who worked entirely on land were covered by workers' compensation laws in those states that enacted such laws, pursuant to the Supreme Court's 1917 decision in Southern Pacific Co. v. Jensen , state workers' compensation systems did not have jurisdiction over persons working on the \"navigable waters\" of the United States because the Constitution granted the authority over \"matters of admiralty and maritime jurisdiction\" to the federal government. The LHWCA created a federal workers' compensation program to cover these workers. In 1972, the LHWCA zone of coverage was extended to include areas adjacent to navigable waters that are used for loading, unloading, repairing, or building vessels.\n\n\tFirms and Workers Covered by the LHWCA\n\n\t\tCovered Firms\n\nThe LHWCA provisions apply to any private firm with any covered employees who work, full- or part-time, on the navigable waters of the United States, including in any of the following adjoining areas: piers; wharves; dry docks; terminals; building ways; marine railways; or other areas customarily used in the loading, unloading, repairing, or building of vessels.\n\n\t\tCovered Workers\n\nWith the exception of workers excluded by statute (listed below), the LHWCA covers any maritime employee of a covered firm, including longshore workers (those who load and unload ships) and harbor workers (i.e., ship repairmen, ship builders, and ship breakers).\n\n\t\t\tWorkers Excluded by Statute\n\nSections 2(3) and 3(b) of the LHWCA exclude the following workers from coverage:\nWorkers covered by a state workers' compensation law, including employees exclusively engaged in clerical, secretarial, security, or data processing work; persons employed by a club, camp, recreational operation, museum, or retail outlet; marina employees not engaged in the construction, replacement, or expansion of the marina; suppliers, transporters, and vendors doing business temporarily at the site of a covered employer; aquaculture workers; and employees who build any recreational vessel under 65 feet in length, or repair any recreational vessel, or dismantle any part of a recreational vessel in connection with the repair of the vessel. Workers, whether covered or not covered by a state workers' compensation law, including masters and crew members of vessels; persons engaged by the master of a vessel to unload any vessel under 18 tons net; and employees of the federal government, or any state, local, or foreign government or any subdivision of such a government.\n\n\t\t\t2009 Amendment to the LHWCA\n\nSection 803 of the American Recovery and Reinvestment Act of 2009 (ARRA) modified one of the excluded classes of workers under the LHWCA by adding additional exclusions for persons who work on recreational vessels over 65 feet in length. Prior to the amendment, Section 2(3)(F) of the LHWCA read as follows:\n(3) The term \"employee\" means\u2026but such term does not include\u2026\n(F) individuals employed to build, repair, or dismantle any recreational vessel under sixty-five feet in length.\nThis section, as amended, reads as follows (with additions in italics):\n(3) The term \"employee\" means\u2026but such term does not include\u2026\n(F) individuals employed to build any recreational vessel under sixty-five feet in length, or individuals employed to repair any recreational vessel, or to dismantle any part of a recreational vessel in connection with the repair of such vessel.\nBy granting an exemption from the LHWCA to persons engaged in the repair of any recreation vessel, regardless of its size, this amendment limits the scope of the LHWCA and increases the types of workers excluded from coverage.\n\n\t\t\t2011 DOL Regulations Defining Recreational Vessel\n\nIn 2011, the DOL promulgated implementing regulations for the new recreational vessel provision provided by Section 803 of ARRA. These regulations provided definitions of recreational vessel for the purposes of the determination of LHWCA coverage. These definitions are based on the classification of vessels used by the U.S. Coast Guard (USCG) and provided in statute and regulation. \n\n\t\t\t\tGeneral Definition\n\nSpecifically, under these current DOL regulations, a vessel is considered a recreational vessel if the vessel is\nbeing manufactured or operated mainly for pleasure or leased, rented, or chartered to another person for his or her pleasure.\n\n\t\t\t\tDefinition for Vessel Being Built or Repaired Under Warranty\n\nIn addition, for a vessel being built or repaired under warranty by its manufacturer or builder, the vessel is considered a recreational vessel if it appears based on its design and construction to be intended for recreational uses. The manufacturer or builder bears the burden under this regulation to establish that the vessel is a recreational vessel. \n\n\t\t\t\tDefinition for Vessel Being Repaired or Dismantled\n\nFor a vessel being repaired, dismantled for repair, or dismantled at the end of its life (ship breaking), the vessel is not considered a recreational vessel if it was operating, more than infrequently, in one of the following categories provided in the U.S. Code :\n\"passenger vessel\" (46 U.S.C. \u00a72101(22)); \"small passenger vessel\" (46 U.S.C. \u00a72101(35)); \"uninspected passenger vessel\" (46 U.S.C. \u00a72101(42)); vessel routinely engaged in \"commercial service\" (46 U.S.C. \u00a72101(5)); or vessel that routinely carries \"passengers for hire\" (46 U.S.C. \u00a72101(21a)). \nA vessel being repaired, dismantled for repair, or dismantled at the end of its life is considered a recreational vessel if the vessel is a public vessel owned, or bareboat chartered, by the federal government or a state or local government and shares elements of design and construction with traditional recreational vessels and is not used for military or commercial purposes. \n\n\t\t\tLegislation to Change the DOL's Definition of Recreational Vessel\n\nSince the promulgation of the DOL's 2011 rules providing regulatory definitions of recreational vessels for the purposes of the LHWCA, numerous bills have been introduced that would, if enacted, remove the existing regulatory definitions for a vessel being repaired, dismantled for repair, or dismantled at the end of its life so that the USCG categories of vessels provided in Section 2101 of Title 46 of the United States Code would no longer be used in the classification of such a vessel under the LHWCA. This legislation would expand the types of recreational vessels. Because persons who work on recreational vessels are not covered by the LHWCA, the legislation would allow employers to purchase workers' compensation for these workers under state laws rather than the LHWCA, which, due to the more generous benefits frequently offered by the LHWCA and the limited number of providers, may be more expensive. \nIn the 115 th Congress, Section 3509 of H.R. 2810 , the National Defense Authorization Act for 2018 (NDAA), as initially passed by the House of Representatives on July 14, 2017, contained this legislative provision. This provision was not included in the Senate version of the bill nor in the final NDAA enacted into law. \n\n\t\t\tExtensions of Coverage Under the LHWCA\n\nThe LHWCA has been amended four times to extend coverage to occupations outside the original scope of the law. In 1928, coverage was extended to employees of the District of Columbia . The provision was repealed, effective for all injuries occurring on or after July 26, 1982, with the enactment by the District of Columbia government of the District of Columbia Workers' Compensation Act of 1982. Benefits for injuries that occurred prior to July 26, 1982, continue to be paid under the LHWCA.\nCoverage was extended to overse a s military and public works contractors in 1941 with the enactment of the Defense Base Act. In 1952, coverage was extended to civilian employees of nonappropriated fund instrumentalities of the armed forces , such as service clubs and post exchanges. Coverage was extended in 1953 to employees working on the Outer Continental Shelf in the exploration and the development of natural resources , such as workers on offshore oil platforms.\n\n\tInsurance and Financing\n\nEmployers required by the LHWCA to provide workers' compensation coverage to their employees may either purchase private insurance or self-insure. The DOL is responsible for authorizing insurance carriers to provide coverage under the LHWCA program and for authorizing companies to self-insure. However, the DOL does not set or regulate insurance premiums. These insurance arrangements are the primary means of providing LHWCA benefits to injured, sick, and deceased workers and their families. General revenue is not used to pay any LHWCA benefits.\n\n\t\tSpecial Fund\n\nThe DOL operates the Special Fund to provide LHWCA benefits in cases in which the responsible employer or insurance carrier cannot pay or in which benefits must be paid for a second injury under Section 8(f) of the LHWCA. The Special Fund is financed through an annual assessment charged to employers and insurance carriers based on the previous year's claims, payments required when an employee dies without any survivors, disability payments due to an employee without survivors after his or her death, and penalties and fines assessed for noncompliance with LHWCA program rules.\n\n\t\tAdministrative Costs\n\nThe administrative costs associated with the LHWCA are largely provided by general revenue. General revenue is used to pay for most oversight functions associated with the LHWCA and the processing of LHWCA claims. General revenue is also used to pay legal and investigative costs associated with the DOL Office of the Solicitor and Office of the Inspector General. Revenue from the Special Fund is used to finance oversight activities related to the Special Fund and the program's vocational rehabilitation activities. In 2016, total administrative costs associated with the LHWCA were approximately $15.8 million, of which $13.6 million, or 86%, was paid by general revenue and $2.2 million, or 14%, was paid by the Special Fund.\n\n\tLHWCA Benefits\n\nThe LHWCA provides medical benefits for covered injuries and illnesses and disability benefits to partially cover wages lost due to covered injuries or illnesses, and it provides survivors benefits to the families of workers who die on the job.\n\n\t\tMedical Benefits\n\nThe LHWCA provides medical benefits to fully cover the cost of any medical treatment associated with a covered injury or illness. These medical benefits are provided without any deductibles, copayments, or costs paid by the injured worker. Prescription drugs and medical procedures are fully covered, as are costs associated with travelling to and from medical appointments. A covered worker may select his or her own treating physician, provided the physician has not been debarred from the LHWCA program for violating program rules.\n\n\t\tVocational Rehabilitation\n\nCovered workers are entitled to vocational rehabilitation services provided under the LHWCA. Vocational rehabilitation services are designed to assist the covered worker in returning to employment. There is no cost to the covered worker for vocational rehabilitation and workers actively participating in a rehabilitation program are entitled to an additional benefit of $25 per week. All costs associated with vocational rehabilitation under the LHWCA are paid out of the Special Fund. Vocational rehabilitation services may be provided by public or private rehabilitation agencies.\n\n\t\tDisability Benefits\n\nThe LHWCA provides disability benefits to covered workers to partially cover wages lost due to the inability to work because of a covered injury or illness. The amount of disability benefits is based on the worker's pre-disability wage, subject to maximum and minimum benefits based on the National Average Weekly Wage (NAWW) as determined by the DOL. The NAWW is updated October 1 of each year and is based on average wages across the United States for the three calendar quarters ending on June 30 of that year. The minimum weekly benefit that can be paid to a covered employee is equal to 50% of the NAWW and the maximum weekly benefit that can be paid is equal to 200% of the NAWW.\nDisability benefits under the LHWCA, like all workers' compensation benefits, are not subject to federal income taxes. Unlike most state workers' compensation benefits, however, LHWCA benefits are adjusted based on wage inflation rather than price inflation. Benefits are adjusted annually each October 1 to reflect the change in the NAWW from the previous year, up to a maximum increase of 5%. \n\n\t\t\tTotal Disability Benefits\n\nThe LHWCA provides benefits in cases of total disability. Under the LHWCA, a worker is considered totally disabled if he or she is unable to earn his or her pre-injury wage because of a covered injury or illness. In addition, a worker is also considered totally disabled if he or she loses both hands, arms, feet, legs, or eyes, or any two of these body systems, such as the loss of one arm and one leg. Total disability benefits under the LHWCA are equal to two-thirds of the covered worker's wage at the time of the injury or illness. Total disability benefits continue until the worker is no longer totally disabled or dies.\n\n\t\t\tPartial Disability Benefits\n\nIf a covered worker is able to partially return to work or return to work at a wage level less than his or her wage at the time of injury, then he or she is considered partially disabled. In cases of temporary partial disability, the LHWCA benefit is equal to two-thirds of the difference between the workers' pre-injury wage and his or her current earning capacity or actual earnings.\n\n\t\t\tPermanent Partial Disability Benefits\n\nSection 8(c) of the LHWCA provides a schedule of benefits to be paid in cases of permanent partial disability (PPD), such as the loss of a limb. The benefit schedule provides the number of weeks of compensation, at two-thirds of the pre-injury wage, for each type of PPD. For example, the LHWCA schedule provides that a worker who loses an arm is entitled to 312 weeks of compensation. Benefits in cases not listed on the schedule are paid at two-thirds of the difference between the pre-injury wage and current earning capacity for the duration of the disability. Schedule benefits for PPD are paid regardless of the current work status or earnings capacity of the employee. Thus, an employee with a PPD can fully return to work and earn his or her wage in addition to the PPD compensation. A copy of the LHWCA PPD schedule can be found in the Appendix to this report. \n\n\t\t\tDisability After Retirement\n\nIf a worker has an illness that was caused by his or her covered employment but did not manifest itself until after his or her retirement, then he or she is entitled to disability benefits equal to two-thirds of the NAWW multiplied by the percentage of his or her impairment. The percentage of impairment is determined using the current edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment (AMA Guides ), or another professionally recognized source if the condition is not listed in the AMA Guides.\n\n\t\tSurvivors Benefits\n\nThe LHWCA provides cash benefits to the surviving spouses and minor children of workers killed on the job. Benefits for a surviving spouse end when the spouse remarries or dies and benefits for surviving children continue until the children reach the age of 18, age 23 if a full-time student, or for the life a child with a disability.\nA surviving spouse with no eligible children is entitled to one-half of the deceased worker's wage at the time of death under the LHWCA. A surviving spouse with one or more eligible children is entitled to two-thirds of the deceased worker's wage at the time of death. Once all children become ineligible for benefits because of their ages, the surviving spouse's benefit is reduced to the level of a spouse without any eligible children.\nIf an eligible spouse becomes ineligible for benefits because of death or remarriage, or if there is no surviving spouse, benefits are still paid to any surviving children. Under the LHWCA, a single surviving eligible child is entitled to one-half of the deceased worker's wage at the time of death, and two or more surviving children are eligible for a combined two-thirds of the wage at the time of death.\nThe survivors of a covered worker killed on the job are entitled under the LHWCA to a cash payment to provide for the burial and funeral of the deceased. The burial and funeral allowance is capped by Section 9(a) of the LHWCA at $3,000, and this cap not adjusted to reflect changes in prices or wages.\nIf a covered worker who is receiving scheduled PPD benefits dies of a cause unrelated to his or her illness or injury, then the balance of any remaining PPD benefits is paid to his or her survivors. If a covered worker who dies on the job leaves no survivors, his or her employer or the employer's insurance carrier is required to pay $5,000 into the Special Fund.\n\n\tLHWCA Claims Process\n\nAlthough the responsibility for the payment of benefits under the LHWCA rests with the employer or the employer's insurance company, decisions on benefit eligibility and the amount of benefits are made by the DOL. Upon the report of an injury, illness, or death, the LHWCA claims process begins. If the employer or insurance carrier does not controvert the claim, then arrangements are made by the DOL for the claim to be paid.\nIf, however, the employer controverts any part of the claim, then the DOL sets up an informal conference, either in person or by phone, between the employer or insurance carrier and worker with the goal of resolving any disputes over the claim. If this informal conference fails to resolve all outstanding disputes, then a formal hearing before a DOL administrative law judge (ALJ) is scheduled. If the employer or insurance carrier or the worker is dissatisfied with the decision of the ALJ, then this decision may be appealed to the Benefits Review Board (BRB). The BRB is made up of five members appointed by the Secretary of Labor. Either party dissatisfied with the decision of the BRB may file a petition with the U.S. Court of Appeals for the circuit in which the injury occurred praying that the BRB's decision be set aside or modified. \nIf an employer or insurance carrier fails to pay compensation in accordance with a final decision on a claim, the covered worker or the DOL may request that the U.S. District Court order that payment be made.\n\n\t\tAppendix. Benefits Schedule for LHWCA PPD","output":"The Longshore and Harbor Workers' Compensation Act (LHWCA) is a federal workers' compensation program that covers certain private-sector maritime workers. Firms that employ these workers are required to purchase workers' compensation or self-insure and are responsible for providing medical and disability benefits to covered workers who are injured or become ill on the job and survivors benefits to the families of covered workers who die on the job. The LHWCA is administered by the Department of Labor (DOL), and all benefit costs are paid by employers and their insurance carriers. In 2016, more than $1.4 billion in LHWCA benefits were paid to beneficiaries.\nCongress has extended the LHWCA provisions to cover workers outside of the maritime industry, such as overseas government contractors and civilian employees of military post exchanges. As part of the American Recovery and Reinvestment Act of 2009 (ARRA), persons who repair recreational vessels of any size were added to the LHWCA exemption list. In 2011, the DOL implemented this provision; since then, those regulations have proven controversial and numerous bills have been introduced to modify the regulatory definition to increase the number of workers exempted from the LHWCA.\nThe LHWCA pays for all medical care associated with a covered injury or illness. Disability benefits are based on a worker's pre-injury wage, and, unlike comparable state workers' compensation benefits, are adjusted annually to reflect national wage growth."}
{"id":"gao_GAO-18-606","pid":"gao_GAO-18-606_0","input":"\tBackground\n\n\t\tFederal Grant Programs\n\nThe federal government uses grants to address national priorities\u2014such  as substance use prevention, treatment, and recovery\u2014through  nonfederal parties, including state and local governments, federally  recognized tribes, educational institutions, and nonprofit organizations.  While there is variation among different grant program goals and grant  types, most federal grants follow a common life cycle that includes an  award, implementation, and closeout stage for administering the grants.  During the award stage, the federal awarding agency enters into an  agreement with the grantee stipulating the terms and conditions for the  use of grant funds including the period that funds are available for the  grantee\u2019s use. During the implementation stage, the grantee carries out  the requirements of the agreement and requests payments, while the  awarding agency monitors the grantee and approves or denies payments.  The grantee and the awarding agency close the grant once the grantee  has completed all the work associated with a grant agreement, the grant  period of performance end date (or grant expiration date) has arrived, or  both.\nFederal grant programs may fund various types of grants, including  discretionary grants, formula grants, and cooperative agreements.  Discretionary grants are generally awarded on a competitive basis for  specified projects that meet eligibility and program requirements. Formula  grants are noncompetitive awards based on a predetermined formula,  typically established in statute, and are provided to eligible applicants that  meet specified criteria outlined by statute or regulation, such as a state. A  cooperative agreement is a type of federal financial assistance similar to  a grant, except the federal government is more substantially involved with  the implementation.\n\n\t\tSubstance Use Prevention, Treatment, and Recovery Services\n\nSubstance use prevention programs and services (which we refer to  collectively as \u201cprevention services\u201d in this report) are designed to prevent  or delay the early use of substances and stop the progression from use to  problematic use or to a substance use disorder. Prevention services  generally focus on reducing a variety of risk factors and promoting a  broad range of protective factors through various activities that include,  for example, setting policies that reduce the availability of substances in a  community, teaching adolescents how to resist negative social influences,  and communicating the harms of substances such as the nonmedical use  of prescription opioids and marijuana through media campaigns. In  addition, prevention services can be targeted at all members of a given  population without regard for risk factors, such as all adolescents, or to  particular subgroups of individuals or families, such as those who are at  increased risk of substance use due to their exposure to risk factors.  Targeted audiences for such services may include families living in  poverty or children of substance-using parents.\nWhen substance use progresses to a point that it is clinically diagnosed  as causing significant impairments in health and social functioning, it is  characterized as a substance use disorder. Treatment services for  substance use disorders are designed to enable an individual to reduce  or discontinue substance use and to address health problems, and  typically include behavioral therapy. Behavioral therapies use various  techniques to modify an individual\u2019s behaviors and improve coping skills,  such as incentives and reinforcements to reward individuals who reduce  their substance use. For opioid use disorders, treatment may involve  combining behavioral therapy with medications\u2014an approach commonly  referred to as medication-assisted treatment. Some of these treatment  services may be paid for by private insurers, public health coverage  programs, nonprofit organizations, or consumers (out-of-pocket), but  federal grant programs and various state and local programs also provide  funding for these services.\nSubstance use recovery services are designed to help engage and  support individuals with substance use disorders in treatment and provide  ongoing support after treatment. There are a variety of recovery services  such as peer recovery coaching, which involves the use of coaches\u2014 peers who identify as being in recovery and use their knowledge and  experience to inform their work\u2014to help individuals who are transitioning  out of treatment to connect with community services and address barriers  that may hinder the recovery process. Other examples include recovery  housing, which provides a substance-free environment and support from  fellow recovering residents, and recovery high schools, which help  students recovering from substance use disorders focus on academic  learning. Some recovery services may be paid for through various  sources, including Medicaid programs in certain states, some private  insurers, and federal grant programs. In addition, some recovery services  may be offered by member-led, voluntary associations that charge no  fees, such as 12-step groups.\n\n\tThree Federal Agencies Operated 12 Grant Programs That Funded Services Specifically Targeting Adolescents and Young Adults in Fiscal Year 2017\n\n\t\tEight of the 12 Federal Grant Programs for Adolescents and Young Adults Funded Substance Use Prevention Services\n\nWe identified 12 federal grant programs within three of the four agencies  in our review that funded substance use prevention, treatment, and  recovery services in fiscal year 2017 and targeted adolescents\u2019 and  young adults\u2019 use of illicit substances. Eight of these programs focused  on prevention, and all 8 remain active in fiscal year 2018. The 8 grant  programs have varying purposes and were administered by two entities  within HHS\u2014SAMHSA or IHS\u2014or by ONDCP. For example, the Drug- Free Communities Support Program is funded and directed by ONDCP to  support community coalitions in preventing and reducing substance  abuse among youth aged 18 and younger. As another example, the  Strategic Prevention Framework for Prescription Drugs program,  administered by SAMHSA, is designed to raise awareness about the  dangers of sharing prescription medications such as opioids, and to  promote collaboration between states and pharmaceutical and medical  communities to understand the risks of overprescribing to youth (aged 12  to 17) and adults (aged 18 and older). In addition, this program is  intended to provide prevention activities and education to schools,  communities, and parents.\nIn total, the 8 grant programs targeting the prevention of substance use  among adolescents and young adults had 1,146 active grantees in fiscal  year 2017. The Drug-Free Communities Support Program had the  largest number of active grantees\u2014713 community coalitions\u2014and the  other 7 programs had a combined total of 434 that included states and  federally recognized tribes. The total number of active grantees in fiscal  year 2017 includes those that received a single- or multi-year award in  fiscal year 2017, as well as those that received a multi-year award in  fiscal year 2016 for a project that was ongoing in fiscal year 2017.  Grantees were awarded a total amount of about $266 million in fiscal year  2017, with SAMHSA\u2019s Strategic Prevention Framework-Partnerships for  Success program providing the largest amount of funding (about $95  million). (See table 1.)\nAll 8 prevention grant programs had ongoing or planned evaluations to  assess the effectiveness of their grantees in accomplishing a variety of  program goals, according to agency officials. For example, ONDCP is  overseeing the ongoing evaluation of the Drug-Free Communities  Support Program through semi-annual progress reports and through the  collection of data, such as data on past 30-day substance use, from  coalitions that received awards. A recent evaluation of this program found  that coalitions included about 19,000 community members who were  targeting prevention services to about 20 percent of the population in the  United States (including 2.5 million middle school and 3.5 million high  school youth) in fiscal year 2015. In addition, this evaluation found that  middle and high school youth in communities with a coalition reported a  significant decrease in the past 30-day use of marijuana, prescription  drugs, alcohol, and tobacco, from 2002 to 2016. However, at the same  time, the perceptions of the risk of marijuana use decreased significantly  among high school youth in communities with community coalitions,  according to the evaluation. As another example, IHS\u2019s planned  evaluation of the Methamphetamine and Suicide Prevention Initiative- Generation Indigenous grant program will focus on measures such as the  types of services that grantees implemented to prevent  methamphetamine use and promote positive development among  American Indian and Alaska Native youth, according to agency officials.  For the other 6 prevention grant programs, planned evaluations will  examine the extent to which reductions in substance use are observed  over time among the grantees\u2019 targeted adolescents or young adults.\n\n\t\tFour of the 12 Federal Grant Programs for Adolescents and Young Adults Funded Substance Use Treatment and Recovery Services\n\nOf the 12 federal grant programs targeting adolescents\u2019 and young adults\u2019  use of illicit substances, we identified 4 that focused on the provision of  substance use treatment and recovery services and had active grantees  in fiscal year 2017. Two of the 4 programs ended at the close of fiscal  year 2017 and the other 2 remained active in fiscal year 2018. The 4  programs had different purposes and were administered by OJJDP or  SAMHSA, within DOJ and HHS, respectively. For example, the  Cooperative Agreements for Adolescent and Transitional Aged Youth  Treatment Implementation, administered by SAMHSA, is still active, and  intends to increase the capacity of states to provide treatment and  recovery services to adolescents (aged 12 to 18) and transitional-aged  youth (aged 16 to 25) that have substance use disorders or co-occurring  substance use disorders and mental disorders. This program aims to  increase states\u2019 capacity by increasing the number of qualified treatment  providers. The other 3 grant programs were designed to improve different  aspects of the existing juvenile drug treatment courts, which DOJ defines  as a court calendar or docket that provides specialized treatment and  services for youth with substance use or co-occurring mental health  disorders. As an example, the Fiscal Year 2017 Juvenile Drug Treatment  Court Program, which is still active and administered by OJJDP, aims to  deliver services that are consistent with DOJ\u2019s Juvenile Drug Treatment  Court Guidelines\u2014a set of best practices for effective juvenile drug  treatment courts.\nIn total, the 4 grant programs that targeted substance use treatment and  recovery services among adolescents and young adults had 57 active  grantees in fiscal year 2017. SAMHSA\u2019s Cooperative Agreements for  Adolescent and Transitional Aged Youth Treatment Implementation had  the largest number of active grantees (36), which included state  substance abuse agencies and federally recognized tribes. The three  juvenile drug treatment court programs had a total of 21 active grantees  that included, for example, county juvenile drug treatment courts and a  state judicial department. The total number of active grantees in fiscal  year 2017 included those that received a single- or multi-year award in  fiscal year 2017 as well as active grantees that received multi-year  awards in prior years. In total, active grantees from 2 of the 4 programs  were awarded about $23 million in fiscal year 2017. (See table 2.)\nTwo of the 4 treatment and recovery grant programs had ongoing or  planned evaluations to assess the effectiveness of their grantees in  accomplishing a variety of program goals, according to agency officials.  SAMHSA officials told us that its ongoing evaluation of the Cooperative  Agreements for Adolescent and Transitional Aged Youth Treatment  Implementation is assessing the types of treatment services provided to  adolescents and young adults as well as the extent to which they  abstained from substance use. Officials added that the evaluation is  examining grantees\u2019 efforts to expand the qualified workforce of treatment  providers for adolescents and young adults. A recent evaluation that was  completed for this program found that most grantees provided training to  treatment providers on evidence-based treatment services and other  topics, and about one-third of grantees identified additional training needs  such as training on co-occurring disorders and trauma-informed services.  This evaluation also found a decrease in substance use among  adolescents and young adults who received treatment services after 6  months and that enhanced provider training was associated with this  decrease. OJJDP\u2019s Fiscal Year 2017 Juvenile Drug Treatment Court  Program includes a planned evaluation of the impact of the DOJ juvenile  drug treatment court guidelines on participant outcomes. That is, OJJDP  plans to compare the outcomes of participants in courts aligned with the  guidelines to participants in other court programs that will serve as  \u201ccomparison courts.\u201d OJJDP officials told us that the evaluation plans to  assess youth outcomes such as recidivism in substance use, quality of  relationships with parents and peers, and mental wellbeing. OJJDP  officials stated that while they are not evaluating their fiscal year 2015 and  2014 juvenile drug treatment court grant programs, grantees must report  on various performance measures related to substance use to assist DOJ  with fulfilling its responsibilities under the Government Performance and  Results Act of 1993 and the GPRA Modernization Act of 2010. For  example, grantees must report on a semiannual basis the number of drug  and alcohol tests performed on juveniles and the number of positive tests  recorded.\n\n\t\tOther Federal Grant Programs Fund Prevention, Treatment, and Recovery Services, but Do Not Specifically Target Adolescents and Young Adults\n\nOther federal grant programs beyond the 12 we identified provide funds  for substance use prevention, treatment, and recovery services across  age groups but do not specifically target adolescents and young adults.  The Substance Abuse Prevention and Treatment Block Grant is the  largest of such grant programs that fund prevention, treatment, and  recovery services across age groups. SAMHSA, which administers this  grant, awarded a total of $1.8 billion in fiscal year 2017 to grantees which  included states, the District of Columbia, territories, and one federally  recognized tribe. The amount of awards that states receive is based on a  formula that takes into account a grantee\u2019s: population at risk of  substance abuse; relative costs of providing prevention and treatment  services; and relative ability to pay for prevention and treatment  services.\nStates have some flexibility in determining how to use their Substance  Abuse Prevention and Treatment Block Grant funds, and our analysis  shows variation in the extent to which grantees used these funds to  provide prevention, treatment, and recovery services to adolescents and  young adults in 2014, the most recent year for which data were available.  For prevention services that target individuals, such as those delivered to  middle school students in the classroom, the percentage of persons  served that grantees could identify as being adolescents and young  adults ranged from 0.1 percent (Oklahoma) to 100 percent (American  Samoa and United States Virgin Islands). However, most of the grantees  reported percentages that fell in the range of 23 to 61 percent. For  prevention services that target populations rather than individuals, such  as media campaigns, grantees similarly reported that the percentage of  adolescents and young adults served ranged from 0.1 percent (Indiana)  to 100 percent (United States Virgin Islands). However, most of the  grantees reported percentages that fell in the range of 18 to 46 percent.\nFor treatment and recovery services, grantees reported that the  percentage of all persons served who were adolescents and young adults  ranged from 8 percent (District of Columbia) to 100 percent (Red Lake  Band of Chippewa Indians). However, most of the grantees reported  percentages that fell in the range of 17 to 26 percent. (See app. I for the  percentages of persons served that were adolescents and young adults,  by grantee.)\nIn addition to the Substance Abuse Prevention and Treatment Block  Grant, other federal grant programs provide funds for prevention,  treatment, and recovery services across age groups, but do not  specifically target adolescents and young adults. For example, the State  Targeted Response to the Opioid Crisis grant program, administered by  SAMHSA, aims to help states and others reduce the number of opioid  overdose related deaths by providing funds for prevention, treatment, and  recovery services for opioid use disorders. In fiscal year 2017, SAMHSA  awarded about $485 million in grants to 50 states, the District of  Columbia, and 6 territories through this program. As another example, the  Targeted Capacity Expansion: Medication Assisted Treatment \u2013  Prescription Drug and Opioid Addiction grant program, also administered  by SAMHSA, provides funding to states to expand access to medication- assisted treatment services as well as recovery services among  individuals with opioid use disorders. In fiscal year 2017 SAMHSA  awarded $31 million in additional grants to 6 states through this program.\n\n\tNIDA Had 186 Active Grant-Funded Research Projects Focused on Substance Use Prevention, Treatment, and Recovery among Adolescents and Young Adults in 2017\n\n\t\tMost of NIDA\u2019s 186 Active Grant-Funded Research Projects for Adolescents and Young Adults in 2017 Focused on Substance Use Prevention\n\nOur analysis found that HHS\u2019s NIDA had 186 active grant-funded  research projects focused on illicit substance use prevention, treatment,  or recovery among adolescents and young adults in October and  November 2017, and most of these projects addressed substance use  prevention. Specifically, 126 research projects, or about 68 percent of  NIDA\u2019s ongoing research projects for this population, involved research  related to preventing the use of illicit substances, such as the use of  marijuana or nonmedical use of opioids and other prescription drugs. The  remaining 60 projects, or about 32 percent, involved research related to  treatment for or recovery from the use of illicit substances among  adolescents and young adults, or a combination of categories (e.g.,  substance use prevention, treatment, and recovery). Among the  categories of research projects, the fewest involved research exclusively  about recovery (4 out of 186 projects, or about 2 percent), as shown in  table 3. Our analysis also found that about 12 percent of the ongoing  projects (22 of 186) involved the use of brain imaging in research on  prevention, treatment, or recovery. In total, of the 186 research projects  that were active in October and November 2017, 135 received $61.3  million in grants from NIDA in fiscal year 2017. NIDA did not provide  awards in fiscal year 2017 for the remaining 51 projects that were active  in October and November 2017.\nThe following examples illustrate the types of research activities funded  by the prevention, treatment, and recovery grants identified in our  review:\nPrevention research projects. One research project involved  testing whether a parenting intervention is associated with lower  substance use and other high-risk behaviors among adolescents  in the long term, including how such outcomes relate to genetic  risk factors. The project\u2019s participants included 731 adolescents to  be assessed over multiple years. The project planned to collect  DNA; observations of family interaction; parent, youth, and  teacher reports regarding adolescents\u2019 conduct; and assessments  of their peer environments.\nTreatment research projects. One research project involved  testing the effectiveness of the use of the medication naltrexone  (extended release), compared to the use of buprenorphine in  treating adolescents and young adults with opioid use disorders.  The project\u2019s participants included 340 adolescents and young  adults and the project planned to provide counseling to the  participants during the course of the study. The project planned to  assess a variety of outcomes after 3 and 6 months, including the  number of days participants were in treatment, participants\u2019 use of  opioids as well as other drug and alcohol use, and the cost- effectiveness of the treatment.\nRecovery research projects. One research project involved  testing the effectiveness of a smartphone application to deliver  recovery services to adolescents after they received treatment for  a substance use disorder, compared to a control group of  adolescents that received recovery services via traditional  methods. Examples of recovery services delivered with a  smartphone application include participating in online recovery  group discussions and receiving motivational messages. The  project\u2019s participants included 400 adolescents to be assessed  over a 9-month period. The project planned to collect a variety of  information, such as how frequently participants used the  smartphone application, how long they abstained from substance  use, and their quality of life.\n\n\t\tIn Fiscal Year 2017, NIDA and Nine Other HHS Entities Funded a Large Study Examining the Effects of Substance Use on Adolescent Brain Development\n\nIn fiscal year 2017, NIDA and nine other entities within HHS provided  grant funding for a large study\u2014the Adolescent Brain Cognitive  Development study\u2014designed to examine the effects of substance use  and other factors on development of the adolescent brain. This study  was established as a result of the collaboration of several federal  agencies that determined such a study was needed because of gaps in  knowledge about how substance use and other factors affect brain  development. This study is a longitudinal study that plans to collect data  from a sample of about 11,000 children across the country for 10 years,  beginning when they are 9 or 10 years old. Twenty-one research sites  across the country were selected to collect information from children  about their brain development, genetics, substance use, mental health,  physical health, environment, and other measures. In addition, this study  is funding a data analysis and informatics center to develop the  procedures for data collection, create and maintain a common database  pooling data from all of the research sites, and conduct data analysis.  According to NIDA officials, data from the Adolescent Brain Cognitive  Development study will be made available to researchers for future use  through a data archive. In fiscal year 2017, 15 federal grants provided  funding for this study, of which NIDA contributed $18.1 million.\n\n\tStakeholders Identified Gaps in Services and Research for Adolescents and Young Adults, and Ongoing Federal Efforts Aim to Address Gaps Stakeholders Identified Gaps in Services for Adolescents and Young Adults, and Federal Agencies Have Ongoing Efforts to Address Them\n\nStakeholders that we interviewed identified various gaps in services, and  among the most frequently cited were a lack of available recovery  services and treatment providers for adolescents and young adults with  substance use disorders. They also identified gaps in substance use  prevention services such as a lack of prevention services tailored for  certain subgroups within these ages. In general, officials from the  agencies in our review agreed that these gaps exist, and described  actions the agencies are taking that may help address them.\n\n\t\tStakeholders Identified Gaps in Research, Such as for Adolescent-Specific Substance Use Treatment Services, and in Recovery Services for both Adolescents and Young Adults\n\nStakeholders that we interviewed commonly identified gaps in research  concerning adolescent-specific substance use treatment approaches, as  well as in recovery services for both adolescents and young adults. They  also identified other gaps, such as a lack of knowledge about how to  effectively communicate to adolescents and young adults the harms of  substance use. Officials from HHS\u2019s NIDA agreed that such gaps in  research exist.\nGaps in substance use research related to adolescents and young  adults. Stakeholders commonly identified the following gaps in research:\nSubstance use disorder treatment with adolescents. Four of  the stakeholders we interviewed identified gaps in adolescent- specific substance use disorder treatment research. Officials  from one research organization said that it can be challenging to  recruit a sufficient number of adolescents with a substance use  disorder to participate in research studies focused on substance  use treatment, both because fewer adolescents have such  disorders compared to adults, and because adolescents\u2014or  potentially their parents\u2014may be in denial about the need for  treatment. These officials further stated that having too few  funding announcements that focus on adolescent-specific  research contributes to the gaps in research in this area, because  it is easier for researchers to simply work with adults when  announcements do not specify an age group of interest. An official  from another research organization said there is also a gap in  knowledge about how to deliver treatment services to adolescents  in ways that are developmentally appropriate. The official stated  that adolescents who receive treatment services generally are  less likely to complete substance use disorder treatment, and, as  a result, additional research is needed to identify how to engage  and retain adolescents in a developmentally appropriate way. The  official explained that adolescents often do not believe they need  treatment and are not certain they want to stop using substances.\nRecovery services. Three of the stakeholders we interviewed  identified gaps in recovery service research for adolescents and  young adults. Officials from one advocacy and education  organization said there has been little research conducted to  determine the types of recovery services that are most effective  for adolescents in preventing relapse. Officials from one research  organization said that it would be beneficial to develop a variety of  recovery services, since services are likely to vary in effectiveness  for different groups of adolescents and young adults.\nTranslating research into practice. Three of the stakeholders  we interviewed identified gaps in knowledge about how to  translate evidence-based services from research into sustainable,  real world practices. For example, an official from one research  organization explained that translating evidence-based treatment  services from research into real world settings can be difficult for a  variety of reasons\u2014such as, because services that are grant- funded may have components that are impractical to implement or  are not reimbursable. The official said one example of such an  impractical component would be having an expert observer  periodically rate the fidelity of providers\u2019 implementation of the  service\u2014a component that makes sense when testing the efficacy  of the service under the grant, but which can be disruptive to  workflow and may not be reimbursable by insurers once the grant  ends. Officials from another research organization similarly  commented that more research is needed to identify which  components of services make them effective.\nCommunicating harms of substance use. Officials from two of  the three research organizations identified a gap in knowledge  about how to effectively communicate the harms of substance use  to adolescents and young adults. They stated that it is particularly  difficult to effectively communicate the harms of cannabis to  adolescents and young adults. One official explained that societal  changes in attitudes towards cannabis have made it more difficult  to convince adolescents of both its harm and of the need for  treatment when its use develops into a substance use disorder.\nFederal response to gaps in research. Officials from NIDA agreed that  these gaps in research exist and explained that while additional research  is needed to address them, the process by which NIDA funds research  through grants ultimately relies on researchers to submit proposals for  consideration. While NIDA officials stated that researchers can submit  proposals for research projects addressing adolescent or young adult  substance use prevention, treatment, or recovery under general funding  announcements for grants, NIDA also had eight funding announcements  (as of May 2018) that either focused on these age groups or included  them as a population of interest, three of which were new as of fiscal year  2018.\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS, DOJ, ONDCP, and Education  for comment. HHS, DOJ, and ONDCP provided technical comments,  which we incorporated as appropriate. Education did not have comments  on our draft.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretaries of the Departments of Health and Human  Services, Justice, and Education; the Director of the Office of National  Drug Control Policy; and other interested parties. In addition, the report is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or dickenj@gao.gov. Contact points for Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II.\n\nAppendix I: The Use of Substance Abuse Prevention and Treatment Block Grant Funds for Adolescents and Young Adults\n\nTable 4 shows the percentage of persons who were provided services  with Substance Abuse Prevention and Treatment Block Grant funds in  2014, and who were also identified by grantees as being adolescents or  young adults. Percentages are listed for two broad types of substance  use prevention services (individual and population-based), as well as  substance use disorder treatment and recovery services. Substance  Abuse Prevention and Treatment Block Grant grantees include states,  territories, and one federally recognized tribe.\n\nAppendix II: 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; Pamela Dooley, Analyst-in-Charge; Spencer Barr; and Brandon  Nakawaki made key contributions to this report. Also contributing were  Kaitlin Farquharson, Derry Henrick, and Laurie Pachter.","output":"Why GAO Did This Study\n\nAccording to the Surgeon General, adolescence and young adulthood are critical at-risk periods for illicit substance use, and such use can harm the developing brain. Congress included a provision in law for GAO to review how federal agencies, through grants, are addressing substance use prevention, treatment, and recovery among adolescents and young adults.\nRelated to prevention, treatment, and recovery targeting adolescents (aged 12 to 17) and young adults (aged 18 to 25), this report describes (1) grant programs to provide services; (2) NIDA grant-funded research, and (3) gaps stakeholders identified in related services or research.\nGAO selected four agencies to review\u2014HHS, ONDCP, DOJ, and Education\u2014the key agencies that fund grant programs for services for adolescents and young adults. GAO analyzed documents on grant programs and on research funded by NIDA. GAO interviewed officials from the four agencies and 20 stakeholder groups (including advocacy and education, and research organizations, as well as a non-generalizable selection of state substance abuse, education, and judicial agencies in four states) about gaps in services or research and agency efforts to help address them. States were selected for variation in geography and overdose rates.\nHHS, DOJ, and ONDCP provided technical comments on a draft of this report, which GAO incorporated as appropriate.\n\nWhat GAO Found\n\nGAO identified 12 federal grant programs within three federal agencies that funded substance use prevention, treatment, and recovery services in fiscal year 2017 and targeted adolescents' and young adults' use of illicit substances such as marijuana and nonmedical use of prescription opioids. The three agencies included the Department of Health and Human Services (HHS), the Office of National Drug Control Policy (ONDCP), and the Department of Justice (DOJ). While the Department of Education (Education) has grant programs that can fund prevention services for adolescents, they do not specifically target such services.\nEight programs targeted substance use prevention. In total, they had 1,146 active grantees in fiscal year 2017 and provided about $266 million in awards that year.\nFour programs targeted treatment and recovery services. In total, they had 57 active grantees in fiscal year 2017. Two of the 4 grant programs awarded about $23 million in funding in that year (the other two awarded funding in prior years).\nIn addition, other grant programs beyond these 12 also fund substance use prevention, treatment, and recovery services across age groups, but are not specifically targeted to adolescents and young adults.\nHHS's National Institute on Drug Abuse (NIDA)\u2014the agency that is the primary funder of research on illicit substance use\u2014also had 186 active grant-funded research projects focused on substance use prevention, treatment, and recovery among adolescents and young adults as of October and November 2017.\nMost of these research projects\u2014126\u2014were examining prevention, 45 were examining treatment, 4 were examining recovery, and 11 were examining a combination of research categories.\nIn total, these 186 research projects received about $61 million from NIDA in fiscal year 2017.\nMost of the 20 stakeholders GAO interviewed identified gaps in services for adolescents and young adults, including insufficient access to recovery services and a shortage of treatment providers, and described financial and other reasons that likely contribute to these gaps. Federal agency officials GAO interviewed agreed that these gaps exist, and described grant programs and other efforts to help address them, such as a grant program that HHS established in 2018 to expand recovery services for these age groups. Stakeholders also identified gaps in research, such as too few treatment studies with adolescent participants, and described reasons for these gaps, including too few federal grants focused on adolescent research. NIDA officials agreed that these gaps exist, and stated that NIDA had eight grant opportunities (as of May 2018) that focused on these age groups or included them as a population of interest, three of which were new in 2018."}
{"id":"gao_GAO-19-42","pid":"gao_GAO-19-42_0","input":"\tBackground\n\nScientific research on and projections of the changes taking place in the  Arctic vary, but there is a general consensus that the Arctic is warming  and that its sea ice is diminishing. For example, scientists at the  National Snow and Ice Data Center reported that for 2018 the minimum  amount of sea ice coverage in the Arctic\u2014typically occurring in  September each year\u2014was the sixth lowest in the satellite record and  656,000 square miles fewer than the mean for the 1981 through 2010  time frame. Further, the scientists found that the 12 lowest recordings of  September ice coverage on satellite record have all occurred in the past  12 years. Figure 1 shows the sea ice coverage (i.e., extent) in the Arctic  for September 2018 compared with the median ice edge for 1981 through  2010.\nWhile much of the Arctic Ocean remains ice-covered for the majority of  the year, most scientific estimates predict there will be a continued  decrease in sea ice coverage in the Arctic Ocean in the summer  sometime in the next 20 to 40 years. According to the Navy\u2019s Arctic  Roadmap for 2014 to 2030, while there may be less sea ice there in the  future, the ice that remains will continue to be a challenge to those  operating in the area.\nMost commercial ship activity in the Arctic is regional\u2014shipping into or  out of the Arctic, mainly in support of commercial activity\u2014not trans- Arctic. However, according to the official Navy estimate from 2013, the  decreasing coverage of sea ice will result in more open water allowing  increased maritime activity along three trans-Arctic routes from 2012  through 2030: the Northern Sea Route, the Northwest Passage, and the  Trans-Polar Route (see fig. 2). This development could, for example,  reduce by thousands of miles and by several days of travel the shipping  of goods between countries in Asia and North America.\nIncreased economic activity in the Arctic could potentially increase the  need for military capabilities there to safeguard U.S. interests. For  example, estimates of significant oil, gas, and mineral deposits in the  Arctic have increased the interest in exploration opportunities in the  region. These resources include an estimated 13 percent of the world\u2019s  undiscovered oil; 30 percent of the world\u2019s undiscovered gas; and  approximately $1 trillion of minerals including gold, zinc, nickel, and  platinum. According to information provided by the Department of State,  the vast majority of these resources are within the undisputed continental  shelf of the respective coastal states. Officials from the Department of  State stated that disputed claims related to the small remaining portions  of the Arctic seabed may be addressed within the international framework  established by the United Nations Convention on the Law of the Sea.\nHowever, as we reported in 2015, even with the changing climate and  growing interest in the region, several enduring characteristics will  continue to provide challenges to surface navigation in the Arctic for the  foreseeable future. These include large amounts of winter ice and  increased movement of ice from spring to fall. Increased movement of  sea ice makes its location less predictable, a situation that increases the  risk that ships can become trapped or damaged by ice impacts. In  addition, the lack of infrastructure in the Arctic region affects the reliability  of shipping through the area. Economic factors such as risk costs, as well  as changes in the shipping market resulting from the Panama Canal  expansion may also affect the amount of shipping along these routes. As  figure 3 shows, even as the seasonal ice decreases over time, the Navy  has projected that the Arctic will remain impassable for most commercial  ships for most of the year from 2012 through 2030. These factors  combined are likely to affect the pace at which commercial activity will  increase.\nWe have previously examined emerging issues and challenges for the  United States in the Arctic. See figure 4 for a timeline of our prior reports  related to Arctic issues. We also include a list of our prior work related to  the Arctic at the end of this report.\n\n\tThe Navy\u2019s Report Aligns with Current Assessments of Arctic Threat Levels and Capabilities Required to Execute DOD\u2019s Arctic Strategy\n\nThe Navy\u2019s June 2018 report aligns with DOD\u2019s assessments that the  Arctic threat level remains low and that DOD has the capabilities required  to execute its 2016 DOD Arctic Strategy. Specifically, the June 2018  report and the information it provides for each of the reporting elements  discusses how the department can execute the 2016 DOD Arctic  Strategy.\nThe strategy contains two overarching objectives: to (1) ensure security,  support safety, and promote defense cooperation and (2) prepare to  respond to a wide range of challenges and contingencies to maintain  stability in the region. These objectives reflect DOD\u2019s assessment that  there is a low level of military threat in the Arctic, as well as the stated  commitment of the Arctic nations to work within a common framework of  diplomatic engagement. In the strategy, DOD identifies the types of  investments that will need to be made over time as activity in the region  increases; however, DOD also discusses the importance of assessing the  needs in the Arctic and of balancing potential Arctic-specific capabilities  investments against other national security priorities and fiscal realities.  The Arctic threat assessment briefings we received from officials at the  U.S. Northern Command and the Office of Naval Intelligence also  reflected the low risk for conflict in the Arctic referenced in the Navy\u2019s  June 2018 report. Below, we summarize the Navy\u2019s response to each  reporting element, and our evaluation of whether the response aligns with  current assessments of Arctic threat levels and capabilities required to  execute DOD\u2019s 2016 Arctic Strategy.\n\n\t\tReport Provides Information on Current Naval Capabilities in the Arctic That Align with DOD\u2019s Strategy\n\nReporting Element One: The Navy was required to report on the current naval  capabilities of the Department of Defense in the Arctic region, with a particular  emphasis on surface capabilities.\nThe June 2018 report provides information on this required element, with  the Navy stating that it relies on the submarine force as well as on  aviation assets and surface operations when necessary to operate in the  Arctic. These capabilities in the Arctic region are consistent with those  identified in The United States Navy Arctic Roadmap for 2014 to 2030 to  execute the 2016 DOD Arctic Strategy, and as corroborated in our  discussions with U.S. Northern Command and Navy officials.\nIn addition, the Navy discusses the significant limitations of its surface  ships for Arctic operations in the June 2018 report. The limitations  identified are consistent with information contained in the U.S. Navy Cold  Weather Handbook for Surface Ships and with information we discussed  with Naval Sea Systems Command officials who oversee modifications to  the fleet and the acquisition of new ships. For example, Navy officials told  us that top-side icing has detrimental effects on ships. As sea spray  accumulates on a ship deck and freezes, a ship can lose some of the  capabilities of its external sensors and radars and a ship\u2019s stability in the  water decreases as the ship\u2019s center of gravity becomes top heavy. Navy  and Coast Guard officials told us that while the Coast Guard regularly  operates in the Arctic given its ice-breaking and maritime safety missions,  among others, Navy surface ships have not been designed to maneuver  and operate in icy waters. Although some of the Navy\u2019s T-class ships  have some capability to operate in light or broken first-year ice due to the  inherent strength of their hulls, traditional surface combatant ships (e.g.,  Cruisers, Destroyers, or Frigates) are not designed to operate in icy  waters.\n\n\t\tReport Provides Information on the Gaps between Current Naval Capabilities and the Ability to Execute DOD\u2019s Strategy\n\nReporting Element Two: The Navy was required to report on any gaps that exist  between the current naval capabilities and the ability of the department to fully execute  its updated strategy for the Arctic region.\nThe June 2018 report provides information on this required element, with  the Navy stating that the department can execute the 2016 DOD Arctic  Strategy with current naval capabilities. The June 2018 report is similarly  aligned with Navy assessments of Arctic capabilities and gaps contained  in its plan, The United States Navy Arctic Roadmap for 2014 to 2030 that  the Office of the Chief of Naval Operations issued in February 2014. This  plan provides guidance to prepare the Navy to respond effectively to  future Arctic Region contingencies, delineates the Navy\u2019s leadership role,  and articulates the Navy\u2019s support to achieve national priorities in the  region. At the time of our review, DOD was in the process of drafting  another report\u2014on DOD arctic capability and resource gaps\u2014as required  by section 1054 of the National Defense Authorization Act for Fiscal Year  2018. In addition, according to Navy officials, the Navy was also drafting  its Arctic Strategic Outlook, which is a follow-up to The United States  Navy Arctic Roadmap for 2014 to 2030. According to DOD and Navy  officials, both forthcoming reports will focus on contextualizing Arctic  needs within the framework of the 2018 National Defense Strategy.  Because these efforts were not complete at the time of our review, we  were unable to determine whether the Navy\u2019s June 2018 report aligns  with these assessments.\n\n\t\tReport Provides Information on Any Gaps in Naval Capabilities Requiring the Ice- Hardening of Existing Vessels or the Construction of New Vessels to Achieve DOD\u2019s Strategy\n\nReporting Element Three: The Navy was required to report on any gaps in the current  naval capabilities that require ice-hardening of existing vessels or the construction of  new vessels to preserve freedom of navigation in the Arctic region whenever and  wherever necessary.\nThe June 2018 report provides information on this required element, with  the Navy stating that there are currently no validated capability gaps that  require the Navy to ice-harden existing vessels or construct new ice- capable vessels to preserve freedom of navigation in the Arctic.  Furthermore, the Navy stated that its current assets are sufficient to  execute the 2016 DOD Arctic Strategy. As noted above, freedom of  navigation operations are undertaken to, among other things, promote  maritime stability and to challenge excessive sovereignty claims. In  addition, DOD officials stated that the United States already has options  other than Navy surface ships for demonstrating the United States\u2019  freedom to operate in the Arctic, including using Coast Guard vessels,  Navy submarines, or military aircraft.\n\n\t\tReport Provides Information on Navy\u2019s Analysis and Recommendation for Ice- Hardening Vessels to Achieve DOD\u2019s Strategy\n\nReporting Elements Four and Five: The Navy was required to provide an analysis and  recommendation of which Navy vessels could be ice-hardened to effectively preserve  freedom of navigation in the Arctic region when and where necessary, in all seasons  and weather conditions, and an analysis of any cost increases or schedule adjustments  that may result from ice-hardening existing or new Navy vessels.\nThe June 2018 report provides some information on these required  elements, with the Navy stating that it is not pursuing ice-hardening or the  winterization of surface ships. According to the Navy, because there is no  specific capability requirement for the Navy to ice-harden ships, the report  does not list or name potential ice-hardening candidates among existing  vessels or provide cost or schedule estimates for ice-hardening vessels.  Officials with the Naval Sea Systems Command, which develops cost and  schedule estimates for ship modifications and new construction, told us  that they had not conducted life-cycle cost studies for ice-hardening  existing ships because there is no capability requirement for an ice- hardened ship and, therefore, no ship design on which to base such a  study or estimate.\nFurthermore, the June 2018 report states that the Navy is leveraging  cooperative research with international partner-nations such as Canada,  Denmark, Finland, and Norway, to better understand how other Arctic  nations are meeting additional requirements for Arctic operations. Navy  officials from the Naval Sea Systems Command stated that ships built to  operate in ice and extreme cold environments have unique features,  including stronger, thicker construction of all portions of the hull that  would come into contact with ice; different hull form design; redesigned  propellers constructed of higher than traditional strength material;  increased strength ship parts, such as rudders and seawater intakes and  discharges designed to resist the formation or accumulation of ice; and  more powerful heating and ventilation to accommodate sustained  operations in extreme cold environments, among other things. They also  noted that research completed to date has advanced the Navy\u2019s  knowledge in several of these areas including hull form and propeller  design.\nNavy officials estimated that a new ship design might require 20 years to  reach initial operational capability. They noted the process might take  only 10 years if the Navy can leverage an ongoing program, such as the  DDG-51 Class program. Navy officials cautioned that the combination of  features that enable ice-capable ships to sustain operating in extreme  cold environments could compromise other performance areas such as  speed, range, and ship motion. Officials told us that this would add to the  Navy\u2019s already strained efforts to maintain existing global naval presence  requirements.\nAlthough the June 2018 report did not discuss any cost and schedule  adjustments that might arise from ice-hardening or new ship construction,  we have previously reported that the Navy has faced challenges meeting  its shipbuilding cost, schedule, and performance goals over the past  decade. Specifically, we found that the 11 lead ships most recently  delivered to the Navy cost $8 billion more to construct than initially  budgeted for. Navy officials stated that the Navy contractor construction  yards currently lack expertise in the design for construction of winterized,  ice-capable surface combatant and amphibious warfare ships.  Accordingly ice-hardening and winterization design practices could  introduce cost and schedule risk, challenging the execution of an ice- hardened new construction ship building program for an ice-capable ship.  If the Navy executes this potential program without the requisite  knowledge at key points it could be at risk of cost and schedule growth  that we have seen in recent Navy shipbuilding programs. The Navy has  faced these challenges in part because the department has proceeded  with construction prior to completing technology development and ship  design. We have found that successful ship building programs are based  on sound business cases, starting with the lead ship, and on the  attainment of critical levels of knowledge at key points in the process prior  to making significant investments.\n\n\tThe Navy Does Not Have a Capability Requirement to Ice- Harden Existing Vessels or Construct New Ones and Is Evaluating Arctic- Related Capabilities Using the Established DOD Process\n\nNavy officials said that the Navy does not currently have a specific  capability requirement for ice-hardening existing vessels or for the  construction of new ones, and stated that the Navy or Joint Force is  unlikely to produce such a requirement in the near term. Navy officials  told us that the Navy will continue to use DOD\u2019s established process, the  Joint Capabilities Integration and Development System (JCIDS), which  governs the department\u2019s requirements process, to assess Arctic-related  capability requirements in the near and long term (see fig. 5). All DOD  components use the JCIDS process or variations of the process within  their organizations to identify, assess, validate, and prioritize joint military  requirements.\nBefore starting the JCIDS process, the military services, combatant  commanders, and other DOD components conduct capabilities-based  assessments or other studies to assess capability requirements and  associated capability gaps and the associated risks. In October 2017, the  Joint Requirements Oversight Council (JROC) validated U.S. Northern  Command\u2019s initial capabilities document identifying three gaps in the  ability to exercise\/deploy, position, and conduct deterrence\/decisive  operations in ice-diminished Arctic waters. At the time of our review, the  JROC had reviewed and validated the U.S. Northern Command\u2019s Arctic  initial capabilities document and designated it for further study by the  Navy. The validation of an initial capabilities document by the JROC is  an early part of the JCIDS process, and informs updates to capability  requirement documents related to specific materiel and nonmateriel  capability solutions to be pursued.\nA Navy official stated that the capability gaps identified in the U.S.  Northern Command\u2019s validated initial capabilities document will now  compete for resources with other issues designated for study across the  Navy. According to a Navy official, whenever the Navy initiates a study,  this triggers the analysis of alternatives phase of the JCIDS process.  Under this process, each alternative would need to be specifically  evaluated for its costs and benefits. DOD officials noted that there are  several analytical steps in the JCIDS process during which potential  solutions for any identified gaps are analyzed. They told us that potential  solutions might also include alternatives other than ice-hardening or new  ship construction, such as adding capabilities to Coast Guard ships or  partnering with allies to achieve common strategic goals in the Arctic.\nEven as the seasonal ice decreases over time, according to Navy  officials, the Arctic will remain impassable for most commercial ships for  most of the year. For these reasons, projections of increased Arctic sea  activity remain uncertain. DOD, U.S. Northern Command, Navy, and  Coast Guard officials told us that even as Arctic maritime activity is  expected to increase, several enduring characteristics will continue to  provide challenges to surface navigation in the Arctic for the foreseeable  future. These challenges include large amounts of winter ice and  increased movement of ice from spring to fall. As mentioned earlier, the  increased movement of sea ice makes its location less predictable, a  situation that is likely to increase the risk that ships can become trapped  or damaged by ice impacts. Coast Guard officials noted that a  challenging environment like the Arctic may result in a higher likelihood of  incidents occurring. Further, responding to incidents with search and  rescue operations are riskier to execute than in non-polar environments.  In addition, the lack of infrastructure and logistical support in the Arctic  affects maritime activities through that region.\n\n\tAgency Comments\n\nWe are not making any recommendations in this report. We provided a  draft of our report to DOD, Department of Homeland Security, and the  Department of State for comment. DOD, Department of Homeland  Security, and Department of State provided technical comments, which  we incorporated into this report as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees. We are also sending copies to the Secretary of Defense,  Secretary of State, and the Secretary of Homeland Security. In addition,  this report will be available at no charge on our website at  http:\/\/www.gao.gov.\nIf you or your staff have questions about this report, please contact me at  (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix II.\n\nAppendix I: Organizations We Interviewed\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Suzanne Wren (Assistant  Director), Delia Zee (Analyst-in-Charge), John Beauchamp, Mae Jones,  Amie Lesser, Ned Malone, and Shahrzad Nikoo made key contributions  to this report.\n\nRelated GAO Products\n\nCoast Guard Acquisitions: Polar Icebreaker Program Needs to Address  Risks before Committing Resources. GAO-18-600. Washington, D.C.:  September 4, 2018.\nNavy Shipbuilding: Past Performance Provides Valuable Lessons for  Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018.\nCoast Guard Acquisitions: Status of Coast Guard\u2019s Heavy Polar  Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018.\nCoast Guard: Status of Polar Icebreaking Fleet Capability and  Recapitalization Plan. GAO-17-698R. Washington, D.C.: September 25,  2017.\nHigh-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.\nArctic 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.\nClimate Change Adaptation: DOD Can Improve Infrastructure Planning  and Processes to Better Account for Potential Impacts. GAO-14-446.  Washington, D.C.: May 30, 2014.\nArctic Issues: Better Direction and Management of Voluntary  Recommendations Could Enhance U.S. Arctic Council Participation.  GAO-14-435. Washington, D.C.: May 16, 2014.\nMaritime 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.\nManaging for Results: Implementation Approaches Used to Enhance  Collaboration in Interagency Groups. GAO-14-220. Washington, D.C.:  February 14, 2014.\nManaging for Results: Key Considerations for Implementing Interagency  Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September  27, 2012.\nArctic Capabilities: DOD Addressed Many Specified Reporting Elements  in Its 2011 Arctic Report but Should Take Steps to Meet Near- and Long- term Needs. GAO-12-180. Washington, D.C.: January 13, 2012.\nCoast Guard: Efforts to Identify Arctic Requirements Are Ongoing, but  More Communication about Agency Planning Efforts Would Be  Beneficial. GAO-10-870. Washington, D.C.: September 15, 2010.\nAlaska Native Villages: Limited Progress Has Been Made on Relocating  Villages Threatened by Flooding and Erosion. GAO-09-551. Washington,  D.C.: June 3, 2009.","output":"Why GAO Did This Study\n\nThe Navy is responsible for providing ready forces for current operations and contingency response in the Arctic Ocean. According to data from the National Snow and Ice Data Center, the coverage of sea ice in the Arctic has diminished significantly since 1981. This could potentially increase maritime activities there, leading to a need for a greater U.S. military and homeland security presence in the region.\nPublic Law 115-91 required the Navy to report to Congress on the Navy's capabilities in the Arctic, including any capability gaps and requirements for ice-hardened vessels. It also included a provision for GAO to review the Navy's report. This report (1) assesses the extent to which the Navy's report aligns with current assessments of Arctic threat levels and capabilities required to execute DOD's 2016 Arctic Strategy and (2) describes any current requirements for ice-hardened vessels and DOD's approach for evaluating the capabilities needed as Arctic requirements evolve.\nGAO reviewed the Navy's report along with DOD's assessments of Arctic threats and naval capabilities. GAO also reviewed the 2016 DOD Arctic Strategy\u2014 the most current strategy, DOD and Department of State information on the freedom of navigation program as well as DOD's processes for developing capabilities and assessing Arctic capability gaps.\nGAO is not making any recommendations in this report. DOD provided written technical comments which were incorporated as appropriate.\n\nWhat GAO Found\n\nThe Navy's June 2018 report aligns with Department of Defense (DOD) assessments that the Arctic is at low risk for conflict and that DOD has the capabilities to execute the 2016 DOD Arctic Strategy . The June 2018 report also aligns with assessments of Arctic capabilities and gaps in the Navy's 2014 roadmap for implementing the strategy. The June 2018 report states that the Navy can execute the strategy with subsurface, aviation, and surface assets. The report notes the significant limitations for operating surface ships in the Arctic, but states that the Navy has the capabilities required for executing the strategy , and so has no plan to design ice-hardened surface ships. In addition, DOD officials stated that the United States has options other than Navy surface ships for demonstrating the U.S. right to operate in the Arctic, including using Coast Guard vessels, Navy submarines, or military aircraft.\nNavy officials said that the Navy does not have a specific requirement for ice-hardening existing vessels or constructing new ones. The Navy plans to continue to use DOD's established process, the Joint Capabilities Integration and Development System to reassess Arctic-related requirements as conditions evolve (see fig.). In October 2017, the Joint Requirements Oversight Council validated U.S. Northern Command's initial capabilities document identifying three gaps in the ability to exercise\/deploy, position, and conduct deterrence\/decisive operations in ice-diminished Arctic waters. At the time of GAO's review, the Joint Staff had validated the capability gaps, which will now compete for resources with other issues designated for further study. Officials said additional study may identify alternative solutions such as adding capabilities to Coast Guard ships or partnering with allies to achieve common strategic goals in the Arctic."}
{"id":"gao_GAO-18-545","pid":"gao_GAO-18-545_0","input":"\tBackground\n\n\t\tNIH Institutes and Centers and Biomedical Research\n\nNIH, which had total budgetary resources of $32 billion in fiscal year  2016, is comprised of the Office of the Director and 27 institutes and  centers that focus on specific diseases, particular organs, or stages in life,  such as childhood or old age. As the central office at NIH, the Office of  the Director establishes agency policy and is responsible for overseeing  the institutes and centers to ensure that they operate in accordance with  NIH\u2019s policies. The institutes and centers accomplish their missions  primarily through extramural research programs. Most extramural  research funding is provided for investigator-initiated research projects for  which researchers, through their institutions, submit applications in  response to NIH announcements. In addition to these announcements,  the institutes and centers may issue more narrowly scoped solicitations,  through request for proposals, for research targeting specific areas.\nAll extramural research project applications are to follow NIH\u2019s process of  peer review, which includes two sequential levels of review. The first level  involves non-governmental experts assessing the scientific merit of the  proposed applications and assigning them a priority score. The second  level involves advisory councils at the institute or center associated with  the grant application, that, in addition to scientific merit, consider the  institutes\u2019 and centers\u2019 missions and strategic plan goals and public  health needs. Advisory councils review grant applications and their  scores, and, based on this review, make recommendations about which  grant applications should be awarded funding. The director of each  institute or center makes the final extramural funding decisions.\nNIH investigators also conduct research through NIH\u2019s intramural  research program. These efforts accounted for approximately 10 percent  of NIH\u2019s total budgetary resources of $32 billion in fiscal year 2016. NIH  employs about 3,600 investigators working in its own laboratories and  clinics. In addition, this research relies on another 6,000 investigators at  various stages of research training who come to NIH for a few years to  work as non-employee trainees, including about 2,500 who are  postdoctoral fellows. According to NIH officials, intramural investigators  are generally not allowed to apply for extramural or private grants,  because their salaries are funded with the agency\u2019s appropriations.\n\n\t\tCareer Path of Independent Extramural Investigators\n\nThe career path to become an independent extramural investigator  generally consists of students completing graduate level education (i.e.,  research doctorate or clinical doctorate), postdoctoral research, or  medical residency. When postdoctoral research is completed, the  researcher will generally seek opportunities to become an investigator at  a medical research center or as a faculty member at a university and  begin the process of obtaining academic tenure\u2014that is, a full-time,  permanent faculty position. Once the postdoctoral researcher becomes a  faculty member, he or she can generally begin applying for large NIH  research project grants. Some researchers may become affiliated with  other types of research institutions and also apply for grants.\nInvestigators in medical research centers and university faculty are  generally dependent on external funding to cover the cost of their  research. Although biomedical investigators may be funded by other  federal agencies\u2014such as the National Science Foundation\u2014and  nonfederal sources, studies have shown that NIH is the most likely source  of government funding for biomedical research.\n\n\t\tNIH Grants\n\nNIH\u2019s research support for extramural investigators includes research  project grants, fellowships, training grants, and career development  grants. Some of the main funding mechanisms provided to institutions by  NIH that fund investigators beginning their research careers include the  following extramural grants:\nLarge grants. NIH awards large renewable research project grants:  R01 and R01-equivalent (R01e) grants. According to NIH, in fiscal  year 2016, the average size of large grants was typically in excess of  $460,000 total. R01and R01e grants are NIH\u2019s most common type of  grant, according to NIH. They are generally the largest type of grant  available to investigators beginning their careers and, for purposes of  this report, are therefore referred to as \u201clarge\u201d grants. Large grants  provide 3 to 5 years of financial support for discrete, specified  research projects. According to NIH, it is generally expected that  within that period a project can be completed, results published, and  sufficient time will remain for the investigator to prepare a subsequent  application for a renewal or new award before funding ends.\nSmaller grants. While some non-R01 equivalent (non-R01e) grants  may match or exceed the amount of some R01e grants, they are  generally of a lesser amount and, for purposes of this report, are  therefore referred to as \u201csmaller\u201d grants. According to NIH, in fiscal  year 2016, smaller grants were, on average, amounts that ranged  from about $61,000 to about $1.1 million total. These grants provide  limited funding for a relatively short period of time to support a variety  of exploratory or developmental projects, including pilot or feasibility  studies, collection of preliminary data, and secondary analysis of  existing data.\nCareer development grants. Also known as K-series grants, these  grants are intended to provide mentored research opportunities and  career enhancement experiences to support investigators or  postdoctoral fellows at various stages of their research careers.  NIH\u2019s data show that in fiscal year 2016, career development grants  were, on average, about $178,000 total.\n\n\t\tExtramural Investigator Career Status\n\nNIH generally classifies the career status of an extramural investigator  based on whether the investigator has received a large NIH research  grant. NIH considers early career investigators to be those who meet the  definition of early stage and intermediate stage investigators. NIH also  recognizes established and \u201cother\u201d investigators among those who apply  for research grants. Table 1 lists NIH extramural investigators\u2019 career  stages and descriptions of these stages.\nAccording to NIH, it generally takes an early stage investigator up to 2  years to develop a successful application for a large grant and receive  funding. Typically, investigators devote between 6 months to 1 year to  write their first large NIH grant application. Most of these grants, with a  funding period of over 3 years, require significant preliminary data to  support the proposed hypothesis contained in the application. In addition,  the median average time elapsed for applicants to learn whether they  have been awarded a grant is 270 days, or 9 months. According to NIH,  because most investigators beginning their careers do not receive large  NIH research grants on their first attempt, these investigators might apply  for smaller grants. They may also apply for career development grants  that are intended to provide mentored research or training opportunities.\n\n\t\tConcerns Regarding the Stability and Diversity of the Biomedical Research Workforce\n\nAccording to research by the National Academies of Sciences,  Engineering, and Medicine, and others, the biomedical research  workforce is growing older at a rate that is disproportionate to the general  American labor force. Some stakeholders in the scientific community  have voiced concerns that large NIH research grants that can launch  early career investigators are often being awarded to established  investigators rather than early stage and intermediate stage investigators.  For example, a recent National Academies report pointed out that  between 1998 and 2003, the NIH budget grew from $13 billion to $27  billion, but the percentage of grants awarded to investigators who were in  the early stages of their careers steadily declined. Many in the field have  reported on the need to support investigators who are researching varied  biomedical issues in order to maximize the number of new discoveries.  Further, stakeholders within the scientific research community have  reported on the uncertain path that investigators may encounter early in  their careers and the prospect that they will ultimately pursue other career  options.\nSeveral reports have found that certain racial and ethnic groups are  underrepresented in the biomedical research workforce and in science.  These reports have also provided data on gender workforce disparities.  For example, a 2011 publication by the National Academies of Sciences,  Engineering, and Medicine showed that, in 2006, underrepresented  minorities made up about 29 percent of the U.S. population, but, in 2007,  were awarded about 5 percent of science and engineering doctorates.  Other studies have shown significant research funding disparities for  investigators from underrepresented groups that apply to NIH for large  research grants, such as R01 grants. In 2011, NIH funded a study that  examined the association between grant recipients and the applicants\u2019  race and ethnicity. The study found that R01 applicants that self-identified  as African American were 13 percentage points less likely than white  applicants to receive these grants. After controlling for other variables\u2014 including educational background, training, previous research grants, and  publication record\u2014African American applicants were 10 percentage  points less likely to be awarded such a grant than a white applicant.  Further, while women comprise about half of the postdoctoral graduates  for the biological sciences in the United States, studies have shown a  disparity in the number of female investigators in senior science research  positions at universities. This disparity may result in a smaller number of  female investigators among NIH grant applicants and may further  contribute to their underrepresentation in certain facets of science.  However, we previously reported that once female investigators apply for  NIH grants, their likelihood of receiving NIH grants is the same as their  male counterparts.\n\n\tNIH Has Promoted Efforts to Support Early and Intermediate Stage Investigators, but Those Who Have Not Yet Received a Large NIH Research Grant Remain Less Competitive\n\n\t\tNIH Has Promoted Programs and Policies to Support Early and Intermediate Stage Extramural Investigators, but It Is Too Early to Assess Its Most Recent Initiative\n\nOver the last 10 years, NIH has introduced programs and policies to  support extramural investigators competing for their first large NIH  research grant that leads to research independence. NIH developed  certain programs to fund extramural researchers with the goal of  stabilizing the biomedical research workforce. These targeted programs  were intended to promote support for extramural investigators that had  not yet received a large NIH research grant. The various programs  include both large and smaller research grants, career development  grants, and student loan repayments. Of particular note are the NIH  Director\u2019s New Innovator Award, which is intended to support  investigators beginning their research careers with reviewer-determined  highly novel research; and the Director\u2019s Early Independence Award,  which is intended to support reviewer-determined exceptional  investigators who wish to pursue independent research directly, forgoing  the traditional postdoctoral training period. In addition, the Pathway to  Independence Award provides investigators beginning their research  careers with a mentored research experience, which may lead to  independent research positions.\nSome institutes and centers have established their own programs to  support investigators beginning their research careers. For example, a  subset of the National Institute of General Medical Sciences\u2019 \u201cMaximizing  Investigators\u2019 Research Award program\u201d targets funding for laboratories  led by an early stage investigator. In addition, the National Institute of  Arthritis and Musculoskeletal and Skin Diseases\u2019 \u201cSupplements to  Advance Research from Projects to Programs,\u201d supports intermediate  stage investigators by providing supplemental funding to existing  research projects to encourage broader innovation and exploration of  high-risk ideas.\nIn addition, NIH\u2019s LRP is designed to help recruit and retain highly  qualified individuals into biomedical research careers. This program  provides student loan repayments in return for a commitment to engage  in NIH mission-relevant and certain statutorily-defined approved  research. We examined the funding rates of early stage and  intermediate stage extramural and intramural investigators who applied  for both initial and renewal LRP payments.\nLRP payments to extramural investigators: The LRP funding  rate (awardees\/applicants) for extramural investigators applying  for total (both initial and renewal) payments between fiscal years  2013 through 2017 was about 50 percent. During this period,  8,186 extramural investigators applied for initial LRP payments  and 3,206 received them; 5,131 extramural investigators applied  for renewal payments and 3,426 received them. Therefore, the  funding rates were 39 percent for initial applicants and 67 percent  for renewal applicants. Early stage and intermediate stage  investigators had similar funding rates in receiving LRP payments  during the 5-year period, though there was some variation each  year. Early stage and intermediate stage investigators seeking  initial LRP payments had funding rates of about 40 percent and 35  percent, respectively. Both of these categories of investigators  seeking renewal LRP payments had a funding rate of 67 percent.\nLRP payments to intramural investigators: The LRP funding  rate (awardees\/applicants) for intramural investigators applying for total (both initial and renewal) LRP payments from fiscal years  2013 through 2017 was about 87 percent; 397 intramural  investigators applied for both initial and renewal LRP payments,  and NIH funded 345 of the applicants. The funding rate for  applicants seeking initial LRP payments during this 5-year period  was about 83 percent, whereas the funding rate for those applying  to renewal LRP payments was 90 percent.\nNIH also implemented policies to improve opportunities for early and  intermediate stage extramural investigators. For example, to address the  concerns about established investigators receiving a disproportionate  share of research funds, NIH established its Early Stage Investigator  Priority Policy in 2008. The policy specified that early stage investigator  status would be considered a factor when applications were being  selected for award. Studies have shown that under the Early Stage  Investigator Priority Policy, grants being awarded to early stage  investigators stopped declining and remained flat for several years. They  also showed that the field of biomedical research continued to be very  competitive for early stage investigators.\nHowever, some have expressed concern that these accomplishments are  not sufficient. For example, according to a recent report by the National  Academies of Sciences, Engineering, and Medicine, a variety of steps  have been taken over the years to address the challenges facing early  and intermediate stage investigators, but these efforts have not resolved  the underlying problems that make it difficult for them to establish their  careers.\nMore recently, the Cures Act required that NIH implement the NGRI,  which the agency established in August 2017. NIH\u2019s Office of the  Director, which oversees the initiative and its implementation, directed the  NIH institutes and centers to reprioritize large NIH research grant support  for early stage and intermediate stage investigators. The policy\u2019s stated  goal for fiscal year 2017 was to increase the number of large NIH  research grants provided to both early stage investigators and  intermediate stage investigators by 200 grants each compared to the  number that were awarded in fiscal year 2016. These 400 grants would  redirect approximately $210 million from NIH\u2019s base budget to support  additional early career investigators in the first year of NGRI\u2019s  implementation. However, with only one month to implement the policy,  NIH did not meet this goal. From fiscal year 2016 to fiscal year 2017, the  number of large NIH research grants awarded increased by 57 for early  stage investigators and decreased by 2 for intermediate stage  investigators. Similarly, the goal to increase funding for the additional 400  grants was not met; funding increased by about $107 million during this  period. Given that this initiative is in the early stages and its goals were  set late in fiscal year 2017, it is too early to fully assess the impact of this  effort.\nAccording to NIH officials, the agency is in the process of reevaluating  which investigators should be the focus of the NGRI initiative and may  revise the program to include investigators whose careers are more  advanced. NIH officials stated that the NGRI policy\u2019s intention to direct  more research funding to early stage investigators will remain in place.  However, NIH\u2019s NGRI Working Group no longer designates intermediate  stage investigators\u2014or what it calls \u201cearly established investigators\u201d\u2014as  a distinct group. NIH\u2019s current definition\u2014that of being within 10 years of  receiving a first large NIH research grant as an early stage investigator\u2014 includes investigators who could have completed their graduate level  education (i.e., research doctorate or clinical doctorate), postdoctoral  research, or medical residency between 15 and 20 years ago. According  to NIH officials, NIH\u2019s working group is considering broadening this  definition even further. It is concerned that intermediate stage  investigators, facing increasing pressure to secure additional sources of  research funding to prevent the closure of their laboratories if their first  large NIH research grant is not renewed, could lose all NIH support and  become likely to leave the biomedical research workforce. Therefore, the  working group is considering a different approach for all established  investigators, with a focus on all meritorious investigators (regardless of  career stage) who are doing high quality research, yet are still at risk for  losing all NIH funding. Specifically, NIH officials said the working group  plans to reevaluate ways that it can provide additional, prioritized support  to these investigators in order to further their career trajectories. The  working group may recommend to NIH that the NGRI be expanded to  also target support for certain investigators whose careers are in more  advanced stages, rather than just those in the early stages of their  careers.\nIn addition, NIH has not yet implemented the expansion of its LRP as  directed by the Cures Act. The Cures Act amended the LRP by  increasing the eligible annual loan repayment amount from a maximum of  $35,000 to a maximum of $50,000. The act also gave the NIH Director  the discretion to amend the research categories that are eligible for  intramural or extramural loan repayment based on emerging scientific  priorities or workforce needs. The agency has established a working  group to provide recommendations to the NIH Director regarding any  suggested structural changes and associated timelines for  implementation. NIH officials told us that they are awaiting  recommendations from this working group on how to use the agency\u2019s  new authorities. They said that they expect to implement program  changes to the LRP, as permitted by the Cures Act, by fiscal year 2020.\n\n\t\tInvestigators Who Had Received at Least One Large NIH Grant Had Higher Funding Rates for All Grant Types Compared to Those Who Had Not\n\nOur analysis shows that intermediate stage investigators are more  successful at competing for grants than early stage investigators. Our  examination of the trends of NIH grant data showed that the applicant  funding rates (awardees\/applicants) for investigators who had previously  received an initial large NIH research grant was greater than the applicant  funding rates for investigators who had never received such a grant. We  analyzed 5 years of grant data to determine an overall perspective of  funding rates from fiscal years 2013 through 2017. We found that  intermediate stage and established investigators\u2014groups comprised of  investigators who had already received their first large grant award\u2014had  greater applicant funding rates for all three grant types compared to early  stage and other investigators. For example, we found that in fiscal year  2017, the most recent year for which data were available, intermediate  stage investigators had funding rates that were comparable to those of  established investigators. Investigators that had not yet been awarded  their first large NIH research grant\u2014early stage investigators and other  investigators\u2014were not as successful when competing for large NIH  research grants, small grants, or career development grants. (See table  2.)\nWe also found that over time\u2014from fiscal years 2013 through 2017\u2014 intermediate stage investigators and established investigators had greater  applicant funding rates for all three grant types compared to early stage  and other investigators. Of the investigators that had not yet been  awarded their first large NIH research grant, early stage investigators  were more successful in competing for NIH grants than the other  investigators that were outside of the 10-year period of having completed  their graduate level education (i.e., research doctorate or clinical  doctorate), postdoctoral research, or medical residency. For instance, we  found that early stage investigator funding rates ranged from about 5 to  11 percentage points lower than intermediate stage or established  investigators for each of the five fiscal years examined. Similarly, other  investigator funding rates ranged from about 12 to 14 percentage points  lower than intermediate stage or established investigators for each of the  five fiscal years examined. (See fig. 1.)\nFinally, we found that during this 5-year period, two of the four extramural  investigator groups were more likely to receive large, small, and career  development grants than the other two groups. Specifically, investigators  beginning their research careers\u2014the early stage and intermediate stage  investigators\u2014were more likely to receive these grants. Although early  stage investigators were more likely than intermediate stage investigators  to apply for smaller research grants (about 4,500 applicants compared to  about 2,000 applicants, respectively) and career development grants  (about 2,000 applicants compared to about 50 applicants, respectively),  intermediate stage investigators were still more successful in competing  for these grants, as well as the large NIH research grants. For more  information on the trends in the number of grants awarded to early stage  and intermediate stage investigators, by award type, for fiscal years 2013  through 2017, see appendix I.\n\n\tNIH Has Taken Steps to Support a Diverse Scientific Workforce, but Disparities Persist and Its Diversity Efforts Have Not Been Fully Evaluated\n\n\t\tNIH Established Working Groups and Programs to Support Investigators from Underrepresented Groups\n\nOver the last 7 years, NIH established advisory groups and other  programs to determine how best to support extramural and intramural  investigators from underrepresented groups.  NIH\u2019s Working Group on  Diversity in the Biomedical Research Workforce was established in  response to the 2011 NIH study that examined the association between  R01 grant recipients and the applicants\u2019 race and ethnicity. NIH directed the group to provide recommendations to improve retention of  underrepresented minorities, the disabled, and scientists from  disadvantaged backgrounds. In June 2012, the working group issued 13  recommendations, which, we found that NIH uses as the foundation of  some NIH-wide efforts to diversify the extramural and intramural  biomedical research workforce. Other advisory groups that have  examined or are currently examining related topics include the following:\nNIH Working Group on Women in Biomedical Careers was  established in 2007 in response to a report from the National  Academies of Sciences, Engineering, and Medicine on barriers  women in biomedical science experience in advancing their careers.  It produced a workshop and report in 2008 on best practices for  sustaining the careers of women in biomedical research;\nAddressing Gender Inequality in the NIH Intramural Research  Program Action Task Force was established in 2016 in response to  data showing women are underrepresented in top NIH research  positions. It produced recommendations in 2017 aimed at ensuring  that female and male investigators have equal opportunities in the  intramural research program at NIH, among other things; and\nAfrican-American\/Black R01 Funding Disparities Working Group was  established in response to the 2011 NIH study that found a funding  disparity between blacks and whites applying for R01 grants. This  group analyzed data on the funding rates of applicants that self- identify as African American or black compared to other racial  groups.\nNIH has acted on some of the advisory groups\u2019 recommendations. For  example, in response to recommendations made by the Diversity in the  Biomedical Research Workforce advisory group, the agency hired a Chief  Officer of Scientific Workforce Diversity in 2014; implemented the three- tiered Diversity Program Consortium, which includes the Building  Infrastructure Leading to Diversity program, the National Research  Mentoring Network, and the Coordination and Evaluation Center; and  established a permanent advisory group on diversity. NIH also  developed a \u201ctoolkit\u201d that includes training modules to educate intramural  investigator search committee members on biases that can lead to a less  diverse workforce, among other things. In fiscal year 2017, NIH created  an Equity Committee to address recommendations made by the  Addressing Gender Inequality in the NIH Intramural Research Program  Action Task Force to further examine concerns about parity between  male and female intramural investigators and other diversity issues.\nOther NIH-wide policies and programs may also help to attract, retain,  and develop investigators from underrepresented groups. The 24 NIH  institutes and centers that fund research and the Office of the Director  provide funds for its investigators, called research supplements, to recruit  graduate students, postdoctoral fellows, and others from  underrepresented racial and ethnic groups, as well as those with  disabilities and from economically disadvantaged backgrounds. These  funds provide graduate students, postdoctoral fellows, and others an  opportunity to conduct research and be mentored by an investigator  supported by the specific NIH institute or center or office. Some  stakeholders we interviewed said that the agency\u2019s LRP also may help to  retain investigators from underrepresented groups, noting that the student  loan debt for African American or black graduate students is higher than  that of white graduate students. Physicians from a professional  organization we interviewed said that the LRP helps to attract physician  scientists from underrepresented groups into research careers.  Physicians we interviewed stressed the importance of the LRP to attract  physician scientists into research careers, because these scientists often  have significant medical school debt. Our analysis of extramural LRP data  showed that, in 2017, African Americans or black, non-Hispanics had a  funding rate of about 34 percent for receiving an LRP payment. White,  non-Hispanic applicants had a funding rate for receiving an LRP payment  of about 52 percent. More recently, the National Academies of  Sciences, Engineering, and Medicine recommended that NIH make the  LRP available to all individuals pursuing biomedical physician-scientist  researcher careers, regardless of their research area or clinical specialty.  They also suggested NIH increase the monetary value of loan repayment  to reflect the debt burden of current medical trainees. Some  stakeholders said that NIH\u2019s family friendly policies, such as  reimbursement for child care expenses and parental leave, may also help  address work-life balance issues for female investigators that may  otherwise forego some research duties to care for young children.\nAdditionally, many\u2014at least 17 of 27\u2014of NIH\u2019s institutes and centers  have established their own policies and programs to attract, retain, and  develop investigators from underrepresented groups. For example, the  National Cancer Institute initiated the Continuing Umbrella of Research  Experiences program to provide training and career development  opportunities to enhance and increase diversity in the cancer research  workforce. This program offers research opportunities and development  to future and current scientists from underrepresented groups from middle  school students to investigators who have yet to achieve research  independence.\n\n\t\tNIH Research Funding and Workforce Data Shows that Disparities Persist for Underrepresented Groups\n\nAlthough NIH has implemented numerous diversity-related efforts, our  analysis of NIH research grant funding and intramural workforce data  from fiscal years 2013 through 2017 shows that some disparities persist  for investigators from underrepresented racial and ethnic groups, and for  female investigators.\n\n\t\t\tNIH Research Grant Applicants\n\nOur analysis of NIH data shows that investigators from underrepresented  racial and ethnic groups comprise a small percentage of applicants. For  example, in fiscal year 2017, applicants from underrepresented racial  groups\u2014that is, American Indian or Alaskan Native, African American or  black, and Native Hawaiians and Pacific Islanders\u2014were 0.2 percent, 1.8  percent, and 0.1 percent, respectively, of all applicants for large NIH  research grants. Applicants from underrepresented ethnic groups\u2014 Hispanics or Latinos\u2014 comprised 4.3 percent of the applicants for large  NIH research grants. (See table 3.) In contrast, white applicants were  about 64 percent of all applicants for large NIH grants in fiscal year 2017.  Investigators from underrepresented racial and ethnic groups also  comprise a smaller number of applicants than other groups for smaller  NIH grants and career development grants.\nAmong grant applicants from underrepresented racial groups, African  American or black applicants were consistently the largest group  represented. For example, in 2017, among underrepresented racial  groups, African American or black applicants were named as  investigators on about 88 percent of applications for large NIH research  grants, about 89 percent of applications for smaller NIH grants, and about 92 percent of career development grant applications. Hispanics and  Latinos were about 5 percent of applicants for smaller NIH grants and  about 6 percent of applicants for career development grants in 2017.\nAccording to data published by the National Science Foundation in 2017,  women represent slightly more than half of all doctorates in biological  sciences. However, from 2013 through 2017, women represented less  than one-quarter of all tenured NIH intramural investigators. For  example, in 2017, 191, (23 percent) of NIH\u2019s 822 intramural tenured  investigators were women. In addition, in 2017, 79, (37 percent), of NIH\u2019s  211 tenure-track intramural investigators were women. Further, in fiscal  years 2013 through 2017, nearly one-third of all extramural investigators  that applied for large grants were women. (See table 4.) Nearly one-third  of all applicants for smaller research grants, and close to half of all  applicants for NIH career development grants, were women. (See app. II  for information on the number of smaller and career development grant  applicants by racial and ethnic groups and gender.)\nStakeholders from 8 of the 12 entities we interviewed suggested potential  reasons why the number of NIH research grant applicants among  underrepresented racial and ethnic groups and for women may be limited.  Attrition of biomedical science doctoral students and early career  investigators from these groups is one explanation. Some stakeholders  said that, while in graduate school, students from these groups may be  discouraged from pursuing a biomedical research career as a result of  implicit bias that they encountered with their mentors. Some stakeholders  said lower numbers among women investigators is the result of decisions  of some to start a family in the early stages of their careers, and further  noted the difficulty in re-entering the biomedical research workforce. In  addition, some stakeholders said that students from underrepresented  groups may lack exposure to a sufficiently rigorous education in  mathematics or the sciences prior to entering college, resulting in the low  numbers of biomedical researchers from these groups. Others said the  low numbers of investigators from these groups makes studying this issue  difficult due to a small sample size. Additional administrative demands  placed on individuals who pursue careers as investigators also affect the  number of applicants. For example, some stakeholders said that once  investigators from an underrepresented group attain faculty positions\u2014 particularly if there are few faculty members from such groups\u2014they are  frequently tasked with additional administrative duties. We were told that,  often, they are selected because they may be one of a handful of  members of underrepresented groups at some institutions. Their  additional duties include participation on institutional committees as well  as mentoring, particularly undergraduate or graduate students from  underrepresented groups. In addition, representatives of one stakeholder  group said that some research faculty from underrepresented groups feel  additional pressure to participate in such activities, because their absence  would be more apparent and they worry that this may adversely affect  them. Stakeholders also told us that additional duties are time consuming  and leave less time to devote to applying for grant funding. They said that  some biomedical graduate students from underrepresented groups  decide to pursue other fields, because of the competing demands  associated with being an academic, such as grant writing and teaching  responsibilities.\n\n\t\t\tNIH Research Grant Applicant Funding Rates\n\nOur analysis of NIH data from fiscal years 2013 through 2017 also shows  that the funding rate for applicants from underrepresented racial groups  applying for large and small NIH grants lags behind that of white  applicants. For example, in fiscal year 2017, the applicant funding rate for  large grants was about 17 percent for underrepresented racial groups and  about 24 percent for Hispanics and Latinos. The funding rate for white  applicants was about 27 percent. (See fig.2.)\nAmong underrepresented racial groups, African American or black  applicants consistently had a lower funding rate for large and smaller  grants than well represented groups during this period (see table 5).\nThe applicant funding rate for career development grants for  underrepresented racial groups increased from about 22 percent to about  32 percent from fiscal years 2013 to 2017, and, for Hispanic and Latino  applicants, from about 30 percent to about 36 percent during the same  period. The applicant funding rate was about 34 percent for white  applicants throughout this period.\nThe large grant funding rate for female investigators was slightly lower  than male investigators. (See fig. 3.)\nWhen looking exclusively at R01 grants, as opposed to all large grants,  research has shown that women are less likely to have their initial R01  grant renewed. Our analysis of R01 grant renewal funding showed that,  in fiscal year 2017, the R01 grant renewal funding rate for female  applicants was about 31 percent compared to about 38 percent for male  applicants. (See fig 4.) According to research by NIH, some applicants  that are unsuccessful in obtaining an initial R01 grant may have greater  success if they reapply; however, some stakeholders we interviewed said  women, and some underrepresented racial groups, are less likely to  reapply for an initial R01 grant if they are unsuccessful with their first  attempt. (See app. III for information on the applicant funding rates for  smaller grants and career development grants by gender.)\nMany stakeholders attributed the underrepresented groups\u2019 lower funding  rates to two factors. First, many stakeholders cited a perceived implicit  bias within the peer review process, which they said may affect the  funding rates for investigators from underrepresented racial and ethnic  groups. They stressed that, many times, peer reviewers approve grants  for investigators from top tier institutions that they are familiar with and  are reluctant to provide high scores to grant applications from other  institutions. Some stakeholders advocated for anonymizing grant  applications to some extent to address this issue. NIH\u2019s Center for  Scientific Review\u2014the center responsible for organizing peer reviews for  grants\u2014is conducting a study that anonymizes certain large grant  applications, and a training module on implicit bias is currently being  offered to NIH peer reviewers. In addition, NIH\u2019s African American\/Black  R01 Funding Disparities Working Group has conducted an analysis on  the R01 funding disparities for African American or black applicants from  fiscal years 2010 through 2015, and is currently pursuing several efforts  to address its findings. Lower grant application priority scores and  application resubmission rates among African American or black  applicants were among their findings. The working group is also pursuing  a randomized control trial to assess the effect of mentoring and coaching  on R01 resubmissions and award rates. Second, some stakeholders told  us that only a very small percentage of biomedical science professors at  top tier research schools are from underrepresented racial or ethnic  groups. Some stakeholders suggested that many investigators from  underrepresented groups seeking grants are affiliated with institutions  outside of the top tier that may lack the infrastructure, grant writing  support, and mentoring opportunities, which could help ensure their  success. As a consequence, many investigators from underrepresented  groups are at a disadvantage compared to their peers at top tier  institutions, according to the stakeholders we interviewed.\n\n\t\tThe Effect of NIH\u2019s Efforts to Strengthen Diversity Is Unclear; Assessments of Some Targeted Efforts Are Incomplete, and Strategic Goals Lack Quantitative Metrics and Time Frames\n\nAlthough NIH has taken steps to address concerns about the diversity of  the biomedical research workforce, its accomplishments have not been  fully evaluated.\n\n\t\t\tStakeholders Reported Mixed Views on NIH\u2019s Efforts to Strengthen Diversity\n\nPositive comments from some stakeholders we interviewed included  praise for the steps NIH has taken to diversify the biomedical research  workforce, the value of the National Research Mentoring Network, and  the research supplements and other training grants offered by NIH\u2019s  centers and institutes, which provide opportunities for students and  postdoctoral fellows from underrepresented groups to work with  established investigators. NIH\u2019s support of conferences and programs,  such as the Annual Biomedical Research Conference for Minority  Students and the Institutional Research and Academic Career  Development Award, was also well regarded by stakeholders. They also  noted NIH\u2019s commitment to diversity and willingness to investigate  diversity issues through advisory groups, and commended the agency on  working to address recommendations from the Working Group on  Diversity in the Biomedical Research Workforce, including hiring a Chief  Officer of Scientific Workforce Diversity. Some stakeholders were actively  engaged in working with NIH on diversity issues. For example, some  physicians from an organization we interviewed said they are working  with the National Institutes on Minority Health and Health Disparities on  issues related to research workforce diversity.\nStakeholders, though, also offered less favorable views and characterized  NIH\u2019s efforts as stagnant, ineffective, or in need of better coordination.  For example, some stakeholders  suggested that for NIH\u2019s National Research Mentoring Network, the  matching of mentees to mentors could be improved or mentioned  uncertainty about the program; questioned how often research supplements are utilized, or noted that  better mentoring and follow-up after the postdoctoral fellow\u2019s work is  completed is warranted;  reported that while their organizations initially collaborated with the  scientific workforce diversity office, that office is not very active or  communication eventually dissipated; expressed concern about NIH\u2019s outreach to minority serving  institutions and organizations, such as historically black colleges and  universities, when it began creating programs like the Building  Infrastructure Leading to Diversity program and the National Research  Mentoring Network and for other efforts; and  stressed that NIH should collaborate more with organizations that  represent underrepresented groups, which have already implemented  programs shown to be effective in engaging these communities in  biomedical research.\n\n\t\t\tMultiple Assessments of Targeted Diversity Efforts Are Ongoing\n\nAccording to NIH officials, evaluations of various NIH efforts are ongoing  and have not been completed. Some examples include the following:\nData collection and analysis by the Diversity Program Consortium\u2019s  Coordination and Evaluation Center began in 2017, and is ongoing.\nIn 2017, NIH\u2019s Center for Scientific Review began conducting a study  to anonymize R01 grant applications from African American or black  and white applicants to detect potential reviewer bias during peer  review. The results of this study are expected in 2019.\nAn evaluation of the National Cancer Institute\u2019s Continuing Umbrella  of Research Experiences program, which provides training and career  development opportunities to enhance diversity in the cancer research  workforce, was submitted for publication in a scientific journal and is  currently pending review.\nSome NIH institutes and centers have conducted evaluations of their  specific diversity efforts. For example, in 2015, the National Institute of  General Medical Sciences analyzed the research supplements provided  to graduate students and postdoctoral fellows from underrepresented  racial and ethnic groups between 1989 and 2006. The study found that  about 65 percent of graduate students and postdoctoral fellows supported  by the program entered research careers in academia, industry, and  government research. About 41 percent of doctoral graduates and 45  percent of postdoctoral fellows supported by this program entered careers  in academic research or teaching compared to about 43 percent of the  U.S. doctoral degree workforce. In 2011, the National Institute on Aging  evaluated its research supplement program and found that the NIH  research grant applicant success rate of former participants from 2002 to  2010 was about 21 percent. The average research grant success rate for  National Institute on Aging grants was about 18 percent during this same  period.\n\n\t\t\tNIH Has Developed a Scientific Workforce Diversity Strategic Plan, but It Does Not Include Quantitative Metrics or Time Frames to Assess the Progress of Its Strategic Goals\n\nIn 2016, NIH\u2019s Chief Officer of Scientific Workforce Diversity established a  5-year strategic plan that describes the agency\u2019s five workforce diversity  goals and supporting objectives. The strategic plan includes goals and  objectives that apply to both extramural and intramural investigators.  During the course of our audit work, NIH updated this plan to describe  progress made on each of its diversity goals, which are to: expand scientific workforce diversity as a field of inquiry, build and implement evidence related to diversity outcomes, understand the role of sociocultural factors in biomedical recruitment  sustain nationwide workforce diversity with seamless career  transitions, and promote the value of scientific workforce diversity.\nNIH officials provided us with performance measures that its scientific  workforce diversity office will use to gauge the agency\u2019s progress in  achieving each of its five strategic plan\u2019s goals. However, these items  outline the particular areas that NIH plans to evaluate, rather than provide  quantitative metrics, evaluation details, or time frames associated with  any of the areas by which to evaluate progress in fulfilling the goals of the  strategic plan. For example, for the first scientific workforce diversity goal  \u201cexpand scientific workforce diversity as a field of inquiry\u201d one of the  performance measures is \u201cnumber of publications stored in the scientific  workforce diversity office\u2019s online database.\u201d Neither the strategic plan  nor the additional documentation that NIH provided specifies a  quantitative metric for the number of publications to be stored in its  database and the time frame for doing so. Similarly, for the second  scientific workforce diversity goal, to \u201cbuild and implement evidence  related to diversity outcomes\u201d one of the performance measures identified  by NIH is to compare the large grants awarded to African American or  black scientists to those received by scientists who are white or from  other racial and ethnic groups. However, there is no description in either  the strategic plan or the additional documentation provided by NIH that  indicates how and when these comparisons will be made, how the results  of these comparisons will be assessed, and what will be considered as  fulfilling this goal. All of the other areas or \u201cperformance measures\u201d  associated with each of the five goals also do not include such details or  time frames. According to documentation provided by NIH its strategic  plan does not explicitly list \u201cspecific metrics\u201d because they will be defined  within \u201cthe implementation phase of the plan.\u201d However we are at the  midpoint of the implementation of NIH\u2019s 5-year plan, which covers the  period of 2016 through 2020. As of May 2018, these specific metrics were  not yet available.\nWithout quantitative metrics, evaluation details, or time frames for  assessing the agency\u2019s performance against the five goals in its strategic  plan, NIH will be unable to hold itself accountable for fulfilling its goals.  This is inconsistent with best practices for strategic workforce planning,  which call for agencies to monitor and evaluate their progress toward their  human capital goals. These best practices also call for performance  metrics to be specified at the outset to avoid a biased determination of  what counts as \u201csuccess\u201d after the results are known. Further, this is  inconsistent with federal internal control standards for monitoring, which  require that an agency evaluate and document the results of ongoing  monitoring to determine whether its management strategies are  effectively supporting its objectives, or need corrective action. NIH\u2019s  establishment of goals and associated areas of future evaluation are  positive steps, but absent specific measures by which to hold itself  accountable, the agency will not have a basis to judge its success.\n\n\tConclusions\n\nNIH\u2019s ability to fulfill its mission of advancing scientific knowledge and  innovation to enhance health, lengthen life, and reduce illness and  disability is dependent on its success in sustaining a thriving and diverse  workforce. For decades, concerns have been raised by the biomedical  research community about NIH\u2019s ability to support investigators beginning  their research careers. Similar concerns have been expressed regarding  support for investigators from groups underrepresented in the sciences,  including those from racial and ethnic groups and women. While the  agency has taken many steps during this time, disparities in its research  grant funding persist. NIH has conducted some evaluations of individual  programs and activities, but these have been relatively narrow in focus  and the results of many efforts are not yet available. More recently, NIH  has taken positive steps such as by establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn, created a strategic  workforce diversity plan and related goals and identified areas of future  evaluation. However, NIH does not have quantitative metrics, evaluation  details, and time frames to assess its progress in meeting its strategic  workforce diversity goals. Without these elements, NIH\u2019s ability to assess  how its diversity strategic plan goals are being achieved is hindered.  Thus, NIH is missing an opportunity to better position itself to support  underrepresented groups and address longstanding disparities.\n\n\tRecommendation for Executive Action\n\nThe NIH Director should develop quantitative metrics, evaluation details,  and specific time frames to assess its current efforts to support  investigators from underrepresented groups against its scientific  workforce diversity strategic goals, and use the results of its assessment  to guide any further actions. (Recommendation 1)\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS for comment. In its written  comments, which are reproduced in appendix IV, HHS concurred with our  recommendation and outlined the steps NIH is taking to implement it.  Notably, for example, HHS indicated that NIH is establishing time frames  to assess its progress in meeting its workforce diversity goals. HHS also  provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees and the Secretary of Health and Human Services. In addition,  the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-7114 or crossem@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V.\n\nAppendix I: Trends in the Number of Grants Awarded to Early Career Extramural Investigators by Award Type, for Fiscal Years 2013 through 2017\n\nTable 6 provides details on the number of grants awarded, number of  awardees and award type for early stage and intermediate stage  investigators from fiscal year 2013 through fiscal year 2017.\n\nAppendix II: Total Number of Applicants for Smaller Grants and Career Development Grants for Fiscal Years 2013 through 2017\n\nTables 7 through 10 provide details on the demographics of NIH grant  applicants during fiscal years 2013 through 2017.\n\nAppendix III: Applicant Funding Rates for Smaller Grants and Career Development Grants for Fiscal Years 2013 through 2017\n\nFigures 5 and 6 provide details on the demographics of NIH grant  applicants during fiscal years 2013 through 2017.\n\nAppendix IV: Comments from the Department of Health and Human Services\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact above, Geri Redican-Bigott (Assistant Director),  Carolina Morgan (Analyst-in-Charge), Jackie Hamilton, Toni Harrison,  and Drew Long made key contributions to this report. Muriel Brown,  Giselle Hicks, and Hayden Huang also made contributions to this report.","output":"Why GAO Did This Study\n\nNIH's success depends on its ability to attract, retain, develop, and otherwise support biomedical investigators\u2014including those employed in its intramural research program as well as those working in its extramural program at universities, academic health centers, and other research institutions. For decades, the agency has faced challenges in supporting early career investigators and those from underrepresented groups, including ethnic and racial minorities and women. The 21st Century Cures Act included provisions that NIH coordinate policies and programs to promote early research independence and enhance the diversity of the scientific workforce.\nThe act also contained a provision that GAO examine NIH's efforts. GAO reviewed the actions NIH has taken to support (1) investigators beginning their biomedical careers; and (2) investigators from underrepresented groups and women. GAO analyzed NIH data from fiscal years 2013 through 2017 on grant funding for investigators by career phase and demographic status. GAO also reviewed relevant laws and NIH policies, programs, and initiatives, and interviewed NIH officials and stakeholders from the scientific research community.\n\nWhat GAO Found\n\nThe National Institutes of Health (NIH), within the Department of Health and Human Services (HHS), plays a prominent role in the nation's biomedical research. While it employs investigators in its intramural research program, over 80 percent of its budget supports its extramural program, primarily through grant funding to investigators at other research institutions. Given this, NIH has a vested interest in supporting a robust national biomedical workforce, but the agency has acknowledged that the environment is highly competitive and many investigators find that it takes years to obtain the type and amount of funding that typically spurs research independence. GAO's analysis found that extramural investigators who had received at least one large NIH research grant during fiscal years 2013 through 2017 were more likely to receive such grants in subsequent application cycles than investigators who had not yet received such grants. In response to the 21st Century Cures Act, enacted in December 2016, NIH introduced an initiative to prioritize these grants for (1) early stage investigators, who are beginning their careers and have never received a large research grant, and (2) intermediate stage investigators, who are within 10 years of receiving their first large grant as an early stage investigator. However, it is too early to assess this new initiative, which was introduced in August 2017. NIH is currently considering revising the program to include investigators whose careers are more advanced.\nNIH implemented recommendations made by internal advisory bodies to support investigators from racial and ethnic groups considered by NIH to be underrepresented in biomedical research. GAO's analysis shows disparities for underrepresented racial and ethnic groups, and for female investigators, from 2013 through 2017. For example, in 2017, about 17 percent of investigators from underrepresented racial groups\u2014African Americans, American Indians\/Alaska Natives, and Native Hawaiian\/Pacific Islanders combined\u2014who applied for large grants received them. In contrast, about 24 percent of Hispanic or Latino applicants, an underrepresented ethnic group, received such grants. Asians and whites\u2014well represented groups\u2014were successful in receiving large grants about 24 and 27 percent of the time, respectively. Though women represent about half of all doctorates in biological science, GAO found that women investigators employed by NIH in its intramural program comprised about one-quarter of tenured investigators. NIH has taken positive steps such as establishing the position of Chief Officer of Scientific Workforce Diversity, who in turn created a strategic workforce diversity plan, which applies to both extramural and intramural investigators. The plan includes five broad goals for expanding and supporting these investigators. However, NIH has not developed quantitative metrics, evaluation details, or specific time frames by which it could measure the agency's progress against these goals.\n\nWhat GAO Recommends\n\nThe Director of NIH should develop quantitative metrics, evaluation details, and time frames to assess NIH's efforts to diversify its scientific workforce against its diversity strategic plan goals, and take action as needed. HHS agreed with GAO's recommendation."}
{"id":"gao_GAO-18-266","pid":"gao_GAO-18-266_0","input":"\tBackground\n\nThe Settlement Act, enacted on December 22, 1974, was intended to  provide for the final settlement of a land dispute between the Navajo and  Hopi tribes that originated nearly a century ago. The 1882 Executive  Order, signed by President Chester Arthur, set aside approximately 2.5  million acres of land for the Hopi and \u201csuch other Indians as the Secretary  of the Interior may see fit to settle thereon.\u201d Since that time, the Navajo  and Hopi tribes have disputed the rights and occupancy of the lands. In a  1962 court case, Healing v Jones, the Hopi tribe claimed exclusive rights  to the entire reservation, and the Navajo claimed exclusive rights to about  80 percent of the reservation. In 1963, the U.S. Supreme Court affirmed  an Arizona District Court decision that set aside about 631,000 acres of  the land\u2014known as District Six\u2014as exclusively Hopi and designated the  remaining about 1.9 million acres as a joint use area, to be managed and  used jointly by the two tribes. The two tribes legally co-owned the joint  use area, but the use of the land remained a source of disputes between  the two tribes. The Settlement Act authorized the partitioning of the  surface of the joint use area and directed that it generally be split evenly  between the tribes. It required Navajo households residing on lands  partitioned to the Hopi Tribe (Hopi Partitioned Lands) to relocate and,  similarly, Hopi households residing on lands partitioned to the Navajo  Nation (Navajo Partitioned Lands) to relocate. Figure 1 illustrates the  current Navajo and Hopi reservations.\nFigure 2 illustrates the portion of the reservation near Tuba City, Arizona,  that was subject to the land dispute, the area that was designated as  exclusively Hopi (District Six), and the partitioned lands.\n\n\t\tSelected Settlement Act Provisions and ONHIR\u2019s Responsibilities and Structure\n\nThe Settlement Act and its subsequent amendments contain several key  provisions for relocation and other activities.\nRelocation. The Settlement Act mandated that ONHIR submit a  report, including a detailed plan, to Congress concerning the  relocation of households and members of each tribe from lands  partitioned to the other tribe. ONHIR stated that it has no authority to  require any person to leave the land that was awarded to the other  tribe. The act instructed that the relocation process be completed 5  years after the relocation plan took effect. The report and plan, which  ONHIR transmitted to Congress in April 1981, provided details on  relocation of households and their members, including generating  names of those residing on the partitioned lands and identifying sites  for relocation, among other things. The relocation was scheduled to  be completed by July 1986. Specifically, the relocation benefits  include $130,000, adjusted to current construction and housing  development costs, for a household of three or fewer and $136,000  for a household of four or more to obtain a decent, safe, and sanitary  replacement home, in addition to moving expenses and, within the  first few years, bonus payments provided within the first years  following the relocation plan. Because there were far fewer Hopi  households residing on lands partitioned to the Navajo Nation, almost  all of the households relocated (about 99 percent) have been for  Navajo families.\nResettlement land taken into trust for the Navajo Nation. The  Settlement Act as amended authorizes and directs the Secretary of  the Interior to take certain lands into trust for the Navajo Nation, which  would become part of the Navajo Reservation. The 1980 amendments  to the Settlement Act required the border of any parcel taken into trust  to be within 18 miles of the Navajo reservation\u2019s then boundary. Most  of the lands taken into trust in Arizona pursuant to the Settlement Act  as amended are known as the New Lands. Navajos living on Hopi  Partitioned Lands could choose to relocate to the New Lands, as well  as other areas on the Navajo reservation or off-reservation.\nAdministration and use of acquired trust land. Pursuant to the  Settlement Act as amended, ONHIR administers these lands taken  into trust for the Navajo Nation until relocation is complete. In contrast,  Interior administers other land the federal government holds in trust  for Indian tribes, including the Navajo Nation. In addition, the  Settlement Act as amended requires the lands taken into trust for the  Navajo Nation to be used solely for the benefit of Navajo families\u2014 known as relocatees\u2014that at the time of the Settlement Act\u2019s  enactment had been residing on lands partitioned to the Hopi.\nLeasing of acquired trust land. The Navajo and Hopi Indian  Relocation Amendments of 1988 transferred responsibility for issuing  leases and rights-of-way for housing and related facilities on the New  Lands from Interior to ONHIR. In July 1990, ONHIR issued  procedures for the leasing of New Lands, including homesite and  business leases, in section 1810 of its management manual.  ONHIR\u2019s regulations specify that the agency\u2019s operation is to be  governed by a management manual.\nNavajo Rehabilitation Trust Fund. The 1988 amendments to the  Settlement Act established the Navajo Rehabilitation Trust Fund in the  U.S. Treasury. The Trust Fund consists of appropriations made for the  fund, deposits of income from certain trust assets, and any interest or  investment income accrued. The Trust Fund is essentially a loan from  the federal government to the Navajo Nation to be repaid from  revenues derived from leases of the lands and minerals taken into  trust in New Mexico pursuant to the Settlement Act as amended. The  tribe assumed responsibility for managing the Trust Fund pursuant to  the American Indian Trust Fund Management Reform Act of 1994,  according to Interior officials. Under this act, neither Interior, ONHIR,  nor Treasury has a role in managing or overseeing the Trust Fund  once a tribe has assumed responsibility for managing it.\nAside from administering the relocation activities and the lands taken into  trust pursuant to the Settlement Act as amended, ONHIR also operates  the Padres Mesa Demonstration Ranch. The ranch was established in  fiscal year 2009 on the New Lands and teaches sustainable cattle  ranching and modern livestock marketing to the Navajo. According to  ONHIR officials, the ranch is on approximately 60,000 acres of trust land  acquired pursuant to the Settlement Act as amended. The purpose of the  ranch is to teach relocatees methods to maximize income from cattle- raising operations and be good stewards of the land. In addition to  purchasing cattle, ONHIR hired an employee to manage the ranch\u2019s  operations and contract cowboys to work on the ranch. ONHIR sells the  cattle raised on the ranch and uses the proceeds to help pay for ranch  operations. According to ONHIR documents, from fiscal years 2009  through 2016, ONHIR obligated approximately $1.8 million for the ranch\u2019s  operation from a mixture of appropriations and cattle sale revenue. Over  the same period, cattle sales generated over $1.4 million, according to  ONHIR documents.\nThe Settlement Act established a three-member commission, the Navajo  and Hopi Indian Relocation Commission, to administer the relocation  program. The 1988 amendment abolished the three-member Relocation  Commission and established in its place ONHIR as an independent entity  of the executive branch under the authority of a single Commissioner.  ONHIR has not had a Commissioner since 1994 and has been under the leadership of its Executive Director. As of December 2017, ONHIR said  that they had 31 employees among its three offices in Flagstaff, Sanders,  and Chambers, Arizona.\nONHIR was not designed to be a permanent agency, but a specific  closing date has not been determined. ONHIR previously developed  plans to close out its activities in 2008, according to ONHIR officials, but  has continued to operate. The Settlement Act states that ONHIR will  cease to exist when the President of the United States determines that its  functions have been fully discharged. During a testimony at a  congressional hearing in February 2016, ONHIR\u2019s Executive Director said  that ONHIR was working toward completing its work so the office can  close by the end of fiscal year 2018. ONHIR has developed a draft  transition plan, dated March 2017, that identifies, among other things, four  areas of activity that would need to be transferred to another entity in the  event of its closure in September 2018: (1) appeals and eligibility; (2)  housing; (3) administration of the New Lands; and (4) the Padres Mesa  Demonstration Ranch. In the draft transition plan, ONHIR primarily  identified offices within Interior\u2014including BIA, the Office of Hearings and  Appeals, and the Office of the Solicitor\u2014to take over several key  activities, as well as other entities including the Department of Justice and  the Navajo Nation government. In October 2017, ONHIR supplemented  the draft transition plan with an implementation plan to outline the transfer  of these four areas, among other things.\n\n\t\tOther Federal Agencies and Tribal Entities with Responsibilities in Indian Country\n\nBIA is generally responsible for the administration and management of  land held in trust by the United States for Indians and Indian tribes. BIA  provides services to 573 federally recognized tribes and about 1.9 million  individual American Indians and Alaska Natives. BIA\u2019s responsibilities  include regulating grazing on trust land, leasing trust land, and  maintaining roads in Indian country, among other things. BIA administers  the vast majority of land held in trust for Indian tribes and has issued  regulations governing leasing of and grazing on trust land that it  administers, including the Hopi Partitioned Lands and the portions of the  Navajo reservation that are not administered by ONHIR. BIA\u2019s  regulations do not apply to the lands acquired pursuant to the Settlement  Act as amended because under the act, ONHIR is responsible for  administering those lands. BIA also administers a Housing Improvement  Program that funds rehabilitation of housing units.\nOther federal agencies, such as HUD and the Indian Health Service,  provide housing assistance and infrastructure in Indian country and tribal  entities, such as the Navajo Tribal Utility Authority, provide services on  the Navajo reservation. HUD, through its Office of Native American  Programs, awards block grants (known as the Indian Housing Block  Grant program) to tribally designated housing entities, such as the Navajo  Housing Authority. These grants can be used to provide housing  assistance for tribal members, such as constructing homes. The Indian  Health Service is authorized to provide drinking water and sanitation  services to Indian homes and communities, among other things. ONHIR  and the Indian Health Service have an interagency agreement to share  the cost of connecting relocation homes on the reservation to water and  sewer lines. Most of the electricity, water, and wastewater on the Navajo  reservation are operated by the Navajo Tribal Utility Authority, an  enterprise of the Navajo Nation government. Similarly, ONHIR and the  Navajo Tribal Utility Authority have an interagency agreement for the  construction of electrical power lines and related services for relocation  homes.\nThe Navajo Nation government makes decisions about allocation of  resources, including federal grants it receives. The Navajo Nation Council  hosts 24 council delegates representing 110 Navajo Nation chapters. The  chapters are political subdivisions of the Navajo Nation with delegated  authority to address local issues pertaining to the land and health status  of their respective chapter populations. In a March 2014 report, we found  each chapter could have different development priorities and approval  processes for housing programs and services. In its comments on a  draft of this report, ONHIR stated that more than 400 families have moved  to the New Lands, and over 1,200 families have moved to locations  outside the Navajo Nation. The New Lands are part of the Nahata Dziil  Chapter.\n\n\t\tHousing Issues in Indian Communities\n\nWe have previously found that American Indians have historically faced  worse housing conditions than other socioeconomic groups. They  disproportionately experience socioeconomic challenges, including high  unemployment and extreme poverty, which affect housing conditions on  Indian reservations and in Indian communities. Overcrowding,  substandard housing, and homelessness are far more common in  American Indian communities. For example, a 2017 Urban Institute report  prepared for HUD found that 5.6 percent of American Indian households  had problems with plumbing, 6.6 percent had problems with the kitchen,  and 12 percent had problems with heating. In comparison, 1.3 percent of  households in the United States had problems with plumbing, 1.7 percent  had problems with the kitchen, and 0.1 percent had problems with  heating.\nAs we have previously found, common housing challenges in Indian  communities are largely related to remoteness and other geographical  factors, lack of adequate infrastructure, land use regulation, and other  factors. Some remote areas where Indian tribes are located can present  unique logistical challenges, including a lack of buildable land and limited  supply of building materials. In some regions, tribes face challenges  related to a lack of adequate infrastructure, such as roads, water, and  sewer systems. According to Navajo Nation officials, traditionally, tribes  lived a lifestyle that was connected to their traditional and ancestral lands,  with homes and other structures built from natural materials and  constructed in communities with extended families. For example, many of  the Navajo who were on the Hopi Partitioned Lands were self-sufficient  and lived in traditional homes called hogans, which are made of wooden  poles, tree bark, and mud. See figure 3 for an example of a traditional  home.\n\n\tONHIR Has Changed Relocation Eligibility Requirements and Application Deadlines for Various Reasons, and Additional Applicants Could Still File Court Appeals\n\n\t\tONHIR Developed an Eligibility Certification Process, and Denied Applicants Can Appeal Their Eligibility Determination\n\nONHIR\u2019s process for certifying applicants\u2019 eligibility to receive relocation  benefits has generally been consistent over time since ONHIR began  accepting applications. All applicants must apply through ONHIR for  relocation benefits and demonstrate that they meet eligibility criteria,  discussed later in this report. Based on eligibility criteria, in general, a  certifying officer determines whether an applicant is certified or denied. If  an applicant is certified, the applicant becomes an ONHIR client for  relocation. If an applicant is denied, the applicant is eligible to file for  appeals\u2014first, an administrative appeal, then an appeal with the U.S.  District Court for the District of Arizona, if the administrative appeal  upholds the denial decision. Figure 4 illustrates this process.\nIf an applicant is denied, he or she can obtain assistance from the  Navajo-Hopi Legal Services Program, an entity established in 1983 within  the Navajo Nation\u2019s Department of Justice to assist individual members of  the Navajo and Hopi tribes who were affected by the Settlement Act.  Applicants\u2019 denial letters indicate that the applicant can seek counsel  through this program; however, not all applicants are represented by  counsel for the administrative hearing. As of July 2017, ONHIR had spent  about $1.5 million on legal services and over $1.2 million on the hearing  officer who adjudicates the administrative appeals. In addition, about  $285,000 was spent for an attorney salary at the Navajo-Hopi Legal  Services Program from 2009 through 2011 and, according to ONHIR  officials, about $418,000 was spent on attorney fees for applicants whose  eligibility for relocation benefits was reversed in the U.S. District Court.\nAs of December 2017, ONHIR had certified more than 3,800 households  since the agency began reviewing its first applicants in 1977. The  certification process on average has taken about 979 days for those who  were certified without a need to file for an appeal and 3,301 days for  those who were certified through the appeals process (that is, those who  had their denied application reversed through the appeals process).  Figure 5 illustrates these time frames.\n\n\t\tONHIR Has Extended Application Periods and Changed Eligibility Requirements for Varying Reasons\n\nFor various reasons, ONHIR provided three additional application periods  after the first application period deadline in 1986, which were not included  in the plan ONHIR submitted to Congress. After the original deadline,  ONHIR provided a second application period from April 1997 through  March 2000 after the enactment of a new law, which ratified a formal  agreement under which the Hopi tribe agreed to allow traditional Navajo  residents to remain living on Hopi Partitioned Lands for 75 years. In  conjunction, the formal agreement provided that ONHIR relocate all  eligible Navajo residents on Hopi Partitioned Lands who (1) did not sign  an individual agreement to remain on the land, or (2) signed but then  surrendered their signed individual agreement before the February 2000  deadline.\nONHIR accepted applications again from May 2005 through June 2006  (third application period) based on language in a 2005 Senate bill to  provide a last chance for Navajos living on Hopi Partitioned Lands to  relocate, which passed the Senate but was not enacted, according to  ONHIR officials. ONHIR was not required to reopen its application process, but it chose to do so. Even though ONHIR issued relocation  notices in newspapers and at chapter facilities at the time of the original  application period, ONHIR officials said that the additional application  periods were in recognition that not all Navajo residing on the Hopi  Partitioned Lands had moved, an outcome that was not considered in the  original plans.\nONHIR also accepted applications from February 2008 through  September 2010 (fourth application period) in response to a federal court  decision that concluded that ONHIR had not provided personal notice to a  potentially eligible applicant before July 7, 1986 (the deadline for the initial  application process) to enable him to apply for relocation benefits.  According to ONHIR officials, in consultation with the Department of  Justice in Washington, D.C. and the U.S. Attorney\u2019s Office in Arizona,  ONHIR reopened the process for applications to help ensure that  everyone who might be eligible for benefits was given the opportunity to  apply, rather than litigating a series of similar cases. ONHIR officials said  they worked closely with the Navajo Nation to send out letters of  notification to potential eligible applicants, even though they were not  required to reopen the application process.\nThese three additional application periods have resulted in more  applicants and time required for ONHIR to review applications. The  numbers of applicants and outcomes across the different application  periods are summarized in table 1. The attempts to prompt more Navajos  to relocate in the second and third application periods resulted in a limited number of applications, 129 and 167 applicants, respectively. However,  ONHIR received nearly 2,300 applicants during the fourth application  period.\nThroughout the multiple application periods, applicants demonstrated two  key eligibility criteria: (1) head of household status and (2) residency on  the lands partitioned to the other tribe. However, ONHIR chose and  applied varying eligibility rules related to residency status over the  different application periods.\nOriginal application period. Under the original residency status  criterion, applicants had to demonstrate that they were residents of  the partitioned lands on December 22, 1974 (the date the Settlement  Act was passed) and had not moved there within the previous year.\nSecond and third application periods. During the second and third  application periods, ONHIR used provisions for late applicants\u2014 persons who had not applied for relocation benefits before the original  deadline\u2014that were established in 1986 amendments to ONHIR\u2019s  regulations and that revised the residency status eligibility criterion.  Unlike the original residency criterion, the agency guidance applicable  to applicants during the second and third application period stated that  applicants must demonstrate continuous residence on the partitioned  lands from December 22, 1974, to July 7, 1986 (the original deadline)  and until eligibility determination is rendered. There were exceptions  for demonstrating continuous residency as set out in the agency  guidelines interpreting the regulations, including for those who were  temporarily away for school, prison, medical treatment, and military  service.\nFourth application period. During the fourth application period,  ONHIR decided to apply the original criterion, without the continuous  residency requirement implemented in the guidelines for the second  and third application periods, for all applicants. ONHIR officials said  they made this decision in response to a federal court decision,  discussed previously, that concluded that ONHIR had not provided  personal notice to a potentially eligible applicant before the original  July 1986 deadline; the U.S. District Court District of Arizona applied  the original criterion in this decision.\nThe applicant has the burden of proof for providing evidence to meet the  eligibility criteria. Demonstrating head of household or residency status  has been difficult for residents for several reasons, according to a Navajo-Hopi Legal Services Program representative and Navajo Nation chapter  officials we interviewed. For example, Navajo is an oral culture that  historically existed mostly on a livestock or cash economy in which  transactions were not documented, making it difficult to document the  source of income or head of household status. In its comments on a draft  of this report, ONHIR stated that the legal residence determination was  complicated because many Navajos performed seasonal work and lived  outside the Hopi Partitioned Lands for extended periods. According to  Navajo Nation officials, oral evidence has not been allowed by the ONHIR  Hearings Officer, and language and cultural barriers have also been  obstacles. Some Navajos have limited English proficiency, although  ONHIR offers translators for Navajo speakers. In its comments on a draft  of this report, ONHIR stated that oral evidence has always been allowed  but has sometimes been found not to be credible. Another unique  characteristic of the Navajo is the use of shared mailboxes at trading  posts\u2014a place in the community for people to meet and receive their  mail\u2014making it difficult to ensure that ONHIR denial letters or other  notifications reach individual applicants. For example, in one appeals  case a court found that applicants who did not personally sign for the  receipt of a denial letter must be notified of the court\u2019s decision to allow  those applicants to file a waiver of the appeal deadline. ONHIR also  stated that it offered administrative appeals to Navajos for whom ONHIR  could not show actual receipt of denial letters.\n\n\t\tAlthough ONHIR Officials Believe That Most Eligible Applicants Have Been Processed, the Potential for Future Court Appeals Remains\n\nWhile ONHIR officials said that eligibility determination has been  completed, the potential exists for further federal court appeals,  potentially resulting in the need for additional eligibility determinations. As  of January 2018, ONHIR officials said that 24 of the remaining 25  households that were denied eligibility benefits have gone through the  hearing process and are awaiting their decisions, which officials said  should be completed in early 2018. Households whose denials are  upheld will be eligible to file for an appeal with the U.S. District Court for  the District of Arizona. Additionally, any households that have been  denied and are within the 6-year statute of limitations are still eligible to  file for appeals in federal court. Eleven cases were pending in the federal  district courts and four in federal appeals court as of March 2018, and  according to ONHIR officials, at least 240 households that were denied  eligibility benefits and whose decisions were upheld by the hearing officer  (and are within the 6-year statute of limitation) could potentially file for  appeals in federal court before the end of fiscal year 2018.\nAny additional court appeals could result in the need for additional  eligibility determinations in the future. For example, a federal court  recently remanded a case to ONHIR to review the applicant\u2019s income  information and reevaluate the eligibility determination. According to  ONHIR officials, they are taking steps to review the applicant\u2019s case file,  investigate the evidence of the applicant\u2019s income to demonstrate the  head of household status, and share the findings with the applicant\u2019s  attorney. ONHIR officials stated that due to the unique situation of each  applicant, they review the information in the applicant\u2019s case file to  comply with the court\u2019s order on eligibility determination.\n\n\tONHIR Has Nearly Completed Home Building but Provided Limited Contractor Oversight, and Outstanding Warranties Remain in Effect\n\n\t\tONHIR Developed Policies and Procedures for the Home-Building Process\n\nONHIR\u2019s policies and procedures are intended to provide certified  applicants who are eligible for relocation benefits with decent, safe, and  sanitary homes, as mandated in the Settlement Act. For example,  ONHIR\u2019s management manual includes policies that require ONHIR to  provide counseling on the home-building process and home maintenance  training for relocatees. Figure 6 shows an example of a relocation home.  Prior to moving to relocation homes, many families lived in one-room  houses that they constructed themselves with no basic infrastructure,  such as electricity, water, or plumbing facilities, and some families were  unfamiliar with the features of a modern home. Families lived a spiritual  and religious lifestyle that was connected to their traditional culture and  ancestral lands, with homes constructed in communities with extended  families.\nONHIR\u2019s management manual also includes policies that require  employees to work with clients on the home acquisition process starting  from the time clients are certified and continue until 2 years after the client  has been relocated, including assisting clients with finding contractors,  signing home-building contracts, understanding home maintenance, and  requesting warranty repairs. ONHIR works with families after they have  moved into their relocation home by providing assistance with warranty  issues; assistance in adjusting to their new community; and referrals to  agencies in the new community that provide health care, supplemental  nutrition, financial assistance, behavioral health, employment, and other  social services. Relocation homes are the property of the client, and  ONHIR has no responsibility for relocation homes after a 2-year warranty  period on each home expires. ONHIR wrote a standard template of a  contract that clients and contractors must sign, but ONHIR is not a  signatory of the home-building contract. However, ONHIR is a signatory  to the 2-year home warranty contract, along with the client and the  contractor. Additional policies and procedures required by ONHIR\u2019s  management manual are summarized in table 2.\nONHIR\u2019s management manual also includes policies for overseeing  contractor performance. ONHIR officials provide clients with a list of home-building contractors, but clients may choose any licensed  contractor in the jurisdiction where the home is built. ONHIR officials  estimate that more than 95 percent of relocation homes have been built  by contractors from its list. ONHIR officials said that contractors on the list  ONHIR provides to clients must demonstrate good standing and must be  licensed by the state of Arizona, as stated in its policy. In addition,  ONHIR\u2019s policy states that ONHIR may take action against contractors  whose work results in an excessive number of warranty complaints.\n\n\t\tMost Building Is Complete, but Weaknesses in Oversight Allowed Poor Performing Contractors to Build Homes\n\nThe majority of ONHIR\u2019s home-building work is now complete. As of  December 2017, according to officials, ONHIR had relocated 3,687  families into new homes, and ONHIR officials said they expect  construction on the remaining 20 homes to be completed by September  2018.\nAlthough most home-building activities are complete, we found that  ONHIR has historically allowed contractors with a history of performance  issues to build relocation homes. For example, ONHIR provided us with  a report generated from its contractor performance database that shows a  contractor who had failed 42 percent of final inspections during a 11-year  period\u2014from January 2006 through September 2017\u2014continued to  receive home-building contracts. Similarly, we identified homes with  multiple warranty complaints in ONHIR\u2019s warranty database. Specifically,  one home in the warranty file database had 17 warranty defect  complaints attributed to the contractor. ONHIR officials said that they do  not track complaints by contractor in a database nor do they have a defined number of complaints for removing contractors. ONHIR officials  said that they have not removed a contractor involuntarily from their list  since the 1990s.\nONHIR officials explained that these contractors continued building  homes because it is difficult to find contractors who want to work on the  reservation due to the isolated nature of homesites. Moreover, in recent  years they said they did not track complaints by contractor because they  would be aware of complaints about a contractor due to the smaller  number of relocation homes that have been built. As a result, according to  ONHIR officials, they have not needed to take actions to remove  contractors from their list since the 1990s or to generate reports on  contractor performance. In addition, ONHIR officials said some warranty  complaints were trivial, such as peeling paint or visible carpet seams, and  thus terminating contractors for such issues was unnecessary. ONHIR  officials also noted that all homes eventually passed their final inspections  and any failed inspection items were corrected and reinspected before  contractors received payments.\n\n\t\tSome Tribal Government Officials and Relocatees Said ONHIR Has Not Discharged Its Responsibilities because of Construction, Societal, and Infrastructure Concerns\n\nAlthough ONHIR said it has nearly completed its relocation obligations,  some relocatees, the Hopi tribe, and Navajo Nation government officials  said that it has not completed its work. Specifically, Navajo Nation  officials and some relocatees said the office should remain open to  address various concerns with relocation homes and the societal effects  of relocation. Moreover, according to some relocatees and Navajo Nation  government officials, these concerns include homes that were built with  faulty materials and with unfinished infrastructure, such as electricity. As  previously mentioned, ONHIR has no responsibility over relocation homes  after the 2-year warranty period on each home expires. However, an  official from the Navajo-Hopi Legal Services Program said that  homeowners had concerns with their homes beyond the 2-year warranty  period. While ONHIR has attributed such issues to a lack of homeowner  maintenance, relocatees have attributed these issues to ONHIR\u2019s lack of  oversight of the home-building process. Concerns some relocatees and  tribal government officials described include the following:  Construction. Navajo Nation officials from three separate chapters told  us that relocation homes were not built properly. The President of the  Navajo Nation said that homes frequently have construction issues  related to cheap materials or poor workmanship, while another official  said that ONHIR does not properly oversee contractors. Another official  told us that the windows fall out of homes when it gets too windy. One  official said that some families have left their relocation homes behind  because of structural issues. Hopi tribe officials said relocatees from their  tribe were provided the cheapest homes available and that the conditions  of mobile homes are substandard. See figure 7 for examples of homes  with cracked foundations and broken windows.\nONHIR officials said they inspect all complaints on relocation homes,  even after the warranty period has expired. If the investigation reveals an  issue that is a result of a construction defect, ONHIR officials said they  will fix the issue, whereas they will not fix issues they deem are the result  of poor homeowner maintenance.\nSoil settling. Navajo Nation officials from two chapters told us that  ONHIR did not conduct soil tests on homesites and others said that some  homes have experienced foundation issues. For example, one relocatee  said her relocation home has cracks in the walls and the floors. ONHIR  helps clients to apply for homesite leases, and according to ONHIR  officials, they assigned engineering technicians to conduct feasibility  studies to assess the condition of the soil for all on-reservation homesites,  as required by ONHIR policy. However, ONHIR officials also  acknowledged that expansion and contraction of soil over time in Arizona  is common and that shifting soil can lead to cracks in the foundation or  walls of homes. As reported by the Interior Inspector General in 2016, 5  relocatee homes on the Navajo reservation experienced cracks and other  visible signs of damage due to soil settling and have consequently been  replaced by ONHIR. ONHIR officials acknowledged that they have  demolished and replaced an additional 9 homes due to foundation issues  related to soil expansion and other issues, such as leaks in utility lines  and septic tanks. For the homes experiencing foundation issues outside  of the 14 homes ONHIR has replaced, ONHIR attributed continued soil  collapse to homeowners not maintaining the proper degree of slope  around their home to allow for drainage. In addition, they said that homes  may now be occupied by three generations of families. According to a  2016 Interior Inspector General report, ONHIR officials said this leads to  increased water use inside the homes which, in their opinion, exacerbates  the soil-settling issue.\nSocietal effects. Relocated families expressed that relocation has  contributed to societal ills such as depression; alcoholism; drug abuse;  and suicide due to substandard living conditions and homesites away  from their family and previous sources of livelihood. The Navajo Nation  stated that relocatees experienced hardships adjusting to a new way of  life and felt a loss of connection with their culture moving away from their  ancestral lands and traditional way of life. According to a report issued by  the Navajo Nation Human Rights Commission, relocatees were promised  by the federal government, the Hopi Tribe, and the Navajo Nation that  relocation would offer a better life that did not materialize. ONHIR  officials noted that both the Navajo Nation and the Hopi Tribe have  requested extended counseling beyond the warranty period; however,  according to the March 2017 transition plan, ONHIR does not believe  providing it is within their statutory authority.\nConnections to utility infrastructure. According to Navajo Nation  officials, some homes are not properly connected to utility infrastructure,  such as electricity and water. For example, they stated that a number of  relocation homes in the Navajo area do not have electricity. In its  comments on a draft of this report, ONHIR stated that some relocatees  chose to relocate to remote areas and signed a form to affirm that they  wanted solar or cistern rather than grid utilities. A representative from the  Hopi Tribe told us that in one home, contractors installed plumbing  systems that were subsequently covered in concrete, which made repairs  difficult. Another chapter official said that a septic tank in one relocation  home continually overflowed because the tank was smaller than the  specifications. ONHIR officials said all homes are built to code at the time  of construction and have proper connections to infrastructure in terms of  water and electricity. They said they verify that homes pass necessary  inspections, including framing; mechanical; plumbing; and insulation, prior  to disbursing payments to the contractors.\nCommunity infrastructure. Some Navajo Nation chapter members and  ONHIR officials disagree as to whether ONHIR had an obligation to  provide additional community infrastructure under the Settlement Act.  Some chapter members said that ONHIR should not close because it has  not met its responsibilities to provide infrastructure projects, such as  paved roads and running water. The Navajo Nation Human Rights  Commission report states that relocatees were told they would be  provided with running water and the ability to raise livestock, among other  things. Provisions in the Settlement Act directed ONHIR to create a  report with a plan to ensure that infrastructure such as water, sewers, and  roads would be available at their relocation sites. ONHIR published a  report to meet the provision in 1981. This provision was repealed in  November 1988. ONHIR officials acknowledged that relocatees have  expressed the need for additional infrastructure, but said it is not within  ONHIR\u2019s statutory responsibility to provide it. The Settlement Act as  amended does not require ONHIR to provide infrastructure for the New  Lands.\n\n\t\tWarranty Commitments on Homes Already Built and Homes for Newly Eligible Applicants Are Activities That May Continue into the Future\n\nAlthough ONHIR\u2019s home building for certified applicants is nearly  complete, responsibilities remain for existing homes under warranty and  any additional homes built for newly certified applicants. As previously  discussed, relocation homes are under warranty for 2 years, starting at  the time when the house passes final inspection. During this 2-year  period, ONHIR is responsible for helping homeowners, who are located  on-reservation, request warranty repairs. After September 2018, 52  relocation homes will remain under the 2-year warranty period, according  to ONHIR officials. In addition, as previously discussed, ONHIR officials  told us that at least 240 denied applicants could still file for appeals in the  federal court and become eligible for relocation benefits, which would  necessitate the construction of additional homes. A 2-year warranty  period would then begin after these houses pass final inspection.\n\n\tExecutive Branch or Congressional Action May Be Needed to Terminate ONHIR and Effectively Transfer Remaining Relocation Activities\n\n\t\tONHIR Has Not Yet Requested a Presidential Determination for Closure\n\nAs previously mentioned, ONHIR was not designed to be a permanent  agency. The Settlement Act states that ONHIR will cease to exist when  the President of the United States determines that its functions have been  fully discharged. Although ONHIR officials have said they are working  toward completing their tasks so the office can close by the end of fiscal  year 2018, they acknowledge that not all activities will be complete by that  time. Federal internal control standards state that management should  externally communicate the necessary quality information to achieve the  entity\u2019s objectives. For example, information necessary to communicate  to an agency\u2019s oversight body includes significant matters related to risks  or changes. However, according to ONHIR officials, they have not  specifically communicated with the President about the determination on  whether the agency has fully discharged its functions and whether the  office should close.\nInstead of directly requesting that the President make a determination for  ONHIR to cease operations, ONHIR has been making plans to close  through other means and transition remaining activities. Specifically,  ONHIR officials told us that they anticipate that closure of the office will  need to occur through a legislative change or through the termination of  program funds through the budget and appropriations process. As  stated in the March 2017 transition plan, the plan was developed in  response to direction from the Office of Management and Budget and the  Senate and House Appropriations Committees that ONHIR should wind  down its activities. Further, in its comments on a draft of this report,  ONHIR stated that it has had regular communications with executive and  legislative branch offices on completing its work and closing. However,  neither the draft transition plan nor the October 2017 implementation plan  indicates how ONHIR would request a determination from the President  that ONHIR has fully discharged its responsibilities and can be  terminated. Without such a presidential determination, ONHIR has not  met the explicit requirements for being permitted to cease operation  under the Settlement Act.\n\n\t\tONHIR Has Not Developed Complete Information on Its Remaining Activities\n\nAlthough ONHIR officials anticipate that the agency will close by  September 2018, they have not ensured that complete information related  to its relocation activities can be made available to other successor  agencies. This lack of planning and information could hamper the efforts  of a successor agency or agencies to effectively take over these  activities.\nEligibility and appeals. As previously mentioned, there is the possibility  for 240 or more denied households to appeal their eligibility decision in  the future, and the paper case files and client database contain important  information regarding eligibility for the continuation of ONHIR\u2019s relocation  activities. Specifically, paper case files contain comprehensive  information on each applicant from the time he or she applied for  relocation benefits, including documents submitted to prove head of  household or residency status for eligibility determination. In addition, the  client database tracks decisions and dates related to the eligibility  determination process and is necessary to identify applicants\u2019 status.\nIn its March 2017 transition plan and October 2017 implementation plan,  ONHIR has not developed detailed information on how it plans to identify  and prepare information in the paper case files and client database for the  240 or more denied households that could file for federal appeals. ONHIR  officials said that they have not prepared eligibility determination and  appeals information for transfer because they expect eligibility  determinations to be completed by the time the office plans to close. In  the event that such transfers are needed, they said the transfer of these  records will be through an agreement between ONHIR, the National  Archives and Records Administration, and BIA. However, such an  agreement has not yet been developed, and discussions on the transfer  of records\u2014such as during monthly transition meetings\u2014are high-level  and mostly unrelated to information needed for potential eligibility  determination responsibilities. In addition, officials said that information  about appeals filed in the future in the federal court could be obtained  from an online federal database.\nFederal internal control standards state that management should use  quality information to achieve the entity\u2019s objectives. Additionally, the  standards state that management should identify, analyze, and respond  to risks related to achieving the defined objectives. If ONHIR does not  take the steps to ensure that complete information for the 240 or more  denied households eligible to appeal their eligibility decision is available  to a successor agency, a successor agency could face difficulty in  administering eligibility determinations and remaining appeals in the  future.\nWarranties and contractor performance. As previously discussed,  ONHIR\u2019s remaining home-building responsibilities include managing the  52 remaining 2-year warranty agreements and assisting in the  construction of homes for any newly certified applicants. To fulfill these  responsibilities, complete information on home warranties and contractor  performance is critical. ONHIR\u2019s warranty database has data fields to  track relevant information on concerns reported to ONHIR\u2014including  warranty expiration date, date warranty complaint received, type of  complaint (possible warranty defect or homeowner maintenance issue).  However, the database is incomplete. For example, our review found that  about 98 percent of warranty complaints in the warranty database have  no record of the date of warranty repairs. Moreover, ONHIR does not list  the names of contractors in its database. ONHIR officials said the  information is not recorded because they rely on memory and paper files  to supplement the information in the warranty database about contractors.  ONHIR officials also said they do not regularly use the database to  monitor contractors\u2019 performance because it became too cumbersome to  track electronically. However, in its comments on a draft of this report,  ONHIR stated that it has the capability in its electronic data system to  search for warranty complaints.\nIn its October 2017 implementation plan, ONHIR suggested BIA\u2019s  contract office as a potential successor agency for administering the  remaining warranty provisions in the event that it closes before these  home-building responsibilities are fully discharged. With regard to any  newly certified applicants deemed eligible for benefits through the  appeals process, the October 2017 implementation plan suggests that  these applicants be given the cash equivalent of a relocation home  instead of building new homes. However, the Settlement Act provides for  no authority to issue cash payments and Congress has not otherwise  authorized cash payments, and any future home-building activities may  need to be assumed by a successor agency. Because OHNIR does not  have complete information on existing warranties and contractor  performance, another successor agency could be hampered in its ability  to assume ONHIR\u2019s remaining home-building responsibilities. Federal  internal control standards state that management should identify, analyze,  and respond to risks related to achieving the defined objectives.  Additionally, the standards state that management should use quality  information to achieve the entity\u2019s objectives. Without complete warranty  and contractor information, a successor agency may have difficulty  understanding what warranty issues have already been addressed or  have difficulty overseeing contractors to help ensure that newly certified  applicants secure decent, safe, and sanitary relocation homes.\n\n\t\tThe Settlement Act Does Not Include Provisions for Transferring Remaining Relocation Activities to Successor Agencies\n\nIn its transition and implementation plans, ONHIR has identified a number  of potential successor agencies that could be selected to take over  ONHIR\u2019s remaining activities in different areas. However, officials at these  agencies said they currently do not have the authority to undertake these  activities under the Settlement Act.\nAppeals and eligibility. Should ONHIR close before the 6-year statute of  limitations has expired for all denied applicants, another agency or  agencies would need statutory authority for coordinating eligibility  determinations and home-building for any newly certified applicants. As  previously discussed, at least 240 households that had been denied  relocation benefits as of September 2017 may choose to contest their  denial in federal court, according to ONHIR officials. ONHIR\u2019s March  2017 transition plan states that the Department of Justice will continue to  represent the government on behalf of ONHIR in any federal court  hearings, and ONHIR has also identified Interior\u2019s Office of Hearing and  Appeals to hear any matter remanded to the agency by the federal court  for a further hearing.\nHome-building. Another entity would need authority to assume  remaining home-building activities. Alternatively, ONHIR\u2019s October 2017  implementation plan suggests that newly certified applicants be given the  cash equivalent of a relocation home. However, as previously  mentioned, cash payments are not currently authorized under the  Settlement Act and legislation would be needed to provide such  payments. Moreover, Navajo Nation officials said they do not approve of  using cash payments in place of providing relocatees with a home. In  November 2017, ONHIR officials said that, as an alternative to cash  payments, they discussed with the Navajo Nation the potential for the  Navajo Housing Authority\u2014a recipient of the HUD Indian Housing Block  Grant Program\u2014to administer remaining home-building activities. They  did not make a decision, however, because the Navajo Nation wanted to  inquire about the capacity of the Navajo Housing Authority to assume  these activities. Although ONHIR has not identified HUD as an agency  with a potential role, such as assuming or providing oversight of Navajo  Housing Authority administration of remaining home-building activities,  HUD officials told us that HUD would not be able to assume ONHIR  housing functions. This is due to the nature of its block grant program,  restricted oversight mechanisms, and limited capacity in terms of staff  resources and technical skills to supervise construction. In addition,  HUD officials said that their current oversight is limited to reviewing a  sample of Indian Housing Block Grant program grantees\u2019 policies,  procedures, and implementation of procurement and environmental  regulations, which may not be consistent with the oversight or authority  needed should the Navajo Housing Authority administer the remaining  ONHIR home-building activities.\nWarranties. Should ONHIR close before 2-year home warranties expire  on the remaining homes constructed under ONHIR\u2019s oversight, another  agency would need statutory authority to oversee these home warranties.  As previously mentioned, ONHIR is currently a signatory to the warranty  along with the contractor and the client, and more than 52 homes will  have warranties in effect after ONHIR\u2019s proposed closure date of  September 2018, according to ONHIR officials. In its draft transition plan,  ONHIR suggests transferring warranty-related activities to the BIA  Contract Office. However, according to BIA officials, BIA does not  currently have the authority to conduct these activities, and BIA is not  equipped to implement warranties.\nPost-move counseling. Another agency would need statutory authority  to provide post-move counseling to the 52 clients who will remain under  warranty after ONHIR\u2019s proposed closure date of September 2018.  Currently, ONHIR provides relocatees with post-move counseling during  the 2-year warranty period. According to ONHIR\u2019s management manual,  the purpose of post-move counseling is to assist families in adjusting to  their new house, connect families to local service agencies, and gain  understanding about the client\u2019s familial and employment situation.  ONHIR\u2019s March 2017 transition plan suggested that the post-move  counseling program could be transitioned to BIA. However, BIA officials  said BIA currently does not have the authority to conduct these  activities. In November 2017, ONHIR officials said the program would  discontinue for any newly certified applicants if cash settlements for  relocation benefits were authorized, but they did not address what would  happen to the 52 clients that will remain within the 2-year warranty period  after September 2018.\nThe Settlement Act does not include provisions on the transfer of  activities after ONHIR\u2019s closure, and as described above several activities  will remain past ONHIR\u2019s planned closure date. Without legal direction to  authorize the transfer of ONHIR\u2019s remaining activities to other federal  entities, the future of these activities remains uncertain and may  adversely affect those in the process of relocating.\n\n\tONHIR Has Not Always Managed Navajo Trust Land in Accordance with Its Policies\n\n\t\tONHIR Has Entered Into Lease and Other Agreements for Navajo Trust Land but Has Not Properly Managed Them\n\nONHIR is statutorily required to administer the land taken into trust for the  Navajo Nation pursuant to the Settlement Act as amended until relocation  is complete. The act also authorizes ONHIR to issue leases for housing  and other related facilities on the New Lands. ONHIR\u2019s management  manual, which governs its operations, states that it will grant appropriate  requests for leases of the New Lands\u2014both developed and undeveloped  land\u2014for homesites, businesses, and community services facilities,  among other things. According to the manual, entities that want to lease  property in the New Lands are to submit an application form and  supporting documents to ONHIR. Since the 1980s, ONHIR has received  applications from and granted leases to various businesses, the New  Lands chapter, and other tribal entities. The leases give the lessee  permission to occupy and use the land, including, in the case of  developed land, any structures on it, for terms varying from 2 to 99 years.  In addition, ONHIR has entered into or administered surface use  agreements for the New Lands.\nUnlike ONHIR\u2019s eligibility determinations and home-building activities,  which were intended to have a finite end, the Navajo trust land will need  to be managed in perpetuity so long as it is held in trust by the federal  government. ONHIR\u2019s draft transition and implementation plans identify BIA and the Navajo Nation as entities that could assume responsibility for  managing the trust land once ONHIR terminates. However, ONHIR does  not have the authority to transition management of the trust land it  administers to another entity. Moreover, we identified a number of  concerns with how ONHIR has maintained information or established  controls for proper administration of leases and agreements for the New  Lands, which could further hinder an eventual transition of these  responsibilities to another entity.\n\n\t\t\tONHIR Does Not Have a Complete Inventory of Leased or Occupied Land\n\nONHIR does not have a comprehensive inventory of leased and vacant  properties on or surface use and other agreements for Navajo trust land it  administers. ONHIR officials identified 23 properties on trust land they  administer through documentation and in interviews. Of these  23 properties, ONHIR possessed the current lease for 15 properties.  ONHIR officials also identified 5 surface use agreements for Navajo trust  land they administer, 3 of which are listed as active on their transition  website. ONHIR officials said they have not maintained a comprehensive  inventory because they had a long tenure with the agency and are  cognizant of what properties and agreements exist.\nFederal internal control standards state that management should design  control activities to achieve objectives and respond to risk. For example,  as part of control activities, management clearly documents all  transactions and other significant events in a manner that allows the  documentation to be readily available for examination. Without developing  a comprehensive inventory of leased and vacant properties on Navajo  trust land that ONHIR administers, the entity which assumes  responsibility for leasing the land will not have the information it needs to  carry out that responsibility.\n\n\t\t\tAs of December 2017, ONHIR Does Not Have Written Leases for Some Occupied Lands\n\nONHIR has occupied or has allowed others to occupy Navajo trust land it  administers without a written lease or agreement, which is inconsistent  with ONHIR\u2019s management manual. Specifically, of the 23 existing  properties on trust land ONHIR officials identified, 7 were in use as of  December 2017 but did not have a written lease, as required, for various  reasons:\nONHIR issued a permit for the use of one property in 2000 that was  valid through 2005 and then, according to ONHIR officials, had an oral  agreement to indefinitely extend the permit. The officials also said  they had an oral agreement to lease another property.\nONHIR itself occupies and uses 4 properties without leases, including  a headquarters and New Lands office and two structures on the  Padres Mesa Demonstration Ranch, discussed below.\nA lease for 1 property expired in 2011 but it has not been renewed  and does not include an option to extend the lease beyond its initial  termination date. The Navajo Nation is currently working to renew the  lease because it has assumed responsibility from BIA for leasing its  trust land. In its comments on a draft of this report, ONHIR stated  that in the meantime the federal agency using the property has  continued to pay rent to ONHIR while a new lease is negotiated.\nONHIR officials said some of these properties do not have written leases  because the agency deferred to the tribe\u2019s wishes. However, not having  written leases for these properties on trust land is inconsistent with  ONHIR\u2019s management manual, which calls for written leases and land  use approvals for the New Lands. Without written leases for these  properties, the entity which assumes responsibility for leasing the Navajo  land that ONHIR has been administering will not know the status of these  properties because they are being used without written leases.\n\n\t\t\tFor Most of the Leases, ONHIR Is the Lessor Rather than the Tribe and No Successor Has Been Identified\n\nThere are at least two parties to every lease of land, the lessor and the  lessee. The lessor is generally the landowner, and the lessee is the party  to whom the lease grants permission to use or occupy the land. However,  the New Lands are held in trust by the federal government for the Navajo  Nation, and federal law provides that trust lands may be leased by the  Indian owners with the approval of the Secretary of the Interior. ONHIR is  the lessor for 20 of the 22 leases that we reviewed. ONHIR officials said  the leases were done this way because its management manual called  for ONHIR to serve as the lessor. However, ONHIR changed its  management manual in 2011 to say the Navajo Nation should serve as  the lessor for business; commercial; industrial; and mineral leases unless  the tribe requests ONHIR to be the lessor. ONHIR did not revise the  leases in effect in 2011 to reflect this change. After the 2011 changes to  the management manual, ONHIR became the lessor for the one business  lease entered into for the New Lands. ONHIR did not provide  documentation that the tribe requested ONHIR to serve as lessor for this  lease. Navajo Nation officials said ONHIR informs the tribe about leases  out of courtesy and does not seek the tribe\u2019s permission to lease Navajo  trust land. Moreover, the Navajo Nation Department of Justice has taken  the position that ONHIR does not have the authority to lease Navajo trust  land.\nIn addition to these leases, ONHIR identified 5 surface use agreements  for Navajo trust land it administers. In 3 of 5 of these agreements,  ONHIR, not the tribe, is the party granting the right to access and use the  Navajo trust land. However, ONHIR is not the landowner and this is also  inconsistent with BIA\u2019s leasing practices.\nIn addition, of the current leases of New Lands with ONHIR as the lessor,  2 leases specify what is to happen should ONHIR close. None of the  surface use agreements specify what is to happen should ONHIR close.  ONHIR officials said that they have not updated or amended the other  leases and agreements because there is no need to do so yet. ONHIR\u2019s  transition and implementation plans also do not identify which leases and  agreements need to be amended or assigned upon ONHIR\u2019s closure. In  its March 2017 transition plan, ONHIR identified BIA as the successor  agency for managing leases on the Navajo trust land ONHIR is currently  administering. However, this is inconsistent with the Navajo Nation\u2019s  assumption of responsibility for leasing its trust land from BIA.\nFederal internal control standards state that management should design  control activities to achieve objectives and respond to risk, for example, to  ensure that transactions such as leases are properly executed. In  addition, federal internal control standards state that management should  design control activities to identify, analyze, and respond to change,  including changes to the entity\u2019s activities. Without ONHIR identifying  which leases and other agreements need to be amended or assigned  because they identify ONHIR as the lessor, any entity that assumes  responsibility for leasing these trust lands in the event that OHNIR closes  will not be able to effectively manage these properties.\n\n\t\t\tONHIR Has Collected and Retained Revenues from These Lands\n\nHalf of the 22 leases we reviewed required the lessee to pay a non- nominal amount (i.e., more than $1 a year) of annual rent to ONHIR. In  addition, annual payments for 3 of 5 surface use agreements are made to  ONHIR, according to ONHIR officials. According to agency documents,  since the 1990s, ONHIR has collected and retained over $1 million in  revenue from these leases of and surface use agreements for Navajo  trust land it administers. ONHIR deposits the lease revenue into ONHIR\u2019s  Treasury account. ONHIR officials said they have used the revenue to  aid relocation efforts by renovating facilities located on Navajo trust land  ONHIR administers, providing grants to Navajo chapters, and funding  other activities to benefit the relocatees. However, the Settlement Act as  amended does not state that ONHIR may collect, retain, and use revenue  from leases of Navajo trust land, and ONHIR officials have not identified  another statute authorizing the agency to do so. ONHIR officials said the  agency retained this revenue to ensure that all net revenues from these  trust lands are used exclusively for the benefit of relocatees because the  Settlement Act as amended requires the trust lands be administered for  the benefit of relocatees. However, this statutory provision does not  authorize ONHIR to receive lease revenues.\n\n\t\tONHIR Is Operating the Padres Mesa Demonstration Ranch without a Land Use Agreement and Grazing Permit\n\nONHIR is operating the Padres Mesa Demonstration ranch on Navajo  trust land, but has not leased the land, which is inconsistent with ONHIR\u2019s  management manual. As mentioned previously, ONHIR\u2019s management  manual calls for written leases for and land use approvals of the New  Lands. According to ONHIR officials, there is no requirement for them to  have a lease or obtain permission from the tribe to occupy the structures  on the ranch, including a range office, or operate a ranch on Navajo trust  land.\nIn addition, ONHIR\u2019s grazing of the ranch\u2019s cattle on the New Lands  without a grazing permit is inconsistent with ONHIR\u2019s regulations.  ONHIR\u2019s grazing regulations require a grazing permit for all livestock  grazed on the New Lands, but ONHIR does not have a grazing permit for  the cattle on the ranch because ONHIR officials decided it was not  necessary to issue a permit to itself. Moreover, ONHIR is not eligible for a  grazing permit under its regulations because it is a federal entity and only  enrolled Navajo tribal members are eligible for permits. We are examining  ONHIR\u2019s use of appropriations to establish and operate a cattle ranch in a  separate legal opinion.\nONHIR has identified two different entities to assume operation of the  ranch in the event of its closure. ONHIR\u2019s March 2017 transition plan  identified BIA as the entity to oversee the continued operation of the  Padres Mesa Demonstration Ranch. However, BIA officials said the  agency does not have the statutory authority to operate a for-profit ranch.  Moreover, these officials said they are not interested in doing so because  it is a role for the tribe and would be a conflict of interest for the agency  since BIA regulates grazing on trust land. In addition, ONHIR\u2019s October  2017 implementation plan indicates that the Navajo Nation would assume  responsibility for the ranch after ONHIR\u2019s closure and after negotiating an  agreement with the chapter. Because the ranch is located on Navajo  Nation trust land, the tribe could choose to continue its operation after  ONHIR closes. Navajo officials said they are interested in operating the  ranch but they have not determined how the for-profit ranch would be  managed if the tribe also regulated grazing on the New Lands, which it is  also interested in doing.\n\n\tCongressional Action May also Be Needed to Address Other Provisions in the Settlement Act as Amended\n\nCongressional action may also be needed to address other provisions in  the Settlement Act as amended regarding (1) the use of the acquired trust  lands, (2) trust acquisition, and (3) the Navajo Rehabilitation Trust Fund.\n\n\t\tUse of Acquired Trust Lands to Benefit Relocatees and Regulation of Grazing\n\nTrust land is generally held in trust for the benefit of an Indian tribe or  individual Indian. However, the Settlement Act as amended requires the  land taken into trust pursuant to the Settlement Act, including the New  Lands, to be used solely for the benefit of relocatees. The New Lands  chapter government wants this restriction to continue if and when ONHIR  terminates. However, without congressional action to continue this  restriction, it is likely the trust lands acquired in Arizona pursuant to the  Settlement Act as amended would be administered for the benefit of the  tribe as a whole rather than to solely benefit the relocatees.\nIn addition, as part of its administration of the New Lands, ONHIR\u2019s  regulations governing grazing of livestock on the New Lands are different  from how grazing is regulated by BIA for other Indian trust land. The  purpose of ONHIR\u2019s regulations was to aid in the resettlement of Navajo  Indians residing on Hopi Partitioned Lands to the New Lands and to  preserve the New Lands\u2019 forage, land, and water resources. Under these  regulations, grazing permit holders must be permanent residents of the  New Lands. In contrast, under BIA\u2019s regulations that apply to the portions  of the Navajo reservation not under ONHIR\u2019s administration, any Navajo  tribal member is eligible for a grazing permit. Navajo Nation and chapter  officials told us they would like ONHIR\u2019s grazing regulations to continue if  ONHIR were to close.\nONHIR\u2019s implementation plan identifies BIA as the entity to regulate  grazing on the New Lands after ONHIR closes. ONHIR\u2019s implementation  plan also says BIA officials have agreed to regulate grazing on the New  Lands in accordance with ONHIR\u2019s regulations. However, BIA officials  said Interior currently does not have the authority to regulate grazing on  the New Lands, so they cannot make any decisions on how to do so. In  addition, Navajo Nation officials said they want to assume responsibility  for regulating grazing on the New Lands and prefer to have ONHIR\u2019s  grazing regulations, which are stricter than BIA\u2019s, remain in place at least  at the Padres Mesa Demonstration Ranch. Should ONHIR close,  Congress will need to consider addressing how grazing on the New  Lands will be regulated after ONHIR\u2019s closure.\n\n\t\tMandatory Trust Acquisition Provision for the Navajo Nation\n\nThe Settlement Act as amended provides for two categories of land to be  taken into trust for the Navajo Nation: (1) up to 250,000 acres of BLM  land in Arizona and New Mexico that is transferred to the tribe (category  1) and (2) up to 150,000 acres of land held in fee by the Navajo Nation  (category 2). No more than 35,000 of the 400,000 acres selected could  be in New Mexico. The tribe was authorized to select the lands in both  categories for 3 years after the 1980 amendments\u2019 enactment, and then  ONHIR was authorized to select the lands after consultation with the  Navajo Nation. Once the lands are selected, the Settlement Act as  amended provides for the mandatory acquisition of these selected lands  as land held in trust by the federal government for the Navajo Nation.  Mandatory trust acquisitions are not subject to BIA\u2019s regulatory  requirements for discretionary trust acquisitions under the Indian  Reorganization Act.\nAs of December 2017, about 12,000 of the 400,000 acres had yet to be  selected, and about 24,000 acres that had been selected had yet to be  taken into trust (see table 3).\nThe over 11,000 acres of category 1 land selected but not yet taken into  trust are located in New Mexico. These lands have not been taken into  trust because of unprocessed coal preference right lease applications.\nCongress will need to determine whether the Navajo Nation should be  able to select the entire 400,000 acres and have that land taken into trust  as a mandatory trust acquisition, as provided for in the Settlement Act as  amended. Without congressional action, any additional land the tribe  acquired and wanted taken into trust would be a discretionary trust  acquisition subject to BIA\u2019s regulations.\nFurthermore, the Navajo Nation has raised two additional issues  regarding the trust acquisition provision that Congress may also need to  address.\nDeselection and reselection. The Navajo Nation would like to make  changes to some of the land it has selected and make new selections,  but the Settlement Act as amended does not authorize deselection of  land the tribe previously selected to be taken into trust pursuant to the  act\u2019s mandatory trust acquisition provision. Deselection had not  occurred as of January 2018, but bills have been introduced in  Congress that would cancel some of the tribe\u2019s land selections and  authorize the tribe to replace those with new selections. Without  statutory authorization, the Navajo Nation cannot deselect these lands  and make new selections to reach the 400,000 acres provided for in  the Settlement Act as amended.\nTrust status versus restricted fee status. The Navajo Nation has  indicated that it is interested in having a statutory option for the  selected land to be held in restricted fee status rather than held in  trust. In 2016, a law was enacted that mandated a trust acquisition  for certain parcels of land unassociated with the Settlement Act unless  the Navajo Nation elected to have the land conveyed to it in restricted  fee status. The President of the Navajo Nation has testified before  Congress that the tribe is interested in having this option in future  legislation involving the Settlement Act. Without statutory  authorization, the land not yet selected pursuant to the Settlement Act  as amended could not be held in restricted fee status if the tribe so  chooses. However, without congressional action this cannot be  changed.\n\n\t\tThe Navajo Rehabilitation Trust Fund\n\nEstablished in the U.S. Treasury by the 1988 amendments to the  Settlement Act, the Navajo Rehabilitation Trust Fund is essentially a loan  from the federal government to the Navajo Nation to be paid back from  revenues derived from leases of the lands and minerals taken into trust in  New Mexico pursuant to the Settlement Act as amended. From fiscal  years 1990 through 1995, Congress appropriated approximately $16  million to the Trust Fund. The Settlement Act as amended requires all  net income derived by the Navajo Nation from the surface and mineral  estates of lands in New Mexico taken into trust pursuant to the act to be  deposited into the Trust Fund. Moreover, the net income is required to be  used to reimburse the general fund of the Treasury for the amounts  originally appropriated to the Trust Fund. According to leasing and other  documents from the Navajo Nation and BLM, several of these parcels  have been generating modest income since at least the 1990s.  Specifically, BLM identified several parcels of the New Mexico trust land  with grazing allotments or oil and gas leases. In addition to these sources  of revenue, the tribe entered into an agreement for use of a parcel of the  New Mexico trust land that requires, beginning in 2015, annual rent  payments of $25,000 to be paid to the Trust Fund.\nThe Navajo Nation has not reimbursed the general fund of the Treasury  for the approximately $16 million appropriated to the fund, contrary to the  statutory requirement to do so. While the Navajo Nation acknowledges its  legal obligation to repay the Treasury, the tribe is seeking loan  forgiveness because the Trust Fund\u2019s purpose was to aid the relocatees  and the tribe views such aid as an unfulfilled federal obligation, according  to tribal officials. Further, these officials said repaying the Treasury would  eliminate any benefit the relocatees received from the land because the  revenue generated from the New Mexico trust lands and minerals has not  been sufficient to justify partial payment.\nBecause much of the land the Navajo Nation selected in New Mexico has  not been taken into trust and the land that has been taken into trust is  generating modest income, Congress will need to consider whether to  continue the statutory repayment requirement or repeal it. If Congress  decides to repeal the repayment requirement, it will need to consider  specifying whether revenues from the trust lands acquired in New Mexico  pursuant to the Settlement Act as amended are to be used by the tribe  exclusively for the benefit of relocatees.\n\n\tConclusions\n\nThe relocation of Navajo and Hopi families has taken more time than  originally anticipated when the Settlement Act was enacted in 1974,  extending ONHIR operations more than 30 years beyond the original  estimates. ONHIR has proposed to close by the end of fiscal year 2018  and initiated steps to identify agencies to handle the remaining activities.  However, the Settlement Act does not give other agencies the authority to  undertake various ONHIR responsibilities. Therefore, if ONHIR closes  without congressional actions, any potential successor agency will not  have the appropriate authority to administer any remaining activities. As a  result, newly certified applicants and clients who remain under the 2-year  warranty period will not have an entity to assist with securing decent,  safe, and sanitary relocation homes, as intended in the Settlement Act.  Further, several other provisions in the Settlement Act as amended may  need congressional action. These include (1) the requirement for the trust  lands acquired in Arizona pursuant to the Settlement Act as amended to  be used solely for the benefit of relocatees and whether grazing on the  New Lands should be regulated consistent with ONHIR\u2019s current  regulations; (2) the mandatory trust acquisition provision for the Navajo  Nation; and (3) the requirement for the Navajo Nation to repay the U.S.  Treasury for appropriations made to the Navajo Rehabilitation Trust Fund.\nIn addition, although ONHIR believes it has completed most of its  responsibilities under the act and believes it can close by September  2018, it does not have the authority to make this decision. Rather, the  Settlement Act states that ONHIR will cease to exist when the President  of the United States determines that its functions have been fully  discharged. However, ONHIR has yet to request that the President make  this determination. Moreover, OHNIR has not prepared complete  information about its various activities, such as eligibility determinations,  appeals, and home building, which increases the risk that successor  agencies will not be able to effectively assume ONHIR\u2019s activities.\nFinally, ONHIR has not appropriately managed leases and other  agreements for Navajo trust land it administers or identified changes that  would need to be made in leases in the event that it closes. Because the  land ONHIR administers is held in trust by the federal government,  another entity will need to assume these responsibilities if ONHIR closes.  However, OHNIR does not maintain a complete inventory of leased or  occupied land and does not have written agreements for some occupied  land. Further, ONHIR has not identified which leases will need to be  amended to identify the appropriate lessor and the entity to receive the  lease revenue. Without these actions, the entity that assumes  responsibility for leasing the New Lands will not have the information it  needs to effectively manage the properties.\n\n\tMatters for Congressional Consideration\n\nWe are making the following four matters for congressional consideration  for when ONHIR closes:  Congress should consider providing necessary authority for other  agencies to continue remaining activities when ONHIR closes. (Matter for  Consideration 1)\nCongress should consider determining (1) whether the requirement for  the land acquired pursuant to the Settlement Act as amended to be used  solely for the benefit of relocatees should continue and (2) how grazing  on the New Lands should be regulated. (Matter for Consideration 2)\nCongress should consider addressing the mandatory trust acquisition  provision for the Navajo Nation in the Settlement Act as amended. (Matter  for Consideration 3)\nCongress should consider whether the requirement for the Navajo Nation  to repay the U.S. Treasury for appropriations made to the Navajo  Rehabilitation Trust Fund should continue. (Matter for Consideration 4)\n\n\tRecommendations for Executive Action\n\nWe are making the following five recommendations to ONHIR.\nThe Executive Director of ONHIR should request a presidential  determination as to whether ONHIR has fully discharged its  responsibilities and whether it should close. (Recommendation 1)\nThe Executive Director of ONHIR should prepare complete information on  the remaining denied households who could still file for federal appeals.  Such information could include paper case files and information in  ONHIR\u2019s client database for those households. (Recommendation 2)\nThe Executive Director of ONHIR should prepare complete information on  warranties and contractors. Such preparation should include linking  warranty complaints to the relevant contractor, completing missing  warranty information, and completing information on contractors\u2019 past  performance. (Recommendation 3)\nThe Executive Director of ONHIR should establish a comprehensive  inventory of (1) properties located on trust land it administers, (2) leases  of those properties, and (3) surface use and other use agreements for  trust land it administers. (Recommendation 4)\nThe Executive Director of ONHIR should identify which leases and other  agreements need to be amended or assigned because (1) ONHIR is the  lessor, (2) the lease or agreement provides for annual payments to be  made to ONHIR, and\/or (3) the lease or agreement terminates upon  ONHIR\u2019s closure. (Recommendation 5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Office of Navajo and Hopi Indian  Relocation (ONHIR); Department of the Interior; Department of Justice;  Department of Housing and Urban Development (HUD); Department of  Health and Human Services; Department of the Treasury; the Navajo  Nation; and the Hopi Tribe for review and comment. The Department of  Justice, Department of the Treasury, and the Hopi Tribe did not provide  comments. The Department of the Interior and the Department of Health  and Human Services provided technical comments that we incorporated  as appropriate.\nWe received comments via e-mail from HUD\u2019s Acting Director of Grants  Evaluation in the Office of Native American Programs. In this e-mail, the  Acting Director stated that HUD believes the report should clearly state  that HUD would not be an appropriate agency to continue ONHIR\u2019s  housing functions, because it does not provide direct services to tribes,  review or approve actions or transactions, or have the technical capacity  to assume ONHIR housing functions. We have acknowledged this in the  report and our objective was to identify legislative actions that may be  necessary to transition remaining relocation activities. Therefore, our  focus was on whether or not additional authorities might be needed if  ONHIR were to close. Although we present background information about  other federal agencies and tribal entities with responsibilities in Indian  Country as well as perspectives from various agencies on the transition  and remaining activities, we did not independently evaluate these  agencies\u2019 authorities or capacity and do not draw conclusions about  which agencies and tribal entities including HUD should be provided the  necessary authority by Congress to continue ONHIR\u2019s remaining  activities.\nIn ONHIR\u2019s comments, which are summarized below and reproduced in  appendix II, ONHIR did not explicitly agree or disagree with our five  recommendations but stated that it had either already taken steps or had  plans to once a successor is identified.\nWith regard to the draft report\u2019s first recommendation to request a  presidential determination as to whether ONHIR has fully  discharged its responsibilities and whether it should close, ONHIR  stated that it has worked for decades with the Office of  Management and Budget within the Executive Office of the  President on completing its work. While this may be the case, our  review found that no presidential determination for ONHIR to  cease operation has been requested, and no such decision has  been communicated, therefore we believe our recommendation is  valid.\nWith regard to the second recommendation to prepare complete  information on the remaining denied households that could still file  for federal appeals, ONHIR stated that it has a solid grasp of  potential appeals. Specifically, ONHIR said that case files have  been identified and all needed information already exists in the  case files and in its database. ONHIR stated that it will provide  potential successor agencies with any information they request.  However, because it is unclear when ONHIR will close and which  agency will assume ONHIR\u2019s remaining eligibility and appeals  activities at that time, a successor agency will not have the  institutional knowledge to follow and connect the information  needed for determining eligibility and providing support for cases  for which appeals were filed in federal court. Therefore, we  maintain that ONHIR should proactively prepare the necessary  information associated with these appeals for any successor  agency. Preparing complete and readily available information  could minimize the challenges the successor agency may  encounter in administering future appeals and eligibility  determinations.\nWith regard to the third recommendation to prepare complete  information on warranties and contractors, ONHIR stated that up- to-date and complete information on warranty status appears in  the existing case files. We maintain our concern about the  accuracy of ONHIR\u2019s warranty database because in its comment  letter ONHIR acknowledged that some complaints were entered  multiple times due to data entry issues. Moreover, ONHIR states  that its staff know which relocatee homes will still be under  warranty as of September 30, 2018, and have compiled a list of  such homes. However, preparing the case file and list of such  homes does not address the deficiencies that we found in the  warranty database. While we revised the report by including  ONHIR\u2019s statement that its system has the capability to search  warranty complaints, we continue to believe that the information  available through searches will be incomplete for a successor  agency because the information is disconnected. Without linking  warranty complaints to the relevant contractor, completing missing  warranty information, and completing information on contractors\u2019  past performance, any successor agency may have difficulty  understanding what warranty issues have already been addressed  or have difficulty overseeing contractors to help ensure that newly  certified applicants secure decent, safe, and sanitary relocation  homes.\nWith regard to the fourth recommendation to establish a  comprehensive inventory of (1) properties located on trust land it  administers, (2) leases of those properties, and (3) surface use  and other use agreements for trust land it administers, ONHIR  stated that such documentation exists and is maintained and  updated. However, this statement is inconsistent with what we  found during our review. We reviewed information provided by  ONHIR from various sources as part of our review, and the  information available did not include a comprehensive inventory of  leased and vacant properties on or surface use and other  agreements for Navajo trust land ONHIR administers. We  continue to believe that without developing a comprehensive  inventory of leased and vacant properties on Navajo trust land that  ONHIR administers and leases and agreements for those  properties, the entity that assumes responsibility for leasing the  land will not have the information it needs to carry out that  responsibility.\nWith regard to the fifth recommendation to identify which leases  and other agreements need to be amended or assigned because  (1) ONHIR is the lessor; (2) the lease or agreement provides for  annual payments to be made to ONHIR, and\/or (3) the lease or  agreement terminates upon ONHIR\u2019s closure, ONHIR stated that  it will move forward with specific transition activities after a  successor entity is identified. We believe that such an approach is  risky because it assumes that ONHIR staff will be available to  work closely with staff from a new successor entity to personally  transfer their knowledge to the new staff. However, there is no  guarantee that ONHIR will continue operating or that its many  retirement-eligible employees will be available to assist any  successor entities during a transition period. We, therefore,  maintain that the Executive Director of ONHIR should identify  which leases and other agreements need to be amended or  assigned.\nONHIR also made other comments in its letter, which we have responded  to in appendix II.\nThe Navajo Nation and the Navajo Nation Human Rights Commission  also submitted comments on a draft of this report, which are reproduced  in appendix III and IV.\nWe are sending copies of this report to the appropriate committees and  the Office of Navajo and Hopi Indian Relocation, Department of the  Interior, Department of Justice, Department of Housing and Urban  Development, Department of Health and Human Services, Department of  the Treasury, the Navajo Nation, and the Hopi Tribe. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  us at (202) 512-8678 or shearw@gao.gov or (202) 512-3841 or  fennella@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines (1) ONHIR\u2019s management of the eligibility and  appeals processes and the status of these activities; (2) ONHIR\u2019s  management of the home-building process and the status of these  activities; (3) executive branch or legislative actions that may be  necessary to terminate ONHIR in an orderly manner and transition  remaining relocation activities; (4) ONHIR\u2019s management of Navajo trust  lands and related transition activities; and (5) legislative actions that may  be necessary to address other Settlement Act provisions.\nTo address these objectives, we reviewed our prior related reports and  other studies and analyzed relevant laws and regulations. We  interviewed ONHIR officials on relocation and other key activities, and we  interviewed ONHIR\u2019s hearing officer to better understand his role in the  appeals process. We also interviewed federal officials from the  Department of the Interior\u2019s (Interior) Bureau of Indian Affairs (BIA), Office  of Inspector General, and Bureau of Land Management (BLM);  Department of Housing and Urban Development (HUD); Department of  the Treasury (Treasury); and Indian Health Services within the  Department of Health and Human Services. We also conducted  interviews with tribal government officials from the Navajo Nation and the  Hopi Tribe including officials from the Navajo-Hopi Legal Services  Program, the Navajo-Hopi Land Commission Office, and the Navajo  Nation Human Rights Commission. Additionally, we conducted two visits  in August 2017 to ONHIR\u2019s offices in Flagstaff and Sanders, Arizona, and  the Navajo region where we interviewed ONHIR staff, observed a  transition meeting, took two separate tours of homes (one with ONHIR  officials and the other with Navajo Nation officials) and observed  rangeland management activities, and attended presentations in three  Navajo Nation chapters.\nAdditionally, to address the first, second, and third objectives, we  reviewed ONHIR\u2019s management manual, policy memorandums, the 1981  Report and Plan, and the 1990 Plan Update on relocation activities,  including the eligibility and appeals processes, and home-building  activities. We obtained two data files as of June 2017 from ONHIR\u2019s  Client Database\u2014Client Master and Hearing File\u2014to analyze the time  frame for becoming certified for relocation benefits and relocating to the  house provided by ONHIR. Using the case numbers in the Hearing File,  we identified those applicants that were certified for relocation benefits  through the administrative appeals process. We assessed the reliability of  ONHIR\u2019s data files by conducting a file review of a random sample of 30  case numbers, which we selected based on the distribution of two factors:  (1) application date, and (2) type of determination. We recorded the  relevant information in the paper files\u2014 such as date applied, date of  determination, determination code, and date relocated\u2014and compared it  to the data fields in the electronic files. We determined that ONHIR\u2019s data  files were sufficiently reliable for the purpose of our report. We also  reviewed home-building-related documentation, including contractor lists,  contracts, warranty information, and contractor performance reports, to  understand ONHIR\u2019s oversight of home-building activities. In addition, we  reviewed ONHIR\u2019s transition-related documentation including transition  guiding principles, the draft transition plan, and the draft \u201cFrom Transition  Plan to Transition Implementation\u201d document to understand ONHIR\u2019s  planned closure. We also reviewed and assessed the original statute to  determine the extent to which ONHIR has the authority to transfer those  activities. We interviewed ONHIR and Interior officials to identify any  opportunities for modifying or continuing other Settlement Act provisions.\nTo address the fourth and last objectives, we obtained from ONHIR  copies of all leases and use agreements for Navajo trust land it  administers pursuant to the Settlement Act as amended from the 1980s to  the present. We reviewed the terms of the leases and agreements  provided to identify specific elements, such as the identity of the lessor,  lessee, and any concurring parties; start and end dates; required rental  payments, if any; and any provisions on the leases\u2019 continuation or  termination in the event that ONHIR closes. We compared the leases to  ONHIR\u2019s list of properties on Navajo trust land it administers to determine  if all of the properties were covered by leases. We also reviewed  information, such as summary spreadsheets, on sources of revenue  ONHIR collects, retains, and uses, including documentation of Treasury  accounts where such revenue is deposited. We cross-checked the  revenue information ONHIR provided with information from Treasury  about deposits into ONHIR\u2019s Treasury account and we interviewed  ONHIR officials regarding discrepancies. Revenues from the Padres  Mesa Demonstration Ranch were included as part of the revenue  information and ONHIR provided a separate accounting of the  obligations, expenditures, and revenues for the ranch. We reviewed  ONHIR\u2019s regulations and management manual for policies and  procedures on leasing and grazing on the New Lands and compared  them to the agency\u2019s practices. We also reviewed BIA\u2019s regulations on  leasing and grazing on Indian trust lands under the agency\u2019s  administration to identify comparable grazing and leasing policies and  procedures. Furthermore, we interviewed ONHIR, Interior, BLM,  Treasury, and Navajo Nation officials and reviewed documents from the  agencies and tribe to identify any opportunities for modifying or continuing  other Settlement Act provisions.\nWe conducted this performance audit from March 2017 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Comments from the Office of Navajo and Hopi Indian Relocation\n\n\tGAO Comments\n\n1.  We revised the report to state that ONHIR has no authority to require  any person to leave the land that was awarded to the other tribe.   2.  We disagree with the Office of Navajo and Hopi Indian Relocation\u2019s  (ONHIR) characterization of our report and did not make a change  based on this comment. Our report focuses on ONHIR\u2019s management  of the home building process and the status of these activities. To  appropriately address our audit objective on the home building  process, we included the experiences of the population that was being  served by ONHIR. While ONHIR states that the information included  in our report is unsubstantiated, we do not assert that the views on  home building from those we attributed\u2014tribal government officials  and relocatees\u2014are accurate or draw conclusions about the reasons  for the condition of the homes. Further, we presented ONHIR\u2019s  counterargument to the concerns raised by the relocatees to provide  context and balance, with additional details explained in footnotes.  Throughout our report, we ensured a balanced presentation with an  objective tone, consistent with generally accepted government  auditing standards and our quality assurance framework. We believe  that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. Moreover, our  description of Navajo Nation chapters was reviewed and verified by  the Navajo Nation, therefore we believe it accurately states the views  of Navajo Nation officials.   3.  We revised the report to indicate the attorney fees reported were over  a 35-year period.  4.  We revised the report to state that, for the third application period, the  requirement was for applicants to maintain legal residency until their  contact with ONHIR.   5.  We made revisions to the report to include ONHIR\u2019s efforts related to  eligibility determination, such offering administrative appeals to  Navajos for whom ONHIR could not show actual receipt of denial  letters and using restricted delivery certified mail for almost 30 years.  6.  We made revisions to the report to include ONHIR\u2019s perspective on  the difficulties in determining residency because of the nature of  Navajos\u2019 employment opportunities.  7.  Our report does not evaluate the reasons that have affected the  length of the appeal process because it is not pertinent to our  objectives. Therefore, we did not make a change to the report in  response to this comment.  8.  Although this is new information that was not presented to us during  our review, it does not materially affect our findings, therefore we did  not make a change in the report.   9.  We clarified the report to state that ONHIR consulted with the  Department of Justice in Washington, D.C, and the U.S. Attorney\u2019s  Office in Arizona.  10. We clarified the report to indicate that, in response to the Herbert  decision, ONHIR was required to provide notices to \u201cpotentially\u201d  eligible applicants.  11. Our report focuses on actions that may be necessary to terminate  ONHIR in an orderly manner and transition remaining relocation  activities. We did not make a change in the report in response to  ONHIR\u2019s comment because ONHIR had not identified and compiled  the case files during our review that would be necessary or easily  accessible for a successor agency. While ONHIR states in its letter  that case files have been identified and all needed information already  exists in the case files and in its database, because these activities  may have occurred subsequent to our review, we cannot confirm the  accuracy of this comment. We maintain our concerns about ONHIR\u2019s  database given its admission of data entry issues as stated in the  comment letter.   12. We revised the headings of two report sections to emphasize the  distinction between administrative appeals and appeals to the federal  court.   13. We revised the report to include ONHIR\u2019s perspective on allowing oral  evidence.   14. We revised the report to incorporate information ONHIR provided  related to the communities to which relocatees have moved.  15. We clarified the report to state that relocatees with existing Navajo  homesite leases can have their relocation home built on the homesite  lease site if it meets feasibility requirements.   16. We revised the report to incorporate information ONHIR provided on  relocatees who chose to relocate to remote areas.   17. Our report focuses on ONHIR\u2019s management of the home building  process. We did not make a change to the report in response to  ONHIR\u2019s comment because we already describe several procedures  related to home building, including contractor licensing requirements  and feasibility studies. The report also acknowledges that houses  have passed final inspection.    18. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. We did not make a change in the  report because we maintain that including the experiences of the  population served by ONHIR is appropriate for balance.  19. We disagree with ONHIR\u2019s characterization of our report and did not  make a change to the report based on this comment. Throughout the  body of the report, we have included ONHIR\u2019s policies, its  implementation of activities, as well as the statements of officials  related to relocatees\u2019 home-building concerns.  20. We have made revisions to clarify the figure title.  The two  photographed houses are on the Navajo reservation, shown to us  during our site visit. Because one of the houses was shown to us by  ONHIR officials, we believe the home was built by ONHIR. The other  home was from a separate tour with Navajo Nation officials. The  Navajo Nation officials indicated that the home was built by ONHIR.    21. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. We did not make a change in the  report because we maintain that including the experiences of the  population served by ONHIR is appropriate for balance.   22. As described in comment 2, we disagree with ONHIR\u2019s  characterization of our methodology. Throughout the report, we  specifically attribute all the views on home building to those we  interviewed\u2014tribal government officials and relocatees. We also do  not draw conclusions about the reasons for the condition of the  homes. We did not make a change in the report because we maintain  that including the experiences of the population served by ONHIR is  appropriate for balance.   23. We revised the report to include ONHIR\u2019s statement about the search  capability of its electronic data system.    24. During our review, ONHIR officials did not identify contracting for post- move counseling services as an option that they have considered nor  did we find any such reference in transition documents we reviewed.  Therefore we have not made any changes to the report based on this  comment.  25. We disagree with ONHIR\u2019s characterization of our report. We  reviewed information provided by ONHIR from various sources, and  accurately reported that ONHIR does not have a comprehensive  inventory of leased and vacant properties or surface use and other  agreements for Navajo trust land it administers. Therefore, we made  no changes in response to this comment.  26. We disagree with ONHIR\u2019s characterization of our report and did not  make a change in the report based on this comment. ONHIR\u2019s  management manual calls for written leases and land use approvals  for the New Lands, whether or not the Navajo Nation requests these.  It is not the responsibility of the trust beneficiary to request a written  lease. The trustee has a duty to maintain clear, complete, and  accurate books and records regarding trust property.  27. We disagree with ONHIR\u2019s statement that it will wait until a successor  is identified to inform it of the leases. Moving forward with specific  transition activities only after a successor entity is identified is a risky  approach because it assumes that ONHIR staff will be available to  work with staff from a successor entity to transfer their knowledge to  the new staff. However, there is no guarantee that ONHIR will  continue to be operating at that time or that its many retirement- eligible employees will be available to assist any successor entities  during a transition period. ONHIR has proposed closing on September  30, 2018. As of March 2018, no successor entities have been  designated or authorized to assume any ONHIR activities. As we  recommended, clearly documenting what needs to happen as part of  the transition will help ensure a smoother transition in the event that  there is not a transition period between ONHIR and a new successor  entity.  28. We revised the report to indicate that, according to ONHIR, Federal  Aviation Administration has continued to pay rent to ONHIR while a  new lease is negotiated.  29. We disagree with ONHIR\u2019s characterization of the report and did not  make a change based on this comment. As we reported, the  Settlement Act as amended does not specifically authorize ONHIR to  collect, retain, and use revenues from leases of Navajo trust land it  administers. The Settlement Act as amended also does not specify  whether ONHIR, the Navajo Nation, or the relocatees should receive  lease revenues. However, as we reported, under BIA\u2019s regulations for  trust land it administers, revenue from leases is to be either paid  directly to the tribe whose trust land is being leased or to BIA, which  deposits the revenue in the tribe\u2019s trust account that generally earns  interest. BIA officials told us leases of trust land that provide for BIA to  retain lease revenue would not be consistent with the agency\u2019s trust  responsibility.  30. We recognize that ONHIR is not, and has never been, part of BIA. As  we note in the report, the comparison to BIA is instructive because  BIA administers the vast majority of Indian trust land. In addition,  ONHIR in its comments and draft transition plan identify BIA as a  possible successor entity for some activities.  31. As described in comment 29, we disagree with ONHIR\u2019s  characterization of its duties and powers as a trustee and did not  make a change to the report. The Settlement Act as amended does  not specifically authorize ONHIR to collect, retain, and use revenues  from leases of Navajo trust land it administers. Moreover, BIA officials  told us leases of trust land that provide for BIA to retain lease revenue  would not be consistent with the agency\u2019s trust responsibility.  32. We disagree with ONHIR\u2019s characterization of the realities of leasing  Navajo trust land and did not make a change to the report. ONHIR did  not provide documentation of requests from the Navajo Nation for  ONHIR to serve as the lessor on some commercial leases. When  ONHIR served as the lessor, ONHIR provided the Navajo Nation with  some leases for \u201ctechnical review\u201d or for \u201creview and comment\u201d.  However, only one of the leases we reviewed includes the Navajo  Nation President\u2019s signature when the tribe, or a tribal entity, is not the  lessee. Moreover, as we reported, the Navajo Nation Department of  Justice repeatedly informed ONHIR that it lacked the authority to  lease Navajo trust land.  33. As described in comment 27, we disagree with ONHIR\u2019s planned  approach to wait until a successor is identified and did not make a  change in the report. Moving forward with specific transition activities  only after a successor entity is identified is a risky approach because  it assumes that ONHIR staff will be available to work with staff from a  successor entity to transfer their knowledge to the new staff. However,  there is no guarantee that ONHIR will continue operating or that its  many retirement-eligible employees will be available to assist any  successor entities during a transition period.  34. We clarified the report to note that another entity is needed to assume  remaining home building activities.  35. We clarified the report to include ONHIR\u2019s statement that it has had  regular communications with executive and legislative branch offices  on completing its work and closing.   36. We disagree with ONHIR\u2019s comments that the report is misleading  related to a presidential determination. Although we included ONHIR\u2019s  statement on its communications about closure in the report, we  maintain that without a presidential determination, ONHIR has not met  the explicit requirements for being permitted to cease operations  under the Settlement Act.  37. As described in comment 11, during the course of our review, ONHIR  did not have complete information readily available for use by a  successor agency. We cannot assure that any efforts ONHIR has  taken subsequently to compile this information as stated in its  comment letter are accurate. We continue to believe that ONHIR  should proactively compile necessary information rather than waiting  for a successor to request it. Moreover, we maintain our concerns  about ONHIR\u2019s database given its admission of data entry issues in  its comment letter. Therefore, we did not make a change in the report  based on this comment.\n\nAppendix III: Comments from the Navajo Nation\n\nAppendix IV: Comments from the Navajo Nation Human Rights Commission\n\nAppendix V: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Jill Naamane and Jeffrey  Malcolm (Assistant Directors), Chir-Jen Huang (Analyst in Charge),  Susan Baker, William Chatlos, Brad Dobbins, Justin Fisher, Randi Hall,  Erik Kjeldgaard, Ellie Klein, Jessica Sandler, Jennifer Schwartz, Jena  Sinkfield, and Jeanette Soares made key contributions to this report.","output":"Why GAO Did This Study\n\nIn 1974, the Settlement Act was intended to provide for the final settlement of a land dispute between the Navajo and Hopi tribes that originated nearly a century ago. The act created ONHIR to carry out the relocation of Navajo and Hopi Indians off land partitioned to the other tribe. ONHIR's relocation efforts were scheduled to end by 1986. However, those efforts continue today.\nGAO was asked to review ONHIR's operations. Among other things, this report discusses (1) ONHIR's management and the status of relocation activities and (2) executive branch and legislative actions that may be needed for ONHIR to close and transfer remaining activities. GAO reviewed documentation; interviewed officials at ONHIR and other federal agencies, as well as from the Navajo Nation and Hopi Tribe; and conducted two site visits to ONHIR's offices and the Navajo reservation in Arizona.\n\nWhat GAO Found\n\nAs of December 2017, the Office of Navajo and Hopi Indian Relocation, and its predecessor agency (collectively, ONHIR), has relocated 3,660 Navajo and 27 Hopi families off disputed lands that were partitioned to the two tribes and provided new houses for them. Although the Navajo-Hopi Settlement Act of 1974 (Settlement Act) intended for ONHIR to complete its activities 5 years after its relocation plan went into effect, the agency has continued to carry out its responsibilities for over three decades beyond the original deadline and the potential remains for relocation activities to continue into the future. For example, GAO found that by the end of fiscal year 2018\nat least 240 households whose relocation applications were previously denied could still file for appeals in federal court and if the court rules in their favor these households could become eligible for relocation benefits under the Settlement Act, and\nONHIR is still responsible for helping homeowners who might request repairs for 52 relocation homes that remain under warranty.\nONHIR believes that it has substantially completed its responsibilities under the Settlement Act and has stated its intent to close by September 2018. However, ONHIR does not have the authority to close its operations and has not yet taken the steps necessary to facilitate such a closure. GAO identified a number of areas where either executive branch or congressional actions would be needed to affect a closure of ONHIR, as shown in these examples:\nThe Settlement Act states that ONHIR will cease to exist when the President determines that its functions have been fully discharged. ONHIR, however, has not requested a determination nor provided specific information to the President that could facilitate such a decision.\nONHIR has prepared a transition plan and identified potential successor agencies that could assume its remaining activities. However, officials at these agencies said they currently do not have authority under the Settlement Act to undertake ONHIR's activities. Without congressional authorization these agencies would not be able to succeed ONHIR.\nONHIR has prepared an implementation plan to guide its closure but has not yet taken necessary steps to ensure that all the key information about its activities has been compiled. For example, ONHIR's database for tracking warranty requests is missing information, such as the date of warranty repairs and other contractor information. Similarly, ONHIR has not prepared complete information from its files on the remaining denied households who could file for federal appeals. Federal internal control standards state that agencies should identify and respond to risks and use quality information. By not preparing complete information on the relocation activities it has been engaged in, ONHIR places an effective transition of its functions to another agency at risk. This is because any successor agency authorized to continue these activities will not have the complete information needed to effectively fulfill these functions.\n\nWhat GAO Recommends\n\nGAO is making four matters for congressional consideration; including that Congress provide successor agencies necessary authority to continue ONHIR's remaining activities if it closes. GAO is also making five recommendations to ONHIR, including that it request a closure determination from the President and prepare necessary information to facilitate the transfer of its activities to a successor. ONHIR neither agreed nor disagreed with the five recommendations and stated it had either already taken steps or planned to once a successor is identified. GAO continues to believe the recommendations are valid, as discussed in the report."}
{"id":"crs_R45725","pid":"crs_R45725_0","input":"\tIntroduction\n\nThe Jones Act, which refers to Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261), requires that vessels transporting cargo from one U.S. point to another U.S. point be U.S.-built, and owned and crewed by U.S. citizens. The act provides a significant degree of protection from foreign competition for U.S. shipyards, domestic carriers, and American merchant sailors. It is a subject of debate because some experts point out that it makes domestic ocean shipping relatively expensive, constrains the availability of ships, and contributes to making it much more costly to build merchant vessels in U.S. shipyards than in shipyards abroad. \nThe Jones Act has been an issue in recent Congresses, coming into prominence amid debates over Puerto Rico's economic challenges and recovery from Hurricane Maria in 2017; in the investigation into the sinking of the 40-year-old ship El Faro with 33 fatalities during a hurricane in 2015; and in discussions about domestic transportation of oil and natural gas. The law's effectiveness in achieving national security goals has also been the subject of attention in conjunction with a congressional directive that the Administration develop a national maritime strategy, including strategies to increase the use of short sea shipping and enhance U.S. shipbuilding capability. In May 2018, the Office of Management and Budget requested public comment on federal requirements that could be modified or repealed to increase efficiency and reduce or eliminate unnecessary or unjustified regulatory burdens in the maritime sector. \n\n\tLegislative Context\n\nThe Jones Act of 1920 was not the first law requiring that vessels transporting cargo domestically be U.S.-built, owned, and crewed. Rather, it was a restatement of a long-standing restriction that was temporarily suspended during World War I by P.L. 65-73, enacted October 6, 1917. \nLaws favoring a U.S.-flag fleet over a foreign fleet were initiated by the third act of the First Congress (1 Stat. 27, enacted July 20, 1789), which assessed lesser duties on vessels built and owned domestically than on those foreign-built and -owned. On September 1 of the same year, Congress specified that only a U.S.-built vessel owned by U.S. citizens and with a U.S. citizen captain could register as a U.S. vessel (1 Stat. 55). In 1817, Congress enacted a precursor to the Jones Act by disallowing any vessel wholly or partially foreign-owned from transporting domestic cargo between U.S. ports (3 Stat. 351). In 1886, this prohibition was extended to vessels transporting passengers domestically (24 Stat. 81). \nThe early United States had a comparative advantage in shipbuilding due to its ample supplies of large timber. During the second half of the 1800s, it lost that advantage as wooden sailing ships gave way to iron steamships, with the advantage shifting to Scotland and England. Congress began debating how to respond to the steep drop-off in the share of U.S. foreign trade carried by U.S. vessels. The fall-off in domestic coastwise transport was less severe, but railroads began offering competition to coastal shipping. Proposals to allow foreign-built vessels to sail under the U.S. flag became known as the \"free ship\" movement. Opponents of the free ship movement argued that the higher cost of U.S. crews in and of itself would prevent a resurgence of trade carried by U.S. vessels even if foreign-built ships were allowed. While bills that would have allowed foreign-built vessels to qualify for U.S.-flag international service were reported by House and Senate committees in the late 1800s, it was in 1912 that Congress enacted such a measure (P.L. 62-33, 37 Stat. 562). Thus, since 1912, the domestic build requirement has principally applied to vessels making domestic voyages. \nIn the late 1800s, Congress considered but did not pass bills that would have allowed foreign-built ships in domestic trade. Rather, Congress tightened the language concerning coastwise transport in response to shippers' attempts to avoid high-cost U.S. vessels. For instance, in 1891 a shipper loaded 250 kegs of nails at the Port of New York with an ultimate destination of Los Angeles (Redondo).The shipper loaded the merchandise on a foreign-flag ship bound for Antwerp, Belgium, where the goods were transferred to another foreign-flag ship bound for Los Angeles. Despite the circuitous routing and extra port charges, the freight charges were apparently less than they would have been using a U.S.-built and U.S.-owned ship to carry the nails directly between New York and Los Angeles. A court found that the shipper had acted legally. Similarly, shipments from Seattle to Alaska often were routed via Vancouver, Canada, so shippers could use foreign-flag ships for both legs. Congress amended the coastwise law in 1893 (27 Stat. 455) and again in 1898 (30 Stat. 248) to prohibit shippers from routing cargo through a foreign port so as to avoid coastwise laws. \nNonetheless, U.S. shippers continued to use foreign-flag vessels in the Alaska trade by moving cargo between the United States and Vancouver, Canada, by rail. In the Merchant Marine Act of 1920, Senator Wesley Jones of Washington, chair of the Commerce Committee, sought to stop this practice by requiring Alaska-bound cargo to move through the Port of Seattle by amending the coastwise language to cover shipments \"by land and water\" and replacing shipments between \"U.S. ports\" with shipments between \"U.S. points.\" These amendments remain current law. \n\n\t\tShipbuilding Costs Debated\n\nThe relative cost of building ships in the United States versus foreign countries was part of the debate leading up to passage of the Jones Act. Four years earlier, in the Shipping Act of 1916, Congress had requested annual reports on the subject from the federal agency in charge of maritime transportation. The minority report to a 1919 House committee report to the bill that would become the Jones Act expressed the view that banning foreign-built ships would result in more costly domestically built ships:\n\u2026 in order to build up and sustain an American merchant marine it is absolutely necessary to remove every restriction against American merchants acquiring ships, whether built in the United States or out of the United States, at the lowest possible price, in order to enable them to compete with other nations in the transportation of the commerce of the world. If our merchants are allowed to buy ships in the open world market and place them under American registry with the privilege of using them both in the coastwise and overseas trade, it will inevitably follow that ships under the American flag will be bought as cheaply as ships under other flags.\nOn the other hand, if the American merchant shall be permitted to buy ships only from American builders in order to engage in our coastwise trade, it necessarily follows that every ship built in the United States will command a higher price than any foreign-built ship.\nOur American iron and steel manufacturers were unable to compete until they had to. When they had to they did compete successfully. Our shipbuilders can and will do likewise.\nA 1922 government report on shipbuilding indicated that U.S.-built ships cost 20% more than those built in foreign yards. The cost differential increased to 50% in the 1930s. In the 1950s, U.S. shipyard prices were double those of foreign yards, and by the 1990s, they were three times the price of foreign yards. Today, the price of a U.S.-built tanker is estimated to be about four times the global price of a similar vessel, while a U.S.-built container ship may cost five times the global price, according to one maritime consulting firm. The cost differential is also an issue for Department of Defense officials in charge of military sealift ships. As discussed later in this report, the military has modified a plan to build sealift ships domestically, finding it unaffordable, and instead will buy more used foreign-built cargo ships. Since U.S. shipyards do not build vessels for export, they are not required to compete with foreign shipyards on price or vessel characteristics.\nHowever, as was argued in the late 1800s, shipbuilding costs are not the only cost factor. U.S. crewing costs are higher than those of foreign-flag vessels. U.S.-flag ships have an operating cost differential estimated to be over $6 million per ship per year compared to foreign-flag ships. While crewing is the primary cost element, this estimate also includes insurance and ship maintenance costs. A 2011 study by the U.S. Maritime Administration (MARAD) found that in 2010, the average operating cost of a U.S.-flag ship was 2.7 times greater than a foreign-flag ship, but MARAD estimates that this cost differential has since increased. \n\n\t\tStatement of U.S. Maritime Policy\n\nA main thrust of the Merchant Marine Act of 1920 concerned the sale of a surplus of government cargo ships constructed for World War I. A second important and enduring aspect of the bill is its statement of maritime policy. The policy goals stated in the 1920 act, which appear in Section 27, have continued to the present day (46 U.S.C. \u00a750101). The law stated the following:\nThat it is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in times of war or national emergency, ultimately to be owned and operated privately by citizens of the United States; and it is hereby declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine. \nThis statement reflects the United States' status as an emerging power at that time. When World War I began in 1914, European nations utilized their ships for the war effort or kept them in harbors for fear of submarine attacks, leaving the United States with a shortage of ships for carrying its foreign trade. The Merchant Marine Act therefore emphasized that the United States should have its own merchant marine so as not to be dependent on any other nations' merchant vessels. \n\n\tWhat the Jones Act Requires\n\nThe Jones Act applies only to domestic waterborne shipments. It does not apply to the nation's international waterborne trade, which is almost entirely carried by foreign-flag ships. The U.S. citizen crewing requirement means that the master, all of the officers, and 75% of the remaining crew must be U.S. citizens. If the U.S. owner of a Jones Act ship is a corporation, 75% of the corporation's stock must be owned by U.S. citizens. \nRegarding U.S. territories, the U.S. Virgin Islands, America Samoa, and the Northern Mariana Islands are exempt from the Jones Act. Therefore, foreign-flag ships can transport cargo between these islands and other U.S. points. Puerto Rico is exempt for passengers but not for cargo. Vessels traveling between Guam and another U.S. point must be U.S.-owned and -crewed but need not be U.S.-built. \n\n\tRegulatory Background\n\nThe Coast Guard is in charge of enforcing the U.S.-build requirement for vessels (46 C.F.R. \u00a7\u00a767.95-67.101), U.S. ownership of the carriers (46 C.F.R. \u00a7\u00a767.30-67.43), and U.S. crewing (46 C.F.R. \u00a710.221)\u2014essentially, the licensing of Jones Act operators. It enforces these requirements when an operator seeks a \"coastwise endorsement\" (46 C.F.R. \u00a767.19) from the agency. The terms \"coastwise qualified\" and \"Jones Act qualified\" are synonymous. Customs and Border Protection (CBP) is primarily responsible for determining what maritime activity falls under the act, namely defining what constitutes \"transportation\" and whether the origin and destination of a voyage are \"U.S. points\" (19 C.F.R. \u00a7\u00a74.80\u20134.93). Agency interpretations of domestic shipping restrictions have been consistent since the late 1800s and early 1900s, as discussed further below.\n\n\t\t\"U.S.-Built\" Vessel Defined\n\nA significant element of the Jones Act is the requirement to use only \"U.S.-built\" vessels. Competing freight transportation modes have no requirement to purchase only domestically built equipment. Congress has not defined what constitutes a U.S.-built vessel, leaving this determination to the Coast Guard. Coast Guard regulations deem a vessel to be U.S.-built if (1) all \"major components\" of its hull and superstructure are fabricated in the United States, and (2) the vessel is assembled in the United States. The \"superstructure\" means the main deck and any other structural part above the main deck (e.g., the bridge, forecastle, pilot house). \nThe Coast Guard holds that propulsion machinery (the ship's engine), other machinery, small engine room equipment modules, consoles, wiring, piping, certain mechanical systems and outfitting have no bearing on a U.S.-build determination. Consequently, for oceangoing ships, U.S. shipyards typically import engines from foreign manufacturers. This is allowed because engines are deemed components that are attached to the hull rather than an integral part of the hull's structure. A ship part or component that is self-supporting and independent of the vessel's structure and does not contribute to the overall integrity of the vessel or compromise the watertight envelope of the hull can be manufactured in a foreign country. However, the part or component must be attached or joined to the vessel in a U.S. shipyard, not an overseas yard. \nThe Coast Guard's test for \"major components\" of the hull or superstructure is based on weight; up to 1.5% of the steel weight of hull and superstructure components can be manufactured abroad. By this reasoning, the propeller, stern bulb, bulbous bow, some rudders (depending on their design), and watertight closures used in U.S.-built vessels are often imported, as long as they (in the aggregate) do not exceed the steel weight limit. The Coast Guard also permits steel products in standard forms (\"off the shelf\") to be imported with no limit on their weight, but any shaping, molding, and cutting of the steel that is custom to the design of the vessel must be performed in a U.S. shipyard.\nShipyards typically seek confirmation from the Coast Guard that incorporating certain foreign-built components in construction of a vessel will not disqualify the vessel from the Jones Act trade. These \"determination letters\" written by the Coast Guard detail which and to what extent foreign components are permissible. In the Coast Guard Authorization Act of 2018 ( P.L. 115-282 , \u00a7516) Congress directed the Coast Guard to publish these letters.\nShipyard unions refer to ships built in this manner as \"kit ships.\" They sued the Coast Guard in 2007, arguing that the Coast Guard's interpretation of the statute violated the Administrative Procedure Act. The U.S. District Court for the Eastern District of Pennsylvania sided with the Coast Guard, noting in part that the Coast Guard's interpretation is rooted and consistent with the Treasury Department's interpretation dating to at least the late 1800s (the Treasury Department was the agency of jurisdiction at that time), as well as U.S. Attorney General interpretations dating to the early 1900s. The shipyard unions' lawsuit was prompted by a Philadelphia shipyard's partnership with a South Korean shipbuilder, begun in 2004, to use the Korean builder's ship designs and other procurement services to build a series of Jones Act tankers. This partnership continues today and also includes container ships built in the Philadelphia shipyard. Since 2006, General Dynamics NASSCO of San Diego, another builder of Jones Act oceangoing ships, has partnered with Daewoo Shipbuilding of South Korea to procure vessel designs, engineering, and some of the materials for the commercial ships it has since built for Jones Act carriers.\nImporting engines and other major ship components would appear to undermine the Jones Act policy objective of a domestic shipbuilding capability independent of foreign yards. In the court case cited above, the shipyards argued that not allowing use of such foreign components would increase the cost of ships further. This would reduce orders for new ships and harm the domestic fleet. \n\n\t\tPassenger Vessel Itineraries\n\nThe United States is the largest cruise ship market, but most Americans board foreign-flag cruise ships. This is because CBP has determined that a cruise ship serving a U.S. port does not have to be Jones Act-compliant as long as it has visited a distant foreign port (any port outside North and Central America, Bermuda, the Bahamas, and the Virgin Islands). Thus, for example, if a cruise ship includes Aruba or Curacao in its itinerary, it does not need to be Jones Act-compliant. The reasoning is that the main objective of such a cruise itinerary is to visit such foreign ports, not to transport passengers from one U.S. port to another U.S. port. This reasoning was articulated in a 1910 Attorney General's opinion. \nAnother significant regulatory interpretation allowing for the prevalence of foreign cruise ships at U.S. ports is a 1985 rulemaking by the U.S. Customs Service (the predecessor of CBP). In this rulemaking, Customs allowed foreign-flag cruise ships to make round trips from a U.S. port and to visit other U.S. ports as long as they also include a visit to a nearby foreign port (such as those in Canada, Mexico, or Bermuda). All passengers must continue with the cruise until the cruise terminates at the same dock at which it began. Again, the reasoning is based on the primary intent of the cruise voyage; if the main purpose of the voyage is not domestic transportation of passengers then the Jones Act is not violated.\nAnother type of passenger vessel excursion involves visits to no other ports. The purpose of the voyage could be whale watching, recreational diving, gambling, duty-free shopping, or deep-sea fishing, for example. These are so-called \"voyages to nowhere\" since passengers do not visit any other ports besides the one at which they embark and disembark. In these cases, CBP has determined that if such vessels stay within the 3-mile zone of U.S. territorial waters they must be Jones Act-compliant since CBP considers any places within such waters as \"U.S. points.\" This interpretation is based on Treasury Decision 22275, issued in 1900. However, CBP has determined that if the vessel journeys beyond 3 miles from shore (into international waters), then it does not need to be Jones Act-compliant. This determination is based on a 1912 Attorney General opinion. But the policy regarding charter fishing boats differs from that regarding other passenger vessels. If charter fishing boats venture into international waters, they still must be Jones Act-compliant. This determination is by virtue of a 1936 ruling by the Bureau of Navigation and Steamboat Inspection (Circular Letter No. 103, June 3, 1936), and affirmed by Treasury Decision 55193(2) in 1960.\nAnother element of CBP's interpretation of the Jones Act with respect to passenger vessels is its definition of a passenger. According to CBP, a passenger need not be a paying customer (such as a tour boat or cruise ship ticket holder); rather, the term encompasses anyone aboard a vessel who is not a member of the crew or an owner of the vessel. Thus, for example, an owner of a yacht who chooses to entertain business clients aboard his or her vessel must comply with the Jones Act. A construction company transporting construction workers to a construction site must use a Jones Act-compliant vessel.\n\n\t\tOffshore Oil and Gas Vessels\n\nIn the offshore oil market, CBP's interpretations have affected \"lightering\" (the transfer of oil offshore from an oil tanker too large to transit a harbor to a smaller vessel) and offshore supply vessels (OSVs) used to supply oil platforms. CBP has determined that if a tanker to be lightered is anchored to the seabed and within 3 nautical miles of shore (which are U.S. territorial waters), it is a \"U.S. point.\" Many lightering areas in the Gulf of Mexico are 60 to 80 miles offshore and therefore the lightering vessels can be foreign-flagged. Lightering operations in the Delaware Bay and elsewhere are within the 3-mile zone, and therefore lightering vessels operating in these areas must be Jones Act-compliant (in which case tank barges rather than ships are typically used as lighters).\nRegarding OSVs, two factors determine whether these vessels must be Jones Act-compliant in servicing offshore oil rigs. By virtue of the Outer Continental Shelf Lands Act of 1953 (P.L. 83-212), U.S. waters extend 200 miles offshore strictly for purposes related to the exploration, development, and production of offshore natural resources. CBP has determined that within this zone, only oil rigs attached to the seabed (anchored or submerged to) are \"U.S. points.\" Another type of oil rig is not attached to the seabed: some mobile offshore drilling units (MODUs) are semisubmerged and can hold their positions with the use of propellers. CBP had determined that MODUs not attached to the seabed are not \"U.S. points,\" and therefore foreign-flagged vessels were permitted to service these units. However, in 2008, Congress required that OSVs servicing MODUs be U.S.-owned and -crewed, but need not be U.S.-built ( P.L. 110-181 , \u00a73525), which is the same requirement applied to U.S.-flag vessels engaged in international voyages. \nA second factor determining whether OSVs must be Jones Act-compliant is whether the OSV is transporting supplies or workers to the oil rig, or if the vessel is involved in installing equipment necessary for the operation of the rig. CBP defines \"vessel equipment\" as anything \"necessary and appropriate for the navigation, operation or maintenance of a vessel or for the comfort and safety of persons on board.\" Consequently, a vessel laying cable or pipeline in U.S. waters does not need to be Jones Act-compliant. Similarly, while OSVs transporting supplies and rig workers must be Jones Act-compliant (if the rig is attached to the seabed), vessels involved in installing rig equipment or conducting geophysical surveying or diving inspections can be foreign-flagged, as well as \"flotels,\" which are vessels that provide living quarters for construction workers. The distinction can be unclear. In 2017, CBP proposed that most or all activities performed by OSVs fall under the Jones Act, but after reviewing comments, the agency withdrew the proposal. \n\n\t\tOffshore Wind Farms\n\nSome question whether the Outer Continental Shelf Lands Act, and therefore the Jones Act, applies to offshore wind farms located beyond 3 miles from shore. Currently, wind farm developers are being guided by CBP's interpretations of the Jones Act with respect to OSVs and oil rigs. The Department of Energy has noted that the nonavailability of Jones Act-compliant \"Tower Installation Vessels\" (TIVs) can be a hindrance to offshore wind farm development, especially for installations in deeper water. In Europe, TIVs not only install the towers but also transport the equipment from shore to the offshore site. Since there are no Jones Act-compliant TIVs, U.S. wind developers either transport the equipment from foreign countries or use Jones Act-compliant vessels to transport the equipment to the site from a U.S. port alongside non-Jones Act-compliant TIVs to install the equipment. \n\n\t\tForeign Blending Ports\n\nA third CBP interpretation of the Jones Act has been significant in shaping coastal maritime activity. CBP determined that if merchandise is transformed (manufactured or processed) into a new and different product at an intermediate foreign port, then the vessels transporting the original product from a U.S. port to this foreign port and transporting the transformed product from the foreign port to a U.S. port do not need to be Jones Act-compliant. For example, a Texas oil producer has shipped a gasoline product to a Bahamian storage facility where its product is blended with a different imported petroleum product to produce a final gasoline product that is shipped to New York. Foreign-flag tankers are allowed to make all of these shipments even though it could be argued that a portion of the cargo is being shipped between two U.S. points (Texas and New York). The transformation of the product into a new and different product at an intermediate foreign port distinguishes this case from the 1891 kegs-of-nails case mentioned above. This interpretation has precedent in a 1964 Customs Service ruling involving California rice being processed in the U.S. Virgin Islands (exempt from the Jones Act) before being shipped to Puerto Rico, with both shipment legs involving foreign-flag ships. \n\n\tThe Jones Act Since 1920\n\nSince 1920, Congress has enacted provisions that could be said to tighten Jones Act requirements, as well as provisions that exempt certain maritime activities from the requirements. In 1935, Congress forbade Jones Act-qualified vessels sold to foreign owners or registered under a foreign-flag to subsequently requalify as Jones Act-eligible (P.L. 74-191), meaning that they could never again be used in U.S. domestic trade. This provides additional protection from competition for Jones Act carriers if coastal shipping demand increases, because it can take two years to construct a new ship. In 1940, Congress expanded the Jones Act to cover towing vessels, such as river tugs that push barge tows and harbor tugs that assist larger ships, and salvage vessels operating in U.S. waters (P.L. 76-599). In 1988, Congress specified that waterborne transport of valueless material, such as dredge spoil or municipal solid waste, requires use of a Jones Act-qualified vessel ( P.L. 100-329 ).\n\n\t\tPrecedents for Exempting the Jones Act\n\nCongress has enacted numerous exemptions or exceptions to the Jones Act. A list of these legislated exemptions and exceptions can be found in the Appendix .\nIt has waived the Jones Act's restrictions when finding that no Jones Act-qualified operator was interested in providing service in a particular market, reasoning that the waiver thus would bring no harm to the domestic maritime industry. For instance, in 1984, Congress exempted passenger travel between Puerto Rico and any other U.S. port as long as no Jones Act-qualified operator was able to provide comparable service ( P.L. 98-563 ). This exemption remains in force, allowing foreign-flag cruise ships to carry passengers between the U.S. mainland and the island. On two occasions, in 1996 ( P.L. 104-324 ) and again in 2011 ( P.L. 112-61 ), Congress has permitted certain foreign-flagged liquefied natural gas (LNG) tankers to provide domestic service because none existed in the Jones Act fleet; no ship owners have made use of these exemptions (see Table A-1 ). \nCongress has also enacted exemptions due to a sudden spike in demand for Jones Act-qualified vessels. To address a vessel shortage, Congress enacted an exemption for iron ore carried on the Great Lakes during the 1940s that was related to a surge in steelmaking for the war effort. It did the same for a bumper grain harvest in 1951 (see Table A-1 ). In 1996, Congress enacted an exemption for vessels participating in oil spill cleanup operations when an insufficient number of Jones Act-qualified vessels are available. \nCongress has enacted Jones Act waivers for two innovations in vessel designs used in foreign trade but whose cargo operations included domestic legs that technically would otherwise fall under the Jones Act. One concerned a ship designed to carry river barges on international voyages, a technology known as Lighter Aboard Ship (LASH). In 1971, Congress exempted these specific barges from the Jones Act (P.L. 92-163). The exemption is no longer relevant, as this type of shipping is not now in use. In 1965, as container ships were about to come into use internationally, Congress exempted the movement of empty containers between U.S. ports from the Jones Act (P.L. 89-194). This exemption is restricted to containers used for international shipments, thus allowing the foreign-flagged container carriers to reposition their empty equipment along U.S. coastlines.\nJones Act-compliant ships are necessary for transshipment of loaded international containers. This distinction between carriage of loaded and unloaded containers has ramifications for the development of marine highways or short sea shipping routes. Transshipment of international containerized cargo by feeder ships is prevalent abroad, but the practice does not exist in the United States. The Jones Act would require such ships be U.S.-built, -crewed, and -owned. Lack of transshipment services increases demand for rail and road connections to ports, as smaller feeder container ships do not play a role in distributing international containerized cargo among U.S. ports.\n\n\t\t\tWaivers for Specifically Named Vessels\n\nIn addition to authorizing exemptions to the Jones Act under certain circumstances, Congress has enacted exemptions for specific vessels identified by name and identification number (a registration number with a state government, the Coast Guard, or International Maritime Organization). Typically, the legislative language does not indicate why a waiver was needed or describe the kind of vessel, its size, or its function. A search of the statutes at large under the terms \"coastwise\" and \"endorsement\" and \"certificate of documentation\" indicates that since 1989, at least 133 specific vessels have been granted Jones Act waivers by Congress in 16 separate legislative acts.\nThese waivers typically appear in maritime-related legislation, such as a Coast Guard authorization bill. One act contains waivers for 67 vessels and another for 35 vessels. It appears in most cases that these vessels are not commercially significant\u2014for instance, that they are not large or even moderately sized cargo or passenger vessels. Some of them are owned by nonprofit entities. One exception was the previously mentioned 2011 granting of waivers to three LNG tankers built in the United States in the late 1970s that subsequently became foreign-registered ( P.L. 112-61 ). In many cases, it appears the vessel needs a waiver because of a technicality in meeting Jones Act requirements; for example, the U.S.-citizen ownership history may be missing some records. In many cases, the statute granting the waiver places specific conditions on how the vessel can be used.\n\n\t\t\tAdministrative Waivers in The Interest of National Defense\n\nAs noted, the domestic shipping restrictions were waived during World War I. They were waived again in preparation for World War II (P.L. 77-507, 1942). In 1950, after the Korean War began, Congress enacted a provision allowing the executive branch to issue waivers \"in the interest of national defense\" (P.L. 81-891). This authority is still in effect, as the language did not specify that it was intended only for the conduct of that war. In 1991 and 2011, waivers were granted on national defense grounds to expedite oil shipments from the Strategic Petroleum Reserve in response to the Persian Gulf War and a conflict in Libya, respectively.\nIn addition to military conflicts, the executive branch has waived the Jones Act for fuel resupply in the aftermath of natural disasters. This so-called \"national defense waiver\" authority has been the basis for recent waivers granted in the aftermath of major hurricanes, beginning with Hurricane Katrina in 2005 up to and including Hurricanes Harvey, Irma, and Maria in 2017 (see Table A-2 ). In 2008 ( P.L. 110-417 ), Congress inserted a role for MARAD to check on the availability of any Jones Act-qualified vessel before granting certain waivers.\nThe lack of heavy-lift vessels in the Jones Act fleet has also prompted national defense waivers: in 2005 to allow a foreign-flag heavy-lift vessel to transport a radar system from Texas to Hawaii and in 2006 to allow an oil company to use a Chinese-flagged heavy-lift vessel to transport an oil rig from the Gulf Coast to Alaska. The national defense justification for the oil rig waiver was apparently based on addressing a fuel shortage in that region of Alaska. However, in 1992, Customs denied a waiver request to use a foreign-flag heavy-lift vessel to transport replicas of Christopher Columbus's Ni\u00f1a, Pinta, and Santa Maria vessels from Boston to San Francisco. A specific type of heavy-lift vessel is used in the construction of offshore oil rigs, but CBP has denied Jones Act waivers for these vessels even after Coast Guard and the Bureau of Safety and Environmental Enforcement in the Department of the Interior advised that not granting a waiver created a safety hazard for these operators. \nCBP has stated that the \"national defense\" justification is a high standard and that national defense waivers would not be issued for economic reasons such as commercial practicality or expediency. Consistent with this view, while CBP has issued national defense waivers in circumstances involving fuel shortages, it has not issued waivers that would merely favor domestic supply lines over offshore ones, even though one might argue the latter is a national security issue. For instance, in 1976, arguing that offshore supply lines are more vulnerable, some Members of Congress representing Gulf Coast states sought to have the Jones Act extended to the U.S. Virgin Islands. At the time, the largest refinery in North America was located in the U.S. Virgin Islands, and the refinery supplied petroleum products to the U.S. Northeast on foreign-flagged tankers. In 2014, northeast refineries reportedly contemplated seeking a Jones Act waiver to ship crude oil from Texas. These refineries import much of their crude oil. In 2018, the United States exported between 40 million and 80 million barrels of crude oil per month on foreign-flag tankers, imported about 150 million barrels per month from overseas sources on foreign-flag tankers, and shipped about 15 million barrels per month domestically on Jones Act tankers. \nA similar situation is occurring with liquefied natural gas (LNG): the United States has begun exporting substantial quantities by ship while continuing to import LNG by ship, but no LNG is shipped domestically. There are no LNG tankers in the Jones Act fleet, and it is unclear why shippers have not utilized the 1996 or 2011 waivers for LNG tankers mentioned above. Puerto Rico, which currently imports LNG from Trinidad and Tobago, is seeking a 10-year waiver of the Jones Act to receive bulk shipments of LNG from the U.S. mainland.\n\n\tThe Jones Act Fleet\n\nRecent controversies over the Jones Act have concerned the oceangoing ship and offshore supply vessel sectors. The Jones Act also covers ships on the Great Lakes, river barges, harbor tugs, dredging vessels, and various kinds of passenger vessels. The Jones Act ship fleet, in particular, has shortcomings compared to the merchant fleet desired by the drafters of the 1920 act as they described it in the aforementioned statement of U.S. maritime policy. \n\n\t\tOceangoing Ships\n\nAs of March 2018, there were 99 oceangoing ships in the Jones Act-compliant fleet, employing about 3,380 mariners. The largest category of Jones Act ships is tankers. Of the 57 tankers in the fleet, 11 carry Alaskan crude oil to refineries on the West Coast, 44 are medium-sized product tankers that mostly carry refined products along the Atlantic Coast, and 2 are chemical or asphalt tankers. The dry cargo fleet includes 24 small to medium-sized container ships, 7 ships that have ramps for carrying vehicles (known as roll on\/roll off vessels), and 2 dry bulk vessels designed to carry such commodities as grain and coal in bulk form. The fleet also includes 9 relatively small general-cargo vessels supplying subsistence harbors along Alaska's coast. \nAs Figure 1 indicates, the number of oceangoing ships in the Jones Act fleet has shrunk to less than a quarter of what it was in 1950. The ships are much larger today than they were then, but their aggregate carrying capacity (DWT) is still less than in 1950. \nAs shown in the figure, there was a pronounced drop in the size of the fleet in the late 1950s and early 1960s. At a 1967 congressional hearing, Alan Boyd, Secretary of Transportation in the Lyndon B. Johnson Administration, testified that the U.S. merchant marine was \"too small, too old, and too unproductive,\" and stated, \"you do not revitalize an industry by flooding it with Federal dollars and imprisoning it within a wall of protection.\" The Lyndon B. Johnson Administration appears to be the only Administration in the modern era that has called for the repeal of the Jones Act.\nWhile domestic ships are carrying fewer tons of freight today than they did in the 1950s, their most direct competitors, railroads and pipelines, are carrying more. Domestic ships have lost market share to land modes even though ships have economic advantages. Ocean carriers do not need to acquire and maintain rights-of-way like railroads and pipelines. They can move much more cargo per trip and per gallon of fuel than trucks and railroads. Although ships are slower than truck and rail modes, many shippers are willing to sacrifice transit time for substantially lower costs, as long as delivery schedules are reliable. \nThe Jones Act fleet is almost entirely engaged in domestic trade routes where overland modes are not an option, serving Alaska, Hawaii, and Puerto Rico. In other words, it operates in markets where shippers have little alternative. Although the Jones Act can be said to have preserved a nucleus of a U.S. maritime industry, it has not succeeded in meeting the stated policy goal of sustaining a growing merchant marine that carries an increasing proportion of the nation's commerce. \nIn the Merchant Marine Act of 1936 (P.L. 74-835, Section 101), Congress amended the policy goals articulated in the 1920 Act by adding the phrase \"providing shipping service on all routes essential for maintaining the flow [of commerce] at all times,\" and also added the word \"safest\" to the policy goal of having the best equipped and most suitable types of vessels. At present, the Jones Act fleet does not appear to achieve either of these goals\n\n\t\t\tShip Designs Missing from the Fleet\n\nOne can also question whether the policy objective of having \"the best equipped and most suitable types of vessels\" has been achieved. Not all ship designs are represented in the Jones Act fleet. \"Project cargo\" or \"heavy-lift\" vessels are often used to carry oversized pieces of equipment such as smaller vessels, ship engines and modules, wind turbine parts, and power generation equipment. They would be useful for moving dredging fleets to project sites. There have not been any such vessels in the Jones Act fleet in recent decades. The Department of Defense has used \"national defense\" waivers of the Jones Act (see below) to move radar systems and newly built vessels on foreign-flag heavy-lift vessels. This type of cargo typically does not generate regular shipments in any one region; thus these ships would likely need to extend their market reach beyond the United States to include the international market. However, the higher cost structure of Jones Act operators is an obstacle to competing for international shipments. \nTwo dry bulk ships are in the oceangoing Jones Act fleet, and they appear to be mostly inactive, possibly because they are nearly 40 years old. This is twice the economic life of a ship in the global fleet (where ships are typically sent for scrapping between 15 and 20 years of age). The sole Jones Act-qualified chemical tanker was built in 1968. No LNG tankers are in the Jones Act fleet despite new domestic markets as a result of the shale gas boom. The lack of sufficient Jones Act-qualified tanker capacity to move booming shale oil production coastwise added to pressure for lifting the crude oil export ban in 2015.\n\n\t\t\tSeagoing Barges\n\nIn response to the high cost of U.S.-built and U.S.-crewed ships, the U.S. market has developed a unique vessel design, a seagoing barge called an articulated tug barge (ATB). MARAD estimates that over 150 ATBs are operating in the Jones Act trades. While ATBs are more capable than flatwater barges in handling sea swells (with a hinge between the tug and barge), they are still less capable than ships in handling heavy sea states. They are less reliable and less efficient over longer voyages because they are slower and smaller than tanker ships, and the notch between the barge and tug creates more resistance through the water than a single hull. Since ATBs sail closer to the coasts, they could pose a higher risk of grounding and provide less time to prevent spilled oil from reaching shorelines. ATB crews are not qualified to sail sealift ships. ATBs now carry more cargo (predominantly oil) on coastal voyages than does the tanker fleet (see Figure 2 ). \n\n\t\t\tAge of Fleet Raises Safety Concerns\n\nThe El Faro was a Jones Act general cargo ship that sank in a hurricane in 2015. Because the ship was built in 1975, it was required to have only open lifeboats rather than the closed lifeboats with auto launchers required on ships built since 1983. After its sinking, the Coast Guard forbade its sister ship of the same age from sailing, and in congressional testimony noted concern about the condition of the rest of the U.S.-flag fleet:\nWe looked a little further beyond this particular incident, caused us to look at other vessels in the fleet and did cause us concern about their condition.\u2026 And the findings indicate that it is not unique to the El Faro . We have other ships out there that are in substandard condition.\u2026 You know, some of our fleet\u2014our fleet is almost three times older than the average fleet sailing around the world today. Just like your old car, those are the ones likely to breakdown. Those are the (inaudible) one\u2014the ones that are more difficult to maintain and may not start when I go out, turn the key.\nSubstantiating the Coast Guard's concern, in February 2019, the crew of the 46 year-old Jones Act containership Matsonia found a crack in the hull when looking for the source of an oil sheen in Oakland harbor. \nThe Jones Act fleet today is relatively young compared to its prior composition because of shipbuilding undertaken after the large increase in shale oil production and before the lifting of the oil export ban. In part, new ships were needed to comply with tighter emissions requirements in the newly created North American emission control area. Today, just over one-third of the Jones Act oceangoing fleet (35 ships) is 21 years old or older, down from two-thirds (64 ships) in 2007. \n\n\t\tThe Great Lakes Fleet\n\nJones Act-compliant vessels operating in the Great Lakes are considerably older than the oceangoing fleet. The Great Lakes fleet consists of 33 dry bulk ships and several large barges carrying mostly iron ore, limestone, and coal used in steelmaking, and cement. The U.S. fleet of 1,000-foot freighters, the largest ships operating on the Great Lakes, was built between 1972 and 1981. The second-largest class of ships, around 700 feet in length, is older, with some of the vessels having originally been built in the 1940s or 1950s; a number of these were rebuilt in the 1970s. According to the U.S. Lake Carriers Association, ships operating in freshwater, such as the Great Lakes, can have longer lives than oceangoing vessels. Jones Act-compliant Great Lakes ships are much narrower for their length compared to the global dry bulk fleet because of the dimensions of the Soo Locks in Michigan. Domestic tonnage on the Great Lakes has declined steadily since the 1950s, and is now about half what it was then. \nThe Canadian Great Lakes fleet illustrates the effect that vessel import policy can have on a domestic fleet. Canada's fleet was of similar age as the Jones Act fleet, with the youngest ship having been built in 1985, before Canada imposed a 25% tariff on newly constructed imported ships. While this import tariff was in effect, no new ships were added to the Canadian fleet. In 2010, Canada repealed the import tariff, and since then over 35 new dry bulk ships have been constructed in other countries specifically for service on the Great Lakes. These vessels cannot carry cargo between U.S. points. \n\n\t\tInland River Fleet\n\nThousands of tugs and barges carry mostly dry and liquid bulk commodities on the nation's inland rivers. The fleet includes several thousand tugs or pushboats that push the barge tows, about 20,000 dry cargo barges, and several thousand tank barges that carry liquid bulk cargoes. Tonnage is dominated by the export of corn and soybeans and domestic movement of coal. Since 1990, overall tonnage on the system has been flat or declining slightly. One of the two leading manufacturers of river barges ceased operation in April 2018 in response to the fall-off in demand for coal deliveries by barge.\n\n\t\tThe Dredging Fleet\n\nThe Dredging Act of 1906 (P.L. 59-185, 34 Stat. 204) requires that vessels engaged in dredging in U.S. waters be U.S.-built, -operated, and -crewed. The 1906 act was prompted by dredging work then being carried out in Galveston Bay, TX, after a calamitous 1900 hurricane. It required all dredge vessels henceforth to be U.S.-built. In 1988, Congress amended the Jones Act to define \"merchandise\" transported domestically by vessel to also include any valueless material ( P.L. 100-329 ). This change effectively required that dredge spoil be transported in Jones Act-qualified vessels. \nAccording to one study, the ban on foreign-built dredgers and foreign operators raises the cost of dredging U.S. harbors substantially. According to U.S. Army Corps of Engineers figures, while federal spending on navigation dredging has increased over the last decade by several hundred million dollars per year, the spending increase has not resulted in a larger volume of material being dredged from U.S. harbors. In addition to a limited supply of dredging vessels, increases in the cost of fuel, steel, and labor, as well as more stringent environmental requirements, are factors that may be causing cost increases.\nThe U.S. privately owned fleet is much older and smaller, both in terms of the capacity of individual vessels and the total size of the fleet, compared to the four leading European dredging firms that perform work worldwide (except in U.S. waters). Each of the four European firms has a fleet of hopper dredges, the preferred type for dredging coastal harbors, whose total capacity is around three to four times the capacity of the entire U.S. hopper fleet. Three-quarters of the U.S. privately owned hopper dredge fleet is over 20 years of age, while about three-quarters of the European fleet is under 20 years. When the Army Corps bids harbor work requiring a hopper dredge, one of the four U.S. firms is the sole bidder over a third of the time. When the Army Corps schedules dredging projects for an upcoming year, it has periods when an insufficient number of dredges can perform the work. In addition to the dredge vessel, dredging projects involve a number of support vessels. One study found that mobilization and demobilization of the equipment in the U.S. market can amount to more than one-third of total project costs. Foreign firms use heavy-lift vessels to transport their dredge fleets to the next project. As indicated earlier, no such vessels are available in the Jones Act fleet. \n\n\t\tOffshore Supply Vessels\n\nThe size of the OSV fleet can change significantly with changes in the oil market. In 2017, the offshore supply vessel fleet consisted of about 1,800 vessels, working mainly in the Gulf of Mexico. Over the last decade, annual construction averaged 32 vessels, but ranged between 4 and 53 vessels. Foreign-built vessels are relied upon for construction of rigs in deeper waters. These vessels need dynamic positioning propulsion systems to keep the vessel in place while performing the construction work, as the waters are too deep for anchoring. As mentioned above, similar vessels are lacking in the Jones Act fleet for installing wind towers in deeper waters.\n\n\tThe Jones Act and Sealift Capability\n\nAs with the commercial aspirations stated in the maritime policy of the Jones Act, there are also perceived shortcomings with respect to the domestic fleet's ability to serve as a naval auxiliary in times of war or national emergency. Since 1920, Congress has enacted programs that designate other fleets for sealift support, but the merchant mariners crewing Jones Act ships are still identified as contributing to the pool of mariners available to crew the sealift fleet. The shrinking size of the U.S. mariner pool puts in doubt its ability to sufficiently crew a reserve sealift fleet, as discussed further below. In 2014 ( P.L. 113-76 ), Congress directed the Department of Transportation and the Department of Defense to develop a national sealift strategy. This has yet to be issued. \n\n\t\tSealift Crews\n\nThe crews of Jones Act oceangoing ships are arguably the most salient and immediate element that could be called upon to support military sealift. Jones Act mariners typically have six months of shore leave per year, and those mariners on shore leave would be expected to crew a reserve fleet of government-owned cargo ships kept on standby for military sealift purposes (the Ready Reserve Force, or RRF). The Jones Act crew of oceangoing ships consists of about 3,380 merchant mariners, which is about 29% of the total mariner pool of 11,678 mariners that MARAD estimates would be required to crew the government-owned reserve fleet while still concurrently being able to operate the commercial fleet. The remaining pool of mariners would come from (1) the U.S.-flag privately owned international fleet enrolled in the Maritime Security Program (MSP) consisting of 60 ships and 2,386 commercial mariners, and (2) the Military Sealift Command (MSC) fleet of government-owned ships consisting of about 120 ships and 5,576 mariners. \nWhile MARAD estimates that there is a sufficient commercial mariner pool to crew the reserve sealift fleet during a surge lasting up to 180 days, a more prolonged sealift effort would start to entail crew rotations, and MARAD estimates a shortfall of about 1,800 mariners in that scenario. That the mariner pool is barely sufficient to sustain an immediate surge and is insufficient for a longer sealift effort has been a consistent finding of sealift officials for decades, even in previous periods when the mariner pool was much larger than it is today. For instance, this was the same finding by the Department of Defense Transportation Command (TRANSCOM) in 2004, when the RRF consisted of 59 ships and the mariner pool was 16,900. And in 1991, when the RRF consisted of 96 ships and the mariner pool was 25,000 (more than twice the size that it is today), the then MARAD Administrator testified that the mariner pool was barely sufficient to crew the reserve sealift fleet.\n\n\t\tSealift Ships\n\nWhile the Jones Act's statement of maritime policy indicated a desire for a commercial fleet that also could provide sealift in times of war, since then three other fleets of ships have been established for purposes of military sealift: the RRF, MSC, and MSP. These ships are predominantly foreign-built. The RRF, a concept that originates in a 1954 act of Congress (P.L. 83-608), today consists of 46 ships that can sail upon either 5 or 10 days' notice and are on standby with a skeleton crew of about 600 commercial mariners (13 per ship), but would require an additional 1,200 mariners to sustain its operation once activated. The MSC fleet is controlled by TRANSCOM and has a subset of about 50 ships that carry military cargoes in port-to-port voyages similar to those undertaken by commercial ships. MSC ships are mostly crewed by civilian mariners who are federal employees. The MSP ships, a fleet established by Congress in 1996 ( P.L. 104-239 ), receive an operating subsidy of about $5 million per vessel per year to cover the additional cost of American crews and rely heavily on government cargoes (military and food aid) that pursuant to \"cargo preference\" law are reserved for them. As per long-standing agreements between MARAD, acting as advocate for the U.S. maritime industry, and the Department of Defense, the military is to utilize MSP ships and exhaust that capacity before it utilizes MSC ship capacity. \nWhile Jones Act operators are required to purchase more costly U.S.-built ships, the military sealift fleet is largely composed of more economical foreign-built ships. Jones Act operators are competing in the commercial marketplace while the sealift fleet is not. Instead of relying on the Jones Act commercial fleet to provide oceangoing shipbuilding capability, the sealift fleet could be required to be built domestically. The higher cost of the domestically built sealift fleet would be shared nationally, as is the case with other defense assets. Lower-cost coastwise ships would be more price-competitive with railroads, pipelines, and ATBs, thereby enlarging the mariner pool available for sealift support and increasing repair and maintenance work for U.S. shipyards. The sealift ships could also be designed to military specifications rather than be in conflict with commercial needs (see below).\n\n\t\t\tDivergence in Design of Commercial and Sealift Ships\n\nThe military seeks cargo ships with flexible capabilities: ships not so large that they could face draft restrictions in some overseas harbors, ships with ramps or onboard cranes so that they can still unload cargo at underdeveloped or damaged ports, and ships that can carry a wide variety of cargo types and sizes. The majority of the military sealift fleet consists of product tankers for carrying fuel and roll-on\/roll-off (Ro\/Ro) ships that have ramps for moving tanks, trucks, and helicopters. It also consists of container ships used for moving ammunition and other supplies. \nThe military's preference for versatility is in conflict with the commercial fleet's trend toward more specialized and larger ships, a trend driven by the need for ships with the lowest operating cost. General cargo and break-bulk ships capable of carrying a wide variety of cargo types and sizes and that were typically equipped with their own onboard cranes have been largely replaced by container ships without onboard cranes. Thus, commercial mariners may no longer have experience operating cargo cranes, as might be required in foreign ports where shore-based cranes are out of service or are not available. \nThe largest container ships require 45 to 50 feet of water below the waterline, far more depth than many ports can provide. Ro\/Ro ships have been replaced by \"pure car carriers\" that maximize the number of passenger cars they can carry, but may be less useful for military purposes. Cost pressures have induced commercial carriers to install engines that minimize fuel costs by operating at lower speeds and cannot achieve the higher speeds desired for military sealift ships. In addition, more stringent sulfur emission regulations recently enacted have prompted ship operators to convert to LNG-fueled engines, a fuel not globally available, or to install scrubbers, equipment that takes up cargo space and has no military utility. Licensing of engine crews is specific to engine type. Thus, a growing disparity exists between the military's ideal vessel designs and those of commercial carriers, as well as in the skill sets of the crew.\n\n\t\tShipbuilding and Repair Industrial Base\n\nBesides the deep-sea ship crews, another purported Jones Act contribution to military sealift is preservation of a shipyard industrial base with the knowledge and skills to build and repair ships. The Merchant Marine Act of 1970 (P.L. 91-469) added as an additional objective of U.S. maritime policy to have a merchant marine \"supplemented by efficient facilities for building and repairing vessels.\" U.S. shipyards typically build only two or three oceangoing ships per year, and none for export, so they do not achieve economies of scale. There may be gaps of several years in between orders for container ships. In recent years, the demand has been sufficient to sustain one shipyard that builds only commercial ships. However, this yard stated that its employment had fallen below 100 people and that it had no vessels under construction or on order as of March 31, 2019. The other shipyard that builds commercial ships also relies heavily on Navy orders. \nA larger number of shipyards build smaller vessels such as tour boats, ferries, tugs, barges, and offshore supply vessels. Around 1,000 barges are built in a typical year. These vessels also fall under the Jones Act domestic build requirement and are rarely built for export. However, the shipyards building smaller vessels lack dry docks of sufficient size to repair large ships. The government-owned sealift fleet is 44 years old on average, and many of the vessels are in need of repair. According to the Maritime Administrator, there is an insufficient number of large dry docks to service the sealift fleet, delaying their readiness to sail. Some of the reserve fleet has failed Coast Guard safety inspection, and some ships have too much steel rusted from their hulls to be seaworthy. For example, while sailing to a readiness exercise, a hole was found in the hull of one of the ships. According to TRANSCOM, the Navy's plan to recapitalize the reserve fleet includes building new vessels in domestic shipyards, repairing ships in the current fleet to extend their service life out to 60 years, and purchasing used, foreign-built ships. The Navy has found that repairing the vessels has thus far been three times more expensive and has taken twice as long as originally projected. It therefore is contemplating the need to accelerate the purchase of used, foreign-built ships because building new ships in U.S. yards is estimated to be 26 times more expensive and thus not affordable. \nIn addition to the Jones Act, the Tariff Act of 1930 is intended to support U.S. shipyards by assessing a 50% duty on the price of any nonemergency repairs on U.S. flag ships done in foreign shipyards. A 2011 MARAD study found that many U.S.-flag international trading ships have repairs performed in foreign yards because, even with the 50% duty, the total cost is less than if the repairs were performed in a domestic shipyard. A U.S.-flag operator confirms that this is still the case in 2018.\n\n\t\t\tAppendix. Exemptions and Waivers","output":"The Jones Act, which refers to Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261), requires that vessels transporting cargo from one U.S. point to another U.S. point be U.S.-built, and owned and crewed by U.S. citizens. The act provides a significant degree of protection for U.S. shipyards, domestic carriers, and American merchant sailors. It is a subject of debate because some experts point out that it leads to high domestic ocean shipping costs and constrains the availability of ships for domestic use. The Jones Act has come into prominence amid debates over Puerto Rico's economic challenges and recovery from Hurricane Maria in 2017; in the investigation into the sinking of the ship El Faro with 33 fatalities during a hurricane in 2015; and in discussions about domestic transportation of oil and natural gas. The law's effectiveness in achieving national security goals has also been the subject of attention in conjunction with a congressional directive that the Administration develop a national maritime strategy, including strategies to increase the use of short sea shipping and enhance U.S. shipbuilding capability.\nThe Jones Act of 1920 was not the first law requiring that vessels transporting cargo domestically be U.S.-built, owned, and crewed. It restated a long-standing restriction that was temporarily suspended during World War I. Since 1920, Congress has enacted provisions that could be said to tighten Jones Act requirements as well as provisions that exempt certain maritime activity from the requirements. In 1935, Congress forbade Jones Act-qualified vessels that were sold to foreign owners or registered under a foreign flag to subsequently requalify as Jones Act-eligible (P.L. 74-191). This provides additional protection from competition for Jones Act carriers if coastal shipping demand increases, because it can take around two years to construct a new ship. In 1940, Congress expanded the Jones Act to include towing and salvage vessels (P.L. 76-599). In 1988, Congress specified that waterborne transport of valueless material required use of a Jones Act-qualified vessel, such that transport of dredge spoil or municipal waste would fall under the law (P.L. 100-329). Generally, dredging and towing vessels, as well as Great Lakes ships, have occasioned less debate about the Jones Act than oceangoing ships and offshore supply vessels.\nCongress has enacted numerous exemptions or exceptions to the Jones Act. In some cases, Congress has enacted an exemption if there are no Jones Act-qualified carriers interested in providing service in a particular market (for example, passenger travel to and from Puerto Rico). Congress has allowed waivers of the Jones Act for national defense reasons, which most often have been executed to speed fuel deliveries to a region after a natural disaster disrupted normal supply lines.\nRegulatory interpretations of the Jones Act have been significant in defining what constitutes a \"U.S.-built\" vessel, what constitutes \"transportation\" between two U.S. points, and what are \"U.S. points.\" The Coast Guard has determined that a U.S.-built vessel can be assembled with major foreign components such as engines, propellers, and stern and bow sections. This interpretation has been consistent from the late 1800s. Customs and Border Protection (CBP) has determined that cruise ship voyages that involve visits to foreign ports in addition to a domestic port are not domestic transportation and therefore not subject to the Jones Act. This interpretation also dates to the late 1800s. CBP's interpretations of what constitutes domestic transportation and U.S. points are significant to the offshore oil industry, as some of the vessels supporting that industry must be Jones Act-compliant while others need not be.\nBy long-standing agreement, the military is to utilize U.S.-flag commercial ships for sealift before it utilizes government-owned vessels in its reserve fleet. Jones Act mariners are expected to crew sealift ships when needed, and thus the decades-long shrinkage of the oceangoing Jones Act fleet and mariner pool has been raised as a concern. The Department of Defense is planning to buy more used foreign-built ships for sealift rather than building them in the United States for cost reasons. It also has found that repairing its current fleet in U.S. shipyards is three times more expensive and has taken twice as long as estimated.\nMuch of the commercial fleet is relatively old, raising safety concerns. Some useful types of ships are missing from the Jones Act-qualified fleet, such as heavy-lift vessels, liquefied natural gas (LNG) tankers, and deepwater offshore construction vessels. Both situations appear to some observers to be contrary to the policy goal of the Jones Act, which is to \"have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in times of war or national emergency.\""}
{"id":"crs_R45723","pid":"crs_R45723_0","input":"T he federal government has two major tools for affecting the macroeconomy: fiscal policy and monetary policy. These policy interventions are generally used to either increase or decrease economic activity to counter the business cycle's impact on unemployment, income, and inflation. This report focuses on fiscal policy; for more information related to monetary policy, refer to CRS Report RL30354, Monetary Policy and the Federal Reserve: Current Policy and Conditions , by Marc Labonte. \n\n\tWhat is Fiscal Policy?\n\nFiscal policy is the means by which the government adjusts its budget balance through spending and revenue changes to influence broader economic conditions. According to mainstream economics, the government can impact the level of economic activity, generally measured by gross domestic product (GDP), in the short term by changing its level of spending and tax revenue. Expansionary fiscal policy\u2014an increase in government spending, a decrease in tax revenue, or a combination of the two\u2014is expected to spur economic activity, whereas contractionary fiscal policy\u2014a decrease in government spending, an increase in tax revenue, or a combination of the two\u2014is expected to slow economic activity. When the government's budget is running a deficit, fiscal policy is said to be expansionary: when it is running a surplus, fiscal policy is said to be contractionary.\nFrom a policymaker's perspective, expansionary fiscal policy is generally used to boost GDP growth and the economic indicators that tend to move with GDP, such as employment and individual incomes. However, expansionary fiscal policy also tends to affect interest rates and investment, exchange rates and the trade balance, and the inflation rate in undesirable ways, limiting the long-term effectiveness of persistent fiscal stimulus. Contractionary fiscal policy can be used to slow economic activity if policymakers are concerned that the economy may be overheating, which can cause a recession. The magnitude of fiscal policy's effect on GDP will also differ based on where the economy is within the business cycle\u2014whether it is in a recession or an expansion.\n\n\tExpansionary Fiscal Policy\n\nDuring a recession, aggregate demand (overall spending) in the economy falls, which generally results in slower wage growth, decreased employment, lower business revenue, and lower business investment. Recessions occur for a number of reasons, but as seen during the most recent recession from 2007 to 2009, they can result in serious negative consequences for both individuals and businesses. However, the government can replace some of the lost aggregate demand and limit the negative impacts of a recession on individuals and businesses with the use of fiscal stimulus by increasing government spending, decreasing tax revenue, or a combination of the two. Government spending takes the form of both purchases of goods and services by the government, which directly increase economic activity, and transfers to individuals, which indirectly increase economic activity as individuals spend those funds. Decreased tax revenue via tax cuts indirectly increases aggregate demand in the economy. For example, an individual income tax cut increases the amount of disposable income available to individuals, enabling them to purchase more goods and services. Standard economic theory suggests that in the short term, fiscal stimulus can lessen the negative impacts of a recession or hasten a recovery. However, the ability of fiscal stimulus to boost aggregate demand may be limited due to its interaction with other economic processes, including interest rates and investment, exchange rates and the trade balance, and the rate of inflation.\n\n\t\tPotential Offsetting Effects to Expansionary Fiscal Policy\n\n\t\t\tInvestment and Interest Rates\n\nTo engage in fiscal stimulus by either increasing spending or decreasing tax revenue, the government must increase the size of its deficit and borrow money to finance that stimulus. This can lead to an increase in interest rates and subsequent decreases in investment and some consumer spending. This rise in interest rates may therefore offset some portion of the increase in economic activity spurred by fiscal stimulus.\nAt any given time, there is a limited supply of loanable funds available for the government and private parties to borrow from\u2014a global pool of savings. If the government begins to borrow a larger portion of this pool of savings, it increases the demand for these funds. As demand for loanable funds increases, without any corresponding increase in the supply of these funds, the price to borrow these funds, also known as interest rates, increases. Rising interest rates generally depress economic activity, as they make it more expensive for businesses to borrow money and invest in their firms. Similarly, individuals tend to decrease so-called interest-sensitive spending\u2014spending on goods and services that require a loan, such as cars, homes, and large appliances\u2014when interest rates are relatively higher. The process through which rising interest rates diminish private-sector spending is often referred to as crowding out . However, the degree to which crowding out occurs is partially dependent on where the economy is within the business cycle, either in a recession or in a healthy expansion. \nDuring a recession, crowding out tends to be smaller than during a healthy economic expansion due to already depressed demand for investment and interest-sensitive spending. Because demand for loanable funds is already depressed during a recession, the additional demand created by government borrowing does not increase interest rates as much, and therefore does not crowd out as much private spending as it would during an economic expansion. \nIn addition to fiscal policy, the government can influence the business cycle through the use of monetary policy, which is implemented by the Federal Reserve. The Federal Reserve is an independent government agency charged with maintaining stable prices and maximum employment through its monetary policy. The Federal Reserve can influence interest rates throughout the economy by adjusting the federal funds rate, a very short-term interest rate faced by banks. Decreasing interest rates reduces the cost to businesses and individuals of borrowing funds to make new investments and purchases. Conversely, increasing interest rates raises the cost to businesses and individuals of borrowing funds to make new investments and purchases. The Federal Reserve can conduct monetary policy in a complementary nature to fiscal policy, offsetting the rise in interest rates by decreasing the federal funds rate. Alternatively, the Federal Reserve can pursue a policy that offsets stimulus, pushing interest rates up by increasing the federal funds rate. \n\n\t\t\tExchange Rates and the Trade Balance\n\nAnother potential consequence of government fiscal stimulus is an increase in the value of the U.S. dollar and a subsequent increase in the trade deficit, which mitigates some portion of the rise in economic activity resulting from the fiscal stimulus. As discussed above, fiscal stimulus can cause interest rates to rise. In a global context where interest rates are rising in the United States relative to the rest of the world, demand for investment inside the United States is likely to increase among investors around the world as they seek out higher rates of return. The greater demand for investment in the United States is likely to temper the increase in interest rates resulting from fiscal stimulus. However, foreign investors must first exchange their own currency for U.S. dollars to invest in the United States. The increased demand for U.S. dollars increases the value of a U.S. dollar relative to other foreign currencies. As the U.S. dollar appreciates in value, domestic demand for imported goods increases because a U.S. dollar can now buy more goods and services abroad, but foreign demand for U.S. goods and services decreases because they are now relatively more expensive for foreigners. The end result is generally an increase in the U.S. trade deficit, as exports decrease and imports from abroad increase in the United States. An increasing trade deficit, all else equal, means that consumption and production of domestic goods and services are falling, partly offsetting the increase in aggregate demand caused by the stimulus. \nAs discussed above, however, during a recession interest rates are less likely to rise, or are likely to increase to a lesser degree, due to an already depressed demand for investment and spending within the economy. Without rising interest rates, or if they increase to a lesser degree, the associated increase in the trade deficit is also likely to be smaller. In addition, if the Federal Reserve engages in similarly stimulative monetary policy, it may be able to mitigate some of the anticipated increase in the trade deficit by further preventing an increase in interest rates. \n\n\t\t\tInflation\n\nAs discussed above, the goal of fiscal stimulus is to increase aggregate demand within the economy. However, if fiscal stimulus is applied too aggressively, or is implemented when the economy is already operating near full capacity, it can result in an unsustainably large demand for goods and services that the economy is unable to supply. When the demand for goods and services is greater than the available supply, prices tend to rise, a scenario known as inflation. A rising inflation rate can introduce distortions into the economy and impose unnecessary costs on individuals and businesses, although economists generally view low and stable inflation as a sign of a well-managed economy. As such, rising inflation rates can hinder the effectiveness of fiscal stimulus on economic activity by imposing additional costs on individuals and interfering with the efficient allocation of resources in the economy. \nThe Federal Reserve has some ability to limit inflation by implementing contractionary monetary policy. If the Federal Reserve observes accelerating inflation as a result of additional fiscal stimulus, it can counteract this by increasing interest rates. The rise in interest rates results in a slowing of economic activity, neutralizing the fiscal stimulus, and may help to slow inflation as well. \n\n\t\tFiscal Expansion Multipliers\n\nEconomists attempt to evaluate the overall impact of fiscal stimulus on the economy by estimating fiscal multipliers , which measure the ratio of a change in economic output to the change in government spending or revenue that causes the change in output. A fiscal multiplier greater than one suggests that for each dollar the government spends, the economy grows by more than one dollar. A multiplier may be larger than one if the initial government stimulus results in further spending by private actors. For example, if the government increases spending on infrastructure projects as part of its stimulus, directly increasing aggregate demand, numerous contractors and construction workers will likely receive additional income as a consequence. If those workers then spend a portion of their new income within the economy, it further increases aggregate demand. Alternatively, a fiscal multiplier of less than one suggests that for each dollar the government spends, the economy grows by less than one dollar, suggesting the expansionary power of the fiscal stimulus is being offset by the contractionary pressures discussed above. \nEstimates of fiscal multipliers vary depending on the form of the fiscal stimulus and on which economic model the economist uses to measure the multiplier. For example, a 2012 academic research article estimated fiscal multipliers for various forms of stimulus utilizing several different prominent economic models from the Federal Reserve Board, the European Central Bank, the International Monetary Fund (IMF), the European Commission, the Organisation for Economic Co-operation and Development (OECD), the Bank of Canada, and two models developed by academic economists. The authors found varying estimates (see Table 1 ) for different forms of fiscal stimulus ranging from 1.59 for cash transfers to low-income individuals to 0.23 for reduced labor income taxes. Based on these estimates, increasing government spending on consumption by 1% of GDP would result in a 1.55% increase in GDP, and decreasing labor income taxes by 1% of GDP would result in a 0.23% increase in GDP. \nThe magnitude of fiscal multipliers likely depends on where the economy is in the business cycle. As discussed above, during a recession fiscal stimulus is less likely to result in offsetting contractionary effects\u2014such as rising interest rates, trade deficits, and inflation\u2014resulting in a larger increase in economic activity from fiscal stimulus. Accordingly, another academic research article attempted to estimate fiscal multipliers depending on whether the economy was in an expansion or a recession, and found that the multiplier for government spending was between 0 and 0.5 during expansions and between 1.0 and 1.5 during recessions. \n\n\t\tLong-Term Considerations Regarding Fiscal Stimulus\n\nPersistently applying fiscal stimulus can negatively affect the economy through three main avenues. First, persistent large budget deficits can result in a rising debt-to-GDP ratio and lead to an unsustainable level of debt. Second, persistent fiscal stimulus\u2014particularly during economic expansions\u2014can limit long-term economic growth by crowding out private investment. Third, rising public debt will require a growing portion of the federal budget to be directed toward interest payments on the debt, potentially crowding out other, more worthwhile sources of government spending. \nSome economic research has suggested that relatively high public debt negatively impacts economic growth. For example, one academic research paper suggested that for developed countries, a 10-percentage-point increase in the debt-to-GDP ratio is associated with a 0.15- to 0.20-percentage-point decrease in per capita real GDP growth.\n\n\t\t\tUnsustainable Public Debt\n\nAs noted, persistent fiscal stimulus can result in a rising debt-to-GDP ratio and lead to an unsustainable level of public debt. A rising debt-to-GDP ratio can be problematic if the perceived or real risk of the government defaulting on that debt begins to rise. As the perceived risk of default begins to increase, investors will demand higher interest rates to compensate themselves. \nThe tipping point at which public debt becomes unsustainable is difficult to predict. A continually rising debt-to-GDP ratio is likely to lead to an unsustainable level of debt over time. The threshold at which a nation's debt becomes unsustainable depends on a number of factors, such as the denomination of the debt, political circumstances, and, potentially most importantly, underlying economic conditions. A change in these circumstances may shift a nation's debt to unsustainable without the underlying amount of debt changing at all. To date, it does not appear that the United States has an immediate concern with respect to unsustainability; however, the U.S. debt-to-GDP ratio is projected to continually rise under current policy.\n\n\t\t\tDecreased Business Investment\n\nPersistent fiscal stimulus, and the associated budget deficits, can decrease the size of the economy in the long term as a result of decreased investment in physical capital. As discussed previously, the government's deficit spending can result in higher interest rates, which generally lead to lower levels of business investment. Business investment\u2014spending on physical capital such as factories, computers, software, and machines\u2014is an important determinant of the long-term size of the economy. Physical capital investment allows businesses to produce more goods and services with the same amount of labor and raw materials. As such, government deficits that lead to lower levels of business investment can result in lower quantities of physical capital, and therefore may reduce the productive capacity of the economy in the long term.\nAs discussed earlier, some of the increase in interest rates and decline in domestic investment resulting from fiscal stimulus will likely be offset by additional investment in the United States from abroad. The inflow of capital from abroad is beneficial, as it allows for additional investment in the United States economy. However, in exchange for these investment flows, the United States is now sending a portion of its national income to foreigners in the form of interest payments. With a larger portion of investment flows coming from abroad, rather than from within the United States, a larger portion of the U.S. national income will be sent abroad. \n\n\t\t\tCrowding Out Government Spending\n\nRising public debt may also be of concern due to its associated interest payments. All else equal, an increase in the level of public debt will result in an increase in interest payments that the government must make each year. Rising interest payments may displace government spending on more worthwhile programs. In 2019, interest payments on the debt are projected to be about 1.8% of GDP, or about $382 billion. By 2029 interest payments on the debt are expected to increase significantly, rising to about 3.0% of GDP or about $921 billion. \n\n\tWithdrawing Fiscal Stimulus\n\nAs the economy shifts from a recession and into an expansion, broader economic conditions will generally improve, whereby unemployment falls and wages and private spending increase. With improving economic conditions, policymakers may choose to begin withdrawing fiscal stimulus by decreasing the size of the deficit or potentially by applying contractionary fiscal policy and running a budget surplus. As discussed in the previous section, policymakers may choose to withdraw fiscal stimulus for a number of reasons. First, persistent fiscal stimulus when the economy is near full capacity can exacerbate the negative consequences of fiscal stimulus, such as decreasing investment, rising trade deficits, and accelerating inflation. Second, decreasing the size of the budget deficit slows the accumulation of public debt. \nThe government can withdraw fiscal stimulus by increasing taxes, decreasing spending, or a combination of the two. When the government raises individual income taxes, for example, individuals have less disposable income and decrease their spending on goods and services in response. The decrease in spending reduces aggregate demand for goods and services, slowing economic growth temporarily. Alternatively, when the government reduces spending, it reduces aggregate demand in the economy, which again temporarily slows economic growth. As such, when the government reduces the deficit, regardless of the mix of fiscal policy choices used to do so, aggregate demand is expected to decrease in the near term. However, withdrawing fiscal stimulus is expected to result in lower interest rates and more investment; a depreciation of the U.S. dollar and a shrinking trade deficit; and a slowing inflation rate. These effects tend to spur additional economic activity, partly offsetting the decline resulting from withdrawing fiscal stimulus. Whether the decrease in aggregate demand is problematic for overall economic performance depends on the state of the overall economy at that time.\n\n\t\tPotential Offsetting Effects to Withdrawing Fiscal Stimulus\n\n\t\t\tInvestment and Interest Rates\n\nWithdrawing fiscal stimulus is likely to put downward pressure on domestic interest rates, which encourages additional spending and investment, increasing economic activity. When the government decreases its budget deficit, the demand for loanable funds decreases because the government reduces the amount of those funds it is borrowing. The decrease in demand for loanable funds decreases the price to borrow those funds (i.e., interest rates decline). Declining interest rates encourage increased business investment into new capital projects and consumer spending into durable goods by reducing the cost of borrowing. \n\n\t\t\tExchange Rates and the Trade Balance\n\nWithdrawing fiscal stimulus is also expected to result in a depreciation of the U.S. dollar and an improved trade balance with the rest of the world. Assuming the shrinking deficit causes a decline in U.S. interest rates relative to interest rates abroad, individuals in the United States and abroad would rather make investments outside of the United States to benefit from those higher interest rates. Individuals shifting their investments outside the United States must first exchange their U.S. dollars for foreign currency, which decreases the value of the U.S. dollar relative to foreign currencies. As the U.S. dollar depreciates, foreign goods and services become relatively more expensive for U.S. residents and U.S. goods and services become relatively less expensive for foreign individuals. This generally results in an improved trade balance as foreign demand for U.S. goods and services (exports) increases and domestic demand for foreign goods and services (imports) decreases.\n\n\t\t\tInflation\n\nWhen fiscal stimulus is withdrawn, aggregate demand for goods and services in the economy also tends to shrink, which is expected to slow inflation. Economists generally view relatively low and stable inflation as beneficial for economic growth, because businesses and consumers are relatively certain about the future price of goods and can make efficient decisions with respect to investment and consumption over time. \n\n\t\tFiscal Contraction Multipliers\n\nThe ultimate impact on the economy of withdrawing fiscal stimulus depends on the relative magnitude of its effects on aggregate demand, interest rates and investment, exchange rates and the trade deficit, and inflation. The same fiscal multipliers discussed earlier in the \" Fiscal Expansion Multiplier \" section can be used to estimate the impact of withdrawing fiscal stimulus by simply reversing the sign for each multiplier. As shown in Table 1 , decreasing government spending on consumption by 1% of GDP is expected to reduce real GDP by 1.55% after the first year, compared to no change in fiscal policy. Alternatively, increasing labor income taxes by 1% of GDP is expected to reduce real GDP by 0.23% after the first year. \nAgain, monetary policy can be used alongside fiscal policy to affect the overall impact on the economy. For example, the Federal Reserve could lower interest rates to spur aggregate demand as the federal government withdraws fiscal stimulus in an effort to offset the decline in aggregate demand resulting from the shrinking deficit. This could allow the government to withdraw fiscal stimulus without decreasing aggregate demand or economic activity. \n\n\tFiscal Policy Stance\n\nAs shown in Figure 1 , the federal government has generally been running a budget deficit for much of the past 30 years\u2014save for two short periods in the 1960s and 1990s. This suggests that the federal government has been applying some level of fiscal stimulus to the economy for much of the past three decades, although the level of stimulus has increased and decreased over time. However, simply examining the overall budget deficit to judge the level of fiscal stimulus can be misleading, as the levels of federal spending and revenue differ over time automatically due to changes in the state of the economy, rather than deliberate choices made each year by Congress. During economic expansions, tax revenue tends to increase and spending tends to decrease automatically, as rising incomes and employment result in higher average incomes and therefore greater individual and corporate income tax revenues. Federal spending on income support programs, such as food stamps and unemployment insurance, tends to fall as fewer people need financial assistance and unemployment claims fall during economic expansions. The combination of rising tax revenue and falling federal spending tends to improve the government's budget deficit. The opposite is true during recessions, when federal spending rises and revenue shrinks. These cyclical fluctuations in revenue and spending are often referred to as automatic stabilizers. Therefore, when examining fiscal policy, it is often beneficial to estimate the budget deficit excluding these automatic stabilizers, referred to as the structural deficit , to get a sense of the affirmative fiscal policy decisions made each year by Congress. \nAs shown in Figure 1 , budget deficits tend to increase during and shortly after recessions (denoted by grey bars) as policymakers attempt to buoy the economy by applying fiscal stimulus. This can be seen explicitly by viewing the structural deficit\/surplus, as this only shows affirmative changes in fiscal policy made by Congress. The budget deficit then tends to shrink as the economy enters into recovery and fiscal stimulus is less necessary to support economic growth. However, in recent years, the federal budget has bucked this trend. After the structural deficit peaked in 2009 at roughly 7.5% of GDP, it began to decline through 2014, falling to about 2.0% of GDP. Beginning in 2016, in spite of relatively strong economic conditions, the structural deficit has started to rise again, nearing 4.0% of GDP in 2018. \nGiven that the economy is arguably at or exceeding full employment currently, the increase in fiscal stimulus since 2016 is notable. As discussed earlier, expanding fiscal stimulus when the economy is not depressed can result in rising interest rates, a growing trade deficit, and higher inflation. As of publication of this report, interest rates and inflation do not appear to have been affected by the additional fiscal stimulus; interest rates are at historic lows and inflation shows no signs of acceleration. The trade deficit has been growing in recent years; however, it is not clear that this growth in the trade deficit is a result of increased fiscal stimulus.","output":"Fiscal policy is the means by which the government adjusts its spending and revenue to influence the broader economy. By adjusting its level of spending and tax revenue, the government can affect the economy by either increasing or decreasing economic activity in the short term. For example, when the government runs a budget deficit, it is said to be engaging in fiscal stimulus, spurring economic activity, and when the government runs a budget surplus, it is said to be engaging in a fiscal contraction, slowing economic activity.\nThe government can use fiscal stimulus to spur economic activity by increasing government spending, decreasing tax revenue, or a combination of the two. Increasing government spending tends to encourage economic activity either directly through purchasing additional goods and services from the private sector or indirectly by transferring funds to individuals who may then spend that money. Decreasing tax revenue tends to encourage economic activity indirectly by increasing individuals' disposable income, which tends to lead to those individuals consuming more goods and services. This sort of expansionary fiscal policy can be beneficial when the economy is in recession, as it lessens the negative impacts of a recession, such as elevated unemployment and stagnant wages. However, expansionary fiscal policy can result in rising interest rates, growing trade deficits, and accelerating inflation, particularly if applied during healthy economic expansions. These side effects from expansionary fiscal policy tend to partly offset its stimulative effects.\nThe government can use contractionary fiscal policy to slow economic activity by decreasing government spending, increasing tax revenue, or a combination of the two. Decreasing government spending tends to slow economic activity as the government purchases fewer goods and services from the private sector. Increasing tax revenue tends to slow economic activity by decreasing individuals' disposable income, likely causing them to decrease spending on goods and services. As the economy exits a recession and begins to grow at a healthy pace, policymakers may choose to reduce fiscal stimulus to avoid some of the negative consequences of expansionary fiscal policy, such as rising interest rates, growing trade deficits, and accelerating inflation, or to manage the level of public debt.\nIn recent history, the federal government has generally followed a pattern of increasing fiscal stimulus during a recession, then decreasing fiscal stimulus during the economic recovery. Prior to the \"Great Recession\" of 2007-2009 the federal budget deficit was about 1% of gross domestic product (GDP) in 2007. During the recession, the budget deficit grew to nearly 10% of GDP in part due to additional fiscal stimulus applied to the economy. The budget deficit began shrinking in 2010, falling to about 2% of GDP by 2015. In contrast to the typical pattern of fiscal policy, the budget deficit began growing again in 2016, rising to nearly 4% of GDP in 2018 despite relatively strong economic conditions. This change in fiscal policy is notable, as expanding fiscal stimulus when the economy is not depressed can result in rising interest rates, a growing trade deficit, and accelerating inflation. As of publication of this report, interest rates have not risen discernibly and are still near historic lows, and inflation rates show no sign of acceleration. The trade deficit has been growing in recent years; however, it is not clear that this growth in the trade deficit is a result of increased fiscal stimulus."}
{"id":"crs_R45474","pid":"crs_R45474_0","input":"\tOverview1\n\nMembers of Congress may address numerous ongoing and new policy issues in the 116 th Congress. The changing dynamics and composition of international trade and finance can affect the overall health of the U.S. economy, the success of U.S. businesses and workers, and the U.S. standard of living. They also have implications for U.S. geopolitical interests. Conversely, geopolitical tensions, risks, and opportunities can have major impacts on international trade and finance. These issues are complex and at times controversial, and developments in the global economy often make policymaking more challenging. Congress is in a unique position to address these and other issues given its constitutional authority for legislating and overseeing international commerce.\nThe major focus of the 115 th Congress was overseeing the Trump Administration's evolving trade policy. The Trump Administration's approach to international trade arguably represents a significant shift from the approaches of prior administrations, in that it questions the benefits of U.S. leadership in the rules-based global trading system and expresses concern over the potential limits that this system may place on U.S. sovereignty. As such, the Administration's withdrawal from the proposed Trans-Pacific Partnership (TPP), imposition of unilateral trade restrictions on various U.S. imports, renegotiation of the North American Free Trade Agreement (NAFTA), modification of certain provisions in the U.S.-South Korea (KORUS) free trade agreement (FTA), and launch of an extensive review of U.S. participation in the World Trade Organization (WTO) were among the most notable developments in U.S. trade policy in the past two years. Other issues before Congress included approving legislation to (1) strengthen the process used to review the national security implications of foreign direct investment transactions in the United States; (2) modernize U.S. development finance tools to help advance U.S. national security and economic interests and global influence; and (3) provide temporary tariff suspensions and reductions\u2014through Miscellaneous Tariff Bills\u2014on certain products not available domestically. Continued focus on economic sanctions against Russia, North Korea, Iran, Cuba, and other countries were also of interest to many in Congress.\nThe Trump Administration has displayed a more critical view than past administrations of U.S. trade agreements, made greater use of various U.S. trade laws with the potential to restrict U.S. imports, and focused on bilateral trade balances as a key metric of the health of U.S. trading relationships. As part of this shift in focus, the Administration has placed a greater emphasis on \"fair\" and \"reciprocal\" trade. China has also been a center of attention as the Administration has sought to address longstanding concerns over its policies on intellectual property (IP), forced technology transfer, and innovation. Citing these concerns and others, the President has unilaterally imposed trade restrictions on a number of U.S. imports under U.S. laws and authorities\u2014most of which have been used infrequently since the establishment of the WTO in 1995. During the 115 th Congress' second session, many Members weighed in on the President's actions. While some supported his use of unilateral trade measures, others raised concerns about potential negative economic implications of these actions and the risks they pose to the rules-based international trading system. Several Members introduced bills to amend some of the President's trade authorities\u2014for example, to require congressional consultation or approval before imposing new trade barriers.\nThe implications of changes in the U.S. trade landscape for the 116 th Congress will depend on a number of factors, including the impact of the Administration's trade actions\u2014particularly increased tariffs\u2014on U.S. industries, firms, workers, and supply chains; the reaction of U.S. trading partners; and the extent to which future actions are in line with core U.S. commitments and obligations under the WTO and other trade agreements. The U.S.-China trade and economic relationship is complex and wide-ranging, and it will likely entail continued close examination by Congress. In addition to specific trade practices of concern, Congress scrutinize the economic and geopolitical implications of China's Belt and Road Initiative, which finances and develops infrastructure projects across a number of countries and regions. Congress may also examine the economic implications of China's industrial policies in high technology sectors, which could potentially challenge U.S. firms and disrupt global markets.\nHow these issues play out, combined with the evolving global economic landscape, raise potentially significant legislative and policy questions for Congress. The 116 th Congress may consider (1) legislation to implement the U.S.-Mexico-Canada Agreement; (2) measures to reassert its constitutional authority over tariffs and other trade restrictions or to narrow the scope of how the president can use delegated authorities to impose such restrictions; (3) the extent to which past U.S. FTAs should be modernized or revised and, if so, in what manner; (4) what priority should be given to negotiating new U.S. FTAs with the European Union, the United Kingdom, Japan, and other trading partners, as well as the scope of negotiations; and (5) the impact of FTAs excluding the United States on U.S. economic and broader interests, and the appropriate U.S. response to the proliferation of such agreements. Another major issue is the role of the United States in the multilateral, rules-based trading system underpinned by the WTO. Historically, U.S. leadership in the global trading system has enabled the United States to shape the international trade agenda in ways that both advance and defend U.S. interests. The growing debate over the role and future direction of the WTO may raise important issues for Congress, such as how current and future WTO agreements affect the U.S. economy, the value of U.S. membership and leadership in the WTO, and the need to update or adapt WTO rules to reflect 21 st century realities. Such updates might address the proliferation of global supply chains, advances in technology, new forms of trade barriers, and market-distorting government policies.\nThis report provides a broad overview of select topics in international trade and finance. It is not an exhaustive look at all issues, nor is it a detailed examination of any one issue. Rather, it provides concise background information of certain prominent issues that have been the subject of recent discussion and debate, and that may come before the 116 th Congress. However, it does include references to more in-depth CRS products on the issues.\n\n\t\tThe United States in the Global Economy2\n\nIn 2017, the global economy began to display signs of a synchronized recovery from the 2008-2009 global financial crisis and deep economic recession. The International Monetary Fund (IMF) estimates that real global gross domestic product (GDP) rose from 3.3% in 2016 to 3.7% in 2017 ( Figure 1 ). As a group, advanced economies grew 2.3% (up from 1.7% in 2016), while emerging market and developing economies grew 4.7% (up from 4.4% in 2016). The growth performance of major U.S. trading partners diverged widely in 2017, affecting both their bilateral trade and investment relations with the United States and their exchange rates against the U.S. dollar. Canada more than doubled its real GDP growth rate, from 1.4% in 2016 to 3.1% in 2017. China also continued to grow, albeit at a pace of 6.9% in 2017. Among the United States' top trading partners, India and Mexico experienced lower growth in 2017 than in 2016.\nThe IMF forecasts improved performance in the short-term from both advanced economies\u20142.1% for 2019\u2014and emerging market and developing economies\u20144.7% in 2019. This growth is projected to slow in the medium term, however, as output gaps close and advanced economies return to their potential output paths. Beyond the short term, growth rates are expected to fall below pre-recession levels, as the aging populations and shrinking labor forces in advanced economies are expected to act as a drag on expansion. Overall fiscal policy is expected to remain expansionary in 2019, but begin to turn contractionary by 2020. Monetary policy may remain supportive in the Eurozone and Japan, but may continue to tighten in the United States\u2014although the speed of U.S. monetary tightening has been thrown into question by recent economic and financial market developments. More broadly, global financial conditions are expected to remain generally accommodative.\nEmerging markets (EMs) as a group face growing vulnerabilities to their economies due to uncertainties about global trade, depreciating currencies and risks of capital flight, volatile equity markets, large debts denominated in foreign currencies, and, in certain areas, the lack of deeper economic reform. Increased uncertainty over political and policy direction could constrain the rate of growth in Argentina, Brazil, Pakistan, Turkey, and South Africa. Additionally, China is expected to experience slower growth rates in the coming years, as the economy continues to rebalance away from investment toward private consumption, and from industry to services. The rise in China's nonfinancial debt as a share of GDP is likely to contribute to this downward trend. In Venezuela, the economy has collapsed, with the inflation rate forecast by the IMF to have exceeded 1,000,000% in 2018. In addition, declining commodity prices, particularly oil, could increase concerns in commodity-producing economies\u2014many of them EMs\u2014and destabilize national incomes. These and other developments could add to uncertainties in global financial markets, raise risks for U.S. banks of nonperforming loans, complicate the efforts of some banks to rebuild their capital bases, and potentially dampen prospects for long-term gains in productivity and higher rates of economic growth.\nThe United States continues to experience strong economic fundamentals and remains a relatively bright spot within the global economy, which could help it sustain its position as a main driver of global economic growth. With close to 5% of the world's population, it accounted for almost 25% of the world's output in nominal U.S. dollars, more than 10% of its exports (goods and services), and 16% of its growth in 2017. The U.S. economy grew faster in 2017 than in 2016: U.S. real GDP increased 2.2% in 2017, up from 1.5% in 2016. The latest U.S. data show signs of continuing strong performance in 2018, with the IMF forecasting 2.9% growth and the U.S. Federal Reserve estimating growth between 2.9% and 3.2%. Some forecasts indicate that U.S. growth could stop accelerating by 2019 due to higher commodity prices, upward inflationary pressures, monetary policy tightening by the U.S. Federal Reserve, trade policy uncertainties, and global risks. Labor market data indicate that the United States is at\u2014or close to\u2014full employment, as the jobless rate reached 4.1% at the end of 2017 and is projected to have fallen below 4.0% in 2018. The decline in the price of oil is affecting not only the global economy, but also the U.S. economy. While the drop in energy prices may raise U.S. consumers' real incomes and improve the competitive position of some U.S. industries, these positive effects may be offset to some extent by a drop in employment and investment in the energy sector.\nWith the improving global economic outlook, the IMF and the WTO had projected a rebound in trade growth for 2018 and 2019. However, amid several downside risks, including rising trade tensions between major economies like the United States and China, and heightened trade policy uncertainty, the IMF and WTO now expect global trade growth to slow. Restrictive trade policy measures imposed by the United States and some of its major trading partners may be affecting trade flows and prices in targeted sectors. Analysts claim that some recent policy announcements also have harmed business outlooks and investment plans, due to heightened concern over possible disruptions to supply chains and the risks of potential increases in the scope or intensity of trade restrictions. The Organization for Economic Cooperation and Development (OECD) projects that a further rise in trade tensions may have additional adverse effects on global investment and jobs.\nIn addition, exchange rates continue to experience volatility, with a number of currencies depreciating against the U.S. dollar, including the Chinese renminbi, Argentine peso, Turkish lira, and South African rand. Volatile currency and equity markets\u2014combined with uncertainties over global trade and rates of inflation that remain below the target levels of a number of central banks\u2014could further complicate current efforts of the U.S. Federal Reserve to continue tightening monetary policy. Other major economies, such as Eurozone and Japan, may continue to pursue unconventional monetary policies. Uncertainties in global financial markets could put additional upward pressure on the U.S. dollar, as investors may seek \"safe haven\" currencies and dollar-denominated investments. For some economies, volatile currencies and continued low commodity prices could add to debt issues, raising the prospect of defaults and potential economic crises.\n\n\t\tThe Role of Congress in International Trade and Finance12\n\nThe U.S. Constitution assigns authority over foreign trade to Congress. Article I, Section 8, of the Constitution gives Congress the power to \"lay and collect Taxes, Duties, Imposts, and Excises\" and to \"regulate Commerce with foreign Nations.\" For the first 150 years of the United States, Congress exercised its power to regulate foreign trade by setting tariff rates on all imported products. Congressional trade debates in the 19 th century often pitted Members from northern manufacturing regions, who benefitted from high tariffs, against those from largely southern raw material exporting regions, who gained from and advocated for low tariffs.\nA major shift in U.S. trade policy occurred after Congress passed the highly protective \"Smoot-Hawley\" Tariff Act of 1930, which significantly raised U.S. tariff levels and led U.S. trading partners to respond in kind. As a result, world trade declined rapidly, exacerbating the impact of the Great Depression. Since the passage of the Tariff Act of 1930, Congress has delegated certain trade authority to the executive branch. First, Congress enacted the Reciprocal Trade Agreements Act of 1934, which authorized the President to enter into reciprocal agreements to reduce tariffs within congressionally pre-approved levels, and to implement the new tariffs by proclamation without additional legislation. Congress renewed this authority periodically until the 1960s. Subsequently, Congress enacted the Trade Act of 1974, aimed at opening markets and establishing nondiscriminatory international trade norms for nontariff barriers as well. Because changes in nontariff barriers in reciprocal bilateral, regional, and multilateral trade agreements may involve amending U.S. law, the agreements require congressional approval and implementing legislation. Congress has renewed or amended the 1974 Act five times, which includes granting \"fast-track\" trade negotiating authority. Since 2002, \"fast track\" has been known as trade promotion authority (TPA). In 2015, Congress authorized a new TPA through July 1, 2021 (see \" Trade Promotion Authority (TPA) \" below).\nCongress also exercises trade policy authority through the enactment of laws authorizing trade programs and measures to address unfair and other trade practices. It also conducts oversight of the implementation of trade policies, programs, and agreements. These include such areas as U.S. trade agreement negotiations, tariffs and nontariff barriers, trade remedy laws, import and export policies, economic sanctions, and the trade policy functions of the federal government.\nOver the years, Congress has authorized a number of trade laws that delegate a range of authorities to the President to investigate and take actions on imported goods for national security purposes (Section 232, Trade Expansion Act of 1962), trade remedies to counter dumping and subsidy practices by other countries, unfair trade practices (Section 301, Trade Act of 1974), or safeguard measures (Section 201, Trade Act of 1974). The Trump Administration is using these acts to impose steel and aluminum tariffs on major trading partners and for possible tariffs on vehicles and auto parts for national security purposes, and on a range of Chinese products for what the Administration deems as unfair trading practices including intellectual property theft and other practices. Some Members of Congress have opposed the use of these tariffs and in the 116 th Congress may seek to revisit or curtail these statutes.\nAdditionally, Congress has an important role in international investment and finance policy. Under its treaty powers, the Senate considers bilateral investment treaties (BITs), and Congress sets the level of U.S. financial commitments to the multilateral development banks (MDBs), including the World Bank and the International Monetary Fund (IMF). It also funds the Office of the U.S. Trade Representative (USTR) and other trade agencies, and authorizes the activities of various agencies, such as the Export-Import Bank (Ex-Im Bank) and the Overseas Private Investment Corporation (OPIC). Congress also has oversight responsibilities over these institutions, as well as the Federal Reserve and the Department of the Treasury, whose activities can affect international capital flows and short-term movements in the international exchange value of the dollar. Congress also closely monitors developments in international financial markets that could affect the U.S. economy.\n\n\t\tTrade Promotion Authority (TPA)13\n\nTrade Promotion Authority (TPA) is a primary means by which Congress asserts its constitutional authority over trade policy, particularly U.S. trade agreements. TPA\u2014the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 )\u2014which was signed by President Obama on June 29, 2015, is in place until July 1, 2021. Any agreement signed by that date, such as the United States-Mexico-Canada (USMCA), is eligible for consideration under TPA. TPA allows implementing bills submitted to Congress by the President for specific trade agreements to be considered under expedited legislative procedures\u2014limited debate, no amendments, and an up or down vote\u2014provided the President observes certain statutory obligations in negotiating trade agreements. These obligations include achieving progress in meeting congressionally defined U.S. trade policy negotiating objectives, as well as congressional notification and consultation requirements before, during, and after the completion of the negotiation process. \nThe primary purpose of TPA is to preserve the constitutional role of Congress with respect to the consideration of implementing legislation for trade agreements that require changes in domestic law, which includes tariffs, while also bolstering the negotiating credibility of the executive branch by ensuring that trade agreements will not be changed once concluded. Since the authority was first enacted in the Trade Act of 1974 ( P.L. 93-618 ), Congress has renewed or amended TPA five times (1979, 1984, 1988, 2002, and 2015). In addition, TPA legislative procedures are considered rules of the House and Senate, and, as such, can be changed at any time. Precedent exists for implementing legislation to have its eligibility for expedited treatment under TPA removed by Congress. In 2019, Congress may use TPA to consider the USMCA or other agreements negotiated by the Administration.\n\n\tKey U.S. Trade Policy Debates14\n\nThe United States has been a driving force in breaking down trade and investment barriers across the globe and constructing an open and rules-based global trading system through a wide range of international institutions and agreements. Since 1934, U.S. policymakers across political parties have recognized the importance of pursuing trade policies that promote more open, rules-based, and reciprocal international commerce, while being cognizant of potential costs to specific segments of the population, particularly through greater competition. Although there is a general consensus that, in the aggregate, the overall economic benefits of reducing barriers to trade and investment outweigh the costs, the processes of trade and financial liberalization, and of globalization more broadly, have presented both opportunities and challenges for the United States. Many U.S. consumers, workers, firms, and industries have benefited from increased trade. On the consumption side, U.S. households have enjoyed lower product prices and a broader variety of goods and services\u2014some of which the United States does not produce in large quantities. On the production side, stronger linkages to the global economy force U.S. industries and firms to focus on areas in which they have a comparative advantage, provide them with export and import opportunities, enable them to realize economies of scale, and encourage them to innovate.\nAt the same time, some stakeholders argue that globalization is not inclusive, benefiting some more than others. They point to job losses, stagnant wages, and rising income inequality among some groups\u2014as well as to environmental degradation\u2014as indicators of the negative impact of globalization on the U.S. economy, although the causes of these trends are highly contested. Some policymakers also perceive growing bilateral U.S. trade deficits as evidence that U.S. trade with other nations is \"uneven\" or that foreign countries engage in \"unfair\" trade practices. Others view many of the existing global trade rules as outdated, since they do not reflect the realities of the 21 st century\u2014particularly when it comes to technological advances, new forms of trade (such as digital trade), and threats that international trade may pose to U.S. national security. Finally, some experts argue that the 2008-2009 financial crisis caused painful adjustment and costs for some segments of the population, which have exacerbated concerns related to U.S. trade policy and have led to increased domestic nationalism.\nA longstanding objective of some Members of Congress and administrations has been to achieve a \"level playing field\" for U.S. industries, firms, and workers, and to preserve the United States' high standard of living\u2014all while remaining innovative, productive, and internationally competitive, as well as safeguarding those stakeholders who otherwise may be left behind in a fast-changing global economy. Given Congress' constitutional authority over U.S. trade policy, Members are in a unique to position to influence, legislate, and oversee responses that support these goals and that reduce or soften the hardships and costs from international trade.\n\n\t\tTrade and U.S. Employment16\n\nA key question in policy debates over international trade is its impact on U.S. jobs. Trade is one among a number of forces that drive changes in employment, wages, the distribution of income, and ultimately the U.S. standard of living. Most economists argue that macroeconomic forces within an economy, including technological and demographic changes, are the dominant factors that shape trade and foreign investment relationships and complicate efforts to disentangle the distinct impact that trade has on the economy. In a dynamic economy like that of the United States, jobs are constantly being created and replaced as some economic activities expand, while others contract. Various measures are used to estimate the role and impact of trade in the economy and of trade on employment. One measure developed by the U.S. Department of Commerce concludes that, as of 2016 (the most recent year for which data is available), exports support, directly and indirectly, 10.7 million jobs in the U.S. economy: 6.3 million in the goods-producing sectors and 4.4 million in the services sector ( Figure 2 ). According to these estimates, jobs associated with international trade, especially jobs in export-intensive manufacturing industries, earn 18% more on a weighted average basis than comparable jobs in other manufacturing industries.\nTrade and trade liberalization can have a differential effect on workers and firms in the same industry. Some estimates indicate that the short-run costs to workers who attempt to switch occupations or switch industries in search of new employment opportunities may experience substantial effects. One study concluded that workers who switched jobs as a result of trade liberalization generally experienced a reduction in their wages, particularly in occupations where workers performed routine tasks. These negative income effects were especially pronounced in occupations exposed to imports from low-income countries. In contrast, occupations associated with exports experienced a positive relationship between rising incomes and growth in export shares. As a result of the differing impact of trade liberalization on workers and firms, Congress created Trade Adjustment Assistance (TAA) programs to mitigate the potential adverse effects of trade liberalization on workers, firms, and farmers (see text box below).\n\n\t\tU.S. Trade Deficit20\n\nThe overall U.S. trade deficit, or more broadly the current account balance, represents an accounting principle that expresses the difference between the country's exports and imports of goods and services. The United States has experienced annual current account deficits since the mid-1970s. Congressional interest in the trade deficit has been heightened by the Trump Administration's approach to international trade. The Administration has used the U.S. trade deficit as a barometer for evaluating the success or failure of the global trading system, U.S. trade policy, and U.S. trade agreements. It has characterized the trade deficit as a major factor in a number of perceived ills afflicting the U.S. economy\u2014including the rate of unemployment and slow gains in wages\u2014and partially as the result of unfair trade practices by foreign competitors.\nMany economists, however, argue that this characterization misrepresents the nature of the trade deficit and the role of trade in the U.S. economy. In general, traditional economic theory holds that the overall U.S. trade deficit stems from U.S. macroeconomic policies and an imbalance between saving and investment in the U.S. economy. Currently, the demand for capital in the U.S. economy outstrips the amount of gross savings supplied by households, firms, and the government (a savings-investment imbalance). Therefore, many observers argue that attempting to alter the trade deficit without addressing the underlying macroeconomic issues would be counterproductive and create distortions in the economy. A concern expressed by some analysts and policymakers is the debt accumulation associated with sustained trade deficits. They argue that the long-term impact on the U.S. economy of borrowing to finance imports depends on whether those funds are used for greater investments in productive capital with high returns that raise future standards of living, or whether they are used for current consumption. These concerns and the various policy approaches that have been used to alter the savings-investment imbalance in the economy are beyond the scope of this report.\n\n\t\tCore Provisions in U.S. Trade Agreements21\n\nU.S. free trade agreements (FTAs) generally are negotiated on the basis of U.S. trade negotiating objectives established by Congress under Trade Promotion Authority (TPA). U.S. FTAs have evolved in the scope and depth of their commitments since the 1980s. Since the first bilateral U.S. FTA with Israel, which is only 14 pages in length and focused primarily on the elimination of tariffs, the United States has pursued increasingly comprehensive and enforceable commitments. The North American Free Trade Agreement (NAFTA), which entered into force in 1994, was the first FTA that incorporated many of the rules in more recent U.S. FTAs. It initiated a new generation of U.S. trade agreements in the Western Hemisphere and other parts of the world, influencing negotiations in areas such as market access, rules of origin, intellectual property rights (IPR), foreign investment, and dispute resolution. It was the first trade agreement to include provisions on IPR protection, labor, and the environment. Although not all FTAs are exactly the same, core provisions incorporated into most U.S. FTAs include the following:\nTariffs and Market Access. Elimination of most tariffs and nontariff barriers on goods, services, and agriculture over a period of time, and specific rules of origin requirements. Services. Commitments on national treatment, most-favored nation (MFN) treatment, and prohibition of local presence requirements. IPR Protection. Minimum standards of protection and enforcement for patents, copyrights, trademarks, and other forms of IPR. FTAs after NAFTA have new commitments reflecting standard protection similar to that found in U.S. law. Foreign Investment. Removal of investment barriers, basic protections for investors, with exceptions, and mechanisms for dispute settlement. Labor and Environmental Provisions. Commitments to enforce one's own laws in NAFTA evolved to commitments in later FTAs to adopt, maintain, and not derogate from laws incorporating specific standards, among other provisions. Government Procurement. Commitments to provide certain levels of access to and nondiscriminatory treatment in parties' government procurement markets. Dispute Settlement. Provisions for dispute settlement mechanism to resolve disputes regarding each party's adherence to agreement obligations. Other Provisions. Other core provisions have included those related to competition policy, monopolies, and state enterprises, sanitary and phytosanitary standards, safeguards, technical barriers to trade, transparency, and good governance.\nBefore an FTA can enter into force, it must be ratified by the governments of parties involved. In the United States, Congress must approve an FTA before it can enter into force. Before voting on an agreement, Congress may review whether the objectives it set out in TPA legislation were followed in the negotiation of the agreement, evaluate the overall economic effect on the U.S. economy, including through a mandated report by the U.S. International Trade Commission (ITC), determine whether the agreement would promote U.S. standards such as IPR, labor, and the environment in other countries, or consider the enforceability of the agreement and its rules.\n\n\t\tManaged Trade23\n\nDuring 2018, the Trump Administration turned to quotas and quota-like arrangements to achieve some of its trade objectives. It negotiated potential quotas on autos through side letters to the proposed United States-Mexico-Canada Agreement (USMCA), as well as quota arrangements that allowed South Korea, Brazil, and Argentina to avoid U.S. tariff increases on steel and aluminum imports. Some Members of Congress and analysts have questioned whether these actions represent an undesirable shift in U.S. trade policy\u2014towards one that some analysts have labeled managed trade. Managed trade generally refers to government efforts to achieve measurable results by establishing\u2014through quantitative restrictions on trade and other numerical targeted approaches\u2014specific market shares or targets for certain products. These are met through mutual agreement or under threat of trade action (e.g., increased tariffs). The 116 th Congress may wish to examine the extent to which the Administration is adopting such an approach, including its effectiveness and impact on U.S. and international trade.\nAdvocates of managed trade policies contend that, by negotiating results-oriented agreements and using the size of the U.S. economy as leverage, the United States can ensure that trade with certain trading partners is \"fair,\" \"balanced,\" and \"reciprocal.\" In addition, they argue, it will force countries to change their distortive economic policies, decrease the size of the U.S. trade deficit and, by reducing U.S. imports, help strengthen certain U.S. industries and boost U.S. employment. Other policymakers view these measures as protectionist and harmful to the economy. Many economists question the efficacy of prodding U.S. trading partners into negotiating or accepting quotas or numerical targets, as well as the ability of the state, rather than market forces, to provide the most efficient allocation of scarce resources\u2014even when attempting to respond to trade-distorting measures by trading partners. They also note that policies that restrict U.S. imports and boost U.S. exports may not decrease the overall size of the U.S. trade deficit, as it is primarily the result of macroeconomic forces\u2014namely the low level of U.S. savings relative to total investment. According to some observers, a move away from a market-driven, multilateral rules-based system to one driven by numerical outcomes and targets could lead to increasing trade restrictions, retaliation or replication by other countries, higher prices, lower global economic growth, and the erosion of the international trading system.\n\n\t\tTrade and Technology24\n\nThe rapid growth of digital technologies has created new opportunities for U.S. consumers and businesses but also new challenges in international trade. For example, consumers today access e-commerce, social media, telemedicine, and other offerings not available thirty years ago. Businesses use advanced technology to reach new markets, track global supply chains, analyze big data, and create new products and services. New technologies facilitate economic activity but also create new trade policy questions and concerns.\nRecent international negotiations have sought to improve and remove barriers to market access for trade in digital goods and services and also address other concerns, such as cybersecurity and privacy protection. Internationally-traded information and communication technologies (ICT) products, whether physical goods (e.g., laptops) or emerging technologies, including algorithms and artificial intelligence, may be subject to traditional trade barriers such as tariffs or export controls. Nontariff barriers impede U.S. firms' market access by limiting what companies can offer or how they can operate in a foreign market, such as requiring local content or partners. Internet sovereignty is a challenge for firms who seek market access in countries where the government strictly controls what digital data is permitted within its borders, such as what information people can access online. Another often-cited digital trade barrier is data localization requirements or cross-border data flows restrictions that policymakers may enact to promote safety, security, privacy or favor domestic firms but that raise costs and risks for foreign firms. Technology transfer requirements and cybersecurity issues include the infringement of intellectual property and theft of trade secrets, economic espionage, and may touch on national security concerns.\nThe 116 th Congress may consider a variety of issues related to technology and trade. These include provisions in the proposed United States-Mexico-Canada Agreement (USMCA), U.S. participation in e-commerce negotiations at the World Trade Organization (WTO), evolving online privacy policies in the United States and other countries, as well as concerns about trade with China, such as those outlined in the Trump Administration's investigation under Section 301 of the Trade Act of 1974 (see section on Tariff Actions by the Trump Administration).\n\n\t\tEconomics and National Security26\n\nU.S. officials have long recognized that U.S. economic interests are vital to national security concerns and have considered the concepts of \"geoeconomics\" and \"economic statecraft\" in relation to national security strategy. Broadly speaking, these terms refer to the political consequences of economic decisions or the economic consequences of political trends and the dynamics of national power.\nIn recent years, a combination of domestic and international forces are challenging the U.S. leadership role in ways that are unprecedented in the post-World War II era. For some observers, these challenges are not just about economic growth and international economic engagement, but directly affect U.S. national security. In their view, China's growing economic competition for leading-edge technologies, in particular, challenges not only U.S. commercial interests, but potentially threatens U.S. national security interests.\nAccording to some observers, since taking office, the Trump Administration has promoted a form of national security that mixes trade and economic relationships with national security, defense, and foreign policy objectives in ways that seem more confrontational than cooperative, more unilateral than multilateral, and more central to its overall agenda than in previous administrations. For example, the Trump Administration has used the U.S. trade deficit and import tariffs to support the defense industrial base by placing tariffs on the imports of strategic security partners as a form of national economic security. Despite existing National Security Strategy (NSS) reports and previous executive branch efforts, there is a view that the United States lacks a holistic, whole-of-government approach for thinking about economic challenges and opportunities in relation to U.S. national security. To that end, on April 25, 2018, Senators Young, Merkley, Rubio and Coons introduced S. 2757 , the National Economic Security Strategy Act of 2018 to \"ensure Federal policies, statutes, regulations, procedures, data gathering, and assessment practices are optimally designed and implemented to facilitate the competitiveness, prosperity, and security of the United States.\" This and similar legislation may be introduced in the 116 th Congress.\n\n\tPolicy Issues for Congress\n\nPolicy debates during the 116 th Congress may include the use and impact of unilateral tariffs imposed by the Trump Administration under various U.S. trade laws, as well as potential legislation that alters the authority granted by Congress to the President to do so; U.S.-China trade relations; legislation to implement the proposed United States-Mexico-Canada Trade Agreement (USMCA); and the Administration's launch of bilateral trade negotiations with the European Union, Japan, and the United Kingdom, among many others. The following section provides a broad overview of the potentially more prominent issues in international trade and finance that the 116 th Congress may consider.\n\n\t\tTariff Actions by the Trump Administration30\n\nConcerns over trading partner trade practices, the U.S. trade deficit, and potential negative effects of U.S. imports have been a focus of the Trump Administration. Citing these concerns and others, the President has imposed increased tariffs under (1) Section 201 of the Trade Act of 1974 on U.S. imports of washing machines and solar products; (2) Section 232 of the Trade Expansion Act of 1962 on U.S. imports of steel and aluminum, and potentially autos and uranium, and (3) Section 301 of the Trade Act of 1974 on U.S. imports from China. Congress delegated aspects of its constitutional authority to regulate foreign commerce to the President through these trade laws. They allow presidential action, based on agency investigations and other criteria, to impose import restrictions to address specific concerns ( Table 1 ). They have been used infrequently in the past two decades, in part due to the 1995 creation of the World Trade Organization (WTO) and its dispute settlement system.\nAnnual U.S. imports of goods subject to the additional tariffs, which range from 10% to 50%, totaled $282 billion in 2017 ( Figure 3 ). All formally proposed tariffs are now in effect. The President has informally raised the prospect of tariffs on an additional $267 billion of U.S. annual imports from China, and, pending a Section 232 investigation expected to be finalized in early 2019, additional tariffs on approximately $361 billion of U.S. auto and parts imports. While the tariffs benefit import-competing U.S. producers, they also increase costs for downstream users of imported products (e.g., auto producers using steel in cars) and consumers. In response to the U.S. actions, several U.S. trading partners have initiated WTO dispute settlement proceedings and imposed retaliatory tariffs on goods accounting for $126 billion of annual U.S. exports in 2017, causing export declines in targeted industries.\nCongressional views on the tariffs differ, but many Members have raised concerns over their potential negative economic implications and the process for seeking exclusions to tariffs. Some also question whether the President's actions adhere to the intent of the trade laws used. The 115 th Congress held a number of hearings on the effects and implementation of the tariffs, and several Members introduced legislation that would have altered the President's current authorities. The issue may be the subject of further debate and possible legislative activity in the 116 th Congress.\n\n\t\t\tTariffs on U.S. Imports from China (Section 301)33\n\nSections 301 of the Trade Act of 1974, as amended, is one of the principal statutory means by which the United States addresses \"unfair\" foreign barriers to U.S. exports. Concerns over China's policies on intellectual property (IP), technology, and innovation led the Trump Administration to launch a \"Section 301\" investigation in August 2017. In March 2018, President Trump signed a memorandum justifying U.S. action against China under Section 301. In its justification, the Administration focused on: 1) various Chinese policies that force or pressure technology transfers from U.S. companies to a Chinese entity; 2) China's unfair technology licensing practices that prevent U.S. firms from achieving market-based returns for their IP; 3) China's investments and acquisitions which generate large-scale technology and IP transfer to support China's industrial policy goals; and 4) China's cyber intrusions into U.S. computer networks to gain access to valuable business information.\nOn June 15, the U.S. Trade Representative (USTR) announced a two-stage plan to impose 25% ad valorem tariffs on $50 billion worth of Chinese imports. On June 16, China issued its own two-stage retaliation plan against the United States. In response, on June 18, President Trump directed the USTR to propose a new list of products worth $200 billion that would be subject to increased 10% tariffs if China retaliated (stage 3). The first two stages of U.S. 25% tariff hike measures went into effect on July 6 and August 23. China implemented comparable countermeasures on U.S. products. On September 24, the Trump Administration imposed 10% increased tariffs on additional Chinese imports (stage 3), which were to increase to 25% on January 1, 2019 (now on hold). In response, China raised tariffs (by 5% and 10%) on $60 billion worth of imports from the United States ( Figure 4 ). The Trump Administration created a process to enable affected U.S. firms to petition for an exclusion from some of the tariff increases.\nA bilateral meeting between Presidents Trump and Xi at the conclusion of the December 2018 G-20 summit in Argentina may have laid groundwork for addressing the tariff escalation. The two leaders agreed to begin negotiations on \"structural changes\" on IP and technology issues, along with agriculture services, with the goal of achieving an agreement in 90 days. The White House reported that China agreed to make \"very substantial\" (though unspecified) purchases of U.S. agricultural, energy, and industrial products. President Trump agreed to suspend the tariff rate increases planned for January 1, 2019, unless no agreement is reached in 90 days. On December 13, the U.S. Department of Agriculture reported that China had agreed to purchase 1.13 million metric tons of U.S. soybeans.\nWhile some policymakers and many business representatives have expressed support for the Administration's goals of improving China's IP and technology policies, they question whether tariff hikes against China can achieve those goals. Several Members of Congress have raised concerns over the impact the current trade conflict is having on their constituents in terms of higher-priced imports from China and lost U.S. export sales.\n\n\t\t\tTariffs on U.S. Imports of Aluminum and Steel Products (Section 232)36\n\nSection 232 of the Trade Expansion Act of 1962 (as amended) is sometimes called the \"national security clause,\" because it provides the President with the ability to impose restrictions on certain imports that the U.S. Department of Commerce determines threaten to impair the national security. If requested, or upon self-initiation, Commerce investigates the import of specific product(s) and, if it determines in the affirmative, and if the President concurs, he may adjust the subject imports using tariffs, quotas, or other measures to offset the adverse effect. Section 232 sets out timelines and procedures for the investigation and that the President must follow once a decision is made. The executive branch has broad discretion in Section 232 cases to define the scope of the investigation, and the World Trade Organization (WTO) allows members to take measures in order to protect \"essential security interests.\"\nBased on concerns about ongoing global overcapacity and certain trade practices, in April 2017, the Trump Administration initiated Section 232 investigations on U.S. steel and aluminum imports. Effective March 23, 2018, President Trump applied 25% and 10% tariffs, respectively, on certain steel and aluminum imports. In order to limit potential negative domestic effects of the tariffs on U.S. businesses and consumers, Commerce established a process for product exclusions requests and has received over 49,000 requests (including resubmissions) as of October 28, 2018. While the President negotiated tariff exemptions and quota arrangements with Brazil, South Korea, Argentina, and Australia, the proposed United States-Mexico-Canada Agreement (USMCA) did not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico. Multiple U.S. trading partners are challenging the tariffs under WTO dispute settlement rules and have threatened or enacted retaliatory measures, risking potential escalation of retaliatory tariffs. In turn, the United States has argued that trading partners' counter tariffs in response to the U.S. Section 232 measures cannot be justified under WTO rules, and the United States filed its own WTO complaints over the retaliatory tariffs by at least six countries.\nAs Congress continues to debate the Administration's Section 232 actions, it may consider multiple issues including potential amendments to the delegation of constitutional authority that Congress gave to the President through Section 232, examining the investigation and implementation processes, and exploring opportunities to address specific market-distorting practices that are the root causes of steel and aluminum overcapacity through international forums and trade negotiations.\n\n\t\t\tTariffs on U.S. Imports of Washing Machines and Solar Products (Section 201)42\n\nSection 201 of the Trade Act of 1974 grants authority to the President to provide temporary import relief (e.g., through additional tariffs or quotas on imports) in order to facilitate positive adjustment of a U.S. industry to import competition. The President may provide this relief if, as a result of an investigation based on industry petitions or self-initiated by the President, the U.S. International Trade Commission (ITC) makes a recommendation for relief based on a finding that increased U.S. imports of these products are a \"substantial cause of serious injury\"\u2014or threat thereof\u2014to U.S. manufacturers. Section 201 investigations are unlike other trade remedy tools, such as antidumping (AD) and countervailing duty (CVD) cases that investigate \"material injury\" (or threat thereof) based on sales of imported products at less than fair value (AD) or that are subsidized by a foreign government or other public entity (CVD). Rather, Section 201 cases investigate import surges of fairly-traded goods.\nOn January 23, 2018, based on affirmative findings of serious injury by the ITC and recommended actions, President Trump announced that he would impose temporary new tariffs on imports of large residential washing machines and solar photovoltaic (PV) cells and modules , effective February 7, 2018. When initiating the actions on January 23, the President said , \"My administration is committed to defending American companies, and they've been very badly hurt from harmful import surges that threaten the livelihood of their workers, of jobs, actually, all over this country.\" While such actions may benefit some U.S. domestic producers, they could also raise prices for U.S. consumers and domestic industries that use these imports to manufacture downstream products. The Section 201 measures could also increase tensions with various U.S. trading partners. Prior to the ITC affirmative findings, several Members wrote to the ITC commissioners to caution that imposing tariffs could have unintended consequences, including by raising prices and potentially costing jobs at foreign-run facilities in the United States.\n\n\t\t\tTrading Partner Retaliation and Countermeasures48\n\nIncreasing U.S. tariffs or imposing other import restrictions potentially opens the United States to complaints it is violating its World Trade Organization (WTO) and free trade agreement (FTA) commitments. In response to the recent U.S. tariff actions, several U.S. trading partners, including Canada, China, Mexico, and the European Union (EU), have initiated dispute settlement proceedings, which are now at various stages in the WTO dispute settlement process. Several countries have also imposed retaliatory tariffs and the United States has similarly responded by initiating additional disputes at the WTO, arguing that the retaliatory measures do not adhere to WTO commitments. Some analysts fear this escalating series of unilateral tariff actions, retaliations, and resulting WTO disputes may threaten the stability of the multilateral trading system, given the political sensitivity of a potential WTO panel ruling on issues related to national security (Section 232) and the possibility of countries potentially disregarding WTO rulings not in their favor.\nEconomically, retaliation amplifies the potential negative effects of the U.S. tariff measures. It broadens the scope of U.S. industries potentially harmed by making targeted U.S. exports less competitive in foreign markets. To date, six trading partners have imposed retaliatory tariffs in response to Section 232 actions affecting approximately $25 billion of U.S. annual exports, and China has imposed retaliatory tariffs in response to Section 301 actions affecting approximately $101 billion of U.S. annual exports ( Figure 5 ). The products affected cover a range of industries, but the largest export categories include soybeans, motor vehicles, steel, and aluminum. Lost market access resulting from the retaliatory tariffs may compound concerns that U.S. exporters increasingly face higher tariffs than some competitors in foreign markets, as other countries proceed with trade liberalization agreements, such as the EU-Japan FTA, which do not include the United States.\n\n\t\tU.S.-China Trade and Key Issues52\n\nSince China embarked upon economic and trade liberalization in 1979, U.S.-Chinese economic ties have grown extensively (see text box). Total bilateral trade rose from about $2 billion in 1979 to $636 billion in 2017. China was the United States' largest trading partner, largest source of imports ($506 billion), and third largest merchandise export market ($130 billion). From 2008 to 2017, U.S. merchandise exports to China grew faster (at 82.4%) than those to any other major U.S. trading partner. According to the U.S. Department of Commerce's Bureau of Economic Analysis (BEA), sales by U.S.-invested firms in China in 2016 totaled $464 billion. The U.S. merchandise trade deficit with China was $376 billion in 2017, by far the largest U.S. bilateral trade imbalance; projections estimate it may have reached $418 billion in 2018 ( Figure 6 ). Reducing the U.S. trade deficit with China has been a major objective of the Trump Administration and many in Congress. \n\n\t\t\tIndustrial Policies and Made in China 202555\n\nFrom the U.S. perspective, tensions over various economic and trade issues stem largely from China's incomplete transition to an open-market economy. While China has significantly liberalized its economic and trade regimes over the past three decades\u2014especially since joining the World Trade Organization (WTO) in 2001\u2014it continues to maintain or has recently imposed a number of policies to support and protect domestic firms, especially state-owned enterprises (SOEs). Major Chinese government practices of concern to U.S. stakeholders include subsidies, tax breaks, and low-cost loans given to Chinese firms, foreign trade and investment barriers, discriminatory intellectual property and technology policies, and the lack of the rule of law. An American Chamber of Commerce in China business climate survey in 2018 found that 75% said that foreign businesses in China were \"less welcomed\" there than before, compared to 44% who felt that way in 2014. Several recently issued economic plans, such as the \"Made in China 2025\" (MIC 2025) initiative, which seeks to make China a global leader in advanced manufacturing in 10 designated industries, appear to indicate a sharply expanded government role in the economy. U.S. business representatives have raised concerns over the potentially distortionary and discriminatory aspects of the MIC 2025 plan, and the Trump Administration's Section 301 actions against China appear to be largely aimed at curbing the initiative (see section on Tariffs on U.S. Imports from China). More recently, Presidents Trump and Xi agreed to negotiations to address issues of concern. The 116 th Congress may monitor ongoing 301 actions and any potential bilateral agreement to resolve U.S. trade concerns.\n\n\t\t\tChina's Policies on Technology, Innovation, and Intellectual Property58\n\nU.S. firms cite the lack of effective protection of intellectual property rights (IPR) as one of their biggest impediments in conducting business in China. A study by the Commission on the Theft of American Intellectual Property estimated that global IPR theft costs the U.S. economy $300 billion, of which China accounted for between 50% ($150 billion) and 80% ($240 billion) of those losses. In May 2014, the U.S. Department of Justice indicted five members of the Chinese People's Liberation Army for government-sponsored cyber-espionage against U.S. companies and theft of proprietary information to aid state-owned enterprises. During Chinese President Xi Jinping's state visit to the United States in September 2015, the two sides reached an agreement on cyber security, pledging that neither country's government would conduct or knowingly support cyber-enabled theft of intellectual property for commercial purposes and to establish a joint dialogue on cybercrime and related issues (which has continued under the Trump Administration). However, in October 2018, Crowdstrike, a U.S. cybersecurity technology company, identified China as \"the most prolific nation-state threat actor during the first half of 2018.\" It found that Chinese entities had made targeted intrusion attempts against \"multiple sectors of the economy, including biotech, defense, mining, pharmaceutical, professional services, transportation, and more.\"\nIn November 2018, FBI Director Christopher Wray stated: \"No country presents a broader, more severe threat to our ideas, our innovation, and our economic security than China.\" Then U.S. Attorney General Jeff Sessions proclaimed that \"Chinese economic espionage against the United States has been increasing\u2014and it has been increasing rapidly.\" On December 1, 2018, U.S. Assistant Attorney General John C. Demers stated at a Senate hearing that from 2011 to 2018, China was linked to more than 90% of the Department of Justice's cases involving economic espionage and two-thirds of its trade secrets cases. The 116 th Congress may consider how to address the threats outlined by senior government officials, including through possible legislation.\n\n\t\t\tBelt and Road Initiative (BRI)64\n\nChina conceived its Belt and Road Initiative (BRI) in 2013 to promote greater economic connectivity and integration across several regions, through the development of \"economic corridors\" and revitalized land and sea routes for trade and investment. While infrastructure investment is a core component, objectives of policy coordination, trade facilitation, financial integration, and people-to-people ties also drive the initiative. To date, China has released little official aggregate information on BRI, raising questions for the United States and others about its scope. According to Chinese media, China has signed agreements on BRI cooperation with more than 100 countries and international institutions, and collectively, projects could entail capital requirements ranging $1 trillion to $4 trillion. Based on emerging trends, projects appear to largely involve Chinese SOEs, materials, and financing. If BRI achieves Chinese objectives to \"complement the development strategies of countries involved\" and build a \"new model of win-win cooperation\" it could help fill major deficits in infrastructure investment in Asia and other regions and reshape trade patterns.\nSome observers, including U.S. officials and Members of Congress, have growing concerns about the initiative's motives, perceived lack of transparency in projects, and potential debt sustainability problems for countries receiving Chinese loans (such as Sri Lanka and Pakistan), as well as the use of economic leverage to achieve geopolitical and strategic goals. The United States has commercial interests at stake, and more broadly, economic interests in shaping the rules governing global and regional trade and finance; BRI could potentially reshape these systems to reflect Chinese interests. In response, the Trump Administration has called for modernizing U.S. development finance tools and cooperating with allies on \"high-quality infrastructure.\" Its \"Free and Open Indo-Pacific\" strategy involves $113 million in new U.S. initiatives and investments in the region.\nChina's growing economic influence was cited as a motivation for Congress to pass the Better Utilization of Investments Leading to Development (BUILD) Act ( P.L. 115-254 ), signed into law in October 2018. The 116 th Congress may hold further hearings on Chinese economic practices and BRI, and it may consider new tools to counter Chinese influence and better support U.S. firms involved in economic activities abroad. As part of its oversight and approval of funding for U.S. participation in multilateral development banks and international financial institutions, Congress may also exercise oversight of institutions involved in BRI and implementation of the BUILD Act, as well as consider possible multilateral cooperation on debt transparency issues.\n\n\t\tU.S. Bilateral and Regional Trade Agreements and Negotiations71\n\nIn addition to multilateral efforts through the World Trade Organization (WTO), the United States has worked to reduce and eliminate barriers to trade and create nondiscriminatory rules and principles to govern trade through bilateral and regional trade agreements. Over the past two decades, these agreements, referred to as free trade agreements (FTAs) in the U.S. context, have proliferated globally in part due to difficulty in reaching consensus on new agreements at the WTO. In total, the United States has concluded 14 FTAs with 20 countries since 1985, when the first bilateral FTA was concluded with Israel ( Figure 7 ).\nThe Trump Administration has taken a number of actions with regard to FTAs, and the issue may be a focus of the 116 th Congress. In January 2017, the President withdrew the United States from the 12-member Trans-Pacific Partnership (TPP), which had been signed but not ratified during the Obama Administration. The Trump Administration has also made changes to existing U.S. FTAs. Most significantly, the Administration renegotiated the North American Free Trade Agreement (NAFTA), the largest U.S. FTA. The modified agreement\u2014renamed the United States-Mexico-Canada Agreement (USMCA)\u2014requires congressional approval and implementing legislation in order to enter into force, suggesting a possible vote in the 116 th Congress. The President also negotiated changes to the U.S.-South Korea (KORUS) FTA, but the relatively minor adjustments were made by proclamation at the end of 2018 and require no further action by Congress. Looking forward, the Administration has notified Congress under Trade Promotion Authority (TPA) of its intent to negotiate trade agreements with the European Union (EU), Japan, and the United Kingdom (UK), which could begin in early 2019. Congress is expected to weigh in on the scope and objectives for these new agreements throughout the negotiating process, especially through the TPA requirement for the Executive Branch to conduct ongoing consultations before, during, and after the completion of the negotiations.\n\n\t\t\tU.S.-Mexico-Canada Agreement (USMCA)75\n\nOn November 30, 2018, President Trump and the leaders of Canada and Mexico signed the United States-Mexico-Canada Agreement (USMCA), a proposed trilateral free trade agreement (FTA) that, if approved by Congress and ratified by the governments of Canada and Mexico, would revise and modernize the North American Free Trade Agreement (NAFTA). Pursuant to trade promotion authority (TPA), the Administration notified Congress of its intention to sign the agreement on August 31, 2018, in part to allow for the signing of the agreement prior to Mexico's president-elect Andres Manuel Lopez Obrador taking office on December 1, 2018. Members may debate and potentially consider legislation to implement the agreement in the 116 th Congress. Issues for potential examination include whether the USMCA meets TPA's negotiating objectives, whether provisions on labor and environment would have stronger enforcement, and the economic impact of the agreement. Congress may also consider the economic and political ramifications if President Trump gives a six-month notification of an intention to withdraw from NAFTA.\nMany trade policy experts and economists give credit to FTAs such as NAFTA for expanding trade and economic linkages among countries, creating more efficient production processes, increasing the availability of lower-priced consumer goods, and improving living standards and working conditions. Other proponents contend that NAFTA has political dimensions that create positive ties within North America and improve democratic governance. At the same time, some policymakers, labor groups, and consumer advocacy groups argue that NAFTA has had a negative effect on the U.S. economy. They often refer to labor provisions as being weak and maintain that the proposed USMCA should have stronger, more enforceable labor provisions to address issues such as outsourcing, lower wages, and job dislocation.\nThe proposed USMCA, comprised of 34 chapters and 12 side letters, retains most of NAFTA's chapters, including the elimination of tariff and nontariff trade barriers, while making notable changes to rules of origin (ROO) for motor vehicle and agriculture products and modernizing provisions on intellectual property rights (IPR), digital trade, and services trade. The agreement also allows some greater access to the Canadian dairy market to U.S. dairy producers and adds new obligations on currency misalignment, a new chapter on state-owned enterprises, and a new chapter on anti-corruption. Other provisions new to U.S. FTAs include a sunset clause provision, which would require a joint review and agreement on renewal issues after six years, revised provisions on government procurement and investment, and a provision that allows a party to withdraw from the agreement if another party enters into an FTA with a country it deems to be a nonmarket economy (e.g., China).\nThe Trump Administration's proposals on ROO in motor vehicle products were one of the more controversial issues in the USMCA negotiations. Under NAFTA, the ROO requirement for autos, light trucks, engines, and transmissions is 62.5%; for all other vehicles and automotive parts it is 60%. USMCA would raise these requirements to 75% of a motor vehicle's content and to 70% of its steel and aluminum content. It would also add a wage requirement, for the first time in any FTA, stating that 40%-45% of auto content must be made by workers earning at least $16 per hour.\nSupporters of the proposed USMCA contend that the agreement would modernize NAFTA by including updated provisions in areas such as digital trade and financial services. Some analysts believe that the updated auto ROO requirements contained in the USMCA could raise compliance and production costs and lead to higher prices, which could possibly negatively affect U.S. vehicle sales. Overall, the full economic effects of the proposed USMCA would not be expected to be significant because nearly all U.S. trade with Canada and Mexico is now conducted duty and barrier free. Many economists and other observers believe that it is not expected to have a measurable effect on United States-Mexico trade and investment, jobs, wages, or overall economic growth, and that it would probably not have a measurable effect on the U.S. trade deficit with Mexico.\n\n\t\t\tU.S.-South Korea (KORUS) FTA Modifications77\n\nThe U.S.-South Korea (KORUS) free trade agreement (FTA), the second-largest U.S. FTA by trade flows, has been a centerpiece of U.S.-South Korea economic relations since its entry into force in March 2012. Formal negotiations to modify the pact began in January 2018, following months of public criticism of the agreement by President Trump, including threats of potential U.S. withdrawal. In September, the two countries signed a modified agreement. The relevant U.S. tariff changes became effective January 1, 2019, through Presidential proclamation. A major underlying factor in the renegotiation was President Trump's concern over the growth in the bilateral trade deficit since KORUS took effect ( Figure 8 ). Most economists, however, argue that other factors, including a slowdown in South Korea's economic growth during the period, were the key drivers of the deficit. In 2017, the U.S. trade deficit with South Korea shrank by more than $7 billion, in part due to increased U.S. energy (crude oil and natural gas) and services exports.\nThe KORUS FTA is the most recent and arguably most extensive U.S. FTA in effect. The changes made through the modifications were relatively minor and focused mostly on U.S. tariff adjustments and South Korean implementation issues. Specifically, the modifications, among other things, extend the 25% U.S. light truck tariff for twenty years to 2041, double the number of U.S. vehicle exports to South Korea that can be imported with U.S. safety standards (25,000 to 50,000 per manufacturer per year), and confirm South Korea's adherence to KORUS commitments on origin verifications, and its intent to amend a domestic pharmaceutical pricing policy to ensure it is consistent with KORUS commitments. Although South Korea's National Assembly ratified the modifications, the government has expressed concern over potential U.S. Section 232 tariffs on auto and auto parts. Unlike the United States-Mexico-Canada Agreement (USMCA), the KORUS FTA modifications do not explicitly exempt any South Korean autos from future Section 232 actions.\n\n\t\t\tU.S.-European Union Trade Negotiations80\n\nOn October 16, 2018, the Trump Administration notified Congress, under Trade Promotion Authority (TPA), of its intent to enter trade agreement negotiations with the European Union (EU), its largest overall trade and investment partner. This followed a U.S.-EU announcement in July 2018 on plans to work to eliminate transatlantic tariffs, nontariff barriers, and subsidies on \"non-auto industrial goods,\" as well as to boost trade specifically in services, chemicals, pharmaceuticals, medical products, and U.S. soybeans. Although the European Commission does not have a negotiating mandate from EU member states, U.S.-EU preparatory talks have been ongoing. The proposed negotiations represent a potential de-escalation of the conflict between the two sides over recent new tariff measures (see Tariff Actions by the Trump Administration). Each side agreed not to impose further tariffs on each other while negotiations are active, and to examine current U.S. steel and aluminum tariffs.\nAt the same time, the proposed negotiations are likely to be complex. No agreement exists on their scope. The EU, so far, has rejected the U.S. assertion on including all agriculture in the negotiations. It is an open question if the scope will broaden to include other areas designated under TPA. Depending on which issues are addressed, the challenges that impeded the previous U.S.-EU trade negotiations could resurface. EU FTAs negotiated in recent years emphasize expanded protections for geographical indications, replace investor-state dispute settlement (ISDS) with an investment court system, and lack explicit commitments to remove trade restrictions on data flows; these approaches raised concerns for some Members of Congress in the past. The United Kingdom's expected withdrawal from the EU also could affect the negotiations, as it would remove a traditionally leading voice on trade liberalization from the EU. How the United States approaches some trade issues might evolve in the wake of the proposed United States-Mexico-Canada Agreement (USMCA). Congress has a direct interest in monitoring and shaping trade discussions on these issues. Implementing legislation for any final U.S.-EU trade agreement would be subject to congressional consideration. As negotiations proceed, Congress may debate and hold hearings on such issues as the potential impact of greater transatlantic trade liberalization on the U.S. economy and particular sectors, and the extent to which any U.S.-EU commitments could help develop globally relevant rules on trade.\n\n\t\t\tU.S.-Japan Trade Negotiations83\n\nIn September 2018, President Trump and Japanese Prime Minister Abe announced plans to launch formal bilateral trade negotiations. Under Trade Promotion Authority (TPA) procedures, on October 16, the Administration officially notified Congress of its intent to enter into the negotiations\u2014which could begin after 90 days\u2014and began consultations with Congress over the scope of such negotiations. As a top U.S. trade and investment partner, Japan is a longstanding U.S. priority for trade negotiations, in particular following U.S. withdrawal from the proposed Trans-Pacific Partnership (TPP) in 2017 ( Figure 10 ). Japan's recent free trade agreements (FTAs) with major markets in the Asia-Pacific and Europe could set new rules and lower tariffs for other countries trading with Japan, disadvantaging U.S. exporters and further incentivizing U.S. interest in new talks. Japan had preferred a regional approach to U.S. trade negotiations, and urged the United States to reconsider its TPP withdrawal. Some suggest Japan's willingness to enter bilateral talks relates to potential U.S. Section 232 tariffs on Japanese autos and auto parts\u2014Japan's top export to the United States and a major source of the U.S. trade deficit with Japan.\nThe initial joint announcement stated that the negotiations will focus on goods and services\u2014specifically areas that \"can produce early achievements\"\u2014and then turn to investment and other issues. Negotiations of commitments on agriculture and autos may be among the most contentious, and both sides have expressed priorities for the new talks. Japan plans to limit new agriculture market access to its offers in existing trade agreements, including TPP, while the United States seeks market access outcomes that will increase U.S. production and employment in the auto industry. An agreement limited in coverage or presented to Congress in stages would represent a shift in approach from recent U.S. FTAs, which typically contain more comprehensive provisions. The Administration provided more certainty in the scope of the new U.S.-Japan talks in releasing its specific negotiating objectives in December 2018, as required by TPA 30 days before talks can commence. It suggests that a broad range of issues may be covered, including trade in goods, services, agriculture, investment, intellectual property, state-owned enterprises, and digital trade. The Office of the U.S. Trade Representative (USTR) specified that it may pursue negotiations with Japan in stages, in consultation with Congress, but that the aim is to \"address both tariff and nontariff barriers and to achieve fairer, more balanced trade in a manner consistent with the objectives that Congress has set out\" in TPA.\n\n\t\t\tU.S.-United Kingdom Trade Negotiations87\n\nIn light of \"Brexit\"\u2014the expected withdrawal of the United Kingdom (UK) from the European Union (EU)\u2014some Members of Congress and the Trump Administration called for launching U.S.-UK free trade agreement (FTA) negotiations. The UK is a major U.S. trade and economic partner, and foreign direct investment (FDI) and affiliate activity are key aspects of bilateral ties ( Figure 11 ). In January 2017, President Trump and Prime Minister May discussed how the two sides could \"lay the groundwork\" for a future U.S.-UK FTA. The two sides subsequently established a bilateral working group that has met regularly to explore ways to strengthen trade and investment ties, including through a potential future FTA. On October 16, 2018, the Administration formally notified Congress, under Trade Promotion Authority (TPA), of its intent to enter into the negotiations. The 116 th Congress may hold ongoing consultations with the Trump Administration over the scope of the negotiations, and to engage in oversight as the negotiations progress.\nFTA prospects depend on the terms of the UK's withdrawal from the EU and the future UK-EU trade relationship, including whether the UK will have an independent trade policy. Tremendous uncertainty surrounds the UK-EU Brexit negotiations. Under a draft agreement and political declaration, a transition period could extend through at least 2020, during which time the UK may be able to negotiate, but not enter into, trade agreements with other countries. Aspirations for the future UK-EU relationship include negotiating a comprehensive UK-EU FTA, along with developing an independent UK trade policy. Yet, the \"Irish border\" issue presents challenges; a agreement reached by both sides in late 2018\u2014in which the UK would have remained in a customs union with the EU as a \"backstop\" if they cannot reach an alternative arrangement that avoids a \"hard border\" (customs check, physical border infrastructure) between Northern Ireland and Ireland\u2014was rejected by the UK Parliament in January 2019. How aligned the UK remains with the EU in such areas as regulations could affect dynamics in the U.S.-UK FTA negotiations. Some experts view a U.S. FTA with the UK as more feasible than one with the EU, given similarities in U.S. and UK trade policy approaches historically and the two countries' \"special relationship\"; others caution that domestic interests could complicate trade negotiations. Prospects of bilateral FTA negotiations have already generated concern among some stakeholders, particularly in the UK, about implications, such as for food safety regulations. Other key negotiating issues could include financial services, investment, and e-commerce, which are prominent in U.S.-UK trade.\n\n\t\t\tProliferation of Non-U.S. Trade Agreements92\n\nSince 1990, the number of free trade and regional agreements in force globally has grown six-fold from fewer than 20 to nearly 300 ( Figure 12 ). All 164 members of the World Trade Organization (WTO) are now party to at least one FTA and, as of 2014, each member had on average 11 FTA partners. With only 14 U.S. FTAs in effect, the vast majority of these agreements do not involve the United States. The multilateral trading system, meanwhile, has not produced a broad set of new trade liberalization agreements (excluding more limited scope agreements, such as the Trade Facilitation Agreement) since the Uruguay Round, which also established the WTO in 1995. The proliferation of FTAs, particularly in the absence of a major new multilateral agreement, presents certain challenges for the United States. These agreements are inherently discriminatory given their limited membership (i.e., they provide preferential treatment to some countries and not others). U.S. exporters benefit from the preferential aspects of FTAs when they gain better access to FTA partner markets than their foreign competitors, but may be similarly harmed when third parties negotiate agreements that do not involve the United States.\nDuring the 116 th Congress, this issue may grow more prominent as agreements among a number of the United States' top trading partners are concluded and take effect. Major recent agreements include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11), involving among others Canada, Mexico, Japan, and Vietnam, which took effect at the end of 2018, and the European Union-Japan FTA which is expected to come into effect in early 2019. Both the United States and Japan exported more than $10 billion of autos to the European Union (EU) in 2017; the EU-Japan FTA would eventually eliminate the EU's 10% auto tariff, giving Japanese exporters a major competitive advantage in the EU market. As other countries move forward with new FTA negotiations that cover a significant share of world trade, a number of issues arise that may be of interest to Congress, including how these agreements will affect U.S. economic and strategic interests, their impact on U.S. leadership in trade liberalization efforts and establishing new trade rules, and the appropriate U.S. response.\n\n\t\tThe World Trade Organization (WTO)94\n\nThe 164-member World Trade Organization (WTO), established in 1995, oversees and administers global trade rules and negotiations, and resolves trade disputes. The WTO succeeded the General Agreement on Tariffs and Trade (GATT) of 1947, which was established to advance a more open, rules-based trading system and to further economic stability, growth, and prosperity. The United States was a key architect of the GATT\/WTO and the agreements resulting from multilateral trade negotiations. Successive rounds of trade liberalization, culminating in the Uruguay Round (1986-1994), supported the significant expansion of trade through reductions in trade barriers and the establishment of rules and principles, such as nondiscrimination and transparency. Since the establishment of the WTO, members have lowered their average most-favored nation (MFN) applied tariff on a unilateral basis from 25% in 1994 to less than 10% today ( Figure 13 ). The WTO's dispute settlement system has processed more than 500 disputes, with the aim of enforcing its rules, managing trade tensions, and ensuring a stable system.\nWhile the WTO is recognized as the foundation of the global trading system, including by Congress, it faces growing challenges. Many observers believe it must adopt reforms to remain a relevant and effective institution, both in terms of its negotiating and dispute settlement functions. Compared to past administrations, the Trump Administration has taken a more skeptical stance toward the WTO and the value of multilateral trade deals. President Trump has also raised the possibility of U.S. withdrawal from the WTO. As debates over the future of the WTO intensify, a number of issues arise that may be of interest to the 116 th Congress, including how current and future WTO agreements affect the U.S. economy and the value of U.S. membership and leadership in the WTO.\n\n\t\t\tMultilateral and Plurilateral Negotiations97\n\nWhile the landscape of global trade and investment has changed dramatically since the World Trade Organization (WTO)'s founding, WTO rules have not been modernized or expanded since 1995, with some exceptions. The most recent round of multilateral negotiations, the Doha Round, began in 2001, but stalled in 2015, with no clear path forward. The deadlock in negotiations is largely due to entrenched differences in priorities among leading emerging market economies, developing countries, and advanced economies, as well as rigidities in the multilateral negotiating process.\nThe most recent 11 th WTO Ministerial Conference in 2017 did not result in major breakthroughs in negotiations. Work to build on current agreements continues, including through plurilateral agreements among subsets of countries. WTO members committed to achieve a multilateral deal on fisheries subsidies by the next ministerial in 2020; the United States has supported these efforts. In other areas, such as agriculture, talks remain stalled. Separate groups of members committed to work programs or plurilateral talks on e-commerce (which the United States joined), investment facilitation, and micro, and small and medium-sized enterprises. The United States viewed the 11 th Ministerial outcome positively\u2014that it signaled \"the impasse at the WTO was broken,\" paving the way for like-minded countries to pursue new work in other areas. Some WTO members, including the United States, point to plurilateral or sectoral settings as the way forward for the institution. The Trump Administration has not specified its position on plurilaterals pursued under the Obama Administration, such as on services and environmental goods. More recently, the European Union (EU), Canada, China, and other countries have put forward WTO reform proposals. These and other issues may be of ongoing interest to Congress.\n\n\t\t\tDispute Settlement99\n\nThe World Trade Organization (WTO) dispute settlement system is often called the \"crown jewel\" of the organization by its adherents because it provides a means to enforce commitments and resolve disputes peacefully without recourse to unilateral action. Under its procedures, countries first seek to settle their differences through consultation. If consultations prove unsuccessful, a dispute can be launched. The dispute is presented before a dispute settlement panel, and a decision is adopted by the Dispute Settlement Body. Cases can be appealed to the Appellate Body (AB). If a party is found to violate an agreement, it has time to bring its law into conformity with the decision. If the party refuses to bring itself into compliance, or if the compliance panel deems the steps taken to be insufficient, the aggrieved party can retaliate by withdrawing trade concessions (i.e., reimposing tariffs) to a level equivalent to the economic damage of the infringing measure. The U.S. Trade Representative (USTR) is authorized to launch cases on behalf of the United States, after input from other agencies and stakeholders in the private sector or nongovernmental organizations (NGOs). The United States is an active user of the dispute settlement system. Among WTO members, the United States has been a complainant in the most dispute cases since the system was established in 1995, initiating 123 disputes ( Figure 14 ). The two largest targets of complaints initiated by the United States are China and the EU, which, combined, account for more than one-third.\nSome stakeholders, including the Trump Administration and some Members of Congress, hold a more skeptical view of the WTO's dispute settlement system and have focused on reforming it. The Administration has withheld the appointment of AB panelists, imperiling the ability of the AB to hear cases past December 2019, when it would lack a quorum. USTR Robert Lighthizer has called for systemic changes in the body, but, thus far, the United States has not made specific proposals. U.S. concerns are known to include whether AB panelists have interpreted agreements too expansively and opine on issues not central to the case at hand, whether proceedings are completed in a timely manner, and whether AB jurists should be able to finish cases after their terms have expired. The European Union (EU) and others have proposed reforms to address U.S. concerns on a number of issues, but these were rejected by the United States. The U.S. Ambassador to the WTO claims that the proposals \"instead appear to endorse changing the rules to accommodate and authorize the very approaches that have given rise to Members' concerns.\"\n\n\t\t\tChallenges and Future Direction101\n\nThe United States has historically served as a leader in the World Trade Organization (WTO) and many U.S. firms rely on WTO rules to open markets for imports and exports, eliminate discriminatory treatment, and defend and advance U.S. economic interests. There are costs and benefits to the United States and other countries to uphold the rules and enforce WTO commitments. As WTO members did not conclude the Doha Round, new questions emerged about the WTO's future direction. Many observers are concerned that recent U.S. tariff actions and counterretaliation by other countries, as well as escalating trade disputes are straining the system. Arguably, the WTO system is only as strong as the members' commitment to abide by its rules, and if those rules are not respected by one or more members engaging in tit-for-tat retaliation, the edifice of the system could be weakened. Another question is whether the WTO is equipped to handle effectively the challenges of emerging markets like China that many experts view as not full-fledged market economies.\nThe Administration has expressed doubt over the value of the WTO and multilateral trade negotiations to the U.S. economy. While some U.S. frustrations with the WTO are not new and are shared by other trading partners, the Administration's overall approach has spurred new questions regarding future U.S. leadership and participation in the WTO.\nMany observers believe the WTO needs to adopt reforms to salvage its role as the foundation of the global trading system. In addition to ongoing WTO efforts to negotiate new trade liberalization and rules in areas like fisheries or e-commerce and digital trade, negotiations in other areas such as services, competition with state owned enterprises, and other issues could help increase the relevance of the WTO as a negotiating body. Partly in response to perceived protectionist actions by the Trump Administration, other countries have begun to assert themselves as leaders and advocates for the global trading system. Led by the European Union (EU) and Canada, some WTO members have begun to explore aspects of institutional reform that could promote the effectiveness of the WTO. The 116 th Congress may consider whether new U.S. negotiating objectives or oversight hearings are needed to address prospects for WTO reforms and rulemaking.\n\n\t\tIntellectual Property Rights102\n\nIntellectual property is a creation of the mind that may be embodied in physical and nonphysical (including digital) objects. Intellectual property rights (IPR) are legal, private, enforceable rights that governments grant to inventors and artists that generally provide time-limited monopolies to right holders to use, commercialize, and market their creations and prevent others from doing the same without their permission. Examples of IPR include patents, copyrights, trademarks, trade secrets, and geographical indicators.\nDebate over IPR includes a number of policy concerns, including the role of intellectual property in the U.S. economy as a source of innovation and comparative advantage; the impact of IPR infringement on U.S. commercial, health, safety, and security interests; and the balance between protecting IPR to stimulate innovation and advancing other public policy goals, such as promoting access to medicines and ensuring the free flow of information. As the global economy changes, protection and enforcement of IPR in the digital environment, including cyber-theft, is of increasing concern. At the same time, lawful limitations to IPR, such as exceptions in copyright law for media, research, and teaching (known as \"fair use\"), also may have benefits.\nIPR is addressed in trade agreements and U.S. law. Since 1988, Congress has included IPR as a principal U.S. trade negotiating objective in trade promotion authority (TPA). In the TPA passed in 2015, Congress directs the Executive Branch to seek IP commitments that exceed the minimum standards of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The United States also has other trade policy tools at its disposal under U.S. law to advance IPR goals. The \"Special 301\" provision of the Trade Act of 1974 allows the U.S. Trade Representative (USTR) to identify and report different levels of U.S. concern about foreign countries' IPR practices and policies. The U.S. International Trade Commission (ITC) conducts investigations into allegations that U.S. imports infringe U.S. intellectual property under the \"Section 337\" provision of the Tariff Act of 1930, as amended. Section 337 investigations, depending on their outcome, can lead to orders prohibiting counterfeit and pirated goods from entering U.S. borders.\nA central part of the IPR debate in the 116 th Congress may be the IPR provisions of the proposed United States-Mexico-Canada Trade Agreement (USMCA), which retain the North American Free Trade Agreement's (NAFTA's) core protections for IPR and specific enforcement requirements. At the same time, the USMCA also includes updated and new provisions, notably ten years of data protection for biologics; extension of copyright terms to 70 years; prohibitions on circumvention of technological protection measures; criminal and civil penalties for trade secret theft, including by state-owned enterprises and cyber-theft; and copyright safe-harbor provisions for Internet Service Provider (ISP) liability. In addition, Congress may continue to monitor closely negotiations with China to address the IPR issues raised by the Trump Administration's Section 301 investigation (see sections on Tariff Actions by the Trump Administration and U.S.-China Trade and Key Issues). These include forced technology transfer from U.S. companies, cyber-intrusion and cyber-theft of U.S. trade secrets, discriminatory licensing restrictions on U.S. firms, and efforts to acquire sensitive U.S. technology.\n\n\t\tLabor and Environment103\n\nSome Members of Congress and others have sought to improve labor and environmental conditions in other countries through the inclusion of more enforceable provisions in U.S. free trade agreements (FTAs). They have been concerned that lax or lower standards in other countries may make U.S. products less competitive (resulting in lost jobs and production to overseas firms), or cause damage to the environment as trade and investment expand. Other policymakers have tried to limit the scope and enforceability of such provisions, or believe that the competence to address these issues lies elsewhere, such as the International Labor Organization (ILO). They also view trade agreements as enabling greater economic growth that can provide more resources for addressing labor and environmental issues.\nCongress may consider how the proposed United States-Mexico-Canada Agreement (USMCA) addresses worker rights protection, an issue that is prominent in the negotiation of U.S. FTAs. Since 1988, Congress has included worker rights protection as a principal negotiating objective in trade promotion authority (TPA) legislation, and the United States has been in the forefront of using FTAs to promote core internationally-recognized worker rights consistent with the ILO Declaration on Fundamental Principles and Rights at Work (1998). The North American Free Trade Agreement (NAFTA) was the first U.S. FTA that addressed worker rights by committing the parties to enforce their own labor laws and to resolve disputes. The proposed USMCA has language similar to more recent FTAs, requiring countries to adopt, maintain, and not derogate from laws that incorporate ILO principles, including freedom of association and the effective recognition of the right to collective bargaining, elimination of all forms of compulsory or forced labor, effective abolition of child labor, and elimination of discrimination in respect of employment and occupation. It also has an additional commitment for Mexico to adopt and maintain labor laws and practices for protection of worker representation in collective bargaining.\nOn the environment, the United States has negotiated environmental provisions in FTAs, which have evolved over time. NAFTA was the first agreement to include environmental provisions, committing the parties to enforce their own laws and cooperatively resolve disputes in a special venue, among other goals. The Trade Act of 2002 was the first grant of TPA containing environmental negotiating objectives, calling for countries not to fail to enforce their own environmental laws in a manner affecting trade and investment. Environmental obligations were expanded in later U.S. FTAs and were largely reflected in the 2015 grant of TPA, which obligated parties to adopt and maintain laws consistent with multilateral environmental agreements (MEAs) to which they are a party. Parties also were obligated not to derogate from their laws in order to attract trade and investment. These provisions were subject to the same dispute settlement provisions as other parts of the agreement with the withdrawal of trade concessions as the ultimate penalty for noncompliance. The World Trade Organization (WTO) does not have provisions related to environmental protection, although negotiations are underway to eliminate tariffs for environmental goods, which the United States and other believe will support broader environmental goals. In the proposed USMCA, Congress may examine the extent to which environmental provisions are consistent with TPA and the strength of enforcement mechanisms for environmental commitments.\n\n\t\tSelect U.S. Import Policies104\n\nThe United States often uses its import policy to accomplish broader foreign and domestic policy goals. For example, Congress created programs that provide duty-free access to the U.S. market to foster economic growth in less developed countries. In addition, to address unfair trade practices and thus provide relief to \"materially injured\" domestic producers and workers, Congress created an investigative process through which an additional duty is placed on imported merchandise to offset the amount at which the merchandise is found to be sold in the U.S. market at less than fair value, or to be subsidized by a foreign government or public entity. Congress also helped to provide a competitive edge to U.S. business by suspending or reducing tariffs on imports used by domestic manufacturers to make downstream goods. As the current Administration's actions shift the trade landscape, Congress may conduct oversight of these policies and their implementation, including Trump Administration decisions to self-initiate anti-dumping investigations, which until these actions, had not occurred since 1985.\n\n\t\t\tTrade Preferences105\n\nSince 1974, Congress has created six trade preference programs to assist developing countries. The following trade preference programs are still in effect:\nGeneralized System of Preferences (GSP\u2014expires December 31, 2020), which applies to all designated developing countries; Caribbean Basin Economic Recovery Act (CBERA\u2014permanent), which includes under its umbrella, the Haitian Hemispheric Opportunity through Partnership Encouragement Acts (HOPE I and II\u2014expires September 30, 2025) and the Haitian Economic Lift Program (HELP\u2014expires September 30, 2025); Caribbean Basin Trade Partnership Act (CBTPA\u2014expires September 30, 2020); African Growth and Opportunity Act (AGOA\u2014expires September 30, 2025); and Nepal Preference Program (expires December 31, 2025).\nThese programs give preferential, temporary, nonreciprocal, duty-free access to the U.S. market for select products from developing countries designated by the Administration. The aim of the policy is to encourage eligible countries to develop viable domestic industries. The 115 th Congress extended GSP, one of the largest and oldest of the preferential trade programs. However, since the CBTPA and GSP expire in September and December of 2020, respectively, the 116 th Congress could consider further extending these programs. Given the Administration's discretion over product and country eligibility, Congress may seek to consult closely with the Administration over its enforcement of statutory eligibility criteria to ensure adherence to congressional objectives or examine possible reforms to the programs.\nIn line with its increased focus on reciprocity in U.S. trade relations, the Trump Administration has also expressed increased interest in potentially negotiating reciprocal trade agreements with current preference program beneficiaries. U.S. Trade Representative Robert Lighthizer, for example, emphasized the possibility of new reciprocal free trade agreement (FTA) negotiations with African countries in his remarks at the annual United States-Sub-Saharan Africa Trade and Economic Cooperation Forum (\"AGOA Forum\"). Congress has directed the Administration to seek such agreements in the past. In the 116 th Congress, it may consider influencing the scope and prioritization of any new negotiations through consultations with the Administration, and it would ultimately have to pass implementing legislation to bring new FTAs into force.\n\n\t\t\tTrade Remedies107\n\nTrade remedies are quasi-judicial administrative actions taken to mitigate injury (or the threat thereof) to domestic industries and workers caused by certain trade practices. Antidumping (AD) and countervailing duty (CVD) remedies provide relief from injurious imports that either are sold at less than fair value or subsidized by a foreign government. Safeguard (Section 201) actions provide temporary relief from import surges of fairly-traded goods. AD\/CVD laws are administered primarily through the International Trade Administration (ITA) of the U.S. Department of Commerce, which addresses the existence and amount of dumping or subsidies, and the U.S. International Trade Commission (ITC), which determines injury to the U.S. industries petitioning for redress. In AD and CVD cases, the remedy is an AD or CVD \"order\" that places an additional duty assessed to offset the calculated amount of dumping or subsidy. World Trade Organization (WTO) rules permit the use of all three of these remedies.\nSince a series of legislative changes expanded access to AD\/CVD remedies in the 1970s, they have increased in use. As of October 22, 2018, there are 462 AD\/CVD orders affecting imports from 47 countries ( Figure 15 ). The majority of these orders (51.3%) apply to iron and steel imports. Critics of AD\/CVD remedies argue that they are protectionist, opaque, overused by certain industries, based on poor economics, and give too much discretion to the ITA. Advocates argue that AD\/CVD remedies are based on sound economics, provide a safety valve necessary for the continuation of trade liberalization, and ensure a fairer trading system. As part of its oversight function, Congress might consider how the current Administration's priorities might affect the U.S. trade remedy regime, including, as noted above, self-initiation of investigations as opposed to industry-led petitions. Additionally, while the quasi-judicial nature of AD\/CVD investigations may indicate that Congress intended AD\/CVD actions to be conducted apart from political influence, the involvement of constituents can lead to Members being asked to write letters or testify at hearings on either side of a trade remedy action to support a constituent's cause.\n\n\t\t\tMiscellaneous Tariff Bills (MTBs)112\n\nMany Members of Congress introduce bills to support importer requests for the temporary suspension of tariffs on chemicals, raw materials, or other nondomestically made components used as inputs in the manufacturing process. A rationale for these requests is that such tariff suspensions help domestic producers of manufactured goods reduce costs, making their products more competitive. Due to the large number of bills typically introduced, they are often packaged together in a broader miscellaneous tariff bill (MTB). The American Manufacturing Competitiveness Act of 2016 ( P.L. 114-159 ) revised the process by directing the U.S. International Trade Commission (ITC) to receive importer petitions for reduced or suspended duties and report its findings directly to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance. Using the new procedure, Congress passed P.L. 115-239 , the Miscellaneous Tariff Bill Act of 2018. P.L. 114-159 also provides for the initiation of a new MTB process in 2019, which could be considered by Members in the 116 th Congress.\n\n\t\tInternational Investment113\n\nIn 2017, the United States was the world's largest source of foreign direct investment (FDI) ($342 billion) and the largest recipient of FDI ($275 billion). The U.S. dual position as a leading source and destination for FDI means that the United States has important economic, political, and domestic interests at stake in the development of international policies regarding direct investment. Investment is a major driver of trade, and U.S. investment policy is a critical part of the U.S. trade policy debate\u2014intersecting with questions about economic impact, trade restrictions, national security, and regulatory sovereignty.\nTraditionally, the United States has supported a rules-based open and liberalized investment environment, including by negotiating rules, disciplines, and market access commitments in trade agreements and administering investment promotion programs, while also reviewing certain proposed inbound foreign investment transactions for U.S. national security implications. The U.S. investment policy landscape may be evolving in the wake of the Trump Administration's approach to investment issues in the proposed United States-Mexico-Canada Agreement (USMCA), as well as legislation passed in the 115 th Congress to update and expand the scope of the Committee on Foreign Investment in the United States (CFIUS).\n\n\t\t\tCommittee on Foreign Investment in the United States (CFIUS)115\n\nCompetition over technological leadership and changing dynamics in the global economy with the rise of emerging economies, such as China and state-led firms, has led to renewed debates in Congress over the impact of foreign investment on U.S. economic and national security interests. In general, U.S. policies treat foreign investors no less favorably than U.S. firms, with some exceptions for national security. In 2007, Congress asserted its role in formulating the scope and direction of U.S. foreign investment policy when the Foreign Investment and National Security Act of 2007 ( P.L. 110-49 ) was enacted, formally establishing the Committee on Foreign Investment in the United States (CFIUS), which serves the President in overseeing the national security implications of foreign direct investment. This law broadened Congress's oversight role, and explicitly includes homeland security and critical infrastructure as issues that the President must consider when evaluating the national security implications. The law also grants the President the authority to suspend or block foreign investments that are judged to \"threaten to impair\" U.S. national security and requires review of investments by foreign investors owned or controlled by foreign governments. The law has been used five times to block a foreign acquisition of a U.S. firm, although a number of investments have been withdrawn before reviews were completed.\nIn 2017, growing concerns over the impact of Chinese investment in U.S. high-technology firms resulted in the introduction of bipartisan legislation to \"strengthen and modernize\" CFIUS. On August 13, 2018, President Trump signed into law the Foreign Investment Risk Re view Modernization Act (FIRRMA) of 2018 (Title XVII, P.L. 115-232 ), which amends the current process for CFIUS (under P.L. 110-49 ) to review, on behalf of the President, the effect of investment transactions on U.S. national security. The legislation represents the most comprehensive reform of the CFIUS review process since it was created, and notably expands the scope of transactions that fall under CFIUS' jurisdiction. Certain provisions take effect immediately, while others, including some related to the expanded scope of CFIUS, are subject to further regulations (the U.S. Department of the Treasury issued temporary regulations in October 2018). Some experts have suggested that the broad changes under FIRRMA could potentially lead CFIUS to take a more assertive role that emphasizes both U.S. economic and national security interests, particularly relative to the development of emerging or leading-edge technology. While specific countries are not singled out in the legislation, FIRRMA allows CFIUS to potentially discriminate among foreign investors by country of origin during the review of certain investment transactions. Greater scrutiny could be directed on transactions tied to certain countries, pending specific criteria defined by regulations. The debate over FIRRMA and its forthcoming implementation raises a number of questions for the 116 th Congress, including the extent to which the amended review process will be successful in protecting U.S. national security interests and whether it balances the objectives of maintaining the traditionally open U.S. investment climate while preserving the competitiveness of U.S. firms.\n\n\t\t\tInternational Investment Agreements (IIAs)118\n\nThe United States negotiates international investment agreements (IIAs), based on a \"model\" Bilateral Investment Treaty (BIT), to reduce restrictions on foreign investment, ensure nondiscriminatory treatment of investors and investment, and advance other U.S. interests. U.S. IIAs typically take two forms: (1) BITs, which require a two-thirds vote of approval in the Senate; or (2) BIT-like chapters in free trade agreements (FTAs), which require simple majority approval of implementing legislation by both houses of Congress. While U.S. IIAs are a small fraction of the more than 3,300 IIA agreements worldwide, they are often viewed as more comprehensive and of a higher standard than those of other countries ( Figure 16 ).\nA focal point for Congress on investment issues may be implementing legislation for the proposed United States-Mexico-Canada Agreement (USMCA). The investment provisions in USMCA differ significantly from those under the North American Free Trade Agreement (NAFTA) and previous FTAs and BITs entered into by the United States. Differences relate to investor-state dispute settlement (ISDS), the binding arbitration of private claims against host-country governments for violation of investment obligations under IIAs (e.g., obligations to provide nondiscriminatory treatment and a minimum standard of treatment to foreign investors). A longstanding cornerstone of U.S. trade agreements, ISDS has been favored widely in the U.S. business community as an important reciprocal form of protection for foreign investment that is modeled on U.S. law. At the same time, it is contested by some civil society groups based on concerns over its scope and fairness, among other issues. While ISDS is in the current NAFTA, the proposed USMCA would eliminate ISDS with respect to Canada and place specific limits with respect to Mexico. ISDS is available under the proposed USMCA for alleged violations by Mexico of national treatment, most-favored nation treatment, or direct expropriation. However, the proposed USMCA would limit other claims against Mexico, such as those of indirect expropriation, government contracts involving the oil, power generation, telecommunications, transportation, and infrastructure sectors. Claimants would also be required to first exhaust local remedies. Treatment of ISDS and other provisions common to IIAs could be a focus of proposed new U.S. trade agreement negotiations with Japan, the European Union (EU), and the United Kingdom (UK), especially considering the EU's push to include an Investment Court System in place of ISDS in its recent trade agreements and negotiations with other countries.\n\n\t\tU.S. Trade Finance and Promotion Agencies120\n\nThe federal government seeks to expand U.S. exports and investment through finance and insurance programs and other forms of assistance for U.S. businesses in order to support U.S. jobs and economic growth. Trade finance and promotion activities also may support U.S. foreign policy goals. Many of these activities are driven by demand from U.S. commercial interests.\nA number of U.S. government agencies have distinct roles in carrying out these functions. Two agencies that may be focal points for legislative activity and oversight in the 116 th Congress are the Export-Import Bank (Ex-Im Bank) and Overseas Private Investment Corporation (OPIC), discussed below. Collectively, trade promotion agencies raise issues for Congress in terms of their economic justifications, use of federal resources, and intersection with U.S. policy goals and priorities. They also raise questions about the federal trade organizational structure.\n\n\t\t\tExport-Import Bank of the United States (Ex-Im Bank)121\n\nEx-Im Bank, the official U.S. export credit agency (ECA), provides direct loans, loan guarantees, and export credit insurance to help finance U.S. exports of goods and services to contribute to U.S. employment. Driven by private sector demand, it aims to provide such support when alternative financing is not available or to counter government-backed export credit financing extended by other countries. Ex-Im charges interest, premiums, and other fees for its services, which it uses to fund its activities, and is subject to the annual appropriations process. Proponents of the agency contend that it supports U.S. exports and jobs, contributes financially to the U.S. Treasury, and manages its risks. Critics argue that it crowds out private sector activity, provides \"corporate welfare,\" and poses a risk to taxpayers.\nEx-Im Bank operates under a renewable general statutory charter, which Congress extended through September 30, 2019 ( P.L. 114-94 ). Despite its reauthorization, Ex-Im Bank is not fully operational. Since July 2015, the Board of Directors has lacked a quorum due to unfilled positions, constraining it from approving medium- and long-term export financing above $10 million. Ex-Im Bank reported a backlog of almost $40 billion in pending transactions at the end of FY2018. In recent years, Ex-Im Bank authorizations for finance and insurance transactions have declined ( Figure 17 ). In the 115 th Congress, four presidential nominees to the Board were approved by the Senate Banking Committee and were pending before the Senate. In the 116 th Congress, potential issues could be consideration of nominations to the Board, as well as whether to reauthorize Ex-Im Bank, and if so, for how long and under what terms.\nEx-Im Bank abides by Organization for Economic Cooperation and Development (OECD) guidelines for ECA activity with repayment terms of two years or more, which aim to ensure that price and quality\u2014not financing terms\u2014guide decisions on purchasing exports. Foreign ECAs, of both OECD and non-OECD members, increasingly are providing financing outside of the scope of the OECD Arrangement. ECA financing by China, a non-OECD member, is of particular concern. Within and outside of the reauthorization debate, Congress may consider the effectiveness of current international ECA rules and ongoing international negotiations to enhance existing ECA rules or develop new arrangements, as well as other opportunities to address concerns about \"unfair\" competition from foreign ECAs.\n\n\t\t\tOverseas Private Investment Corporation (OPIC) and the BUILD Act123\n\nSpun out of the U.S. Agency for International Development (USAID) in 1971, OPIC has been the primary U.S. development finance institution (DFI). It aims to promote economic growth in developing and emerging economies by providing project and investment fund financing and insuring against the political risks of investing abroad for U.S.-linked private investors. It operates based on private sector demand. In FY2018, OPIC made $3.3 billion in new commitments for investment projects in infrastructure and other sectors in sub-Saharan Africa, Latin America, the Indo-Pacific, and other regions. OPIC charges fees for its services, which it uses to fund its activities. It is also subject to the appropriations process. In recent years, Congress has renewed OPIC's authority through appropriations legislation. \nThe 116 th Congress will have responsibility for overseeing the Administration's consolidation and expansion of OPIC under the Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), which establishes a new U.S. International Development Finance Corporation (IDFC) as a successor to OPIC (see textbox). The BUILD Act is part of the U.S. policy response to China's growing economic influence in developing countries, exemplified by China's Belt and Road Initiative. Based on the BUILD Act timeline, the IDFC could become operational as early as summer 2019. During a transition period, OPIC is to continue to perform its existing functions.\nAs the IDFC is operationalized, the 116 th Congress may examine implementation issues and whether the current statutory framework allows the IDFC to balance both its mandates to support U.S. businesses in competing for overseas investment opportunities and to support development, as well as whether it enables the IDFC to respond effectively to strategic concerns, especially vis-\u00e0-vis China. Congress also may consider whether to press the Administration to pursue international rules on development finance comparable to export credit financing. More broadly, the IDFC's establishment could renew legislative debate over the economic and policy benefits and costs of U.S. government activity to support private investment.\n\n\t\tExport Controls and Sanctions127\n\nNational security considerations shape U.S. trade and investment policies. In addition to the national security implications of foreign investment discussed above in the context of the Committee on Foreign Investment in the United States (CFIUS), key programs include controls on exports for foreign policy and other objectives and the use of economic sanctions to achieve specific foreign policy goals. The 116 th Congress may consider the balance of U.S. foreign policy and national security objectives against U.S. commercial and economic interests.\n\n\t\t\tDual-Use Products and Export Controls128\n\nCongress has authorized the President to control the export of various items for national security, foreign policy, and economic reasons. Separate programs and statutes for controlling different types of exports exist for nuclear materials and technology, defense articles and services, and dual-use goods and technology. Under each program, licenses of various types are required before export. The U.S. Departments of Commerce, State, Energy, and Defense administer these programs.\nIn 2018, in conjunction with reform of the Committee on Foreign Investment in the United States (CFIUS), Congress passed the Export Control Reform Act (ECRA) (Subtitle B, P.L. 115-232 ), which authorized the dual-use export control system administered by the Department of Commerce and largely codifies current practices. The Obama Administration undertook a comprehensive reform of the U.S. export control system, which adopted a unified control list, created a single integrated information technology system, and established a single enforcement coordination agency. Responsibility for licensing exports is divided among the Departments of Commerce, State, and the Treasury, based on the nature of the product (munitions or dual-use goods) and basis for control. The Department of Defense has an important advisory role in examining license applications. Enforcement is shared among these agencies, as well as the U.S. Departments of Justice and Homeland Security.\nExports controls lie between the nexus of trade and security. Congress is increasingly concerned with illicit attempts to obtain U.S. technology by foreign powers (particularly China), in both the dual-use and high technology spheres (such as artificial intelligence, robotics, etc.). In addition to enhanced investment scrutiny through CFIUS, the new export control act provides for the creation of an interagency process to identify foundational and emerging technologies and assess their national security implications, and recommend levels of control. Congress may be interested in the implementation of this process and its role in maintaining U.S. superiority in critical technologies.\n\n\t\t\tEconomic Sanctions129\n\nEconomic sanctions may be defined as coercive economic measures taken against a target to bring about a change in policies. They can include such measures as trade embargoes; restrictions on particular exports or imports; denial of foreign assistance, loans, and investments; blocking of foreign assets under U.S. jurisdiction; and prohibition on economic transactions that involve U.S. citizens or businesses. Secondary sanctions, in addition, can impede trade, transactions, and access to U.S.-located assets of foreign persons and entities in third countries that engage with a primary target. The United States maintains an array of economic sanctions against foreign governments, entities, and individuals. Specifically, the United States\nmaintains sanctions regimes against foreign governments it has identified as supporters of acts of international terrorism (Iran, North Korea, Sudan, Syria); nuclear arms proliferators (Iran, North Korea, Syria); egregious violators of international human rights norms, democratic governance, or corruption standards (Belarus, Burundi, Central African Republic, Cuba, Democratic Republic of the Congo, Iran, Libya, Nicaragua, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela, Western Balkans, Yemen, Zimbabwe, and the Hizbollah organization); and those threatening regional stability (Iran, North Korea, Russia, Syria); imposes economic restrictions on individuals and entities found to be active in egregious human rights abuses and corruption within the state system, international terrorism, narcotics trafficking, weapons proliferation, illicit cyber activities, conflict diamond trade, and transnational crime; and targets individuals and entities with economic and diplomatic restrictions to meet the requirements of the United Nations Security Council (Central African Republic, Democratic Republic of Congo, Eritrea, Guinea-Bissau, Iran, Iraq, Lebanon, Libya, North Korea, Somalia, South Sudan, Sudan, Yemen, and individuals affiliated with the Islamic State (Da'esh), al-Qaida, or the Taliban).\nThe 116 th Congress may continue the deliberations of its predecessor to influence decision-making by President Trump's approach to foreign policy and national security. Sanctions are central to the debates over how to deter Iran's missile proliferation activities, normalize relations with North Korea while ensuring an end to its nuclear and missile programs, convince Russia to leave Ukraine, or end the conflict in Syria. The 115 th Congress, in its waning days, showed some interest in reviewing the President's long-standing national emergency authorities to use sanctions; given the frequent use of the authorities, the 116 th Congress may take a close look with an eye toward increasing its role in national security and foreign policy decisions.\n\n\t\tInternational Financial Institutions (IFIs) and Markets131\n\nSince World War II, governments have created and used informal forums, as well as more formal international organizations, to discuss and coordinate economic policies. More informal forums include the Group of 7 (G-7) and the Group of 20 (G-20), and more formal international organizations include the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), the World Bank, and the World Trade Organization (WTO), among others. The United States has traditionally been a leader in these bodies, but the U.S. role is changing under President Trump. Congress plays a key role in shaping U.S. policy at international organizations and forums, including through authorizations and appropriations of U.S. funding, hearings, legislation that directs the Administration's policy and votes at the institutions, and Senate confirmation of high-level political appointees.\nMore broadly, given longstanding economic and foreign policy interests in a stable, thriving global economy, the 116 th Congress may continue monitoring major economic developments overseas and their potential impact on U.S. economic and foreign policy interests. Key issues may include how other countries' exchange rate policies are impacting the U.S. economy, the role of the U.S. dollar in the global economy, trade developments, and ongoing and potential economic crises, particularly in indebted emerging markets and developing countries such as Argentina and Pakistan.\n\n\t\t\tInternational Economic Cooperation (G-7 and G-20)132\n\nBetween the 1970s and the 2000s, international economic discussions at the top leadership level took place among a small group of developed industrialized economies: the Group of 7 (G-7). The G-7 includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In response to the global financial crisis, leaders decided that a broader group of developed and emerging-market economies, the Group of 20 (G-20), would become the premier forum for international economic cooperation and coordination ( Figure 18 ). The G-20 includes the G-7 members, as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, and the European Union (EU). Although the G-20 is considered the \"premier\" forum, the G-7 continues to meet in parallel. G-7 and G-20 leader meetings (\"summits\") are held annually; meetings among lower and senior level officials occur throughout the year.\nTraditionally, the United States has played a strong leadership role at the G-7 and the G-20. For example, the United States was the leader in convening the G-20 to respond to the global financial crisis of 2008-2009. Under President Trump, however, the U.S. role in these forums has been shifting. The summits have become more contentious, with the United States increasingly isolated on key issues, particularly trade and climate change. At the G-7 summit in Canada in 2018, President Trump unprecedentedly withdrew his initial support for the G-7 joint leaders' statement (communiqu\u00e9). Agreement was reached on a communiqu\u00e9 at the G-20 summit in Argentina in 2018, but many analysts question the significance of the communiqu\u00e9's substance. In 2019, France and Japan are scheduled to host the G-7 and G-20 summits, respectively. Although U.S. participation in the G-7 and the G-20 is primarily driven by the Administration, Congress could exercise oversight through hearings and reporting requirements. Additionally, legislative action may be required to implement some commitments made by the Administration in the G-7 and G-20 process.\n\n\t\t\tInternational Monetary Fund (IMF)133\n\nThe International Monetary Fund (IMF) is an international organization focused on promoting international macroeconomic stability. Created in 1945, it has grown in membership over the past six decades to 189 countries. Although the IMF's functions have changed as the global economy has evolved, today it is focused on surveillance of member states and the global economy, lending to member states facing economic crises, and technical assistance to strengthen members' capacity to design and implement effective policies.\nThe FY2016 Consolidated Appropriations Act ( P.L. 114-47 ) authorized U.S. participation in an IMF reform package, which doubled the size of IMF core resources (\"quota\") and gave emerging-markets a stronger voice in the governance of the institution. The legislation also sunsets U.S. contributions to a supplemental fund at the IMF, the New Arrangements to Borrow (NAB), in 2022, the first time the United States reduced its financial commitment to the institution since it was created. Members are evaluating IMF rules on providing large loans, which were used controversially during the 2010-2012 Eurozone debt crisis. Legislation introduced in the 115 th Congress, The IMF Reform and Integrity Ac t ( H.R. 1573 ), would have limited the ability of the U.S. Executive Director to the IMF to vote for large IMF programs, especially, where the Fund is co-financing with larger creditors. In 2019, the IMF is to continue work on its review of IMF quota resources. IMF Managing Director Christine Lagarde has been laying the groundwork to seek an increase in country contributions to the Fund. According to David Lipton, the IMF's first deputy managing director, \"As our world becomes increasingly multipolar, but the scope for national policies to respond to crises becomes more constrained, the IMF will be the indispensable institution.\" The Trump Administration, however, does not appear to support a boost in Fund resources. At a December hearing before the House Financial Services Committee, Treasury Undersecretary David Malpass told Members that \"[the Administration is] opposed to changes in quotas given that the IMF has ample resources to achieve its mission.\" Undersecretary Malpass added that the Administration believes that recent reforms have improved the stability of the global monetary system and that countries have alternative resources to the Fund on which they could draw in the event of a crisis.\n\n\t\t\tMultilateral Development Banks (MDBs)136\n\nMultilateral development banks (MDBs) provide financing funded from private capital markets to developing countries in order to promote economic and social development. The United States is a member, and major donor, to five major multilateral development banks (MDBs): the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. These institutions were established after World War II to provide financing for economic development at a time when private sector financing, especially for war-torn, post-conflict, or developing countries, was not available. While the MDBs have thrived and grown over the past decades, the international economy has changed dramatically. Many developing and low-income countries are able to borrow on the international capital markets to finance their development projects. At the same time, emerging-market countries are creating their own MDBs, including the China-led Asian Infrastructure Investment Bank.\nCongress authorizes and appropriates U.S. funding for the five major MDBs, which may shift under the Trump Administration. The Trump Administration has laid out a comprehensive reform agenda for the MDBs that includes, but is not limited to, creating lending limits to promote more robust financial discipline at the MDBs and graduate borrowers, especially China, and shift lending from higher income developing countries to lower income countries. The Administration is also seeking to better coordinate country programs and best-practices across. Meanwhile, in 2018 the United States and other World Bank members agreed to a $60.1 billion capital increase for the World Bank's main lending facility, the International Bank for Reconstruction and Development (IBRD), which would raise the IBRD's capital from $268.9 billion to $329 billion. World Bank members also endorsed a $5.5 billion capital increase for the International Finance Corporation (IFC), the World Bank's private-sector lending arm, which would more than triple the IFC's capital base from $2.57 billion to $8.2 billion. Congress would need to fully authorize and appropriate funds for any U.S. participation in the proposed capital increase.\n\n\t\t\tExchange Rates and Currency Manipulation141\n\nExchange rates, the price of currencies relative to each other, are among the most important prices in the global economy. They affect the price of every country's imports and exports, as well as the value of every overseas investment. Some U.S. policymakers have expressed concerns that other governments purposefully undervalue their currency to gain an unfair advantage for their exports, or \"manipulate\" their currencies, hurting U.S. companies and jobs. Countries have committed to refraining from currency manipulation through the International Monetary Fund (IMF), the G-7, and the G-20. Under U.S. law, the U.S. Department of the Treasury is tasked with reporting on and responding to currency manipulation. However, the IMF, the G-7, and the G-20 have never publicly labeled a particular country as a currency manipulator, and Treasury has not done so in more than two decades. Some Members of Congress have called for stronger actions to combat currency manipulation over the past decade. It was also a key issue for then candidate Donald Trump during the 2016 presidential campaign. Other policymakers have preferred a more cautious approach, arguing that U.S. consumers benefit when other countries have weak currencies and actions against currency manipulation risk retaliation that could hurt U.S. interests.\nThe 116 th Congress may grapple with debates about currency manipulation in at least two contexts. First, as Congress considers implementing legislation for the proposed United States-Mexico-Canada Agreement (USMCA), it may examine the treatment of exchange rates in the agreement. The USMCA would include, for the first time in a trade agreement, enforceable provisions to combat currency manipulation among the signatories. U.S. concerns about currency manipulation have not focused on Canada and Mexico per se, but addressing currency manipulation in the USMCA may serve as precedent for future trade agreements. Second, China's currency policies have been a particular source of concern for U.S. policymakers. After appreciating in 2017, China's currency depreciated by almost 10% between April and November 2018 ( Figure 19 ). Some analysts believe that the Chinese government is using currency policies to offset the effects of tariffs imposed on U.S. imports from China under Section 301. Currency policy could become a salient issue for Members in the trade disputes between the United States and China.\n\n\t\t\tRole of the U.S. Dollar142\n\nFor at least 70 years, the U.S. dollar has been the world's dominant currency. Central banks around the world hold a large portion of their reserves in U.S. dollars ( Figure 20 ), and private companies use U.S. dollars for international transactions. Dollars make up nearly two-thirds of central bank reserves, countries' dollar imports are on average worth five times what they buy from the United States, and more than half of all global cross-border debt is denominated in U.S. dollars. There are considerable benefits to having a reserve currency, including lower borrowing costs for the U.S. government. This cost advantage occurs because there is generally a willingness of foreign central banks to pay a liquidity premium to hold dollar assets.\nQuestions have been raised about whether the U.S. dollar could lose its status as a reserve currency. Some countries are pursuing or considering policies that challenge the dollar's role. For example, oil market transactions have traditionally been denominated in dollars, but China has begun trading oil futures in renminbi. Some countries have also discussed the creation of alternative payments systems, not centered on the dollar, as a way to circumvent U.S. financial sanctions. Broader concerns about the direction of U.S. economic policy, including rising national debt, as well as the predictability of U.S. policies, including trade conflicts with other countries, are also driving debates about the dollar's supremacy. However, most economists agree that in the short run there are no good alternatives. The Eurozone is still recovering from its crisis, and China does not have a stable banking system or open capital account. However, the 116 th Congress may consider the benefits it derives from dollar as a reserve currency and the long-term impact of various economic policies, such as fiscal policies and financial sanctions, on the role of the dollar in the global economy.\n\n\t\t\tOngoing and Potential Economic Crises145\n\nAnalysts are growing increasingly concerned about debt sustainability in many emerging markets and developing countries. Many emerging markets experienced an influx of capital following the global financial crisis of 2008-2009, as investors sought more profitable investment opportunities than in advanced economies, where interest rates were at historical lows. The influx of capital into emerging markets may have created investment bubbles, which could be vulnerable to changes in the availability or cost of financing, for example if and when the U.S. Federal Reserve raises interest rates. These dynamics started playing out in Argentina and Turkey in 2018, and there are concerns that other emerging markets similarly reliant on external financing may face similar pressures. Additionally, China has increasingly financed projects in developing countries, some of which, such as Pakistan, are starting to experience or exacerbating existing fiscal problems. Some analysts are concerned about whether such countries will be able to meet their financial obligations to China, and the implications if they are unable to do so.\nThe 116 th Congress may monitor economic conditions in emerging markets and developing countries in terms of U.S. interests and implications for the role of the IMF. In terms of U.S. economic interests, U.S. economic exposure through trade, investment, and financial channels to emerging markets that faced the most significant pressures in 2018\u2014Argentina and Turkey\u2014is relatively limited. A broader crisis across emerging and developing markets could have more significant economic ramifications. Economic crises in emerging and developing countries could also have implications for U.S. foreign policy interests, depending on the specific countries in question. In terms of the IMF, Congress may monitor the IMF's role in responding to crises. With the United States as the IMF's largest shareholder, Congress may monitor in particular the size of and reforms attached to any IMF programs and the adequacy of IMF resources. Congress may also focus on the role of Chinese financing in countries approaching the IMF for assistance, including transparency on the size and terms of Chinese financing and burden sharing by China in any financial assistance package.\n\n\tLooking Forward\n\nMembers of Congress exert significant influence over U.S. economic and trade policy and its implementation through their legislative, appropriations, and oversight roles. Given current debates, fundamental questions about the future direction of trade and international economic issues may be key areas of interest for the 116 th Congress. In engaging on these issues, Congress may\nevaluate the impact of Section 301, 232, and 201 tariffs on U.S. workers and firms, and consider legislation that alters the authority granted by Congress to the President to impose unilateral tariffs; consider implementing legislation for the USMCA, and conduct oversight of new bilateral trade negotiations with the EU, Japan, and UK; conduct oversight of the Trump Administration's policies at the WTO, including reform efforts; conduct oversight and take possible legislative action concerning a range of other trade issues, including U.S. trade relations with China and other major economies, as well as U.S. export and import policies and programs; consider legislation to reauthorize the U.S. Export-Import Bank, which expires on September 30, 2019; evaluate the implementation of major legislation passed during the 115 th Congress, including CFIUS and export control reforms, as well as the creation of a new U.S. International Development Finance Corporation as a successor to OPIC; examine U.S. leadership in discussions over international economic policy coordination at the G-7 and the G-20; consider legislation to adjust U.S. funding to the World Bank; and monitor major developments in financial markets, including the impact of other countries' exchange rate polices on the U.S. economy, high levels of debt in emerging markets, and the role of the U.S. dollar.\nU.S. trade and economic policy affects the interest of all Members of Congress and their constituents. Congressional actions on these issues can impact the health of the U.S. economy, the success of U.S. businesses and their workers, the standard of living of Americans, and U.S. geopolitical interests. Some of these issues may be highly contested, as Members of Congress and affected stakeholders have differing views on the benefits, costs, and role of U.S. trade policy. The dynamic nature of the global economy\u2014including the increasingly interconnected nature of the global market, the growing influence of emerging markets, and the growing role of digital trade, among other factors\u2014as well as the Trump Administration's reassessment of U.S. policies provide the backdrop for a potential robust and complex debate in the 116 th Congress over a range of trade and finance issues.","output":"The U.S. Constitution grants authority to Congress to lay and collect duties and regulate foreign commerce. Congress exercises this authority in numerous ways, including through oversight of trade policy and consideration of legislation to implement trade agreements and authorize trade programs. Policy issues cover areas such as U.S. trade negotiations, U.S. trade and economic relations with specific regions and countries, international institutions focused on trade, tariff and nontariff barriers, worker dislocation due to trade liberalization, enforcement of trade laws and trade agreement commitments, import and export policies, international investment, economic sanctions, and other trade-related functions of the federal government. Congress also has authority over U.S. financial commitments to international financial institutions and oversight responsibilities for trade- and finance-related agencies of the U.S. government.\nIssues in the 116th Congress\nDuring his first two years in office, President Trump has focused on reevaluating many U.S. international trade and economic policies and relationships. The President's focus on these issues could continue over the next two years. Broad policy debates during the 116th Congress may include the impact of trade and trade agreements on the U.S. economy, including U.S. jobs; the causes and consequences of the U.S. trade deficit; the implications of technological developments for U.S. trade policy; and the intersection of economics and national security. Among many others, the potentially more prominent issues in this area that the 116th Congress may consider are\nthe use and impact of unilateral tariffs imposed by the Trump Administration under various U.S. trade laws, as well as potential legislation that alters the authority granted by Congress to the President to do so; legislation to implement the proposed United States-Mexico-Canada Trade Agreement (USMCA), which would revise and modernize the North American Free Trade Agreement (NAFTA); the Administration's launch of bilateral trade negotiations with the European Union, Japan, and the United Kingdom, as well as key provisions in trade agreements, including on intellectual property rights, labor, the environment, and dispute settlement; U.S. engagement with the World Trade Organization (WTO), proposals for WTO reform, and the future direction of the multilateral trading system; U.S.-China trade relations, including investment issues, intellectual property rights protection, forced technology transfer, currency issues, and market access liberalization; the future of U.S.-Asia trade and economic relations, given President Trump's withdrawal of the United States from the proposed Trans-Pacific Partnership (TPP) and China's expanding Belt and Road Initiative; the Administration's use of quotas to achieve some of its trade objectives, and whether these actions represent a shift in U.S. policy towards \"managed trade\"; monitoring the implementation of legislation passed by the 115th Congress, including changes to the Committee on Foreign Investment in the United States (CIFUS) and export controls, as well as the creation of a new U.S. International Development Finance Corporation; re-authorization of the Export-Import Bank, the U.S. export credit agency that helps finance U.S. exports; oversight of international trade and finance policies to support foreign policy goals, including sanctions on Iran, North Korea, Russia, and other countries; shifts in U.S. leadership of international economic policy coordination at the Group of 7 (G-7) and the Group of 20 (G-20) under the Trump Administration; legislation to fund the Administration's commitment to increase U.S. contributions to the World Bank, as well as potential U.S.-led reforms to the institution; and major developments in financial markets, including the impact of other countries' exchange rate polices on the U.S. economy, high levels of debt in emerging markets, potential economic crises, and the role of the U.S. dollar in the global economy."}
{"id":"crs_R41479","pid":"crs_R41479_0","input":"\tIntroduction\n\nSocial Security provides dependent benefits and survivors benefits , sometimes collectively referred to as auxiliary benefits , to the spouses, former spouses, widow(er)s, children, and parents of retired, disabled, or deceased workers. Auxiliary benefits are based on the work record of the household's primary earner.\nSocial Security spousal benefits (i.e., benefits for a wife or husband of the primary earner) are payable to the spouse or divorced spouse of a retired or disabled worker. Social Security survivors benefits are payable to the survivors of a deceased worker as a widow(er), as a child, as a mother or father of the deceased worker's child(ren), or as a dependent parent of the deceased worker. Although Social Security is often viewed as a program that primarily provides benefits to retired or disabled workers, 33% of new benefit awards in 2017 were made to the dependents and survivors of retired, disabled, and deceased workers.\nSpousal and survivors benefits play an important role in ensuring women's retirement security. However, women continue to be vulnerable to poverty in old age, due to demographic and economic reasons. This report presents the current-law structure of auxiliary benefits for spouses, divorced spouses, and surviving spouses. It makes note of adequacy and equity concerns of current-law spousal and widow(er)'s benefits, particularly with respect to female beneficiaries, and discusses the role of demographics, the labor market, and current-law provisions on adequacy and equity. The report concludes with a discussion of proposed changes to spousal and widow(er) benefits to address these concerns.\n\n\tOrigins of Social Security Auxiliary Benefits\n\nThe original Social Security Act of 1935 (P.L. 74-271) established a system of Old-Age Insurance to provide benefits to individuals aged 65 or older who had \"earned\" retirement benefits through work in jobs covered by the system. Before the Old-Age Insurance program was in full operation, the Social Security Amendments of 1939 (P.L. 76-379) extended monthly benefits to workers' dependents and survivors. The program now provided Old-Age and Survivors Insurance (OASI).\nThe 1939 amendments established benefits for the following dependents and survivors: (1) a wife aged 65 or older; (2) a child under the age of 18; (3) a widowed mother of any age caring for an eligible child; (4) a widow aged 65 or older; and (5) a surviving dependent parent aged 65 or older.\nIn its report to the Social Security Board (the predecessor to the Social Security Administration) and the Senate Committee on Finance, the 1938 Social Security Advisory Council justified creating spousal benefits on the grounds of the adequacy of household benefits:\nThe inadequacy of the benefits payable during the early years of the old-age insurance program is more marked where the benefits must support not only the annuitant himself but also his wife. In 1930, 63.8 per cent of men aged 65 and over were married. Payment of supplementary allowances to annuitants who have wives over 65 will increase the average benefit in such a manner as to meet the greatest social need with the minimum increase in cost. The Council believes that an additional 50 percent of the basic annuity would constitute a reasonable provision for the support of the annuitant's wife.\nThe Social Security Board concurred in its own report, which it wrote based on the council's report. The board also found that benefit adequacy was the primary justification for spousal benefits:\nThe Board suggests that a supplementary benefit be paid for the aged dependent wife of the retired worker which would be related to his old-age benefit. Such a plan would take account of greater presumptive need of the married couple without requiring investigation of individual need.\nSince 1939, auxiliary benefits have been modified by Congress many times, including the expansion of benefits to husbands, widowers, and divorced spouses. The legislative history of auxiliary benefits is outlined in detail in Appendix A .\n\n\tAuxiliary Benefits\n\nAuxiliary benefits for a spouse, survivor, or other dependent are based on the benefit amount received by a primary earner (an insured worker). The primary earner may receive a Social Security retirement or disability benefit. Social Security retirement benefits are based on the average of a worker's highest 35 years of earnings (less up to 5 years for years of disability) from covered employment. A worker's basic benefit amount ( primary insurance amount or PIA) is computed by applying the Social Security benefit formula to the worker's career-average, wage-indexed monthly earnings ( average indexed monthly earnings or AIME). The benefit formula replaces a higher percentage of the preretirement earnings of workers with low career-average earnings than for workers with high career-average earnings.\nThe primary earner's initial monthly benefit is equal to his or her PIA if benefits are claimed at full retirement age (FRA, which ranges from age 65 to age 67, depending on year of birth). A worker's initial monthly benefit will be less than his or her PIA if the worker begins receiving benefits before FRA, and it will be greater than his or her PIA if the worker begins receiving benefits after FRA. The purpose of the actuarial adjustment to benefits claimed before or after FRA is to ensure that the worker receives roughly the same total lifetime benefits regardless of when he or she claims benefits (assuming he or she lives to average life expectancy). \nAuxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of the primary earner. Auxiliary benefits are determined as a percentage of the primary earner's PIA, subject to a maximum family benefit amount. For example, the spouse of a retired or disabled worker may receive up to 50% of the worker's PIA, and the widow(er) of a deceased worker may receive up to 100% of the worker's PIA. As with benefits paid to the primary earner, auxiliary benefits are subject to adjustments based on age at entitlement and other factors. A basic description of auxiliary benefits is provided in the following sections, with more detailed information provided in Appendix B .\n\n\t\tCurrently Married or Separated Spouses\n\nSocial Security provides a spousal benefit that is equal to 50% of a retired or disabled worker's PIA. A qualifying spouse must be at least 62 years old or have a qualifying child (a child who is under the age of 16 or who receives Social Security disability benefits) in his or her care. A qualifying spouse may be either married to or separated from the worker. An individual must have been married to the worker for at least one year before he or she applies for spousal benefits, with certain exceptions. In addition, the worker must be entitled to (generally, collecting) benefits in order for an eligible spouse to become entitled to benefits.\nIf a spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. An individual who is entitled to a Social Security benefit based on his or her own work record and to a spousal benefit in effect receives the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below).\n\n\t\tWidows and Widowers\n\nUnder current law, surviving spouses (including divorced surviving spouses) may be eligible for aged widow(er) benefits beginning at the age of 60. If the surviving spouse has a qualifying disability and meets certain other conditions, survivors benefits are available beginning at the age of 50. The aged widow(er)'s basic benefit is equal to 100% of the deceased worker's PIA.\nA qualifying widow(er) must have been married to the deceased worker for at least nine months and must not have remarried before the age of 60 (or before age 50 if the widow[er] is disabled). Widow(er)s who remarry after the age of 60 (or after age 50 if disabled) may become entitled to benefits based on the prior deceased spouse's work record. Widow(er)s who are caring for children under the age of 16 or disabled may receive survivors benefits at any age and do not have to meet the length of marriage requirement\u2014see \" Mothers and Fathers \" below.\nIf an aged widow(er) claims survivors benefits before FRA, his or her monthly benefit is reduced (up to a maximum of 28.5%) to take into account the longer expected period of benefit receipt. In addition, survivors benefits may be affected by the deceased worker's decision to claim benefits before FRA under the widow(er)'s limit provision (see Appendix B ). As with spouses of retired or disabled workers, a surviving spouse who is entitled to a Social Security benefit based on his or her own work record and a widow(er)'s benefit receives in effect the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below).\n\n\t\tMothers and Fathers\n\nSocial Security provides benefits to a surviving spouse or divorced surviving spouse of any age who is caring for the deceased worker's child, when that child is either under the age of 16 or disabled. Mother's and father's benefits are equal to 75% of the deceased worker's PIA, subject to a maximum family benefit. There are no length of marriage requirements for mother's and father's benefits, whether the beneficiary was married to, separated from, or divorced from the deceased worker; however, remarriage generally ends entitlement to mother's and father's benefits.\n\n\t\tDivorced Spouses\n\nSpousal benefits are available to a divorced spouse beginning at the age of 62, if the marriage lasted at least 10 years before the divorce became final and the person claiming spousal benefits is currently unmarried. A divorced spouse who is younger than 62 years old is not eligible for spousal benefits even with an entitled child in his or her care. Survivors benefits are available to a divorced surviving spouse beginning at the age of 60 (or beginning at age 50 if the divorced surviving spouse is disabled) if the divorced surviving spouse has not remarried before the age of 60 (or before age 50 if disabled), or if the surviving divorced spouse has an entitled child in his or her care.\nDivorced spouses who are entitled to benefits receive the same spousal and survivors benefits as married or separated persons. If a divorced spouse claims benefits before FRA, his or her benefits are reduced to take into account the longer expected period of benefit receipt. In addition, a divorced spouse who is entitled to a Social Security benefit based on his or her own work record and a spousal or survivor benefit receives in effect the higher of the two benefits (see \" Dually Entitled Beneficiaries \" below). \n\n\t\t\tData on Duration of Marriages\n\nA divorced person who was married to a primary earner for less than 10 years does not qualify for spousal benefits on that spouse's record (although he or she may qualify for benefits based on his or her own record or on another spouse's record). First marriages that end in divorce have a median duration of 8 to 12 years. Table 1 shows that the proportions of males and females who have a marriage that lasted longer than 10 years was higher from 1960 to 1964 than those in recent decades. About 83% of women who married for the first time during the early 1960s stayed married for 10 years or longer; however, for women who married between 1970 and 1999, about 71%-75% of women's first marriages have lasted for 10 years or more. This percentage dropped to 58% for women who first married during the early 2000s.\nOther data suggest that, for men and women aged 15 to 44 between 2006 and 2010, the probability of a first marriage lasting 10 years or longer was 68%. The probability that a first marriage would remain intact for at least 10 years was 73%, 56%, and 68% for Hispanic, black, and white women, respectively. In addition, among the women who were first divorced in 2012, 60% of them had a marriage lasting for 10 or more years.\n\n\t\tDually Entitled Beneficiaries\n\nA person may qualify for a spousal or survivor benefit as well as for a Social Security benefit based on his or her own work record (a retired-worker benefit). In such cases, the person in effect receives the higher of the worker benefit and the spousal or survivor benefit. When the person's retired-worker benefit is higher than the spousal or survivor benefit to which he or she would be entitled, the person receives only the retired-worker benefit. Conversely, when the person's retired-worker benefit is lower than the spousal or survivor benefit, the person is referred to as dually entitled and receives the retired-worker benefit plus a spousal or survivor benefit that is equal to the difference between the retired-worker benefit and the full spousal or survivor benefit. In essence, the person receives a total benefit amount equal to the higher spousal benefit.\nWomen have increasingly become entitled to Social Security benefits based on their own work records, either as retired-worker beneficiaries only or as dually entitled beneficiaries. As shown in Figure 1 , the percentage of women aged 62 or older entitled to benefits based on their own work records\u2014as retired workers or as dually entitled beneficiaries\u2014grew from 43% in 1960 to 79.3% in 2017. More than half of this growth was in the percentage of dually entitled beneficiaries. The percentage of women aged 62 or older entitled to benefits based solely on their own work records fluctuated between 36% and 42% between 1960 and 2005, before increasing to 54.2% in 2017. In 2017, 45.7% of women aged 62 or older relied to some extent on benefits received as a spouse or survivor: 25% of spouse and survivor beneficiaries were dually entitled and 20.7% received spousal or survivors benefits only.\nAs shown in Table 2 , among wives who were dually entitled spousal beneficiaries in December 2017, the retired-worker benefit accounted for 68% of the combined monthly benefit (the retired-worker benefit with a top-up provided by the spousal benefit) and the spousal benefit accounted for 32% of the combined monthly benefit, on average. Among widows who were dually entitled survivor beneficiaries, the retired-worker benefit and the widow(er)'s benefit each accounted for about half of the combined monthly benefit, on average. Many more women than men are dually entitled to retired-worker benefits and spousal or widow(er)'s benefits. As shown in the table, in December 2017, about 6.9 million women and 235,533 men were dually entitled to benefits.\n\n\tWomen, Social Security, and Auxiliary Benefits\n\nSpousal and survivors benefits play an important role in ensuring women's retirement security. In December 2017, about 25.4 million elderly (aged 65 and older) women received Social Security benefits, including 13.3 million women who received only retired-worker benefits, 2.1 million women who were entitled solely as the spouse of a retired worker, 3.2 million women who were entitled solely as the survivor of a deceased worker, and 6.7 million women who were dually entitled to a retired-worker benefit and a spousal or survivor benefit. In 2017, Social Security provided 50% or more of family income for more than 53% of elderly women in beneficiary families and 90% or more of family income for about 28% of elderly women in beneficiary families.\nWomen, however, continue to be vulnerable to poverty in old age for several reasons. These reasons can generally be split into demographic reasons and economic reasons. In addition, the design of auxiliary benefits can lead to equity concerns.\nWith respect to demographic and economic reasons that lead to adequacy concerns,\nWomen on average live longer than men, and thus more women are likely to be widowed than are men. Women reaching the age of 65 in 2017 are likely to live another 20.7 years, on average, compared with another 18.2 years for men. About 5% of women aged 50-59, about 16% of women aged 60-75, and about 56% of women aged 75 and older are currently widowed. By comparison, about 2% of men aged 50-59, about 5% of men aged 60-75, and about 21% of men aged 75 and older are widowed. As a consequence, women may spend more time in retirement and are more vulnerable to inflation and the risk of outliving other assets. The real value of private pension benefits declines with age, as private pensions are generally not adjusted for inflation, and some private pensions cease with the death of the retired worker. Women are more likely to take employment breaks to care for children or parents, and thus have a lower labor force participation rate than men. During 2016, 88.5% of men and 74.3% of women aged 25-54 participated in the labor force. The rate for women with children under three years old was lower, at 63%. Breaks in employment result in fewer years of contributions to Social Security and employer-sponsored pension plans and thus lower retirement benefits. The median earnings of women who are full-time wage and salary workers are 82% of their male counterparts. Because Social Security and private pension benefits are linked to earnings, this \"earnings gap\" can lead to lower benefit amounts for women than for men.\nSocial Security benefits are designed in a way that can result in inequities between households with similar earning profiles. Spousal and survivors benefits were added to the Social Security system in 1939. At that time, the majority of households consisted of a single earner\u2014generally the husband\u2014and a wife who was not in the paid workforce but instead stayed home to care for children. However, in recent decades, women have increasingly assumed roles as wage earners or as heads of families.\nA beneficiary who qualifies for both a retired-worker benefit and a spousal benefit does not receive both benefits in full. Instead, the spousal benefit is reduced by the amount of the retired-worker benefit; this effectively means the beneficiary receives the higher of the two benefit amounts. Because of this, a two-earner household receives lower combined Social Security benefits than a single-earner household with identical total Social Security-covered earnings, despite paying more in Social Security taxes. Moreover, after the death of one spouse, the disparity in benefits may increase: in a one-earner couple, the surviving spouse receives two-thirds of what the couple received on a combined basis, whereas in some two-earner couples with roughly equal earnings, the surviving spouse receives roughly one-half of what the couple received on a combined basis.\n\n\t\tAdequacy Issues\n\nSocial Security is credited with keeping many of the elderly out of poverty. However, in 2017, 6.5% of Social Security beneficiaries aged 65 or older were below the poverty line. Figure 2 highlights the differences in poverty status among men and women aged 65 or older who received Social Security benefits in 2017, after Social Security is combined with other sources of income such as earnings from work, pensions, income from assets, and cash assistance.\n Figure 2 shows that married beneficiaries have significantly lower poverty rates than nonmarried beneficiaries and that nonmarried women aged 65 or older\u2014including widowed, divorced, and never-married women\u2014are more likely to be in poverty than their male counterparts. Particularly vulnerable among women are divorced beneficiaries and the never-married. Among women aged 65 and older, about 13.7% of divorced Social Security beneficiaries and 18.0% of never-married Social Security beneficiaries have total incomes below the official poverty line in 2017. Among Social Security beneficiaries aged 65 and over, poverty rates are also high among never-married men, at a rate of 17.5% in 2017.\nThe reasons for the disparity in poverty rates among elderly men and women relate in part to women's lower lifetime earnings, which affect Social Security benefits and private pensions. Low lifetime earnings can be due to lower labor force participation of women and the earnings gap. In addition, women live two to three years longer than men on average, making them more likely to exhaust retirement savings and other assets before death. In addition, if the deceased husband was receiving a pension, the widow's benefit may be significantly reduced, or the pension may cease with the husband's death, depending on whether the couple had a joint and survivor annuity and how the joint and survivor annuity was structured. Elderly widows also may be at risk if assets are depleted by health-related expenses prior to the spouse's death.\n\n\t\t\tLabor Force Participation of Women\n\nDuring the past several decades, the labor force participation rate among women increased, but still remained below the rate among men. In 1950, about 34% of women aged 16 or older participated in the labor force, compared with about 86% of men aged 16 or older. By 2016, about 57% of women aged 16 or older participated in the labor force, compared with 69% of men in the same age group. Women are also more likely than men to work part-time (i.e., less than 35 hours per week in a sole or principal job). In 2016, 25% of women in wage and salary jobs worked part-time, compared with 12% of men. \nWomen with children under the age of 18 have increasingly entered the labor force in recent decades (see Figure 3 ). However, women with children have fewer years of paid work, on average. By the age of 50, women without children who were born between 1948 and 1958 had worked on average about two years less than men overall (i.e., men with and without children). For a woman with two children, however, the gap at the age of 50 was about 6.5 years less than the average man with or without children. In 2017, about 69% of mothers were employed, compared with 91% of fathers.\nIn addition to childcare, women are also more likely than men to provide care to a spouse, a parent, or some other adult relative. One survey estimates that, among 39.8 million caregivers who have provided unpaid care to an adult in 2015, 60% of them are female. Some researchers find that female caregivers tend to work fewer hours per week and earn a lower wage than non-caregivers. Another study shows that women who leave work to provide care may face relatively low probabilities of returning to work.\n\n\t\t\tEarnings Gap\n\nAnother reason why women receive lower retired-worker benefits than men is that full-time women workers earn about 80%-82% of the median weekly earnings of their male counterparts. In 2016, women who were full-time wage and salary workers had median weekly earnings of $749, or about 82% of the $915 median earned by their male counterparts. The women's-to-men's earnings ratio was about 62% in 1979 and, after increasing gradually during the 1980s and 1990s, has ranged between 80% and 82% since 2004.\nIn 2016, the earnings gap between women and men varied among age groups (see Table 3 ). Among full-time workers, women aged 16-24 earned about 95% as much as men; women aged 25-34 earned about 89% as much as men; and women aged 55-64 earned about 74% as much as men.\nOver time, the earnings gap between women and men has narrowed for most age groups. For example, among full-time workers aged 25-34, the women's-to-men's earnings ratio increased from 68% in 1979 to 89% in 2016. For workers aged 35-44, the earnings ratio increased from 58% in 1979 to 83% in 2016. Similarly, for workers aged 45-54, the earnings ratio increased from 57% in 1979 to 78% in 2016. Part of the earnings gap can be attributed to differences between men's and women's years of education, full-time work experience, and occupations.\nComparing the annual earnings of women and men may understate differences in total earnings across longer periods. Using a 15-year time frame (1983-1998), one study found that women in the prime working years of 26 to 59 had total earnings that were 38% of what prime-age men earned, in total, over the same 15-year period. Another study found that women born between 1955 and 1959 who worked full-time, year-round each year would have an average lifetime loss of $531,500 by age 59, compared with men.\nAs women enter the work force in greater numbers, more women will qualify for Social Security benefits based on their own work records, instead of a spousal benefit that is equal to 50% of the husband's PIA. However, retired-worker and disabled-worker benefits for women continue to be lower than those for men on average for a variety of reasons, as discussed above. Consequently, after the death of a husband, the survivor's benefit, which is equal to 100% of the husband's PIA, will continue to play an important role in the financial well-being of widows.\n\n\t\tEquity Issues\n\nAlthough Social Security provides essential income support to nonworking spouses and widows, the current-law spousal benefit structure can lead to a variety of incongruous benefit patterns that have been documented in the literature. For example, a woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a woman who was married less than 10 years, who worked a full career in a low-wage job.\nThe current system provides proportionately more benefits relative to payroll-tax contributions to one-earner couples (which predominated when Social Security was created in the 1930s) than to single persons or to couples with two earners, on average. As a result, the current system can lead to situations in which Social Security provides unequal benefits to one-earner and two-earner couples with the same total household lifetime earnings. Putting this in a different perspective, some two-earner couples may have to contribute significantly more to Social Security to receive the same retirement and spousal benefits that the system provides to a one-earner couple with identical total household earnings. As women's share of household income has increased, and also as women have increasingly become heads of families, these anomalies could become more relevant.\n Table 4 illustrates the disparate treatment of one-earner and two-earner couples with examples developed by the American Academy of Actuaries. In the table, a one-earner couple with household earnings of $50,000 is compared with two different two-earner couples. The second couple in the comparison is a two-earner couple with the same total household earnings ($50,000) as the one-earner couple, with the earnings evenly split between the two spouses (each spouse earns $25,000). The third couple in the comparison is a two-earner couple in which one spouse earns $50,000 (the same as the primary earner in the one-earner couple) and the other spouse earns half that amount, or $25,000, for total household earnings of $75,000.\nAs the table illustrates, a one-earner couple may receive higher retirement and survivors benefits than a two-earner couple with identical total household earnings. Specifically, the first couple with one earner receives a total of $2,655 in monthly retirement benefits, compared with the second couple with two earners, who receives a total of $2,240 in monthly retirement benefits. Similarly, the survivor of the one-earner couple receives $1,770 in monthly benefits (either as a retired worker or as a surviving spouse). In comparison, the survivor of the two-earner couple with identical total household earnings receives $1,120 in monthly benefits.\nIn the third couple shown in Table 4 , both spouses work in Social Security-covered employment, but in this example one spouse earns $50,000 annually and the other spouse earns $25,000. This couple receives monthly benefits that are $235 higher than the monthly benefits received by the one-earner couple ($2,890 compared with $2,655); however, this couple has earned much more over time ($25,000 annually) and contributed commensurately more in Social Security payroll taxes ($1,550 annually). The survivor benefit received by the third couple is identical to that received by the one-earner couple. Thus, the current-law Social Security spousal benefit structure requires some two-earner couples to make substantially higher contributions for similar benefit levels. With higher earnings but similar benefits to the one-earner couple, the third couple's replacement rate of 46% (i.e., family total monthly benefits as a percentage of preretirement earnings) is lower than that of the one-earner couple, which is 64%. \nAfter the death of one spouse, the disparity in benefits between one-earner and two-earner couples may increase, as shown in the table. For the one-earner couple, the surviving spouse receives a benefit equal to two-thirds of the couple's combined benefit (for a reduction equal to one-third of the couple's combined benefit). For a two-earner couple with equal earnings (the second couple), the surviving spouse receives a benefit equal to one-half of the couple's combined benefit.\nFurther, the surviving spouse in the first couple (the one-earner couple) receives a larger monthly benefit than the survivor of the second couple (a two-earner couple with earnings evenly split)\u2014$1,770 compared with $1,120\u2014although both couples paid the same amount of Social Security payroll tax contributions. Similarly, compared with the one-earner couple, the surviving spouse in the third couple (a two-earner couple with unequal earnings and higher total earnings than the one-earner couple) receives the same monthly benefit ($1,770) although the couple paid a higher amount of Social Security payroll tax contributions. For both two-earner couples in these examples, after the death of one spouse, the second earnings record does not result in the payment of any additional benefits.\nWhen spousal and survivors benefits were first established, most households consisted of a single earner\u2014usually the husband\u2014and a wife who cared for children and remained out of the paid workforce. As a result, benefits for nonworking spouses were structured to be relatively generous. Over the past six decades, women's earnings have increased and the share of households who have one earner has declined, and thus the share of women beneficiaries who received Social Security benefits solely based on husband's earnings record has decreased (see Figure 1 ). \nIn addition to inequities among couples with different work histories and earnings levels, the current structure of Social Security auxiliary benefits creates inequities among the divorced. Divorced spouses with 9\u00bd years of marriage, for example, receive no Social Security spousal and survivors benefits, whereas divorced spouses with 10 or more years of marriage may receive full spousal and survivors benefits.\n\n\t\tOther Program Design Considerations\n\nThe current structure of Social Security spousal and survivors benefits raises other considerations for lawmakers with respect to potential policy changes.\nSocial Security automatically provides pension rights to one or more eligible divorced spouses, in contrast to private pensions. Further, the benefit payable to the primary earner is not reduced for benefits paid to a current or one or more former spouses, again in contrast to private pensions. Divorced spouses receive a higher benefit after the death of their former spouse (the primary earner): benefits for a divorced spouse are equal to 50% of the primary earner's PIA, while benefits for a divorced surviving spouse are equal to 100% of the primary earner's PIA. This can create volatility in the income of divorced spouses. Widow(er)s who had high-earning spouses may face disincentives to marry a lower-earning second husband (if remarriage occurs before the eligibility age for widow[er]'s benefits).\nIn response to the adequacy, equity, and other program design issues described above, policymakers and researchers have proposed a number of ways to restructure Social Security auxiliary benefits. Some of these proposals are discussed in the following section.\n\n\tProposals for Restructuring Social Security Spousal or Survivors Benefits\n\nA number of proposals have been put forward to modify the current structure of Social Security spousal and survivors benefits. These proposals have different potential consequences for benefit levels of current, divorced, and surviving spouses; for the redistribution of benefits among couples from different socioeconomic levels; for the eligibility of means-tested programs such as Supplemental Security Income; and for work incentives. \n\n\t\tEarnings Sharing\n\nEarnings sharing has been suggested as a way to address the unequal treatment of one-earner versus two-earner couples under current law. As noted above, Social Security often provides higher benefits to one-earner couples than to two-earner couples with the same total household earnings. In addition, earnings sharing has sometimes been suggested as a way to provide benefits to divorced women whose marriages did not last long enough (at least 10 years) to allow them to qualify for divorced spousal or survivors benefits. By definition, earnings sharing would not affect never-married persons.\nUnder the most basic form of earnings sharing, spousal and survivors benefits would be eliminated. Instead, for each year of marriage, a couple's covered earnings would be added together and divided evenly between the spouses. For years when an individual is not married, his or her own earnings would be recorded. If a person has multiple marriages, the earnings sharing would occur during each period of marriage. Both members of a couple would have individual earnings records reflecting shared earnings as a member of the couple as well as any earnings before or after the marriage. Social Security benefits would be computed separately for each member of the couple, based on the individual earnings records and using the current-law benefit formula. For couples who were married for the entire career of one or both members, both members of the couple would receive identical benefits and the couple's combined benefit would be equal to twice that of either member of the couple. The two spouses would receive different benefits, however, if either had earnings before or after the marriage.\nEarnings sharing proposals would reduce benefits for the majority of individuals, relative to current law, and in the absence of other benefit enhancements. For example, a 2009 Social Security Administration (SSA) study (hereinafter, 2009 SSA Study) found that 61% of individuals would receive average benefit reductions of about 17%. About 11% of individuals would experience no change in benefits, and 28% would experience benefit increases averaging about 10%. Among married couples, the benefit decrease under earnings sharing proposals would be substantially larger among individuals in one-earner married couples than two-earner married couples. This is mainly because the current system on average provides proportionately more benefits relative to payroll-tax contributions to one-earner couples than to couples with two earners, but under earnings sharing, couples with the same total lifetime earnings generally would receive the same benefits regardless of their individual earnings profiles, all things being equal.\nStudies have found that the largest benefit reductions under earnings sharing could affect widows and divorced women. The 2009 SSA study found that about 93% of widows would experience an average benefit reduction of 27% while 45% of divorced women would experience benefit reductions averaging about 22%. A 2016 study found that 39% of divorced women and 62% of widows would experience a median decrease in benefits of 6% and 14%, respectively.\nThe decline in widow's benefits results from eliminating the surviving spouse benefit under current law and replacing it with earnings credits. The widow's benefit under current law is equal to 100% of the husband's PIA, where the husband's PIA is determined based on unshared earnings. Although earnings sharing would increase the amount of earnings credited to the surviving wife (assuming the husband was the higher earner), the benefit payable to the surviving wife based on shared earnings would be lower than the current-law widow's benefit. Another study found that the gains experienced by divorced spouses and some married women under earnings sharing would come largely at the expense of widowed men and women.\nSome earnings sharing proposals would mitigate these effects by providing enhanced benefits to survivors or other targeted groups. For example, an \"inheritance provision\" could allow a surviving spouse to count all (instead of half) of a deceased spouse's earnings (or those of a deceased former spouse) during each year of marriage, in addition to all of his or her own earnings. An inheritance provision would protect some, though not all, surviving spouses. For example, the 2009 SSA study found that 40% of widows would receive lower benefits relative to current law under earnings sharing with an inheritance provision (compared with 93% without the inheritance provision).\nAlternatively, benefits for surviving spouses could be based on an amount equal to two-thirds of the combined benefit the couple was receiving when both members of the couple were alive (see \" Survivor's Benefit Increased to 75% of Couple's Combined Benefit \" below), or special provisions could be targeted to surviving disabled spouses.\nProvisions to protect survivors from benefit reductions, however, would reduce the amount of savings that would otherwise be achieved through program changes. Similarly, provisions to increase benefits for survivors relative to current law would increase program costs. A higher survivor benefit could be self-financed by reducing, on an actuarially fair basis, the combined benefit the couple receives while both members of the couple are alive.\n\n\t\tDivorced Spouse Benefits\n\nUnder the current Social Security program, a divorced spouse must have been married to the worker for at least 10 years to qualify for spousal and survivors benefits based on the worker's record, as discussed above. Benefits for divorced spouses are equal to 50% of the worker's PIA; benefits for divorced surviving spouses are equal to 100% of the worker's PIA. One approach to extend Social Security spousal and survivors benefits to more divorced spouses would be to lower the 10-year marriage requirement (for example, to 5 or 7 years). Proposals to lower the length-of-marriage requirement for divorced spouses would improve benefit adequacy for some, although not all, divorced women.\nOne study estimated that lowering the marriage-duration requirement from 10 to 7 years would increase benefits for about 8% of divorced women and 2% of widowed women aged 60 or older in the year 2030. Lowering the marriage-duration requirement to 5 years (with a proportional decrease to benefit amounts) would increase benefits for about 11% of all divorced women in the year 2030. The study found that, among divorced women aged 60 and over who would receive higher benefits as a result of lowering the marriage-duration requirement to 5 or 7 years, the outcomes were moderately progressive in the sense that they channeled a greater share of benefit increases to low-income and non-college-educated divorced women in old age. For example, under a 7-year marriage-duration requirement, about 10% of divorced women in the lowest retirement income quintile would receive a benefit increase compared with around 4% in the highest quintile who would receive a benefit increase. Among divorced women who gain, women in the lowest retirement income quintile would see a median benefit increase of 79%, compared with a median increase of 25% among women in the highest quintile. An earlier study found a similar result.\nSome researchers contend that the 50% benefit rate for divorced spouses (50% of the worker's PIA) is not sufficient to prevent many divorced spouses from falling into poverty. The 50% benefit rate for spouses initially was established to supplement the benefit received by a one-earner couple (i.e., in 1939, a spousal benefit was provided for a dependent wife to supplement the benefit received by the worker). Some observers contend that it may not be sufficient for persons (divorced spouses) who may be living alone. As described above, about 13.7% of divorced women and 10.3% of divorced men aged 65 and older have incomes below the poverty line, compared with 2.1% and 2.4% of married women and men respectively in 2017 (see Figure 2 ).\n\n\t\tIncreased Benefits for the Oldest Old\n\nAnother type of benefit modification would increase benefits for the oldest old (for example, beneficiaries aged 80 or older, or after 20 years of benefit receipt) by a specified percentage such as 5%. One rationale for this proposal is that beneficiaries tend to exhaust their personal savings and other assets over time, becoming more reliant on Social Security at advanced ages. Another rationale is that, after the age of 60, Social Security retirement benefits do not keep pace with rising living standards. In particular, the formula for computing a worker's initial retirement benefit is indexed to national average wage growth through the age of 60 and then to price inflation (the Consumer Price Index for Urban Wage and Clerical Workers, or CPI-W) starting at the age of 62. Once a beneficiary begins receiving benefits, his or her benefits increase each year with price inflation (the annual cost-of-living adjustment, based on the CPI-W) so that the initial benefit amount is effectively fixed in real terms. Some argue that the CPI-W is an inaccurate measure of price inflation that seniors face.\nAccording to one study, a 5% bump-up in benefits at the age of 80 would result in a slight decline in poverty rates among widows and nonmarried retired-worker beneficiaries aged 80 or older (declines of 3 percentage points and 4 percentage points, respectively). The same study found that this option is not targeted toward low-income beneficiaries: less than 30% of the additional benefits would accrue to beneficiaries in the bottom quintile of the income distribution. Another SSA study finds that a 5% benefit increase in the individual's primary insurance amount for beneficiaries aged 85 or older in 2030 would decrease the projected poverty rate from 1.5% to 1.2%.\nAlternatively, a benefit increase for the oldest old could be limited to beneficiaries who receive a below-poverty-level benefit. One proposal along these lines would provide a benefit to persons aged 82 or older that would be prorated based on the number of years the person contributed to Social Security.\nOther proposals would link the Social Security COLA to the Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E), which grows faster than the CPI-W on average, and is projected to increase Social Security benefits. Although the changes were targeted to all Social Security beneficiaries, those who received COLAs under the new policy for many years, such as the very old or people who had been disabled for a long period, tend to receive the largest benefit increase. \n\n\t\tMinimum Benefit for Low Earners\n\nSocial Security already has a \"special minimum\" benefit designed to help workers with long careers at low wages. A worker is awarded the special minimum benefit only if it exceeds the worker's regular benefit. The value of the special minimum benefit, which is indexed to prices, is rising more slowly than the value of the regular Social Security benefit, which is indexed to wages. As a result, the number of beneficiaries who receive the special minimum benefit under current law declines each year, and the Social Security Administration projected that the special minimum benefit provision would have no effect on people turning 62 years old in 2019 or later. \nSome observers argue that a carefully designed minimum benefit has the potential to reduce poverty rates among older women, including divorced and never-married women, more efficiently than existing spousal and survivors benefits. Minimum benefit proposals are aimed at improving the adequacy of benefits, in comparison with some other proposals that address issues of equity among individuals and couples with different marital statuses. \nMost minimum benefit proposals would require the worker to have between 30 and 40 years of Social Security-covered earnings to qualify for a minimum benefit at the poverty line or somewhat above it (for example, 120% of the poverty line). These work tenure requirements are intended to address, although not resolve, concerns that providing a minimum benefit could discourage work effort. Setting eligibility for a full minimum benefit at 30 to 40 years of covered earnings would allow many workers to take several years out of the labor force to care for children (or other family members) and still receive a higher benefit than they would have qualified for in the absence of a minimum benefit. Arguably, intermittent work histories play a greater role than long-term low earnings in leading to below-poverty-level benefits among women. Therefore, proposals for a minimum benefit based on a specified number of years of covered employment could be combined with modified spousal benefits or with a caregiver credit to balance recognition of longer work effort with recognition of the requirements of caregiving.\nTo maintain the minimum benefit at a constant ratio to average living standards, some proposals would link the minimum benefit to wage growth instead of setting the minimum benefit equal to a specified percentage of the poverty line. The official poverty line is indexed to price growth, whereas living standards rise with increases in wages and productivity. Wage growth generally outpaces price growth. \nThe 2010 National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center both proposed packages that included, among other measures, provisions to create new minimum benefits. Some researchers propose modernizing the special minimum benefit by tying it to a poverty level that is in line with the recommendations of the National Academy of Social Insurance. If a new minimum benefit is provided, it would be necessary to address interactions between Social Security benefits and eligibility for Supplemental Security Income, Medicaid, and other means-tested programs for low-income individuals.\n\n\t\tCaregiver Credits and Drop-out Years for Caregiving\n\nWomen are more likely than men to take career breaks to care for a child or other relative, as discussed above. The Social Security retired-worker benefit is based on the average of a worker's 35 highest years of covered earnings. If a worker has fewer than 35 years of earnings, for example due to years of unpaid caregiving, years of no earnings are entered as zeros in the computation of career-average earnings. Years of zero earnings lower the worker's career-average earnings, resulting in a lower initial monthly benefit.\nOne approach is to replace years of low or zero earnings with a caregiver credit equal to a specified dollar amount. Some proposals would provide the same fixed credit to all eligible persons. Other proposals would link the amount of the credit to foregone earnings, so that higher earners would receive higher credits. The latter proposal would require that the caregiver have been in the paid labor force previously. Some proposals to base benefits on caregiving, rather than on marriage, would eliminate the current spousal benefit.\nA second approach is to drop years of caregiving , up to a fixed maximum number of years, from the benefit computation period. This approach could be implemented either by dropping years of zero earnings or by dropping years of low earnings. The proposal to drop years of zero earnings (rather than low earnings) would require a person to leave the workforce completely. This could be problematic for many women, making the proposal less likely to reach as many women as a caregiver credit. Allowing a parent to drop up to 5 years of zero (or low) earnings for caring for a child at home would cause the parent's AIME to be calculated based on the highest 30 years of earnings, rather than the highest 35 years of earnings (the benefit computation periods would be reduced from 35 years to 30 years). This change in the benefit computation would result in higher initial monthly benefits for these workers (and higher benefits for family members who receive benefits based on their work records). \nThe Social Security Disability Insurance program allows up to three \"drop-out\" years for caregiving. Policies to credit years of caregiving in the provision of public pension benefits have been implemented in other countries in a variety of ways. In making such a provision, one question to consider is whether the credit should be available only to parents who have stopped working completely or also to parents who continue to work part-time or full-time. Another question to consider is whether to provide credits only for the care of young children or also for the care of other immediate family members such as an aging parent. For example, Canada excludes years of caring for children under the age of 7 from the averaging period in the pension calculation and from the contributory period under its earnings-related scheme, while Germany provides one pension point (equal to a year's contributions at the national average earnings) for three years per child, which can be taken by either the employed or nonemployed parent, or shared between parents (there are also credits for working while children are under the age of 10). \nOther recent proposals, however, would count additional years of earnings (more than 35 years) in the Social Security benefit computation. For example, some proposals would increase the averaging period from 35 to 38 years. These proposals are aimed at helping improve Social Security's projected long-range financial position and at encouraging people to work longer. Such proposals generally would affect women disproportionately. \nA criticism of proposals to drop or credit years of caregiving is that they may be of most benefit to higher-wage households that can afford to forego one spouse's earnings over a period of several years. Lower-wage spouses, and single working mothers, may not be in a position to stop working for any period of time. In addition, a practical issue involves ascertaining that years out of the workforce are actually spent caring for children or other family members.\n\n\t\tSurvivor's Benefit Increased to 75% of Couple's Combined Benefit\n\nUnder current law, an aged surviving spouse receives the higher of his or her own retired-worker benefit and 100% of the deceased spouse's PIA. This leads to a reduction in benefits compared with the combined benefit the couple was receiving when both members of the couple were alive. The reduction ranges from one-third of the combined benefit for a one-earner couple to one-half of the combined benefit for some two-earner couples. However, there is not always a corresponding reduction in household expenses for the surviving member of the couple. Some contend that 75% of the income previously shared by the couple more closely approximates the income needed by the surviving spouse to maintain his or her standard of living.\nOne frequently mentioned proposal would increase the surviving spouse's benefit to the higher of (1) the deceased spouse's benefit, (2) the surviving spouse's own benefit, and (3) 75% of the couple's combined monthly benefit when both spouses were alive. The couple's combined monthly benefit when both spouses were alive would be the sum of (1) the higher-earner's benefit and (2) the higher of the lower-earner's worker benefit and spousal benefit. Some proposals for a 75% survivor benefit would target the provision to lower-income households by capping the survivor benefit, for example, at the benefit amount received by the average retired-worker beneficiary. \nA 75% minimum survivor benefit would increase benefits for many surviving spouses, both in dollar terms and as a replacement rate for the combined benefit received by the couple when both spouses were alive. For a one-earner couple, the benefit for the surviving spouse would increase from 100% to 112% of the worker's benefit (112% = 75% of 150% of the worker's benefit that the couple received when both spouses were alive). For a two-earner couple with similar earnings histories, the surviving spouse's benefit would increase from roughly 50% of the couple's combined benefit when both spouses were alive (under current law, the surviving spouse receives the benefit received by the higher-earning spouse while he or she was alive) to 75% of the couple's combined benefit when both spouses were alive.\nA 75% minimum survivor benefit provision would \"reward\" the second income of a two-earner couple and improve equity between one-earner and two-earner couples. Under current law, upon the death of either spouse, the earnings record of the lower-earning spouse does not result in the payment of any additional benefits (i.e., in addition to the benefits payable on the earnings record of the higher-earning spouse). Stated another way, the earnings record of the lower-earning spouse effectively \"disappears\" with the death of either spouse.\nBecause a 75% survivor benefit would increase costs to the Social Security system, some have proposed financing it through a gradual reduction in the spousal benefit from 50% to 33% of the primary earner's benefit, while both spouses are alive. For a one-earner couple, the couple's combined benefit would be reduced from 150% to 133% of the worker's benefit. This is broadly consistent with the structure of private annuities, where the annuity payout is lower to adjust for a longer expected payout period. As a result, more dually entitled spouses would likely qualify for a retirement benefit based on their own work record only, because more dually entitled spouses would likely have a retired-worker benefit of their own that is equal to at least 33% (rather than 50%) of the higher-earning spouse's retired-worker benefit.\nReducing a one-earner couple's combined monthly benefit to 133% of the worker's benefit, as a way to finance a 75% survivor benefit, could be problematic for low-income couples. Effectively, the increased survivor benefit would help the survivors of both one-earner and two-earner couples, but it would be financed by reducing the combined benefits of one-earner couples from 150% to 133% of the worker's benefit. In addition, unless this proposal were modified for divorced spouses, it would also reduce the spousal benefits received by divorced spouses from 50% to 33% of the primary earner's benefit. After the death of the primary earner, benefits for a divorced spouse would jump to 100% of the primary earner's benefit, creating income volatility unless this outcome is addressed for divorced spouses. \nAlthough the 75% survivor benefit option could increase benefits for vulnerable groups such as aged widows, it would not address the needs of other vulnerable groups, such as individuals who were never married or who divorced before reaching 10 years of marriage. In addition, a 75% survivor benefit option would provide somewhat more additional benefits to higher-income beneficiaries than to lower-income beneficiaries. To address this outcome, as noted above, some proposals would cap the 75% survivor benefit at the average retired-worker benefit. \n\n\tConclusion\n\nAlthough more women have qualified for Social Security benefits based on their own earning records in recent decades, Social Security auxiliary benefits continue to play a crucial role in improving income security for older women, as well as for young surviving spouses and children of deceased workers. Some policymakers and researchers, however, have expressed concerns about the current structure of Social Security auxiliary benefits on both equity and adequacy grounds. For example, the current structure can lead to situations in which a one-earner couple receives higher retirement and survivors benefits than a two-earner couple with identical total household earnings. In addition, auxiliary benefits do not reach certain groups, such as persons who divorced before 10 years of marriage or mothers who never married.\nSome proposals have been suggested to increase Social Security benefits to certain, but not all, vulnerable groups. For example, an enhanced widow(er)'s benefit would provide income support to many elderly women and men, but it would not help those who divorced before 10 years of marriage or who never married. Similarly, a caregiver credit for workers who stay at home to care for young children would increase benefits for never-married and divorced women, but it would not help those without children, whether married or unmarried.\nThe consideration of potential changes to Social Security spousal and survivors benefits involves balancing improvements in benefit equity, for example, between one-earner and two-earner couples, with improvements in benefit adequacy for persons who experience relatively higher poverty rates, such as never-married men and women. In addition, the policy discussion about auxiliary benefits may involve balancing benefit increases for spouses and survivors, divorced spouses, or never-married persons with other potential program changes to offset the higher program costs in light of the Social Security system's projected long-range financial outlook.\nAppendix A. Major Changes in Social Security Auxiliary Benefits\nAppendix B. Summary of Possible Adjustments to Social Security Spousal and Widow(er)'s Benefits Under Current Law\nSocial Security benefits for spouses and widow(er)s are based on a percentage of the worker's primary insurance amount (PIA), with various adjustments for age at entitlement and other factors. The following section describes some of the adjustments that apply to benefits for spouses and widow(er)s.\nAge-Related Benefit Adjustment for Spouses\nSpousal benefits (including those for divorced spouses) are reduced when the spouse claims benefits before full retirement age (FRA) to take into account the longer expected period of benefit receipt (assuming the individual lives to average life expectancy). A spouse who claims benefits at the age of 62 (the earliest eligibility age for retirement benefits) may receive a benefit that is as little as 32.5% of the worker's PIA.\nAge-Related Benefit Adjustments for Widow(er)s\nThe earliest age a widow(er) can claim benefits is age 60. If a widow or widower (including divorced and disabled widow(er)s) claims survivors benefits before FRA, his or her monthly benefit is reduced by a maximum of 28.5% to take into account the longer expected period of benefit receipt (assuming he or she lives to average life expectancy). \nIn addition, survivors benefits may be affected by the deceased worker's decision to claim benefits before FRA. If the deceased worker claimed benefits before FRA (and therefore was receiving a reduced benefit) and the widow(er) claims survivors benefits at FRA, the widow(er)'s benefit is reduced under the widow(er)'s limit provision . Under the widow(er)'s limit provision, which is intended to prevent the widow(er)'s benefit from exceeding the deceased worker's retirement benefit, the widow(er)'s benefit is limited to (1) the benefit the worker would be receiving if he or she were still alive, or (2) 82.5% of the worker's PIA, whichever is higher.\nBenefit Adjustments Based on Other Factors\nBenefits for spouses and widow(er)s may be subject to other reductions, in addition to those based on entitlement before FRA. For example, under the dual entitlement rule, a Social Security spousal or widow(er)'s benefit is reduced or fully offset if the person also receives a Social Security retired-worker or disabled-worker benefit (see \" Dually Entitled Beneficiaries \" above). Similarly, under the g overnment p ension o ffset (GPO), a Social Security spousal or widow(er)'s benefit is reduced or fully offset if the person also receives a pension based on his or her own employment in certain federal, state, or local government positions that are not covered by Social Security. In some cases, a spousal or widow(er)'s benefit may be reduced to bring the total amount of benefits payable to family members based on the worker's record within the maximum family benefit amount.\nUnder the Social Security retirement earnings test (RET), auxiliary benefits may be reduced if the auxiliary beneficiary is below the FRA and has earnings above specified dollar thresholds. Also, under the RET, benefits paid to spouses may be reduced if the benefits are based on the record of a worker beneficiary who is affected by the RET (excluding benefits paid to divorced spouses who have been divorced for at least two years).\n Table B-1 shows the percentage of a worker's PIA on which various categories of spousal and widow(er)'s benefits are based. It also shows the age at which benefits are first payable on a reduced basis (the eligibility age) and the maximum reduction to benefits claimed before FRA relative to the worker's PIA.","output":"Social Security auxiliary benefits are paid to the spouse, former spouse, survivor, child, or parent of a Social Security-covered worker and are equal to a specified percentage of the worker's basic monthly benefit amount (subject to a maximum family benefit amount). For example, the spouse of a retired worker may receive up to 50% of the retired worker's basic benefit and the widow(er) of a retired worker may receive up to 100% of the retired worker's basic benefit.\nWhen auxiliary benefits were first established, most households consisted of a single earner\u2014usually the husband\u2014and a wife who cared for children and remained out of the paid workforce. As a result, benefits for nonworking spouses were structured to be relatively generous. A woman who was never employed but is married to a man with high Social Security-covered wages may receive a Social Security spousal benefit that is higher than the retirement benefit received by a single woman, or a divorced woman who was married less than 10 years, who worked a full career in a low-wage job.\nIn recent decades, this household structure has changed in part because women have entered the workforce in increasing numbers. The labor force participation rate of women with children under the age of 18 increased from 47% in 1975 to 70.8% in March 2016. As a result, many women now qualify for Social Security benefits based on their own work records. Women are, however, more likely than men to take breaks in employment to care for family members, which can result in fewer years of contributions to Social Security and employer-sponsored pension plans.\nBeneficiaries who qualify for multiple benefits do not receive both benefits in full, however. For example, for a beneficiary eligible for his or her own retired-worker benefits as well as spousal benefits, the spousal benefit is reduced by the amount of the retired-worker benefit. The beneficiary receives a reduced spousal benefit (if not reduced to zero) in addition to his or her retired-worker benefit. This effectively means the beneficiary receives the higher of the two benefit amounts. Because of this, a two-earner household may receive lower total Social Security benefits than a single-earner household with identical total Social Security-covered earnings.\nAnother change since 1939 has been an increase in the number of men and women who remain single or who have divorced. Persons who have never been married, or divorced before 10 years of marriage, do not qualify for Social Security spousal or survivors benefits under current law.\nProposals to modify the Social Security auxiliary benefit structure are often motivated by desire to improve adequacy for certain beneficiaries, or equity between a two-earner household and a one-earner household with similar earning profiles. For example, some proposals address the adequacy of benefits for certain groups of beneficiaries, such as elderly and widowed women. Although Social Security plays an important role in the retirement security of aged women, about 13.9% of widowed women aged 65 or older, 15.8% of divorced elderly women, and 21.5% of never-married elderly women have family incomes below the official poverty line in 2017."}
{"id":"crs_R44857","pid":"crs_R44857_0","input":"T he Constitution gives no direct role to Congress in conducting federal law enforcement. While Congress enjoys the legislative power under Article I of the Constitution, which includes substantial authority to investigate the executive branch pursuant to its oversight function, criminal investigations and prosecutions are generally considered core executive functions entrusted with the executive branch un der Article II. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, however, there have often been calls for prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These responses have attempted, in different ways, to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials. This report first analyzes the use of special prosecutors and independent counsels that were authorized under now-expired provisions of the Ethics in Government Act of 1978, as well as the use of special counsels that are currently authorized by DOJ regulations. A glossary of terms at the beginning of the report briefly defines these italicized terms (see Table 1 ). \nThe report continues with an examination of various legal questions relevant to these efforts. As a threshold matter, some have challenged the appointment of a special counsel under the current regulations as unconstitutional under the Appointments Clause. More broadly, designing a statutory framework for criminal investigations and prosecutions with independence from the executive branch raises questions about how this can be achieved consistent with the requirements of the Constitution. For instance, the Supreme Court upheld the constitutionality of the since-expired independent counsel statute in the 1988 case of Morrison v. Olson , but has not applied the reasoning of Morrison in subsequent cases raising related issues. The constitutional status of a statutory framework analogous to the independent counsel statute is thus subject to debate. Several bills introduced in the 116 th Congress (including S. 71 and H.R. 197 , which merge aspects of two preceding bills introduced in the 115 th Congress, S. 1735 and S. 1741 ) statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison .\n\n\tHistorical Background on the Use of Independent Investigations of Alleged Wrongdoing\n\nIn part to counter perceptions that executive officials suspected of criminal wrongdoing may be subject to different standards than individuals outside the government, independent investigations have sometimes been used to determine whether officials have violated the law. The government has used a range of options to conduct these types of inquiries: special prosecutors, independent counsels, and special counsels. Executive branch officials have noted, however, that \"there is no perfect solution\" to achieving the goal of avoiding potential conflicts or the appearance thereof that may arise as a result of the executive branch investigating its own officials.\nWhile special prosecutors investigated executive officials prior to the 1970s, the events commonly known as Watergate led to perhaps the most famous use of an independent investigation in U.S. history. Specifically, the break-in and burglary of the Democratic National Committee Headquarters at the Watergate Hotel in 1972 led to widespread allegations of wrongdoing by senior officials in the executive branch and calls for the appointment of a prosecutor who could conduct an investigation independent of political interference. In the midst of the Watergate controversy, Elliot Richardson, whose nomination to be Attorney General was being considered by the Senate Committee on the Judiciary, agreed to name an independent special prosecutor to pursue the Watergate allegations. Once confirmed by the Senate, the Attorney General, under his own authority, appointed Archibald Cox as special prosecutor for the Watergate investigation in 1973. The President subsequently ordered DOJ officials to fire the special prosecutor later that year, leading to public outcry, the appointment of another special prosecutor, and, ultimately, the initiation of impeachment proceedings by Congress. Following these events, Congress enacted a new mechanism\u2014discussed in the following section\u2014for the use of special prosecutors who would be appointed by a three-judge panel upon the request of the Attorney General.\n\n\tSpecial Prosecutors and Independent Counsels, as Authorized Under the Ethics in Government Act\n\nCongress enacted the Ethics in Government Act of 1978 out of a broad intent \"to preserve and promote the integrity of public officials and institutions.\" The statute addressed a number of concerns about the ethical behavior of some public officials in the wake of the Watergate scandal. Title VI of the statute (hereinafter \"the independent counsel statute\") established a mechanism for the appointment of individuals to lead independent investigations and prosecutions in certain circumstances. The statute originally designated these individuals as \"special prosecutors\" and later renamed them as \"independent counsels.\"\nTwo of the most commonly known examples of appointments of independent counsels under the statute involved incidents known generally as Iran-Contra and Whitewater. In 1986, Lawrence E. Walsh was appointed as independent counsel to investigate potential criminal misconduct of government officials related to the sale of arms to Iran and alleged diversion of profits from the sale to support the \"the military activities of the Nicaraguan contra rebels\" in violation of federal law. That investigation resulted in criminal charges for 14 individuals, most of whom were convicted, though some convictions were overturned on various grounds. In 1994, Kenneth Starr was appointed as independent counsel to investigate potential violations of federal criminal or civil law related to President Clinton or First Lady Hillary Rodham Clinton's relationship with Madison Guaranty Savings and Loan Association, Whitewater Development Corporation, or Capital Management Services, as well as any allegations arising out of that investigation. That investigation led to a myriad of charges for a number of individuals, but did not include indictments of the President or First Lady.\n\n\t\tAppointment Process\n\nAppointment of independent counsels under the statute occurred in two steps, requiring the involvement of both the Attorney General and a panel of federal judges.\n\n\t\t\tRole of the Attorney General\n\nThe independent counsel statute generally directed the Attorney General to conduct a preliminary investigation upon receiving information about potential wrongdoing by certain officials in the executive branch or from presidential campaign committees. If, within 30 days of receiving such information, the Attorney General determined that the information was specific and from a credible source, the Attorney General was required to conduct a preliminary investigation for a period of up to 90 days. The statute did not require the Attorney General to acknowledge or notify any other parties that such information had come to his attention, but did require that the Attorney General inform the court that he had commenced a preliminary investigation.\nThe conclusions reached in that initial investigation determined whether an independent counsel would be appointed to investigate the underlying allegations further. The statute required that the Attorney General request appointment of a special prosecutor by the special division of a federal court (discussed below) under three sets of circumstances. First, if the 90-day window for the preliminary investigation passed without a determination that further investigation or prosecution was not warranted, the Attorney General was required to request the appointment by the court. Second, if the Attorney General's initial investigation determined that further investigation or prosecution was warranted, the Attorney General was also required to request the appointment by the court. Finally, if the preliminary investigation indicated that further action was not warranted, but additional information was subsequently revealed which led the Attorney General to determine that further investigation or prosecution was indeed warranted, the Attorney General was mandated to conduct a preliminary investigation based on that information. \nFollowing that investigation, the statute required the Attorney General to seek appointment of an independent counsel under the same circumstances\u2014 i.e. , if no determination had been made within 90 days or if the Attorney General determined further investigation was warranted. The Attorney General's decision to request an appointment under the statute was not subject to judicial review. While the Attorney General was not authorized under the statute to appoint the independent counsel, he was required to provide the court with \"sufficient information to assist\" the court in the selection of the appointed individual and to define the jurisdiction of the inquiry.\n\n\t\t\tRole of the Court\n\nWhile the Attorney General conducted the initial investigation to determine whether an independent investigation was warranted, the independent counsel statute required that a special division of the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit), composed of three federal judges or Justices, appoint the independent counsel.\nThe Chief Justice of the U.S. Supreme Court assigned three federal judges or Justices to that division for two-year assignments. The statute's provisions regarding assignment of the three-judge panel required that the panel include a judge from the D.C. Circuit and that not more than one judge or Justice be from any single court. Any judge or Justice serving in the special division of the court that appointed the independent counsel was barred from participating in any judicial proceeding involving the independent counsel while he or she was still serving in that position or any proceeding involving the exercise of the independent counsel's official duties.\nBased on recommendations from the Attorney General regarding the selection and jurisdiction of the independent counsel, the three-judge panel had the final authority to make the appointment and define the prosecutorial jurisdiction. The court was expressly barred from appointing \"any person who holds or recently held any office of profit or trust under the United States.\"\n\n\t\tScope of Authority\n\n\"[W]ith respect to all matters in [the] independent counsel's prosecutorial jurisdiction,\" Congress granted the independent counsel \"full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice . . . .\" Examples of the independent counsel's enumerated authorities included\nconducting investigations and grand jury proceedings; engaging in judicial proceedings, including litigation and appeals of court decisions; reviewing documentary evidence; determining whether to challenge the use of testimonial privileges; receiving national security clearances, if appropriate; seeking immunity for witnesses, warrants, subpoenas, and other court orders; obtaining and reviewing any tax return; and carrying out prosecutions in court, including filing indictments.\nThe independent counsel could request DOJ assistance in the course of his or her investigation, including access to materials relevant to the jurisdiction of the inquiry and the necessary resources and personnel to perform his or her assigned duties.\n\n\t\tRemoval\n\nOther than impeachment, the independent counsel could be subject to removal \"only by the personal action of the Attorney General and only for good cause, physical or mental disability . . ., or any other condition that substantially impairs the performance of such independent counsel's duties.\" In other words, the independent counsel was generally not subject to the control and oversight of any other official within the executive branch. If the Attorney General exercised his removal authority, he or she was required to notify the special division of the court responsible for the initial appointment and the Committees on the Judiciary of both the House of Representatives and the Senate, identifying the reasons for removal.\n\n\t\tTermination of Independent Counsel Inquiries\n\nThe inquiry led by the independent counsel under the statute could be terminated under two methods. First, the statute directed that the office of the independent counsel would terminate upon notification by the independent counsel to the Attorney General that the investigation and any subsequent prosecutions had been completed. Second, the statute permitted the special division of the court\u2014by its own choice or by the recommendation of the Attorney General\u2014to terminate the office at any time if the investigation had been completed or sufficiently completed, allowing DOJ to formally complete the inquiry under its own processes. In either case, the independent counsel was required to submit a report to the special division of the court detailing the work completed. The report was required to include \"a description of the work of the independent counsel, including the disposition of all cases brought.\"\n\n\t\tStatutory Reauthorizations and Eventual Lapse of the Independent Counsel Statute\n\nWhen the independent counsel statute was originally enacted in 1978, Congress provided that its authority would lapse five years after enactment. Investigations that had already started pursuant to the provisions were permitted to continue, but no new investigations could be initiated at that time. Rather than allow the statute to lapse, Congress reauthorized the law, with some amendments, several times. It was reauthorized in 1983 and 1987, and remained in effect until 1992, when Congress allowed the law to expire. The statute was again reauthorized in 1994, following concerns related to the investigation of the Whitewater controversy during the interim years. However, concerns over whether the independent counsel possessed too much power, which arose after the extensive independent counsel investigations of the Iran-Contra affair and the Whitewater controversy, resulted in the law's ultimate expiration and nonrenewal in 1999.\n\n\tLegal Authority of Special Counsels Under Current Law\n\nFollowing the expiration of the independent counsel statute, DOJ promulgated regulations in 1999, which are currently still in effect, to establish procedures for the appointment of special counsels pursuant to the Attorney General's general administrative hiring authority. DOJ described these regulations as \"strik[ing] a balance between independence and accountability in certain sensitive investigations.\" DOJ acknowledged at the time the regulations were promulgated, however, that \"there is no perfect solution\" to achieving that goal.\nThus far, it appears the special counsel regulations have been invoked infrequently. In 1999, shortly after the regulations were promulgated, the Attorney General appointed former U.S. Senator John Danforth as special counsel to investigate events related to the government actions that occurred six years earlier at the Branch Davidian compound in Waco, Texas. The special counsel's investigation found no wrongdoing on the part of federal law enforcement officials. \nIn May 2017, Deputy Attorney General Rod Rosenstein\u2014acting in place of Attorney General Jeff Sessions, who had recused himself from the investigation\u2014issued a publicly-available order (public order) appointing former Federal Bureau of Investigation Director Robert S. Mueller III as special counsel. Rosenstein indicated in the public order that the appointment had been made pursuant to general statutory authority to manage DOJ investigations, but directed that the investigation would be subject to the agency's regulations governing the scope and administration of special counsel investigations. Specifically, the public order directed the special counsel to investigate efforts of the Russian government \"to influence the 2016 election and related matters.\" DOJ later issued a non-public memorandum that set forth in more detail the scope of the investigation and definition of the special counsel's authority. That memorandum explained that the public order \"was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals.\"\nIt should be noted that the Attorney General also possesses general statutory authority to appoint DOJ staff to conduct or coordinate particular investigations. DOJ has used this authority previously to appoint individuals who were referred to as \"special counsels\" to investigate particular matters. This authority differs from the special counsel regulations because it involves assignment of an internal agency official rather than an individual from outside the government. For example, in 2003, then-Deputy Attorney General James Comey (acting in place of then-Attorney General John Ashcroft, who had recused himself from the investigation) used this statutory authority to appoint Patrick Fitzgerald to lead an investigation of whether White House or other federal officials unlawfully leaked the identity of a Central Intelligence Agency officer to a reporter. While referred to as a special counsel, Fitzgerald was serving as a U.S. Attorney when named to lead the investigation, precluding an appointment under the special counsel regulations. While an individual referred to as a \"special counsel\" thus may be appointed under either the general statutory authority or under the specific special counsel regulations, those named under the regulations might be viewed as possessing more independence, as they are appointed from outside the agency and are insulated by the regulations from removal except for cause.\nDOJ may also task other arms of the Justice Department\u2014such as the Office of the Inspector General\u2014to investigate high-profile, sensitive, and resource-intensive matters regarding \"the Department's compliance with certain legal requirements and [internal] policies and procedures.\" For example, recently, in response to concerns raised by some Members of Congress with respect to \"certain prosecutorial and investigative determinations made by the [Department of Justice] in 2016 and 2017,\" Attorney General Sessions considered, but declined to pursue, a separate special counsel inquiry related to allegations of potential misconduct within the Department, noting that special counsel appointments are \"by design, . . . reserved for use in only the most 'extraordinary circumstances.'\" Such circumstances, according to Sessions, require the Attorney General to determine that \"'the public interest would be served by removing a large degree of responsibility for the matter from the Department of Justice.'\" Instead, the Attorney General indicated that DOJ's Inspector General has been tasked with reviewing the actions that the Members had suggested be the subject of the second special counsel inquiry, including allegations about DOJ's compliance with legal requirements and internal policies. Instead, the Attorney General announced that he had tasked John W. Huber, U.S. Attorney for the District of Utah, to lead the investigation into those allegations, emphasizing that Huber would be working \"from outside the Washington, D.C. area and in cooperation with the Inspector General.\" \n\n\t\tDOJ Special Counsel Regulations\n\n\t\t\tAppointment and Selection by the Attorney General or the Acting Attorney General\n\nUnder the DOJ regulations that supplanted the independent counsel provisions, the authority to appoint and select a special counsel resides solely with the Attorney General (or his surrogate, if the Attorney General has recused himself from the matter), rather than with the judicial branch. The regulations generally state that the Attorney General \"will appoint a Special Counsel\" to conduct certain investigations or prosecutions. To make such an appointment, the Attorney General must determine that (1) a criminal investigation is warranted; (2) the normal processes of investigation or prosecution would present a conflict of interest for DOJ, or other extraordinary circumstances exist; and (3) public interest requires a special counsel to assume those responsibilities. When DOJ promulgated the special counsel regulations, it explained the type of conflicts that might lead to the appointment of a special counsel: \"[t]here are occasions when the facts create a conflict so substantial or the exigencies of the situation are such that any initial investigation might taint the subsequent investigation, so that it is appropriate for the Attorney General to immediately appoint a Special Counsel.\"\nAfter receiving information that could warrant consideration of an independent investigation, the Attorney General generally has discretion under the regulations to determine whether and when the appointment of a special counsel would be appropriate. The Attorney General may appoint a special counsel immediately; may require an initial investigation to inform his decision about whether to appoint a special counsel; or \"may direct that appropriate steps be taken to mitigate any conflicts of interest, such as recusal of particular officials,\" to permit the investigation to be concluded within \"the normal processes.\"\nIn the event that the Attorney General has recused himself from a particular matter upon which a special counsel appointment might be appropriate, the regulations contemplate that the Acting Attorney General will take responsibility for the appointment process. Federal law provides that the Deputy Attorney General would serve as the Acting Attorney General.\nIndividuals appointed as special counsels under these regulations must be chosen from outside the federal government. Such individuals must be \"a lawyer with a reputation for integrity and impartial decisionmaking, and with appropriate experience to ensure both that the investigation will be conducted ably, expeditiously and thoroughly, and that investigative and prosecutorial decisions will be supported by an informed understanding of the criminal law and Department of Justice policies.\" The special counsel may hold other professional roles during his or her service, but is required to agree that the duties of the appointment will take \"first precedence.\"\n\n\t\t\tScope of Jurisdiction and Authority\n\nLike the appointment and selection process, the sole authority to determine the scope of the special counsel's inquiry rests with the Attorney General. The jurisdiction of the inquiry is determined by \"a specific factual statement\" about the matter to be investigated, which is provided by the Attorney General to the special counsel at the outset of the appointment. Beyond that general jurisdiction, the special counsel is also authorized \"to investigate and prosecute federal crimes committed in the course of, and with intent to interfere with, the Special Counsel's investigation, such as perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses.\" While these are the original parameters of a special counsel's jurisdiction, additional matters may be assigned to the special counsel as the inquiry proceeds. To expand the jurisdiction, the special counsel must find such an expansion is necessary to complete the original assignment or necessary \"to investigate new matters that come to light in the course of his or her investigation.\" Upon such finding, the special counsel's jurisdiction may be expanded only after consultation with the Attorney General, who then has the authority to determine whether to assign the additional matters to the special counsel or \"elsewhere.\" Within the jurisdiction identified by the Attorney General, the special counsel has relatively broad authority to carry out his or her inquiry. According to the regulations, \"the Special Counsel shall exercise, within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney.\"\nThe scope of the special counsel's authority under DOJ regulations has been the subject of legal challenge in the course of Special Counsel Robert Mueller III's investigation that began in 2017. That inquiry resulted in several indictments, including against Paul Manafort, the former chairman of President Trump's 2016 campaign, for crimes such as conspiracy to launder money; tax fraud; obstruction of justice and witness tampering; failure to register as an agent of a foreign principal; false statements; and failure to file reports of foreign bank and financial accounts. Manafort filed a motion to dismiss the criminal indictment lodged against him, challenging the indictment as an unlawful exercise of the special counsel's authority. Specifically Manafort argued that the factual matter named as the special counsel's original jurisdiction in the May 2017 public appointment order (i.e., \"any links and\/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump,\" as well as \"any matters that arose or may arise directly from the investigation, and any other matters within the scope of 28 C.F.R. \u00a7 600.4(a)\" ) would preclude the charges made against him. According to Manafort, because the charges made against him do not relate to links with the Russian government or actions taken during his time as a campaign manager in 2016 and because the public order's general authority does not grant authority on sufficiently specific matters as required by DOJ regulations, the special counsel cannot pursue the charges filed against him without seeking additional authority under the regulations. \nThe government's response to these claims disclosed and explained additional documents outlining the scope of the investigation. DOJ acknowledged that the applicable regulations require the special counsel to be provided a \"'specific factual statement of the matter to be investigated,'\" but emphasized that \"the regulations do not provide that the factual statement must be in an appointment order or otherwise made public.\" According to a subsequent memorandum from Acting Attorney General Rosenstein that was partially released with the government's filing, while the initial order \"was worded categorically in order to permit its public release without confirming specific investigations involving specific individuals,\" a subsequent memorandum provided \"a more specific description\" of allegations deemed to be authorized as part of the special counsel investigation. Such development of the parameters of jurisdiction during the course of an investigation, according to DOJ, are necessary for \"an effective investigation [which] must have some latitude to extend beyond the known facts at the time of [the appointment].\"\nUltimately, the courts that considered Manafort's motion to dismiss his indictments rejected his challenge to the special counsel's authority. For example, a federal district court in Virginia considering Manafort's motion concluded that while many of the charges pursued against Manafort \"on their face, appear unrelated to the 2016 Presidential election,\" the investigation and issues charged in the particular case fell \"squarely within the jurisdiction outlined\" under the appointment order. The court emphasized that the appointment order's broad grant of authority to investigate \"any links\" between campaign officials and the Russian government permitted investigation into relationships with individuals supported by, even if not members of, the Russian government, such as members of a pro-Russia Ukrainian political party. Moreover, with respect to charges filed by the special counsel that did not pertain directly to the campaign and Russia, a D.C. federal court held such charges, such as tax evasion with regard to proceeds resulting from Manafort's relationship with pro-Russian entities, fell within the special counsel's jurisdiction as \"'matters that arose or may arise directly from the investigation.'\" A federal district court in Virginia further relied upon the later DOJ memorandum that clarified the scope of the special counsel's original appointment as a source of the special counsel's authority, explaining that the original appointment order was worded categorically so that it could be publicly released and noting that the clarifying memorandum specifically authorized the special counsel to investigate crimes related to these other charges. Accordingly, the D.C. federal court rejected Manafort's argument that the special counsel's authority amounted to a \"'blank check'\" for limitless investigation, reading the appointment order's language as \"tightly drafted\" to give \"the Special Counsel flexibility from the start to manage the investigation and pursue matters that arose 'directly' from the issues within his purview.\"\n\n\t\t\tOversight and Removal\n\nThe DOJ special counsel regulations limit the special counsel's relatively broad authority to conduct an inquiry by first subjecting his or her conduct to DOJ rules, regulations, procedures, practices, and policies. Special counsels are directed to consult with the appropriate offices within DOJ or the Attorney General directly if necessary. Additionally, special counsels are subject to discipline for misconduct and breach of ethical duties that are generally applicable to DOJ employees.\nSecond, the DOJ regulations contemplate some oversight of the special counsel by the Attorney General. Specifically, they direct the special counsel to \"determine whether and to what extent to inform or consult with the Attorney General or others within the Department about the conduct of his or her duties and responsibilities.\" The regulations expressly require the special counsel to \"notify the Attorney General of events in the course of his or her investigation in conformity with the Departmental guidelines with respect to Urgent Reports.\" Under DOJ internal guidance, attorneys must inform DOJ leadership of certain events, including \"major developments in significant investigations and litigation\" such as the filing of criminal charges. DOJ has explained that conformance with this notification requirement \"guarantees a 'resulting opportunity for consultation' between the Attorney General and the Special Counsel about the anticipated action, which 'is a critical part of the mechanism through which the Attorney General can discharge his or her responsibilities with respect to the investigation.'\"\nWhile the regulations indicate that special counsels \"shall not be subject to the day-to-day supervision of any official,\" the rules authorize the Attorney General to \"request that the Special Counsel provide an explanation for any investigative or prosecutorial step.\" If, after giving the views of the special counsel \"great weight,\" the Attorney General's review of such actions leads him to \"conclude that the action is so inappropriate or unwarranted under established Departmental practices that it should not be pursued,\" the Attorney General must notify the Chairman and Ranking Members of the Judiciary Committees in Congress of that decision with an explanation.\nAside from review of particular actions, the regulations also grant the Attorney General authority to discipline or remove the special counsel. This authority may be exercised \"only by the personal action of the Attorney General.\" In other words, to comply with the regulations, the Attorney General himself must remove the special counsel, not the President or a surrogate (unless, as noted previously in this report, the Attorney General has recused himself in the matter under investigation). A decision to remove the special counsel must be made with \"good cause,\" such as misconduct, a dereliction of duty, incapacity, the existence of conflicts of interest, or violation of departmental policies. The Attorney General must report his decision to remove the special counsel, with an explanation of that decision, to both the Chairman and Ranking Members of the Judiciary Committees of Congress.\n\n\t\tReview and Conclusion of Special Counsel Inquiries\n\nAlthough the special counsel regulations do not provide an explicit timeline for inquiries or a special counsel's tenure, they do require the special counsel to report to DOJ periodically about the budget of operations for the inquiry as well as with status updates in some circumstances. Specifically, the special counsel must provide a proposed budget within 60 days of the appointment. The special counsel must also provide annual reports regarding the status of the investigation and budget requests 90 days prior to the beginning of the fiscal year. The Attorney General is required to review the special counsel's annual report and determine whether the investigation should continue and with what budget.\nWhen the special counsel's inquiry concludes, the special counsel must provide a confidential report to the Attorney General with explanations of the decisions made in the course of the inquiry in favor of or declining to prosecute any charges. The regulations do not expressly provide for disclosure of this report to any other parties, nor do they further identify the parameters of the content of that report. The regulations do, however, require the Attorney General to make certain reports to the Chairs and Ranking Members of the Judiciary Committees of each house of Congress, including upon the conclusion of the investigation. The regulations' only guidance regarding the Attorney General's concluding report's content is that the report must include \"an explanation for [the] action,\" \"including, to the extent consistent with applicable law, a description and explanation of instances (if any) in which the Attorney General concluded that a proposed action by a Special Counsel was so inappropriate or unwarranted under established Departmental practices that it should not be pursued.\" The regulation's use of the word \"including,\" which generally denotes that the terms that follow are illustrative and not definitional, may suggest that the Attorney General's report to Congress is not necessarily limited to explanations of the Special Counsel's prosecutorial decisions. None of the reporting requirements mandate public release of any information shared either between DOJ officials or between DOJ and congressional committees. Instead, the regulations provide the Attorney General with the discretion to \"determine that public release of [his reports to Congress] would be in the public interest.\" Moreover, the report's contents need to be \"consistent with applicable law,\" which may suggest that legal doctrines such as executive privilege and the rules governing the release of grand jury information could restrict what can be included in the report.\n\n\tAppointing and Removing a Special Counsel: Legal Considerations\n\nDesigning a mechanism to provide for criminal inquiries of executive branch officials by officers independent from the executive branch has raised questions about whether this goal can be accomplished in harmony with the requirements of the Constitution. Under the doctrine of separation of powers, the Constitution assigns each branch of government particular functions that generally may not be delegated to, nor usurped by, another branch. In this vein, Congress is entrusted with the legislative power, and may establish executive branch agencies and conduct oversight of those entities. Congress may not, however, engage in criminal prosecutions on behalf of the United States\u2014a function generally reserved for the executive branch. A crucial bulwark in preserving this separation of powers is the Appointments Clause of Article II. That provision requires \"Officers of the United States\" to be appointed by the President \"with the Advice and Consent of the Senate,\" although Congress may vest the appointment of \"inferior\" officers \"in the President alone, in the Courts of Law, or in the Heads of Departments.\" Crucially, Article II also empowers the President to hold executive branch officers accountable, through removal if necessary, which the Supreme Court in Myers v. United States explained was essential in order to \"maintain administrative control of those executing the laws.\" The Court has, however, recognized that Congress may in certain situations restrict the President's power of removal over certain discrete offices. The powers of appointment and removal are key to understanding Congress's authority to create independent investigative offices and define their contours.\n\n\t\tAppointment of a Special Counsel\n\nWhile introduced legislation aimed to insulate a special counsel from executive control raises questions (addressed below) about the President's ability to oversee the executive branch, some have questioned whether the appointment of a special counsel under the current regulations violates the Constitution. Such challenges have been unsuccessful, however, as exemplified by the D.C. Circuit's recent ruling in In re: Grand Jury Investigation . In that case, the recipient of multiple grand jury subpoenas issued by Special Counsel Robert Mueller moved to quash those subpoenas on the grounds that the appointment of the special counsel was unlawful under the Appointments Clause.\nThe D.C. Circuit's panel decision held that the Appointments Clause did not require Special Counsel to be nominated by the President and confirmed by the Senate because the special counsel is not a principal officer. Applying the Supreme Court's test in Edmond v. United States , the D.C. Circuit ruled that, because he is subject to the control of a superior who was nominated by the President and confirmed by the Senate (i.e., a principal officer), the special counsel is an inferior officer who may be appointed by a department head. While acknowledging that the special counsel regulations bestowed a measure of independence on the special counsel, the court reasoned that because the Attorney General could rescind these regulations at any time, the special counsel is an inferior officer who \"effectively serves at the pleasure\" of a principal officer.\nAdditionally, the court rejected the argument that Congress had not \"by law\" granted the Attorney General the authority to appoint a special counsel as required by the Appointments Clause. In so doing, the panel relied on the Supreme Court's opinion in United States v. Nixon , in which the Court concluded that, because Congress had by statute vested general authority in the Attorney General to appoint subordinate officers, the Attorney General's delegation of power to a special prosecutor was valid.\nFinally, the D.C. Circuit panel concluded that a department head properly appointed Special Counsel Mueller in accordance with the Appointments Clause, notwithstanding his appointment by Rod Rosenstein, the Deputy and Acting Attorney General. The panel observed that the relevant statutory scheme provided that, in the case of a \"disability\" of the Attorney General, the Deputy Attorney General \"may exercise all the duties of that office.\" The D.C. Circuit reasoned that when Attorney General Sessions recused himself from matters concerning presidential campaigns, he had a \"disability\" under the statute on that issue. Accordingly, Deputy Attorney General Rosenstein became the acting Attorney General\u2014and was therefore the head of the Department of Justice\u2014on such matters. Acting Attorney General Rosenstein's appointment of Special Counsel Mueller, therefore, was an appointment by the head of a department.\n\n\t\tRemoving a Special Counsel\n\nWhile the legal questions surrounding the appointment of a special counsel under the regulations have largely been resolved, the circumstances in which a special counsel may be removed by a superior have not been settled by the courts. Consideration of the authority to remove a special counsel under current regulations poses several legal questions. As discussed above, Department of Justice regulations provide that a special counsel may be removed only (1) by the Attorney General; (2) \"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies\"; and (3) in writing provided to the special counsel specifying the reason(s) for removal. As a preliminary matter, the specific type of behavior that would constitute grounds for removal under the regulations is largely undetermined. For instance, terms such as \"misconduct\" and \"good cause\" are not defined in the regulations or by reference to an accompanying statute, and case law addressing the definition of similar statutory removal restrictions is sparse. More broadly, the manner in which a special counsel might be removed without new legislation itself poses difficult legal issues, including the ultimate efficacy of the regulations in constraining the discretion of the executive branch.\n\n\t\t\tRemoving a Special Counsel Pursuant to the Regulations\n\nThe Attorney General (or his surrogate if recused) may, consistent with the governing regulations, remove a special counsel \"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies.\" Conceivably, the Attorney General's decision could be the result of an order from the President, as the Attorney General serves at the pleasure of the President and, as the Court has recognized, the President's power to appoint executive branch officials is tied to the power of removal. A decision to remove a special counsel under current regulations could be difficult to challenge in court. Importantly, the current regulations explicitly disclaim the creation of any legal rights. Even without that disclaimer, internal agency rules and guidelines, including those of the Justice Department, have generally not been recognized as creating judicially enforceable rights. Instead, an individual seeking judicial relief against the United States in federal court must usually rely on a cause of action that asserts violation of a recognized legal right or requirement. Consequently, at least under current DOJ regulations, obtaining judicial review of a special counsel's removal by a federal court may be difficult.\n\n\t\t\tLegal Effect of the Regulations\n\nMore broadly, it is uncertain to what extent the regulations ultimately constrain the executive branch. Because no statute appears to require the Department to promulgate regulations concerning a special counsel, the Department likely enjoys discretion to rescind them. The special counsel regulations also were not promulgated according to the notice and comment procedures that are typically required by the Administrative Procedure Act (APA) when agencies issue legislative rules. Instead, the Department considered the regulations to be exempt from these requirements, as they concerned agency management or personnel. The Department could thus likely rescind the special counsel regulations without going through notice and comment procedures, meaning that the regulations could likely be repealed immediately. Once repealed, a special counsel would no longer be protected by a for-cause removal provision.\nWhile DOJ has noted its adherence to the current special counsel regulations, assuming for the sake of argument a situation where the regulations were left in place, a decision by the Attorney General or President to simply ignore the regulations raises unresolved legal questions. Generally, regulations in force typically bind the executive branch with the force of law. In fact, in Nixon v. United States , which concerned a claim of executive privilege by President Nixon against a subpoena issued by a special prosecutor, the Court opined on the regulation in force that insulated the special prosecutor from removal. The Court remarked in dicta that\nSo long as this\u00a0regulation\u00a0is extant it has the force of law. . . . [I]t is theoretically possible for the Attorney General to amend or revoke the regulation defining the Special Prosecutor's authority. But he has not done so.\u00a0So long as this\u00a0regulation remains in force the Executive Branch is bound by it, and indeed the United States as the sovereign composed of the three branches is bound to respect and to enforce it.\nIn other words, insofar as this reading continues to characterize the Court's approach to the matter, both the President and Attorney General must comply with the special counsel regulations until they are repealed. However, the concrete result of an order removing a special counsel in violation of applicable regulations is difficult to predict. For instance, there might not be a private right of action authorizing judicial review in this situation, leaving the legal remedy available for violation of the regulations in question.\nOn the other hand, the matter raises open legal issues regarding the scope of the President's authority to supervise the executive branch. It is unclear to what extent agency regulations restricting the grounds for removal of a constitutional officer engaged in core executive functions can bind the President. One might argue that the special counsel regulations, while binding on the Department of Justice, do not ultimately restrict the President's powers. Article II vests the executive power of the United States in the President; and criminal investigations and prosecutions lie at the very core of this constitutional authority. An argument in favor of a more robust view of the President's authority might be that regulations issued by an executive branch agency nearly 20 years ago that restrict the President's power to remove a high-level officer of the United States who is charged with enforcing the law intrude on the President's authority under Article II. DOJ has in the past asserted authority to decline to follow statutes it deems unconstitutional intrusions on the executive branch's power, and this argument might be extended to the context of similarly viewed regulations, particularly those issued by a prior Administration.\n\n\t\tProposed Legislation to Restrict the Ability to Remove a Special Counsel\n\nGiven the questions regarding the scope and effect of the current DOJ special counsel regulations, a number of legislative proposals aim to impose statutory restrictions on the executive branch's ability to remove a special counsel. Consideration of these proposals requires examination of the Supreme Court's decisions regarding statutory restriction on the removal of certain officers. However, because Congress has not enacted any such bill, analysis of these efforts is necessarily preliminary. As discussed above, current Department of Justice regulations authorize the Attorney General to appoint a special counsel and determine the ultimate scope of his jurisdiction, but limit the Attorney General's discretion to remove a special counsel to certain specified reasons. A number of bills proposed during the 116 th and 115 th Congresses aim to codify aspects of these regulations. Notably, some would statutorily insulate a special counsel from removal and authorize a federal court to review the removal of a special counsel.\nFor instance, S. 1735 , introduced in the 115 th Congress, would have provided that in order to remove a special counsel, the Attorney General must first file an action with a three-judge court; if that panel issues a finding of \"misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice,\" then a special counsel may be removed. Similarly, S. 1741 , the Special Counsel Integrity Act, would have provided that any special counsel appointed on or after May 17, 2017, may only be removed by the Attorney General, or the highest ranking Justice Department official if the Attorney General is recused, for good cause. S. 1741 further provided that a special counsel who has been removed may challenge this action before a three-judge panel, which is authorized to immediately reinstate the individual if the court finds that the removal violated the legislation's terms. Both bills were introduced in the 115 th Congress.\nFinally, S. 71 and H.R. 197 , introduced in the 116 th Congress, merge aspects of both of these proposals. They would similarly require good cause in order for the Attorney General to remove a special counsel, but provide a 10-day window in which the special counsel can challenge a removal decision in federal court. If the court determines that the removal violates that good cause standard, then the removal shall not take effect. Understanding these proposals requires an examination of the significant\u2014and oft-debated\u2014constitutional questions concerning Congress's power to establish executive functions outside the direct control of the President.\n\n\t\t\tPresidential Authority to Oversee Executive Branch Officers\n\nArticle II of the Constitution vests the executive power of the United States in the President. As mentioned above, the Supreme Court has made clear that this power includes authority to hold executive branch officers accountable, through removal if necessary. However, the Court has upheld statutory restrictions on the President's removal power for certain offices. In one such case, Morrison v. Olson , the Court upheld restrictions on the removal of an independent counsel, although, as discussed below, the Court has not always followed aspects of that decision in subsequent years. The constitutionality of legislative efforts to statutorily insulate a special counsel from removal will thus likely turn on the continuing vitality of the Court's opinion in Morrison and, more generally, whether a court would apply a more formalist or functionalist methodology in considering such legislation. Definitive conclusions about such efforts are thus difficult absent further guidance from the Court.\n\n\t\t\t\tMorrison v. Olson\n\nIn the 1988 case of Morrison v. Olson , the Supreme Court addressed the issue of whether a federal prosecutor can be insulated from executive control in the context of the now-expired Independent Counsel Act. Morrison upheld the independent counsel statute, which, as discussed above, vested the appointment of an independent counsel outside of the executive branch and limited the removal authority of the President. Writing for the Court, Chief Justice Rehnquist concluded that the independent counsel was an inferior, rather than a principal, officer, whose appointment was not required to be made by the President subject to Senate confirmation. The appointment of such officers was permissible because they (1) were removable by the Attorney General for cause; (2) had a limited scope of duties; and (3) possessed limited jurisdiction. \nThe Court also held that the Independent Counsel Act's provision limiting the authority of the Attorney General to remove the independent counsel for good cause did not impermissibly intrude on the President's power under Article II. The Court rejected a formalistic rule that would bar statutory for-cause removal protections for an individual tasked with \"purely executive\" functions; instead, it applied a functional test and asked whether Congress has \"interfere[d] with the President's\" executive power and his \"duty to 'take care that the laws be faithfully executed.'\" The Court recognized that the independent counsel operated with a measure of independence from the President, but concluded that the statute gave \"the Executive Branch sufficient control over the independent counsel to ensure that the President is able to perform his constitutionally assigned duties.\"\nMorrison was decided 7-1, with Justice Scalia dissenting from the Court's opinion and Justice Kennedy not participating in the case. In dissent, Justice Scalia argued that the independent counsel statute violated the separation of powers because the Constitution vested authority for criminal investigations and prosecutions exclusively in the executive branch and the statute deprived the President of exclusive control of that power. Under this rationale, he warned that the Court must be very careful to guard against the \"'gradual concentration of the several powers in the same department'\" that can be likely to occur as one branch seeks to infringe upon another's distinct constitutional authorities. Justice Scalia emphasized the power and discretion typically vested in prosecutors and noted that the key check on prosecutorial abuse is political\u2014prosecutors are accountable to, and can be removed by, the President, who is likewise accountable to the people. But operation of the independent counsel statute, for Justice Scalia, eliminated that constitutional feature by creating an unaccountable prosecutor outside of presidential control.\nIn the years since Morrison , especially in the wake of the Whitewater investigation into President Clinton by an independent counsel that culminated in the President's impeachment on grounds that were tangential to the impetus for the investigation, a number of legal scholars criticized the independent counsel statute on both policy and constitutional grounds. Additionally, members of both political parties have since noted opposition to the law, resulting in relatively widespread agreement to let the Independent Counsel Act expire in 1999. \n\n\t\t\t\tPost-Morrison Case Law on Appointments and Removal\n\nThe Supreme Court in the 1997 case of Edmond v. United States applied a different standard than that enunciated in Morrison in the context of a challenge to the appointment of certain \"inferior\" officers. The opinion, authored by Justice Scalia, adopted the reasoning he applied in dissent in Morrison for determining whether an individual is an inferior officer. In that case, the Court did not apply the functional test used in Morrison for determining whether an individual was an inferior officer. Instead, it adopted a formal rule\u2014an inferior officer is one who is \"directed and supervised\" by a principal officer (officers appointed by the President and confirmed by the Senate). Applying this rule, the Court concluded that the appointment of members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was consistent with Article II. Specifically, the Court reasoned that because Members of the Coast Guard Court of Criminal Appeals are removable at will and lack power to render a final decision of the United States unless permitted to do so by a superior in the executive branch they are directed and supervised by principal officers. The appointment of the members of the Coast Guard Court of Criminal Appeals by the Secretary of Transportation was thus constitutional because the members constituted inferior officers and the Secretary was a principal officer.\nMore recently, in the 2010 case of Free Enterprise Fund v. P ublic Company Accounting Oversight Board , the Court invalidated statutory structural provisions providing that members of the Public Company Accounting Oversight Board could be removed only \"for cause\" by the Securities and Exchange Commission, whose members, in turn, appeared to also be protected from removal by for-cause removal protections. The Court again applied a rather formalist rule in analyzing Congress's attempt to shield executive branch officers from removal, rather than the functional approach followed in Morrison . The Court concluded that, while the early 20 th century case of Humphrey ' s Executor v. United States had approved such protections for the heads of independent agencies and Morrison did the same for certain inferior officers, the combination of dual \"for cause\" removal protections flatly contradicted the vestment of executive power in the President under Article II. Further, the Court then applied the test it used in Edmund , rather than the functional analysis of Morrison , in concluding that members of the regulatory board were now\u2014after invalidation of statutory removal protections by the Court\u2014inferior officers because the Securities and Exchange Commission, composed of principal officers, possessed oversight authority over the board and the power to remove its members at will. \nHowever, the Court has not gone so far as to overrule or even explicitly question Morrison . As a result, that opinion's holding regarding the constitutionality of for-cause restrictions for an independent counsel binds the lower courts. Moreover, while the Court's decisions in Edmund and Free Enterprise Fund have not applied the reasoning in Morrison concerning the test for who qualifies as an inferior officer, it is not necessarily clear what removal restrictions are appropriate for principal officers or how the determinations about the appointment power concern determinations about the scope of the removal power. Nonetheless, it appears that the Edmond test, rather than the Morrison analysis, for determining whether an individual is an inferior officer is what will guide the Court going forward. Furthermore, Free Enterprise Fund represents a movement toward a more formalist, and possibly more expansive, view of the Presidential power of removal than was expressed in Morrison . More fundamentally, no member of the Morrison Court sits on the Supreme Court today. Because of this apparent shift in the Court's general approach to separation-of-powers matters related to appointment and removal, and the current Court's relative silence on Morrison's import, whether today's Court would necessarily view a reauthorization of the independent counsel statute or a similar statute in the same manner as it did in Morrison is subject to debate .\n\n\t\t\tLegislation to Establish For-Cause Removal Protection for a Special Counsel\n\nAssuming that the Supreme Court were to follow the functional approach reflected in its Morrison decision, efforts to statutorily require good cause to remove a special counsel would likely pass constitutional muster. As noted above, in Morrison , the Court examined whether Congress had impermissibly interfered with the President's constitutional duties; it approved of the independent counsel statute's provisions that, among other things, (1) required good cause to remove the independent counsel; (2) largely restricted the Attorney General's discretion in deciding to request the appointment of an independent counsel; and (3) placed the actual power of appointment with a panel of Article III judges. Legislation that would statutorily insulate a future special counsel from removal except for good cause appears roughly analogous to the for-cause removal provisions upheld in Morrison . In fact, some proposals appear to be less restrictive of the President's power relative to the independent counsel statute. For instance, S. 1741 (115 th Congress) and S. 71 (116 th Congress) appear to contemplate the appointment of a special counsel at the discretion of the AG, and they provide that only the Attorney General\u2014or the most senior Justice official who has been confirmed by the Senate if the Attorney General is recused\u2014may remove a special counsel. Under both bills, an executive branch official would retain discretion to appoint and remove a special counsel for cause. Under Morrison ' s functional balancing approach, which examines whether Congress has unduly interfered with the President's executive power and duty to take care that the law is executed faithfully, this framework is less intrusive of executive branch power than was the independent counsel statute because the executive branch would retain control over a special counsel's appointment.\nLikewise, insulating a special counsel from removal by the Attorney General except for those reasons outlined in current Justice regulations\u2014\"for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies\" \u2014would likely permit removal of a special counsel for a broader range of reasons than did the now-expired independent counsel statute, which limited the basis for removal to \"good cause, physical disability, mental incapacity, or any other condition that substantially impairs the performance of such independent counsel's duties.\" Specifically, several bills would add misconduct, dereliction of duty, and conflict of interest as grounds for removal, and specifically define good cause to include violation of departmental policies. At least considered in isolation, such a provision would be less intrusive into the executive branch's authority under Article II than the statute at issue in Morrison , as the proposal would grant the Attorney General\u2014a principal officer directly accountable to the President\u2014greater control of the special counsel than he had under the independent counsel statute. Accordingly, if the Court were to embrace a functionalist balancing approach in a challenge to such a provision, it would likely affirm its constitutionality as the executive branch could remove a special counsel for a broader range of reasons than was permitted in the independent counsel statute.\nNevertheless, bills that aim to insulate a special counsel from removal might be constitutionally suspect if the Court chose to overrule Morrison or limit the reach of that case to its facts. In particular, were the Court to face a challenge to a special counsel entrusted with wide-ranging investigative authority who statutorily could not be removed except for cause, application of the approach in Edm o nd , rather than Morrison , might result in the Court concluding that a special counsel is a principal officer. As noted above, Edmond 's test for inferior officer status is that the individual be directed and supervised by a principal officer. And that test was satisfied because Coast Guard Court of Appeals judges were removable at will and lacked power to render final decisions of the executive branch. A special counsel with statutory removal protection would obviously not be removable at will. As to whether a special counsel renders final decisions, any analysis would likely depend on the scope of authority granted to a special counsel. Were the Court to conclude that a special counsel does constitute a principal officer, his or her appointment must be made by the President with Senate confirmation, rather than by the Attorney General. Further, any removal restrictions might be questioned as well, as the Court has never approved such restrictions for a principal officer charged with core executive functions. Nonetheless, the Court has not reconciled its holding on the appointments question in Morrison with its holding in Edmond, meaning that the limits on Congress's power to insulate executive branch officials from removal are subject to debate. \nMore broadly, a departure from Morrison and an application of the Court's more recent formalist approach to separation of powers disputes, as evidenced in Free Enterprise Fund , might cast for-cause removal protections for a special counsel in an unfavorable light. The Court's emphasis in that case on the importance of presidential control over executive branch officers and the ability to hold them accountable in order to preserve the constitutional structure envisioned by the Framers could be read to conflict with statutory removal restrictions for government officers carrying out core executive functions. \nThat said, a middle road is possible. Were Congress to pass legislation insulating a special counsel from removal except for cause, one option might be for the Court to narrowly construe the scope of for-cause removal protections, interpreting them to permit removal for a broad range of reasons. This would avoid overruling Morrison , but arguably preserve substantial executive branch authority over the special counsel. Nonetheless, such a reading might authorize more significant control of a special counsel's decisions, ultimately restricting the independence of the office, at least compared to that envisioned by the independent counsel statute.\n\n\t\t\tLegislation to Establish Judicial Review of a Removal Decision\n\nCertain bills authorizing a judicial role in the removal of a special counsel may raise distinct constitutional questions. As an initial matter, proposals to authorize judicial review of a decision by the Attorney General to remove a special counsel, such as S. 1741 (115 th Congress), as well as S. 71 and H.R. 197 (116 th Congress), appear somewhat similar to provisions considered by the Court in Morrison . And the Supreme Court has otherwise adjudicated suits from government officers who have been removed from their position. It bears mention, however, that the traditional remedy in such situations has been for back pay, rather than reinstatement. Bills that limit available remedies to reinstatement, or require this result, depart from the independent counsel statute's provisions, which provided a reviewing court with the option to order reinstatement or issue \"other appropriate relief.\" One might distinguish between, on the one hand, a court's undisputed power to determine compliance with the law and award damages for violations, and, on the other, a potential judicial order directing an executive branch official to reappoint an individual to an office. In this vein, injunctive relief of this type could be viewed as inserting the judiciary into a role assigned by Article II to the executive branch.\nIn addition, at least one proposal, S. 1735 , might authorize the judiciary to play a more substantial role in the removal of a special counsel. That bill would bar the removal of a special counsel unless the Attorney General first files a petition with a three-judge court, and that court itself finds \"misconduct, dereliction of duty, incapacity, conflict of interest, or other good cause, including violation of policies of the Department of Justice.\" Inserting the judiciary into a removal decision, by requiring a court to determine in the first instance the grounds for the dismissal of an executive branch official before he may be removed, appears to go beyond the restrictions on the President's removal power previously approved by the Supreme Court in Humphrey ' s Executor and Morrison . As the Free Enterprise Fund Court explained, even in the prior cases that \"upheld limited restrictions on the President's removal power, it was the President\u2014or a subordinate he could remove at will\u2014who decided whether the officer's conduct merited removal under the good-cause standard.\" The body charged with determining whether good cause exists to remove a special counsel would not be one that is subordinate to or accountable to the President; indeed, that body is not located in the executive branch at all. Moreover, Free Enterprise Fund invalidated two layers of removal protection for executive branch officers as violating Article II. Here, a special counsel could not be removed unless permitted by Article III judges\u2014judicial officers who may not be removed except through the impeachment process. As such, with regards to this proposal, not only would two layers of removal protection shield a special counsel from dismissal, but one layer would be significantly more stringent than the for-cause protection in Free Enterprise Fund .\nFurther, while the Court in Morrison saw no issue with the independent counsel statute's provision authorizing ex post judicial review (i.e., after the fact) of a removal decision, that conclusion rested on the understanding that the executive branch retained discretion over the decision to remove an independent counsel. Judicial review in that situation was limited to ensuring compliance with the law. Indeed, the Morrison Court narrowly construed that statute to preclude any role for the judicial panel that was entrusted with appointing an independent counsel in removing him during an investigation or judicial proceeding. The Court explained that this move avoided an unconstitutional \"intrusion into matters that are more properly within the Executive's authority.\" Proposals that require an initial judicial finding of good cause in order to authorize removal arguably insert the judiciary into an executive branch function in a manner the Morrison Court appeared to consider questionable.\nOn the other hand, application of a functional approach akin to Morrison , which examined a variety of factors in adjudicating the separation of powers dispute, might nevertheless conclude that a requirement of an initial judicial finding of good cause in order to remove a special counsel does not impair the President's core Article II responsibilities. First, under S. 1735 , the Attorney General retains discretion to initiate a removal in the first place by petitioning the three-judge panel; that body would lack authority to remove a special counsel independently. Second, the previously upheld independent counsel statute authorized judicial review of a removal of the independent counsel and authorized reinstatement as a remedy. The bill's provision would shift the sequence of the judicial role from an ex post review to an ex ante (i.e., beforehand) authorization. Viewed in this light, it is unclear why that shift would necessarily make a substantive difference, because even if the executive branch ignored the provision allowing for ex ante review and removed a special counsel unilaterally, the special counsel could sue for reinstatement, which would leave the court in largely the same position. Finally, while requiring judicial authorization to remove a special counsel might intrude somewhat on the executive branch's Article II authority other aspects of the bill are less intrusive. For instance, the bill leaves discretion to appoint the special counsel with the Attorney General, and appears to permit removal for a wider range of conduct than did the independent counsel statute. Because the Morrison Court balanced a variety of factors and concluded that the independent counsel statute did not impermissibly interfere with the President's duty to execute the law, an application of Morrison might mean that these features ameliorate concerns about a judicial body first approving of a removal.\nLeaving aside issues arising under Article II of the Constitution, legislation requiring the Attorney General to first petition a federal court for a good cause finding before removing a special counsel might raise questions under Article III. The Constitution defines the proper scope of the federal courts' jurisdiction as limited to adjudicating \"cases\" and \"controversies.\" The Supreme Court has articulated several legal doctrines emanating from Article III that limit the circumstances under which the federal courts will adjudicate disputes. The Court has interpreted Article III to require adversity between the parties, or a live dispute that is \"definite and concrete, touching the legal relations of parties having adverse legal interests.\" Further, the Court has made clear that duties of an administrative or executive nature generally may not be vested in Article III judges. Article III courts are permitted to exercise certain non-adjudicatory functions, but these exceptions are generally limited to duties incident to the judicial function, such as supervising grand juries and participating in the issuance of search warrants. With respect to a suit by the Attorney General seeking ex ante judicial authorization to remove a special counsel, these requirements might not necessarily be met. For instance, given this procedural posture, it is not obvious who the adverse party would be as the legislation does not explicitly authorize the special counsel to participate in the proceedings. Likewise, the supervision of executive branch officers, including discretion to remove them, is traditionally an executive or administrative function, rather than a judicial one.\n\n\t\t\tRetroactive Application of Legislation to Insulate a Special Counsel\n\nFinally, certain bills that aim to insulate a special counsel from removal might raise unresolved questions concerning their retroactivity. For instance, S. 1741 (115 th Congress) would have provided that a special counsel may not be removed except for cause and that this provision retroactively applies to any special counsel appointed on or after May 17, 2017. Likewise, S. 71 and H.R. 197 (116 th Congress) contain a similar provision, although it applies to any special counsel appointed on or after January 1, 2017. One might argue that statutorily insulating a currently serving special counsel from removal improperly inserts Congress into the appointments process. The Supreme Court has invalidated legislation that explicitly authorized Members of Congress to appoint executive branch officers and has done the same to legislation authorizing Congress to remove an executive branch officer through a joint resolution. Insulating a currently serving executive branch officer from removal via statute might be seen as an attempt by Congress to subvert the purposes of the Appointments Clause, effectively transforming a particular prosecutor's office from one that is subject to executive branch control into one that is statutorily independent without allowing for a new appointment consistent with the Constitution. In particular, if such a bill were passed immediately, it might be seen to apply exclusively to a single individual in the executive branch, effectively appointing a particular executive branch officer for an indefinite time period. To the extent that this provision is viewed as a legislative aggrandizement of the executive's appointment power, it might raise separation-of-powers concerns.\nThat said, it does not appear that a Supreme Court case has directly addressed such a statutory provision. In Myers v. United States , the Court invalidated a statutory restriction on the removal of an executive branch officer. The pertinent statute in that case bestowed removal protection retroactively on executive branch officers, but the Court's opinion did not hinge on this feature of the statute. Further, such a provision would only codify requirements that already exist in regulations, which might be seen as a relatively minor adjustment to a special counsel's office that does not require a new appointment. Given the lack of preexisting case law relevant to such a provision, firm conclusions about its merit are likely premature.\n\n\tConclusion\n\nBoth Congress and the executive branch have employed a variety of means to establish independence for certain criminal investigations and prosecutions. The use of special prosecutors, independent counsels, and special counsels all have allowed for the investigation of executive branch misconduct. Nonetheless, efforts to provide independence for prosecutors from executive branch control often raise constitutional questions. In turn, proposals to statutorily protect a special counsel from removal thus raise important, but unresolved, constitutional questions about the separation of powers. As a general matter, simply insulating a future special counsel from removal except for specified reasons appears consistent with the Court's opinion in Morrison . To the extent the current Court might depart from the functional reasoning of that case and apply a more formal approach to the question, however, such proposals might raise constitutional objections. Likewise, constitutional objections might arise against proposals aimed to insulate a special counsel in a manner beyond the framework approved in Morrison .","output":"The Constitution vests Congress with the legislative power, which includes authority to establish federal agencies and conduct oversight of those entities. Criminal investigations and prosecutions, however, are generally regarded as core executive functions assigned to the executive branch. Because of the potential conflicts of interest that may arise when the executive branch investigates itself, there have often been calls for criminal investigations by prosecutors with independence from the executive branch. In response, Congress and the U.S. Department of Justice (DOJ) have used both statutory and regulatory mechanisms to establish a process for such inquiries. These frameworks have aimed to balance the competing goals of independence and accountability with respect to inquiries of executive branch officials.\nUnder the Ethics in Government Act of 1978, for example, Congress authorized the appointment of \"special prosecutors,\" who later were known as \"independent counsels.\" Under this statutory scheme, the Attorney General could request that a specially appointed three-judge panel appoint an outside individual to investigate and prosecute alleged violations of criminal law. These individuals were vested with \"full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice\" with respect to matters within their jurisdiction. Ultimately, debate over the scope, cost, and effect of the investigations (perhaps most notably the Iran-Contra and the Whitewater investigations) resulted in the law's expiration and nonrenewal in 1999.\nFollowing the lapse of these statutory provisions, DOJ promulgated regulations authorizing the Attorney General (or, if the Attorney General is recused from a matter, the Acting Attorney General) to appoint a \"special counsel\" from outside the federal government to conduct specific investigations or prosecutions that may be deemed to present a conflict of interest if pursued under the normal procedures of the agency. Special counsels are not subject to \"day-to-day supervision\" by any official and are vested \"within the scope of his or her jurisdiction, the full power and independent authority to exercise all investigative and prosecutorial functions of any United States Attorney.\"\nThe independent nature of these investigations has raised constitutional questions about the propriety of the appointment and removal mechanisms provided for the officials leading the inquiries. These concerns were addressed by the Supreme Court in the 1988 case of Morrison v. Olson, which upheld the constitutionality of the independent counsel statute. The reasoning of that opinion has been challenged, however, and the Court's subsequent analysis of related issues in the 1997 case of Edmond v. United States and the 2010 case Free Enterprise Fund v. Public Accounting Oversight Board did not apply the standard enunciated in Morrison. The constitutional status of a statutory framework similar to the independent counsel statute is thus subject to debate. Several bills introduced in the 116th Congress (including S. 71 and H.R. 197, which merge aspects of two preceding bills introduced in the 115th Congress, S. 1735 and S. 1741) would statutorily insulate a special counsel from removal, echoing aspects of the independent counsel statute's provisions. Whether such proposals would withstand constitutional challenge today might ultimately turn on the continued vitality of the analysis applied in Morrison."}
{"id":"gao_GAO-18-654","pid":"gao_GAO-18-654_0","input":"\tBackground\n\n\t\tPreventing Conflict and Seeking Stability Abroad Are U.S. Priorities\n\nThe National Security Strategy released in December 2017 states that the  U.S. government has a national security interest in addressing conflict  and instability in fragile and failing nations. The strategy commits to  strengthening nations where state weakness may foster threats such as  violent extremism. The strategy also prioritizes efforts that empower  reform-minded governments, people, and civil society in order to address  the drivers of state fragility. In the SAR, a joint review of U.S. stabilization  efforts\u2014diplomacy, assistance, and defense\u2014 the Secretaries of State  and Defense and the USAID Administrator stated that increasing stability  and reducing violence in conflict-affected areas are essential to meeting  U.S. national security goals. State and USAID\u2019s joint strategic plans have  identified strategic objectives to counter instability, transnational crime,  and violence that threaten U.S. interests. Notably, the plan for fiscal  years 2018\u20132022 states that the agencies will make early investments in  preventing conflict, atrocities, and violent extremism before they spread.  The 2018 National Defense Strategy identifies objectives to deter  adversaries from aggression against U.S. interests and prevent terrorists  from directing or supporting external operations against the United States  and its citizens and allies overseas.\nAdditionally, the Quadrennial Diplomacy and Development Review  released in 2015 and covering 2015 to 2019 outlines the lines of effort  that fall under State and USAID\u2019s commitment to prevent and mitigate  conflict. These lines of effort include countering violent extremism,  strengthening U.S. and international capacity to prevent conflict,  preventing atrocities, establishing frameworks for action in fragile states,  strengthening partner capacity to protect civilians and restore peace, and  eliminating the threat of destabilizing weapons. In the Quadrennial  Defense Review released in 2014 and covering 2014\u20132018, DOD also  asserts that \u201cthe surest way to stop potential attacks is to prevent threats  from developing.\u201d The 2014 Quadrennial Defense Review further states  that tackling root drivers of conflict, including building capacity with allied  and partner militaries, and sustaining a global effort to detect, disrupt, and  defeat terrorist plots are part of DOD\u2019s efforts to protect the United States.\nU.S. foreign policy strategies and plans identify the Middle East and  Africa as strategically important regions affected by conflict and instability.  In countries such as Iraq, Nigeria, and Syria, the United States is working  to address drivers of conflict and stabilize areas liberated from violent  extremist groups.\nIraq. As we have previously reported, U.S. government efforts for the  global war on terrorism in Iraq began in 2003. Since the removal of  the Ba\u2019ath regime and the construction of a new government, Iraq has  experienced varying levels of political instability, sectarianism, and  conflict. In December 2011, the last units of U.S. Forces\u2013Iraq were  withdrawn from that country. After their departure, the United States  continued to provide assistance such as training and equipment to  Iraq\u2019s military and security forces and funding for programs to  strengthen political institutions and civil society organizations and to  promote economic growth in Iraq. In 2014, the Islamic State of Iraq  and Syria (ISIS) emerged as a major force in Iraq, destabilizing  various areas of the country according to reporting from State and  USAID. As of December 2017, Iraqi forces, with support from the  United States and the Global Coalition to Defeat ISIS (Coalition), had  liberated the country\u2019s territory from the control of ISIS, according to  State (see fig. 1). According to a State official, although ISIS no  longer holds Iraqi territory, it remains a terrorist threat.\nSyria. Syria\u2019s instability is largely caused by an ongoing civil war that  began with a government crackdown on antigovernment protests in  March 2011. USAID has reported that the conflict has led to  economic collapse, a breakdown in services and governance, and  instability, which violent extremist groups, including ISIS, have sought  to exploit. Millions of Syrians have become refugees or internally  displaced due to this crisis, according to reporting from the United  Nations High Commissioner for Refugees. In May 2012, the United  States began providing nonlethal aid to Syrian opposition forces, and  in September 2014, the United States began air strikes against ISIS  components in Syria. In January 2015, DOD created the Syria Train  and Equip program to provide assistance, including training and  equipment, to vetted members of the Syrian opposition and to support  efforts to counter ISIS and liberate territory from ISIS. For  populations that remain in Syria, governance entities and institutions  face challenges in delivering services to their communities, according  to USAID. As of July 2018, DOD has reported that the Syrian  Democratic Forces, with Coalition support, continued efforts to defeat  ISIS in the middle Euphrates River Valley (see fig. 1 above).  Additionally, the civil war between Syrian opposition forces and the  Assad regime was ongoing as of July 2018, according to reporting  from the United Nations.\nNigeria. There are multiple sources of instability across Nigeria. The  terrorist groups Boko Haram and its offshoot ISIS-West Africa have  destabilized areas in northeast Nigeria and the greater Lake Chad  Region leaving over 2 million people displaced and millions more  dependent upon humanitarian assistance as of June 2018, according  to USAID reporting. Also, in the Middle Belt and Northwest of the  country, according to a State official and reporting from Search for  Common Ground, there is rural violence among civilians which  includes criminal attacks, banditry, cattle rustling, and long-standing  intercommunal conflicts between farming and herding communities.  This violence has exacerbated tensions between the populations in  the north and south and among ethnic and religious groups across the  country. Figure 2 shows incidents involving fatalities due to conflict  and violent extremism in Nigeria from January 1, 2012 to September  8, 2018.\n\n\t\tMultiple U.S. Entities Conduct Efforts to Address Conflict Abroad\n\nThe U.S. government, through federal agencies and federally funded  organizations, supports numerous efforts to address instability and  prevent conflicts abroad.\nState and USAID. These are the principal agencies conducting U.S.  foreign policy and international development and humanitarian  assistance. State is the Executive Branch\u2019s lead foreign affairs  agency. State leads U.S. foreign policy through diplomacy, advocacy,  and assistance. USAID is the U.S. government\u2019s lead international  development and humanitarian assistance agency with a key role in  U.S. efforts to ensure stability, prevent conflict, and build citizen- responsive local governance.\nDOD. While DOD\u2019s primary mission is to provide combat-ready  military forces to deter war and protect the United States, DOD also  provides support to foreign disaster relief through humanitarian  assistance and stabilization efforts across all phases of conflict and  military operations, and in combat and non-combat environments.\nU.S. Institute of Peace (USIP). USIP is an independent national  institute, founded by Congress, to promote international peace and  the resolution of conflicts among the nations and peoples of the world  without recourse to violence. USIP is governed by a bipartisan Board  of Directors, which includes the Secretaries of State and Defense or  their designees, the President or Vice President of the National  Defense University, and 12 others. USIP\u2019s primary funding comes  from congressional appropriation and can be supplemented by funds  from U.S. government partners. USIP staff work abroad and at its  headquarters in Washington, D.C. USIP initiates its own work and  enters into interagency agreements with U.S. agencies such as State,  USAID, and DOD, according to USIP officials. Because USIP is not  an agency within the executive branch, it is not a formal participant in  interagency national security policy processes involving State, USAID,  and DOD, according to State.\nU.S. agencies and USIP are engaged in efforts to counter violent  extremism and address conflict in countries affected by instability and  violent conflicts, including Iraq, Syria, and Nigeria. For example, as areas  are liberated from ISIS in Iraq and Syria, the United States is working with  its partners to try to consolidate gains, reduce levels of local instability,  peaceably manage change, and build the capacity of local governance  entities. To improve the effectiveness of these efforts, U.S. agencies have  evaluated lessons from similar efforts in countries such as Afghanistan  and Iraq. The SAR and assessments from the Special Inspector General  for Afghanistan Reconstruction and the Special Inspector General for Iraq  Reconstruction are examples of U.S. government initiatives to identify  lessons learned from past U.S. efforts.\n\n\t\tKey Practices That Can Enhance Interagency Collaboration\n\nIn prior work, we have identified key collaboration practices that can be  used to assess collaboration at federal agencies (see fig. 3). These  practices can help agencies implement actions to operate across  boundaries, including fostering open lines of communication, and  establish goals based on what the agencies share in common.  Additionally, clarifying roles and responsibilities allows agencies to  determine who will do what, organize their joint and individual efforts, and  facilitate decision making. We have previously found that improving  coordination and collaboration across agencies can potentially help  agencies reduce or better manage fragmentation, overlap, and  duplication.\n\n\tU.S. Agencies and USIP Conduct Various Efforts to Prevent and Mitigate Violent Conflict and Stabilize Conflict- Affected Areas Abroad\n\nState, USAID, DOD, and USIP reported that they have conducted a  variety of efforts in Iraq, Nigeria, and Syria aimed at preventing and  mitigating violent conflicts and stabilizing areas affected by such  conflicts. In response to our request, each agency and USIP provided  descriptions and goals for their specific program-level or project-level  efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).  To identify these efforts, each agency and USIP used its own terminology  and definitions that were in place in fiscal year 2017.\nEfforts reported by State as active in fiscal year 2017. State reported  that it conducted a range of ongoing conflict mitigation and stabilization  efforts to address violent conflict in Iraq, Nigeria, and Syria, in fiscal year  2017. State, in addition to conducting its own efforts, reported that it  sometimes conducted these efforts through grants to implementing  partners or through interagency agreements with USIP.\nFor Iraq, State reported a list of three individual efforts and four  categories of other efforts as active in fiscal year 2017. These efforts  included, for example, antiterrorism training and equipment for law  enforcement; promotion of democratic governance and protection of  basic human rights; support for religious and ethnic minority groups,  internally displaced persons (IDP), and returnees; and clearance of  explosive hazards. These programs were intended to help defeat ISIS  and transnational terror groups, improve governance and rule of law,  and promote reconciliation and the safe return of displaced Iraqis.  Figure 4 depicts clearance operations for explosive remnants of war  at a water treatment facility in Iraq supported by State.\nFor Nigeria, State reported 21 efforts as active in fiscal year 2017.\nState supported programs to prevent and counter violent extremism  though media programing, human rights training, police and law  enforcement training and equipment, conflict early warning and  response systems, and women\u2019s and youth empowerment. According  to State, these programs were intended to aid in the fight against  Boko Haram and ISIS-West Africa by countering the radicalization  process that leads individuals to violent extremism, protecting civilians  from terrorist groups, and assisting the victims of Boko Haram and  ISIS-West Africa and their host communities. To address crime and  communal conflict in other regions of Nigeria, State reported that it  conducts human rights and investigative training for Nigerian police,  supports efforts to teach conflict resolution skills to youth, convenes  dialogues between farmer and herder stakeholders to develop conflict  resolution mechanisms, and other efforts.\nFor Syria, State reported nine efforts as active in fiscal year 2017.\nState reported efforts that included providing training, equipment, and  stipends to Free Syrian Police and education directorates in  opposition-controlled parts of the country, and building the capacity of  civil society and advocacy organizations, local councils, and civilian  networks. According to State, these programs were intended to  support the opposition and help counter violent extremists, such as  ISIS and al Qaeda in Syria.\nAppendix II presents a full list of State\u2019s reported conflict mitigation and  stabilization efforts and their respective goals for Iraq, Nigeria, and Syria,  active in fiscal year 2017.\nEfforts reported by USAID as active in fiscal year 2017. USAID  reported that it conducted a range of ongoing conflict mitigation and  stabilization efforts to address violent conflict in Iraq, Nigeria, and Syria, in  fiscal year 2017. USAID reported that it primarily conducted these  efforts through grants and contracts awarded to implementing partners.\nFor Iraq, USAID reported one effort as active in fiscal year 2017.\nUSAID, along with other international donors, supplies funding to the  United Nations Development Program\u2019s (UNDP) Funding Facility for  Stabilization. The UNDP, at the request of the Prime Minister of Iraq,  and with support from leading members of the Coalition to Degrade  and Defeat the Islamic State of Iraq and the Levant (ISIL), established  the Funding Facility for Stabilization in June 2015 to help rapidly  stabilize newly retaken areas. The aim is to help restore confidence in  the leading role of the Iraqi government in these areas and give  populations a sense of progress and forward momentum. According  to USAID, the Funding Facility for Stabilization supports restoration of  essential services and efforts to kick-start the local economy, enabling  internally displaced persons to return to their homes.\nFor Nigeria, USAID reported five efforts as active in fiscal year 2017.\nUSAID reported that it works through its implementing partners to  conduct a variety of ongoing country-specific efforts including working  with youth to develop countering violent extremism (CVE) action  plans, building the capacity of civil society organizations and religious  leaders, and providing education for displaced persons and host  communities. According to USAID, these efforts are intended to  counter violent extremism from Boko Haram and ISIS-West Africa,  reduce conflict between herders and farmers, and support state and  local government ownership for the continued education of internally  displaced children.\nFor Syria, USAID reported five efforts as active in fiscal year 2017.\nUSAID reported that it supports a multidonor trust fund to restore  essential services and works through an implementing partner to  enable local councils\u2019 ability to restore essential services. USAID  reported that it also works through implementing partners to support  democratic institutions, livelihoods, and local nongovernmental  organizations. According to USAID, the intent of these programs is to  enable the early recovery of areas liberated from ISIS by  strengthening resistance to extremists, democratic processes, and the  influence of strategic moderate actors. Figure 5 depicts a solar array  installation that provides renewable energy for a drinking water  pumping station in Dar\u2019a Province, Syria, supported by a USAID  essential services program.\nEfforts reported by DOD as active in fiscal year 2017. DOD reported  that it conducted stabilization efforts to address violent conflict in Iraq and  Syria, in fiscal year 2017.\nIn Iraq, DOD reported one effort as active in fiscal year 2017. Medical  Staff of the Combined Joint Forces Land Component Command\u2014 Operation Inherent Resolve provided immediate medical trauma  supplies to the World Health Organization to fill a gap in medical  supplies available to treat injured civilians. According to DOD, the  project was coordinated with State and USAID and was funded  through the Overseas Humanitarian, Disaster, and Civil Aid  (OHDACA) appropriation. According to DOD, this project was  intended to increase the chance of survival for civilians affected by  military operations, increase civilian confidence in the government and  the humanitarian assistance community, and provide access,  influence, and visibility to DOD.\nIn Syria, DOD reported eight efforts as active in fiscal year 2017. Civil  Affairs personnel of Special Operations Joint Task Force\u2014Operation  Inherent Resolve provided classroom furniture and school supplies;  cold weather items such as jackets, hats, gloves, socks and blankets;  and in one area food, cooking fuel, construction material, and garbage  removal. The projects were often managed through the local councils.  According to DOD, the projects were coordinated with State and  USAID and were funded through the OHDACA appropriation.  Generally, according to DOD, the projects were intended to assist  vulnerable populations, protect them from ISIL, and support local  councils, while also providing access, visibility, and influence for DOD  forces.\nAppendix IV presents a full list of DOD\u2019s reported conflict stabilization  efforts and their respective goals for Iraq and Syria, active in fiscal year  2017.\nEfforts reported by USIP as active in fiscal year 2017. Although USIP  generally refers to all of its work as \u201cconflict prevention and resolution,\u201d  USIP officials stated that all of USIP\u2019s efforts fit under the general  umbrella of conflict prevention, mitigation, and stabilization and thus  reported all of USIP\u2019s efforts abroad for Iraq, Nigeria, and Syria (and in  neighboring countries for Syria) that were active in fiscal year 2017.  USIP reported that it conducts its efforts in conjunction with local staff and  implementing partners. According to USIP, some USIP efforts are  supported through interagency agreements with U.S. agencies.\nFor Iraq, USIP reported eight efforts as active in fiscal year 2017.\nUSIP reported that it facilitated targeted dialogues among Iraq\u2019s  religious minorities to address security and governance challenges to  reduce the likelihood of recurring violence and enable the return of  IDPs. These dialogues created a monitoring framework to provide  early warnings of potential violence. USIP also reported that it  facilitated dialogues among Iraqis intended to prevent revenge acts of  violence, facilitate the return of the internally displaced, and increase  the resilience of communities to violent extremism from ISIS or others.  Additionally, USIP reported that it provided both governmental and  nongovernmental organizations with training in conflict management  and identified influential religious leaders in specific conflict zones for  future Iraqi-led mediations, dialogues, and peace and reconciliation  efforts. Further, USIP reported that it conducted multiple justice and  security dialogues that included police and government officials and  citizens in areas affected by the aftermath of ISIS to collect and  disseminate lessons learned and best practices.\nFor Nigeria, USIP reported 14 efforts as active in fiscal year 2017.\nUSIP reported that it conducted training programs, facilitated  dialogues, established working groups, collected and shared lessons  learned and best practices, and conducted in-country research and  assessments involving civilian populations, nongovernmental  organizations, police, and youth. The intent of these programs,  according to USIP, was to reduce violent conflict and its root causes,  strengthen the country\u2019s recovery from Boko Haram, and prevent the  emergence of other extremist groups in support of long-term stability.  In addition, according to USIP, the institute connected U.S.  policymakers with key Nigerian officials at the subnational levels who  wield significant influence in Nigeria\u2019s federal government system but  with whom the United States has had limited contact. Figure 6 depicts  a USIP symposium in Washington, D.C., funded by State, which  included governors from states across northern Nigeria to foster key  exchanges and critical discussions with leading American and  international experts on the drivers of violent conflict in the region and  how to resolve them.\nFor Syria, USIP reported three efforts as active in fiscal year 2017.\nUSIP reported that it held dialogues with interfaith and other key  leaders to strengthen civil society\u2019s engagement and coordinating role  with civic, religious, and tribal leaders on conflict management and  prevention. For one effort, according to USIP, it has three ongoing  grants related to the Syria conflict in neighboring countries that focus  on reducing tensions associated with the absorption of Syrian  refugees.\nAppendix V presents a full list of USIP\u2019s reported efforts and their  respective goals for Iraq, Nigeria, and Syria, active in fiscal year 2017.\n\n\tU.S. Agencies and USIP Have Incorporated Aspects of Key Collaboration Practices for Their Conflict Prevention, Mitigation, and Stabilization Efforts but Have Not Documented Their Agreement\n\nState, USAID, DOD, and, where appropriate, USIP have incorporated  aspects of key collaboration practices to coordinate their conflict  prevention, mitigation, and stabilization efforts for Iraq, Nigeria, and Syria.  However, the agencies have not documented their agreement on  coordination for stabilization efforts in conflict-affected areas through  formal written guidance and agreements that address key collaboration  practices. The agencies have individually and jointly established some  common outcomes for stabilization efforts in Iraq, Nigeria, and Syria.  Additionally, State, USAID, DOD, and USIP have generally taken steps to  bridge their organizational cultures; identify sources of leadership that  facilitate coordination; establish roles and responsibilities; and include  relevant participants for their conflict prevention, mitigation, and  stabilization efforts in these countries. During the course of our review,  State, USAID, and DOD released the SAR, which identified areas where  U.S. government coordination for stabilization efforts in conflict-affected  areas could be improved; however, the agencies have not documented  their agreement as to how they will coordinate these efforts in formal  written guidance and agreements that address key collaboration  practices. Because multiple federal entities are engaged in U.S. conflict  prevention, mitigation, and stabilization efforts in Iraq, Nigeria, and Syria,  there is some inherent fragmentation in their efforts as well as the  potential for overlap and duplication. According to key practices for  enhancing interagency collaboration, articulating interagency agreement  on collaborative efforts in formal documents, can strengthen those  collaborative efforts and could reduce the potential for unnecessary  fragmentation, overlap, and duplication.\n\n\t\tOutcomes and Accountability\n\nWe previously found that establishing common outcomes can help  agencies shape and define the purpose of their collaborative efforts.  According to a senior State official, the classified country strategies  maintained by the National Security Council (NSC) may contain common  outcomes for some U.S. conflict prevention, mitigation, and stabilization  efforts. However, the NSC did not respond to our requests for information  regarding NSC-level country strategies for Iraq, Nigeria, and Syria.\nIn the absence of information from the NSC, we reviewed information  provided by the agencies as well as other government documents and  found that outcomes for U.S. stabilization efforts in Iraq, Nigeria, and  Syria have generally been established by one or more of the agencies.  For example, for its stabilization efforts for Iraq, USAID reported that its  outcome metric is the return of internally displaced populations to their  communities. USAID also reported that it monitors progress toward this  outcome using, in part, quarterly reporting from the United Nations  Development Program (UNDP), the implementer for the primary  mechanism through which the United States and other donor partners  fund stabilization efforts in Iraq.\nSimilarly, in the case of Nigeria, the U.S. government has established  common outcomes and accountability mechanisms related to U.S. efforts  to counter Boko Haram and ISIS-West Africa, which includes stabilization  assistance. For example, the interagency, NSC-approved U.S. Strategy  for Countering Boko Haram\/ISIS-West Africa (March 2017), states that  the United States seeks long-term end states under which Lake Chad  Basin countries, in tandem with local authorities and international  partners, are able to address specific regional and community-level  conditions that are drivers of conflict and that make communities  vulnerable to violent extremist groups. The National Counterterrorism  Center facilitates an annual assessment of this strategy, and State,  USAID, and DOD review their progress toward achieving objectives in  this strategy during weekly meetings, according to State officials.\nFor Syria, in January 2018, then-Secretary of State Tillerson identified the  creation of conditions for the safe and voluntary return of Syrian refugees  and internally displaced persons as one of several end states for Syria.  However, agency officials reported different views regarding clarity about  end states and goals for U.S. efforts in Syria. While some U.S. officials  we interviewed could point to sources for U.S. strategy in Syria, other  U.S. officials told us that the United States\u2019 policy and goals for Syria  were unclear. State and DOD officials indicated that the U.S. goals for  Syria change in response to conditions where U.S. agencies and their  partners operate. A USAID official told us that events on the ground often  overtake U.S. efforts, and the complicated regional dynamics also affect  U.S. policy goals.\nMoreover, the U.S. government has also developed Integrated Country  Strategies for Iraq and Nigeria. The Integrated Country Strategies  developed by U.S. embassies and missions may contain outcomes  related to, but not necessarily specific to, U.S. conflict prevention,  mitigation, and stabilization efforts abroad, according to a senior State  official. According to State guidance, Integrated Country Strategies  should articulate a common set of U.S. government goals and objectives  in a country and may also outline performance indicators to measure  progress toward each mission objective. The guidance further states that  the development of these strategies should include coordination and  collaboration among State, USAID, and other U.S. government agencies  at the mission.\nFinally, at a global-level, State, USAID, and DOD have identified a need  to improve the outcomes and accountability of U.S. stabilization efforts.  Specifically, the 2018 SAR recommended that State, USAID, and DOD  work with relevant U.S. embassy, State regional bureaus, DOD  combatant commands, and other stakeholders to develop an outcome- based political strategy for stabilization in countries where stabilization is  a high priority. The SAR notes the importance of developing an  outcome-based political strategy that outlines core assumptions and  achievable end states and that guides all lines of effort to ensure unity of  purpose within the U.S. government. The SAR also identified a need to  establish indicators to measure changes in the conflict environment and  track them consistently over time and stated that doing so could facilitate  more rigorous reviews by policy makers to determine whether  adjustments are needed in U.S. government political strategy and  objectives.\nState and USIP officials reported that due to USIP\u2019s status as an  independent, federally funded institute that operates outside of executive  branch mechanisms, USIP is not a direct participant in processes to  establish common outcomes and accountability mechanisms for U.S.  government conflict prevention, mitigation, and stabilization efforts.\n\n\t\tBridging Organizational Cultures\n\nWe previously found that it is important for agencies to establish ways to  operate across agency boundaries. According to State, USAID, and DOD  officials, they have taken steps to bridge their different organizational  cultures with regard to their conflict prevention, mitigation, and  stabilization efforts for Iraq, Nigeria, and Syria. Specifically, officials said  that they have developed a variety of ways to jointly operate across  agency boundaries, such as through interagency groups and special  coordination positions. USIP does not participate in such interagency  mechanisms; however, it reported that it communicates and coordinates  with State, USAID, and DOD through other means, such as through  bilateral communications and interagency tabletop exercises.\n\n\t\t\tInteragency Groups\n\nState, USAID, and DOD have established various interagency groups to  coordinate their efforts for Iraq, Nigeria, and Syria. According to State,  USAID, and DOD officials, interagency working groups help agencies to  reduce the potential for overlap and duplication of effort. Examples of  interagency groups, by country, are described below.\nIraq: A \u201cLiberated Areas Working Group\u201d serves as a clearinghouse  and information exchange for both mission-level and headquarters- based counterparts to coordinate agencies\u2019 post-ISIS stabilization  efforts for Iraq. As another example, the Ambassador or Deputy Chief  of Mission at Embassy Baghdad leads a stabilization and  humanitarian assistance working group that meets biweekly and  includes participation from State, USAID, and DOD.\nNigeria: In 2015, State established an interagency group, headed by a  retired U.S. Ambassador, that aims to ensure the coordination of U.S.  government efforts to counter Boko Haram. Additionally, the U.S.  mission in Nigeria has working groups that examine various issues,  such as U.S. efforts to mitigate conflict in the country and address  conflict issues in northeast Nigeria.\nSyria: Given that the U.S. agencies do not have an embassy-based  presence in Syria, State, USAID, and DOD coordinate their  stabilization efforts for Syria through three interagency platforms: the  Southern Syria Assistance Platform (SSAP), located in Jordan; the  Syria Transition Assistance Response Team (START), located in  Turkey; and, according to a State official, START-Forward in  northeastern Syria, which reports to START. START and SSAP  personnel noted that the colocation of State and USAID personnel  through these platforms has facilitated coordination between the two  agencies, including information sharing. Further, a State Office of  Inspector General inspection of the U.S. Embassy Ankara, Turkey,  described START as a \u201ccohesive unit\u201d that blends State and USAID  officials, and as a unique and \u201cinnovative model for diplomacy in  dangerous environments.\u201d In addition, for northeast Syria, START  established four stabilization-related working groups that meet on a  regular basis and include civilian and military representation.\nUSIP does not participate in these interagency working groups. Rather,  USIP reported that it coordinates on a bilateral, multilateral, and as- needed basis with State, USAID, and DOD headquarters personnel as  well as with embassy personnel in the countries where USIP conducts  work. USIP also reported that it convenes interagency officials through  various programs and events, such as tabletop exercises and  conferences. For example, in 2016, USIP convened State, USAID, and  DOD, along with various nongovernmental and international  organizations, to design and implement a tabletop exercise on countering  violent extremism in the Lake Chad Basin.\n\n\t\t\tInteragency Collaboration Staff Positions\n\nState, USAID, and DOD officials reported that they also bridge their  organizational cultures through staff positions that are aimed at  enhancing interagency collaboration, such as liaison positions and  officials who are embedded in other organizations. For example, SSAP  and START each have civil-military liaisons, and agency officials said that  these positions have helped to facilitate information sharing among State,  USAID, and DOD. As another example, DOD officials reported that  embedded State and USAID officials at U.S. Africa Command have  helped to inform DOD\u2019s perspective on stabilization in Nigeria.\nUSIP reported that to help bridge organizational cultures and enhance  cooperation with its agency partners, the institute operates an annual  interagency fellows program. Through the program, USIP hosts one  fellow each from State and USAID, and two military officers\u2014one Marine  lieutenant colonel and one Army lieutenant colonel\u2014to conduct research  and work alongside USIP program staff, according to USIP.\n\n\t\t\tInteragency Definitions of Conflict Prevention, Mitigation, and Stabilization\n\nIn 2018, State, USAID, and DOD established a common definition of  \u201cstabilization.\u201d The three agencies have not established common  definitions of the terms \u201cconflict prevention\u201d and \u201cconflict mitigation.\u201d In  the SAR, State, USAID, and DOD defined \u201cstabilization\u201d as \u201ca political  endeavor involving an integrated civilian-military process to create  conditions where locally legitimate authorities and systems can peaceably  manage conflict and prevent a resurgence of violence. Transitional in  nature, stabilization may include efforts to establish civil security, provide  access to dispute resolution, and deliver targeted basic services, and  establish a foundation for the return of displaced people and longer term  development.\u201d According to USAID\u2019s Administrator, the SAR built on  lessons learned from Iraq and Syria, among other locations. The SAR  states that, despite the U.S. government\u2019s significant international  experience in conducting stabilization efforts over recent decades, the  U.S. government\u2019s concept of stabilization was previously ill-defined and  poorly institutionalized across government structures. The SAR also  notes that the lack of standardization in defining and conducting  stabilization led to repeated mistakes, inefficient spending, and poor  accountability for results. During the course of our review, agency and  USIP officials expressed varying views related to the feasibility of  articulating a common definition for \u201cconflict prevention\u201d and \u201cconflict  mitigation.\u201d For example, State and USAID officials noted that all of their  agencies\u2019 foreign assistance and diplomatic efforts could be considered  conflict prevention. USAID also noted that defining the issues or problem  sets associated with \u201cconflict prevention\u201d or \u201cconflict mitigation\u201d will  depend, in part, on the context in which the relevant government agency  engages on those issues. In addition, State\u2019s Bureau of Conflict and  Stabilization Operations opined that conflict management and mitigation  is an evolving field of practice as well as an area that can encompass a  very broad and multifaceted range of efforts, including diplomacy, foreign  assistance, sanctions, and mobilization of international actions. Agency  and USIP officials did not identify a negative effect associated with the  lack of common definitions of the terms \u201cconflict prevention\u201d and \u201cconflict  mitigation.\u201d\nNonetheless, according to State and DOD officials, the agencies have  started discussing the merits and feasibility of defining \u201cconflict  prevention.\u201d For example, in response to our inquiry during a joint  meeting of the three agencies with us in March 2018 to discuss the SAR,  a senior State official noted that the three agencies were collectively  exploring the feasibility of developing a standardized definition and  harmonized approach for conflict prevention. In its technical comments to  our draft report, State indicated that the agencies have begun to  collaborate on the development of a definition for \u201cconflict prevention.\u201d In  addition, as part of its planned structural reorganization of its  headquarters bureaus, USAID is proposing the establishment of a new  Bureau for Conflict Prevention and Stabilization.\n\n\t\tLeadership\n\nWe previously found that it is important for agencies to identify sources of  leadership for the collaborative effort. Agency and USIP officials identified  sources of leadership, such as various NSC committees and special  leadership positions, that facilitate coordination of the U.S. government\u2019s  conflict prevention, mitigation, and stabilization efforts for Iraq, Nigeria,  and Syria. State and DOD officials reported that the NSC plays a  leadership role in providing strategic direction and policy guidance on  issues related to conflict prevention, mitigation, and stabilization. State  and DOD officials also said that the NSC convenes interagency actors,  including State, USAID, and DOD, to discuss high-level issues in these  areas. State reported that the NSC Fragile States and Stabilization  Policy Coordination Committee is the broadest conflict-related  coordination group. State also reported that a significant degree of  NSC-level coordination on conflict-related issues occurs through country- specific working groups, including the groups for Iraq, Syria, and Nigeria.  The NSC-level Atrocities Prevention Board is another interagency  mechanism that covers conflict-related issues. It has the primary purpose  of coordinating a whole-of-government approach to prevent mass  atrocities and genocide. While USIP is not a member of NSC-level  groups, USIP reported that it engages with the NSC regarding national  security issues on a bilateral basis.\nAgency officials also told us that various special diplomatic positions,  such as special envoys and designated coordinators, are a source of  leadership for the coordination of U.S. efforts to address conflict abroad.  State and USAID officials cited the role of the Special Presidential Envoy  for the Global Coalition to Counter ISIS, who reports to the Secretary of  State, as a source of leadership for U.S. stabilization efforts for Iraq and  Syria. State officials also cited the former U.S. Special Envoy for Syria  position as a source of leadership for U.S. efforts for Syria.\nIn 2015, the Assistant Secretary of State for African Affairs at the time  appointed a retired Ambassador as Senior Coordinator on Boko Haram  for the Lake Chad Basin region (which includes Nigeria), according to a  State official. The Senior Coordinator on Boko Haram chairs a weekly  interagency working group that includes a wide array of U.S. agency  offices, including State, USAID, and DOD elements at both the  headquarters and field-levels. According to DOD and State officials, the  weekly meetings led by the Senior Coordinator on Boko Haram have  helped U.S. agencies deconflict their efforts. According to a USIP report,  the Senior Coordinator position has improved the U.S. government\u2019s  ability to align its efforts at both senior and working levels and has  supported broad, interagency information sharing and coordination in the  development of a common U.S. strategy to defeat Boko Haram.\nAgency officials also cited field-level leadership as helpful in coordinating  U.S. government efforts for Iraq, Nigeria, and Syria. For example, for  Nigeria, a USAID official told us that the Ambassador and the Deputy  Chief of Mission at the U.S. embassy have enhanced and led interagency  coordination. The Ambassador has provided input to help deconflict U.S.  programming related to conflict mitigation and stabilization, according to  this USAID official. For Syria, agency officials identified the leadership of  START as helpful in coordinating U.S. stabilization efforts for Syria.  Agency officials provided various views regarding the sufficiency of  leadership mechanisms currently in place for coordinating U.S.  stabilization efforts for Syria. While U.S. field-level efforts for Iraq and  Nigeria are led by Ambassadors, the U.S. government\u2019s ambassadorial  position for Syria has been vacant since 2014. Some officials told us  there was a lack of centralized leadership and decision-making authority  for Syria, while others said that the current leadership structures were  generally sufficient for the coordination of U.S. government efforts for  Syria.\n\n\t\tClarity of Roles and Responsibilities\n\nWe previously found that it is important for agencies to define and agree  on their respective roles and responsibilities for a collaborative effort. We  found that agencies\u2019 roles and responsibilities for conducting stabilization  efforts for Iraq, Nigeria, and Syria were generally clear, and through the  SAR, agencies have taken steps to clarify their stabilization roles and  responsibilities at a global level. USAID officials reported that the agency  has largely funded and overseen stabilization efforts for Iraq through the  UNDP and local implementers. In Syria, State and USAID reported that  they formed a combined team for implementing stabilization assistance,  with support and equipment supplied by the U.S. military. For Nigeria,  according to DOD and USAID officials, roles and responsibilities for  agencies, including lead and supporting roles, have been defined for the  U.S. counter Boko Haram and ISIS-West Africa effort.\nThrough the 2018 SAR, State, USAID, and DOD recommended the  clarification of their respective roles and responsibilities for conducting  U.S. stabilization efforts abroad. The SAR recommended State as the  overall lead federal agency for U.S. stabilization efforts, USAID as the  lead implementing agency for nonsecurity U.S. stabilization assistance,  and DOD as a supporting federal agency that provides security and  reinforces civilian efforts where appropriate. The SAR noted that clear  lines of authority between U.S. agencies would improve effectiveness,  reduce duplication and confusion, enable greater accountability, and fully  operationalize a whole-of-government approach. In June 2018, the  Secretaries of State and Defense and the USAID Administrator approved  the SAR, including its recommendations regarding proposed U.S. agency  roles and responsibilities for U.S. stabilization efforts.\nIn addition to the SAR, a 2018 DOD-sponsored study also recommended  that DOD play a primarily supporting role in non-military, U.S. stabilization  efforts. According to a DOD official, DOD is in the process of updating  its stabilization policy to reflect DOD\u2019s supporting role in U.S. government  stabilization efforts, in accordance with the SAR. As indicated above, U.S.  agencies do not distinguish their coordination of prevention and mitigation  efforts as discrete areas of work; as a result, we were unable to assess  specific roles and responsibilities among U.S. agencies for these areas.\nAccording to USIP, it aims to complement U.S. executive branch efforts  and partner with U.S. agencies to prevent and resolve conflict in areas of  interest to U.S. security. USIP reported that it convenes U.S. government  and non-U.S. government entities on a variety of high-level policy issues;  conducts its own research and programs; and partners with U.S.  agencies to conduct research and programs abroad. State, DOD, and  USAID officials said that USIP plays a valuable, unique, and helpful role  given its status as an independent organization, its specialized expertise,  its ability to convene interagency actors in a non-official setting, and its  ability to build local relationships through a continuous, field-based  presence in certain countries. For example, State officials and  nongovernmental partners of USIP in Nigeria told us that USIP played a  beneficial role in convening national and local Nigerian leaders for peace  and reconciliation dialogues.\n\n\t\tParticipants\n\nWe previously found that it is important to ensure that the relevant  participants have been included in the collaborative effort. U.S.  government entities conducting conflict prevention, mitigation, and  stabilization efforts abroad have demonstrated the key collaboration  practice of ensuring the inclusion of all relevant participants. State,  USAID, DOD, and other agency officials identified State, USAID, and  DOD as the primary U.S. government agencies that participate in  mechanisms to coordinate U.S. conflict prevention, mitigation, and  stabilization efforts abroad. Agency officials conducting such efforts for  Iraq, Syria, and Nigeria reported that the relevant participants\u2014State,  USAID, and DOD\u2014are involved in the coordination of such efforts.\nUSIP also reported that it participates in U.S. conflict prevention,  mitigation, and stabilization efforts through a variety of means. At the  headquarters-level, USIP officials told us that they conduct both regular  and as-needed consultations and discussions with senior agency officials  at the NSC, State, USAID, DOD, and other agencies. USIP and State  officials also indicated that they coordinate their Iraq, Nigeria, and Syria  programs that are funded by State through interagency agreements.  USIP officials said that it is in communication with the embassies where  USIP has a USIP office or ground presence. For Iraq, State and USIP  officials located in-country said that they contact one another as needed.  According to USIP, in March 2018, it reestablished an American country  manager position in Baghdad, Iraq, whose responsibilities include regular  communication and coordination with relevant U.S. government officials.  For Nigeria, USAID and USIP officials said that USIP participates in a  peace and security network that brings together international  nongovernmental organizations and governmental actors\u2014including  USAID\u2014to share information on peace and security efforts being  conducted in Nigeria.\n\n\t\tWritten Guidance and Agreements\n\nWe previously found that agencies that articulate their agreements in  formal documents can strengthen their commitment to working  collaboratively. We found that U.S. agencies and USIP have documented  some aspects of how they coordinate their conflict prevention, mitigation,  and stabilization efforts in Iraq, Nigeria, and Syria. However, State,  USAID, and DOD have not documented their agreement from the SAR on  how they will coordinate their global stabilization efforts in conflict-affected  areas, such as their agreements on common outcomes and accountability  and their roles and responsibilities for conducting U.S. stabilization  efforts.\nSpecifically, we found that U.S. agencies and USIP have documented  some aspects of how they coordinate their conflict prevention, mitigation,  and stabilization efforts in Iraq, Nigeria, and Syria. Notably, USIP  provided us with examples of its written agreements with U.S. agencies  for which USIP implements conflict prevention and mitigation  programming with agency funding. USIP has written agreements with  USAID and various State bureaus for programs implemented in Iraq,  Nigeria, and Syria. According to USIP officials in Nigeria, USIP and State  coordinated the planning and implementation of their efforts during the  course of these interagency agreements.\nIn June 2018, State publically announced that the Secretaries of State  and Defense and the USAID Administrator approved the SAR\u2019s  recommendations regarding U.S. stabilization efforts, such as the SAR\u2019s  recommendations to establish outcomes and accountability mechanisms  and to formally define agencies\u2019 stabilization roles and responsibilities.  According to the SAR, while the principles for effective stabilization, such  as clarified and formally defined roles and responsibilities, have been  widely studied, they have not been systematically applied and  institutionalized. According to key practices for enhancing interagency  collaboration, articulating agreements in formal documents can  strengthen collaborative efforts, and reduce the potential for  fragmentation, overlap, and duplication. However, the SAR remains a  \u201cframework\u201d that, according to State, has yet to be translated into agency  policy and practice, and State, USAID, and DOD have not yet developed  a plan to implement the SAR recommendations.\nState, USAID, and DOD officials acknowledged the importance of  codifying their agreement on the collaboration elements raised in the SAR  but said that they had not yet decided on a specific document or  documents for doing so. For example, officials discussed the idea of  establishing an interagency memorandum among the three agencies to  codify their specific roles and responsibilities for conducting stabilization  efforts, but they indicated that next steps will depend on various factors,  such as decisions with regard to State\u2019s and USAID\u2019s ongoing  organizational redesign processes. Agency officials also indicated that they are considering implementing the SAR\u2019s recommendations through  issuing written, internal guidance within each agency. We have previously  found that written guidance, such as an implementation plan or  memorandum of agreements, can help agencies during times of transition  when leadership changes and there is a need for continuity. By formally  documenting agreements according to key leading practices, the  agencies will be better positioned to strengthen their collaborative efforts,  and reduce any potential for fragmentation, overlap, and duplication.\n\n\tConclusions\n\nIn the National Security Strategy issued in December 2017, the United  States emphasized the need to integrate all instruments of the United  States\u2019 national power in order to deter conflict and secure peace. State,  USAID, DOD, and USIP work individually and jointly to prevent and  mitigate conflict and stabilize conflict-affected areas. Although the three  agencies have incorporated aspects of key practices in the coordination  of their conflict prevention, mitigation, and stabilization efforts in Iraq,  Nigeria, and Syria, they have not fully demonstrated the key practice of  documenting agreements in written guidance. By articulating their  agreement in formal documents, such as a memorandum of agreement or  an implementation plan, these agencies can strengthen their coordination  of U.S. stabilization efforts.\n\n\tRecommendations for Executive Action\n\nWe are making a total of three recommendations, one each to State,  USAID, and DOD. Specifically:\nThe Secretary of State, in collaboration with the Administrator of the  U.S. Agency for International Development and the Secretary of  Defense, should document their agreement on coordination for U.S.  stabilization efforts through formal written guidance and agreements  that address key collaboration practices such as defining outcomes  and accountability and clarifying roles and responsibilities for U.S.  stabilization efforts. (Recommendation 1)\nThe Administrator of the U.S. Agency for International Development,  in collaboration with the Secretaries of Defense and State, should  document their agreement on coordination for U.S. stabilization efforts  through formal written guidance and agreements that address key  collaboration practices such as defining outcomes and clarifying roles  and responsibilities for U.S. stabilization efforts. (Recommendation 2)\nThe Secretary of Defense, in collaboration with the Administrator of  the U.S. Agency for International Development and the Secretary of  State, should document their agreement on coordination for U.S.  stabilization efforts through formal written guidance and agreements  that address key collaboration practices such as defining outcomes  and accountability and clarifying roles and responsibilities for U.S.  stabilization efforts. (Recommendation 3)\n\n\tAgency and USIP Comments\n\nWe provided a draft of this report to State, USAID, and DOD for  comment. State, USAID, and DOD concurred with the recommendations  and provided comments, which are reproduced in appendixes VI through  VIII, respectively. State, USAID, and DOD also provided technical  comments, which we incorporated as appropriate.\nWe also provided a draft of this report to USIP for comment. USIP\u2019s  comments are reproduced in appendix IX. USIP also provided technical  comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of USAID, the  Secretary of Defense, the President of USIP, and other interested parties.  In addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\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 key contributions to this report  are listed in appendix X.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report (1) describes examples of conflict prevention, mitigation, and  stabilization efforts that U.S. agencies and the U.S. Institute of Peace  (USIP) conducted in Iraq, Nigeria, and Syria and their goals in fiscal year  2017 and (2) examines the extent to which U.S. agencies and USIP  incorporated key collaboration practices to coordinate their efforts.\nTo address both objectives, we reviewed the conflict prevention,  mitigation, and stabilization efforts of the Departments of State (State)  and Defense (DOD), the U.S. Agency for International Development  (USAID), and USIP. We reviewed program, coordination, strategy, and  planning documentation and interviewed State, USAID, DOD, and USIP  officials at headquarters and in the field with regard to specific efforts in  Iraq, Nigeria, and Syria. We conducted work in Washington, D.C.; Iraq;  Nigeria; and Jordan and held teleconferences with officials in Syria,  Turkey, and Kuwait. At the posts, we interviewed U.S. embassy  leadership, agency program officers, and implementing partners, where  available. We focused on Iraq, Nigeria, and Syria based on several  criteria, including U.S. national security interests, countries with ongoing  conflict, countries where all three agencies and USIP initially reported that  they conducted relevant efforts in fiscal year 2017, prior GAO reporting,  and input from agencies and USIP. We cannot generalize our findings  from these three countries to the other countries where these agencies  have conflict prevention, mitigation, and stabilization efforts.\nSpecifically, we interviewed officials at the following entities.\nState officials in the Bureau of African Affairs; Bureau of Conflict and  Stabilization Operations; Bureau of Democracy, Human Rights, and  Labor; Bureau of International Narcotics and Law Enforcement;  Bureau of Near Eastern Affairs; Bureau of Political-Military Affairs;  Bureau of Public Affairs; Office of the Inspector General; Office of the  Special Presidential Envoy for the Global Coalition to Defeat ISIS (the  Islamic State of Iraq and Syria); and the Office of U.S. Foreign  Assistance Resources;\nUSAID officials in the Bureau for Africa; Bureau for Democracy,  Conflict, and Humanitarian Assistance; and Bureau for the Middle  East;\nDOD officials in the Office of the Secretary of Defense, Office of the  Joint Chiefs of Staff, U.S. Africa Command, and U.S. Central  Command; and\nUSIP officials in the Middle East and Africa Center and the Policy,  Learning, and Strategy Center.\nTo describe examples of conflict prevention, mitigation, and stabilization  efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria  and their goals in fiscal year 2017, we collected, synthesized, and  summarized information from State, USAID, DOD, and USIP.\nFirst, we obtained the definitions of conflict prevention, mitigation, and  stabilization from each entity to the extent each entity used and defined  these terms. Based on our discussions with each agency and USIP, we  determined that we could not use one common definition, as each agency  and USIP defined these terms based on its programs and the context of  its operations; thus, we would have had to use overlapping terms and  definitions to capture their efforts for fiscal year 2017.\nState and USAID used the term \u201cconflict mitigation and stabilization\u201d  and defined their efforts as foreign assistance programs that reduce  the threat or impact of violent conflict and promote the peaceful  resolution of differences, mitigate violence if it has already broken out,  establish a framework for peace and reconciliation, and provide for  the transition from conflict to post-conflict environments.\nDOD used the term \u201cstabilization\u201d and defined it as \u201can integrated  civilian and military process applied in designated fragile and conflict  affected areas outside the United States to establish civil security,  address drivers of instability, and create conditions for sustainable  stability\u2014a condition characterized by local political systems that can  peaceably manage conflict and change; effective and accountable  institutions that can provide essential services; and societies that  respect fundamental human rights and the rule of law.\u201d\nUSIP generally referred to its work as conflict prevention and  resolution, which may include conflict prevention, mitigation, and  stabilization efforts. USIP did not have current definitions for these  terms in fiscal year 2017. USIP officials stated that all of USIP\u2019s efforts  would fit under the general umbrella of conflict prevention, mitigation,  and stabilization and reported all of USIP\u2019s efforts abroad for Iraq,  Nigeria, and Syria (and in neighboring countries for Syria) that were  active in fiscal year 2017.\nSecond, to collect the data describing the efforts and their goals from  each agency and USIP, we developed a standardized data collection  instrument. We defined \u201cefforts\u201d as any program, initiative, or other similar  level of engagement and also accepted projects and activities when  reported. We had each agency and USIP use its own terms, definitions,  and categorizations of efforts in this instrument. Based on our discussions  with the agencies and USIP, we determined that this would still allow us  to collect a comprehensive set of programs from each entity and to learn  about their key efforts in this domain. However, we recognize that some  entities might have included programs that other entities would not have  included, even though both entities\u2019 programs may have had many  similarities, because of the entities\u2019 differing definitions and terms. To  ensure that our report could be made publically available, we also  accepted reported categories of programs if listing each program  separately would have meant including controlled unclassified information  (sensitive but unclassified) .\nWithin the data collection instrument, we asked agencies to report efforts  by country, specifically, for Iraq, Nigeria, and Syria. To corroborate entries  in the instrument, we requested that the agencies and USIP also provide  one document or website link supporting each entry. Not all agencies fully  complied with this request. In some cases, we conducted web searches  for any publicly available supporting information.\nThird, we reviewed the reported data and supporting documents and  obtained clarification from agency officials where needed. We  synthesized and summarized information for each effort in this report\u2019s  appendixes and, at a higher level, in the body of the report. We requested  technical comments on our summarized information from the agencies  and USIP, and incorporated their suggestions as appropriate. We did not  independently verify whether the reported lists of conflict prevention,  mitigation, and stabilization efforts included all such efforts in Iraq,  Nigeria, and Syria (and in neighboring countries for Syria).\nTo examine the extent to which U.S. agencies and USIP incorporated key  collaboration practices to coordinate their conflict prevention, mitigation,  and stabilization efforts, we analyzed information about State, USAID,  DOD, and USIP\u2019s coordination using six of the seven key practices for  implementing interagency collaborative mechanisms that we have  previously identified and that were applicable to our review. We  assessed coordination of agency and USIP efforts for conflict prevention,  mitigation, and stabilization as a whole because, as indicated above, the  agencies did not always distinguish their coordination efforts to address  conflict using the same terms or categorization of efforts. Where  information was available, we assessed whether the agencies and USIP  had generally incorporated or not incorporated the six selected key  practices to coordinate their efforts between State, USAID, DOD, and  USIP at the headquarters level and for our selected countries of Iraq,  Nigeria, and Syria. To make this determination, we examined agency and  USIP documents and conducted interviews about interagency  collaboration activities with officials from State, USAID, DOD, and USIP.  We reviewed agency reports; jointly developed and independently  developed strategies; interagency agreements; monitoring reports; and  public statements by senior U.S. government officials, among other  documents. We also reviewed agency and third-party reports that  assessed interagency collaboration, among other issues, though it was  beyond the scope of this review to assess the methodology or underlying  data in these reports. During the course of our work, State, USAID, and  DOD released the 2018 Stabilization Assistance Review: A Framework  for Maximizing the Effectiveness of U.S. Government Efforts to Stabilize  Conflict-Affected Areas. This report assessed U.S. stabilization  assistance globally in conflict-affected areas. We reviewed the contents of  the report and interviewed agency officials associated with this review to  better understand their findings as may be related to the key collaboration  practices applicable to our review.\nAlthough the National Security Council (NSC) is responsible for  coordination of security-related activities and functions of the executive  departments and agencies, the NSC did not respond to our request for  documents and interviews. We mitigated this limitation by interviewing  officials at the three agencies and reviewing other available  documentation including the U.S. Strategy for Countering Boko  Haram\/ISIS-West Africa and the U.S. Strategy to Counter the Islamic  State of Iraq and the Levant. During our visit to the U.S. embassy in  Nigeria, we observed meetings for two interagency working groups. We  also interviewed implementing partners for U.S. government and USIP  efforts in Iraq, Jordan, and Nigeria. We used our analysis of agency and  USIP documents and the results of our interviews with officials to assess  collaboration practices among State, USAID, DOD, and USIP. To aid in  our analysis of coordination from our review of documents and interviews,  we used the information obtained under the first objective and compared  State, DOD, USAID, and USIP descriptions of each of their efforts in Iraq,  Nigeria, and Syria to assess for any unnecessary duplication. As  discussed above, some entities may have included efforts that other  entities would not have included based on their definitions for the terms in  our scope. As a result, our analysis only includes the list of programs  provided by the agencies to assess for duplication.\nWe conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: State Reported Conflict Mitigation and Stabilization Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017\n\n\tConflict mitigation and stabilization effort IRAQ\n\nAnti-Terrorism Assistance Program (ATA)\nThe Department of State\u2019s (State) ATA Program is managed by the Bureau of  Counterterrorism and implemented by the Bureau of Diplomatic Security. The ATA  program trains and equips selected Iraqi law enforcement agencies to counter  improvised explosive devices, respond to critical incidents, and conduct terrorism  related investigations. ATA funds support training courses, consultations, associated  equipment deliveries, and training support costs in Iraq and other selected third-country  training locations. ATA provides the antiterrorism training and equipment to help Iraqi  law enforcement agencies deal effectively with security challenges within their borders,  to defend against threats to national and regional stability, and to deter terrorist  operations across borders and regions. ATA assists efforts to defeat the Islamic State  of Iraq and Syria (ISIS) and counter transnational terror groups and organizations by  curtailing the transit of foreign terrorist fighters throughout the country and mitigating the  effects of terrorist incidents.\nState\u2019s Bureau of Democracy, Human Rights, and Labor (DRL) conducts Good  Governance Programs in Iraq through grants to implementing partners. These  programs aim to advance the equitable representation of religious and ethnic minority  groups and internally displaced persons (IDP), women, and other populations  marginalized in governance structures. The programs are also intended to promote  equitable access to resources and services and support reform efforts on key issues of  human rights and democratic governance. Programming engages civil society to  develop and implement key democratic reform processes and institutions in both the  central government and the Kurdistan Regional Government. The goals of Good  Governance Programs in Iraq are to strengthen citizen-responsive governance,  security, and rule of law to prevent instability, violence, or other crises through  collaboration with Iraqi partner institutions on activities that combat corruption and  strengthen governance.\nState\u2019s DRL conducts Political Competition and Consensus Building Programs in Iraq  through grants to implementing partners. Capitalizing on political openings created  through national and provincial elections, these programs intend to work with newly  elected officials and parties to strengthen their ability to equitably represent the needs  of their constituents, with a particular focus on outreach to minorities and marginalized  populations. One publicly competed grant will support avenues for citizens to negotiate  disputes and debate policy priorities through peaceful, democratic methods, and will  work to ease tensions between the central government and the Kurdistan Regional  Government. The overall goal of these programs is to build the capacity of the  government of Iraq to take the lead in strengthening citizen-responsive governance,  security, and rule of law to prevent further instability and violence. DRL programing  intends to help the government of Iraq become more inclusive, transparent, and  responsive with increased participation by women, youth, and religious and ethnic  minorities.\n\n\tConflict mitigation and stabilization effort DRL Rule of Law Programs\n\nState\u2019s description of effort and its goals   State\u2019s DRL conducts Rule of Law Programs in Iraq through grants to implementing  partners. These programs are intended to promote reconciliation initiatives, including  efforts to counter violent extremism; reintegrate returning IDPs, survivors, and their  families; rehabilitate men and boys affected by the conflict; reconstitute and protect  minority communities\u2014in support of the global religious minorities earmark; and support  civil society to promote accountability and transparency. More specifically, these efforts  aim to (1) strengthen civil society\u2019s ability to monitor the status of detainees and  advocate for fair treatment, anti-torture, and due process; promote protection of basic  human rights and democratic principles; and provide psychosocial support for trauma  survivors; (2) increase accountability for human rights violations, including those  associated with the current crisis, with a particular focus on the most vulnerable Iraqis,  including religious and ethnic minorities, and women and children; and (3) support  efforts to advocate for the rights and protections of women, girls, IDPs, victims of war\u2014 including Marla Ruzicka Iraqi War Victims Fund beneficiaries\u2014and other marginalized  groups.\nState\u2019s DRL conducts Social and Economic Services and Protections for Vulnerable  Populations Programs in Iraq through grants to implementing partners. Programs may  include livelihood and vocational training; small and medium enterprise creation and  support; psychosocial and legal aid services; compensation for war victims\/reparations;  and other efforts to support the rehabilitation of victims of conflict that are not reached  through current assistance. These programs aim to address the post-conflict  vulnerabilities of disproportionately affected marginalized populations that are often  targeted by transnational terror groups and organizations to spread radicalization. The  particular emphasis is on widows, single female-headed households, vulnerable youth,  religious minorities in support of the global earmark, and victims of torture and war\u2014 including Marla Ruzicka Iraqi War Victims beneficiaries.\nState\u2019s Bureau of Political and Military Affairs supports Explosive Remnants of War  (ERW) Clearance efforts in response to recent activities of ISIS in Iraq that have  dramatically altered the Conventional Weapons Destruction landscape. ISIS used  mass-produced, technologically advanced improvised explosive devices (IED) to  defend captured territory and target Iraqi Security Forces, as well as to booby trap  homes, public spaces, farm land, and infrastructure to discourage the return of IDPs. As  IDPs return to their communities, these devices continue to perpetuate ISIS\u2019s reign of  terror by indiscriminately killing civilians and impeding stabilization operations. This  program, which State conducts through implementing partners, supports the urgent  survey and clearance of explosive hazards from critical infrastructure associated with  the delivery of clean water, electricity, healthcare, education, and transportation, as well  as other sites in areas of Iraq liberated from ISIS to facilitate follow-on stabilization  projects, the restoration of basic community services, and the return of IDPs. This  program also supports the survey and clearance of ERW in areas impacted by legacy  contamination in Iraq\u2019s North and South. The overall goal is to assist efforts to defeat  ISIS and help the government of Iraq support the safe return of Iraqis that were  displaced from their homes by ISIS or liberation campaigns.\n\n\tConflict mitigation and stabilization effort Mine Risk Education\n\nState\u2019s description of effort and its goals   State\u2019s Bureau of Political and Military Affairs conducts the Mine Risk Education and  Victims\u2019 Assistance programs in Iraq through grants to implementing partners. The risk  education program teaches men, women, and children across Iraq about the dangers  posed by explosive hazards. This program focuses on IDPs who will be returning to  areas liberated from ISIS as well as communities who have already returned to  liberated areas. The program also provides risk education to people in North and South  Iraq who live and work near legacy ERW contamination. The goal of this program is to  strengthen citizen-responsive governance and security to prevent further instability and  violence as well as to bolster human security.\nState\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, is responsible for the Advance Human rights Training for Law  Enforcement Officers effort. It provides advanced human rights training to Nigerian  Police Force officers deploying to the northeast and to trainers from the force\u2019s  academies and colleges (a train-the-trainer focus). The goal of the effort is to increase  the Nigerian Police Force\u2019s capacity to better prevent, detect, respond to, and  investigate crime while protecting the rights of all citizens.\nArewa 24\u2014Hausa Language Media Platform  State\u2019s Bureau of African Affairs, Office of Security Affairs, was responsible for  supporting Arewa 24\u2014Hausa Language Media Platform. Arewa 24 is a free-to-air  satellite TV channel and trans-media platform based in Kano, Nigeria. Positive  narratives intended to help counter violent extremism were inserted into general  entertainment programming aimed at young Hausa speakers in Northern Nigeria.  Arewa 24 contributed to a sustainable ecosystem of indigenous capacity to create,  develop, produce, and disseminate countering violent extremism (CVE) programming.  State supported this effort through grants to an implementing partner. State\u2019s Bureau of  Counterterrorism also managed separate awards in support of this program. This effort  was a Trans-Sahara Counterterrorism Partnership (TSCTP) project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. The goals of the effort were to  (1) sustain broadcast quality of credible, effective, and entertaining CVE television  programming; (2) increase the capacity of media professionals in Northern Nigeria to  produce CVE programming; (3) expand the reach of Arewa 24\u2019s messaging in Nigeria  through agreements and arrangements with other distribution channels; and (4)  continue to build commercially derived revenue, paving the way to sustainability.  Although all U.S. funding for this program ended on September 30, 2017, Arewa 24  remains on the air through support from private Nigerian investors.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Community  Engagement of Federal Security Agents in Peace and Trustbuilding effort through a  grant to an implementing partner. This project is intended to promote confidence- building measures between youth and government of Nigeria law enforcement and  security personnel in Kaduna state. The goal is to improve cooperation between local  residents and the government\u2019s law and security forces essential to deterring and  capturing members of violent extremist organizations.\nConflict mitigation and stabilization   effort  CVE Messaging Center\u2014White Dove (Farar  Tattabara)\nState\u2019s description of effort and its goals   State\u2019s Bureau of African Affairs, Office of Public Diplomacy and Public Affairs,  conducts this effort through a cooperative agreement and grant to an implementing  partner. This effort supports the establishment of a messaging center to produce three  original radio programs in the Hausa language broadcast weekly over 22 stations  across 19 states of northern Nigeria. The program also includes a social media  component. The three radio programs deal with themes of de-radicalization,  rehabilitation, and reintegration. The primary goal is to produce and disseminate  counter-violent extremism organization messaging to mitigate efficacy of such  organizations\u2019 propaganda and recruitment efforts.\nState\u2019s Bureau of African Affairs, Office of Security Affairs, conducted the Ending Labor  Exploitation of Almajiri Children and De-Escalating Insecurity project through a grant to  an implementing partner. The project aimed to reduce vulnerabilities associated with  the Almajiri education system by (1) enhancing public awareness of the threat  presented to community security by the present state of degeneration of the system of  Almajiri education; (2) mobilizing the voices of key community stakeholders, including  teachers, parents, religious scholars and institutions; and (3) supporting the government  to put in place adequate laws and policies to reform the system and combat exploitation  of the Almajiri in the state of Kano. This effort was a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. The project\u2019s goal was to  contribute to ending the systemic labor exploitation and abuse of Almajiri children  prevalent in the Almajiranci system of education, and to reduce the risk of violence and  insecurity in Kano state in Northern Nigeria. This project ended on January 30, 2018  State\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, is responsible for the Equipment Procurements for Police in  Northeast Nigeria effort. This program equips police commands, stations, and officers in  northeast Nigeria. The equipment includes military-grade tents, ponchos, poncho stuff  sacks, cots, flashlights, flashlight holsters, individual first aid kits, and portable  emergency lighting for 1,500 officers. The goal of this effort is to increase the Nigerian  Police Force\u2019s capacity to provide security in the Northeast and to lay the foundation for  the safe and voluntary return of displaced persons when conditions are conducive.\nState\u2019s DRL, Office of Global Programming, is responsible for the Global Center on  Cooperative Security, Promoting Resilient Communities in Nigeria and Kenya effort.  The U.S. Embassy Abuja Political Section also supports this effort. This 2-year program  is designed to support existing networks of young civil society leaders; forge new  partnerships among local civil society organizations, young people, and government  stakeholders; facilitate collaborative learning activities; and organize small grant  assistance and in-kind support to local civil society organizations working to prevent  violent extremism. The goal of the effort is to mitigate threats of violent extremism in  Nigeria and Kenya by promoting community resilience and empowering youth leaders  to recognize and prevent violence committed by groups such as Boko Haram and Al  Shabaab.\nState\u2019s description of effort and its goals   State\u2019s Bureau of African Affairs, Office of Security Affairs, conducted the Healing,  Reconciliation, and Counter-Radicalization in Adamawa, Borno, and Yobe State project  through a grant to an implementing partner. Project activities were designed to help  resolve tensions between individuals returning to local communities and those who  remained throughout periods of instability and to reduce prejudice and stigmatization of  those captured by Boko Haram (especially women who were raped and impregnated,  forced into marriage, and\/or kept as sex slaves). Community resilience groups were  also created to promote community cohesion through the use of strategic  communications and counter narratives. This effort was a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supported it. This project ended on May 31,  2018.\nState\u2019s Bureau of International Narcotics and Law Enforcement Affairs, Office of Anti- Crime Programs, is responsible for the International Law Enforcement Academy  Program (ILEA)\u2014Countering Violent Extremism Series. Nigeria is one of the member  countries of ILEA Gaborone, ILEA Roswell, and the West Africa Regional Training  Center in Accra. In fiscal year 2017, Nigerian law enforcement and criminal justice  system personnel participated in a specialized Countering Violent Extremism (CVE)  course series, which included anticorruption, community policing, combatting CVE in  prisons, threat finance, post-blast investigations, and law enforcement techniques to  combat terrorism. The ILEA program generates course schedules annually based on  feedback from participant countries, like Nigeria, as well as U.S. federal law  enforcement, and State functional and geographic bureaus. The program is also a  cooperative effort that involves the expertise of trainers and agents from federal, state,  municipal, and foreign law enforcement agencies. The ILEA program pursues three  core objectives: building the capacity of foreign criminal justice partners of the United  States to stop crime before it comes to the United States, fostering partnerships across  national borders within important regions of the world, and advancing partner nations\u2019  engagement with U.S. law enforcement agencies. The ILEA program is an important  part of the interagency U.S. effort to combat transnational criminal organizations and  combat violent extremism, which facilitates stability in individual countries and regions,  including Nigeria.\nState\u2019s Bureau of International Narcotics and Law Enforcement, Office of Africa and  Middle East Programs, awarded funds to the U.S. Institute of Peace to conduct the  Justice and Security Dialogues project. Under this effort, citizens and authorities work to  jointly address important security challenges within select communities of the Sahel and  Maghreb, including in Nigeria. Participants share knowledge and skills and support  each other across the broader region. The project is targeting a community population  of 430,000 in the north local government of Jos in Plateau state. The goal of the effort is  to improve the relationship between security providers and citizens and to support  civilian security forces to be more effective, accountable, and responsive to community  needs.\n\n\tConflict mitigation and stabilization effort Northern Governors Dialogue\n\nState\u2019s description of effort and its goals   State\u2019s Bureau of Conflict and Stabilization Operations, Office of Africa Operations,  awarded funds to the U.S. Institute of Peace to conduct the Northern Governors  Dialogue. This effort supports governors of northern states, relevant federal government  officials, and representative civil society leaders in addressing conflict drivers and  stabilization-related challenges. The program is intended to strengthen their collective  understanding of relevant issues and their capacity to develop sustainable and inclusive  policies. The goal is to have an invested group of northern governors and a Senior  Working Group of civil society leaders that have (1) identified a set of citizen-informed  priority policy areas for northern Nigeria to prevent and resolve violent conflict, as well  as to enhance stabilization efforts where appropriate, and (2) demonstrated a continued  willingness to engage together on specific conflict-related issues.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja, conducts the Open Minds  Project through a grant to an implementing partner. This project intends to train and  mentor 80 primary and secondary school students from Plateau state and Federal  Capital Territory in critical thinking skills in support of CVE efforts. The goal is to better  enable participants to resist messaging and recruitment efforts of violent extremist  organizations  State\u2019s Bureau of Democracy, Human Rights, and Labor, Office of Global  Programming, is responsible for the Search for Common Ground, Early Warning\/Early  Response effort. This program establishes community-based early warning and early  response systems and strengthens the capacity of state and local actors to secure  communities. The intent is to enhance community and state actors\u2019 ability to protect  citizens from imminent threats from Boko Haram. Overall goals of the program are to  increase capacity of target communities to identify and analyze early warning signs of  violence; to increase collaboration between communities and local government officials  and security actors in responding to these signs; and to enhance mutual understanding  of their roles in protecting their communities.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Strengthening  Community Resilience through Peace Building project through a grant to an  implementing partner. The project intends to train 50 youth in conflict resolution. The  participants, supported by traditional elders, engage in local community-driven  initiatives. The goal is to strengthen conflict resolution capacity at the community level  by promoting peaceful dialogue and tolerance in S. Kaduna state.\nState\u2019s Bureau of African Affairs, Office of Security Affairs, conducts this effort through  a grant to an implementing partner who is to produce and air 52 episodes of a weekly  radio drama based on stories of victims of the Boko Haram insurgency, especially  women and children. The series focuses on reducing the risks of radicalization and  recruitment, while encouraging adult listeners to reflect on the effects of the insurgency  on their communities and vulnerable groups. The B Chronicles, created in English but  performed in Hausa and Kanuri, are interpreted by the actors and aired on radio  stations in Bauchi, Gombe, Adamawa, Yobe, and Borno states. The series targets a  regional audience of approximately 6\u20138 million people. The goal of this project is to  chronicle and help mitigate the current security challenges in Northern and  Northeastern Nigeria through real life stories that encourage dialogue while fostering  peace, respect, and the spirit of community. This effort is a TSCTP project, and the U.S.  Embassy Abuja Public Affairs Section also supports it.\n\n\tConflict mitigation and stabilization effort Training Almajiri as Peace Promoters in Kano\n\nState\u2019s description of effort and its goals   State\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Training Almajiri  as Peace Promoters in Kano project through a grant to an implementing partner. This  project intends to train 240 students from the formal education system and the  traditional Islamic school system (Almajiri) as peace ambassadors. Student participants  advocate for peaceful conflict resolution, improvements in youth education, and  incorporation of Almajiri schools into the formal educational system.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Training of Youth  Leaders and Community Influencers effort through a grant to an implementing partner.  The project intends to train 25 youth and community influencers from Adamawa, Borno,  and Yobe states as CVE messengers with enhanced leadership skills. The goal is to  develop peer-to-peer CVE messengers with proven community influence to mitigate  propaganda and recruitment efforts of violent extremist organizations.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja conducts the Transformation  of Farmer\/Herder Conflict in Plateau State effort through a grant to an implementing  partner. This project convenes dialogues between farmer and herder stakeholders in  Plateau state to develop mechanisms to resolve disputes between these groups. The  goal is to establish a multistakeholder peace architecture committee to periodically  review conflict risks and to develop a framework for adjudicating conflict.\nState\u2019s Public Affairs Section at the U.S. Embassy Abuja, conducts the United in  Diversity effort through a grant to an implementing partner. This project aims to  increase a core team of 25 youths\u2019 conflict resolution skills and, through a Training of  Trainers model, to train additional youths. The goal is to facilitate interreligious dialogue  between religious groups.\nState\u2019s Bureau of African Affairs, Office of Security Affairs, conducts the Vocational  Training for Women in Adamawa State through a grant to an implementing partner. This  effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs section also  supports it. This project intends to provide rural women living in IDP camps and the  surrounding communities with training and employment opportunities in poultry and  cash-crop farming to help raise their social status, enhance their self-esteem, and  encourage self-reliance to contribute income to their households. The goal is to help  these women learn to recognize and resist techniques and methods of recruitment and  radicalization to violence; and provide options for resisting recruitment into violent  extremist organizations.\nState\u2019s Bureau of African Affairs, Office of Security Affairs, conducts the Youth for  Healthy Communities Initiative through a grant to an implementing partner. This  program is a community initiative anchored in athletic competition that offers concurrent  workshops and creates social and mentoring networks to engage youth on issues of  civic responsibility, conflict mitigation, and the dangers of drug abuse and violent  extremism. This effort is a TSCTP project, and the U.S. Embassy Abuja Public Affairs  Section also supports it. The goals of this program are to build teamwork and  leadership skills, foster citizen responsibility, and counter drug abuse and the risk of  recruitment and radicalization to violence among vulnerable youth in the Kano city  metropolitan area.\n\n\tConflict mitigation and stabilization effort SYRIA\n\nState\u2019s Bureau of Near Eastern Affairs (NEA), Office of Near Eastern Affairs Assistance  Coordination, is responsible for the Access to Justice and Community Security  Program, which provides training, equipment, and stipends to Free Syrian Police  stations in liberated areas of Syria. The United States supports 56 Free Syrian Police  stations comprising approximately 3,500 officers. Support includes vehicles, equipment,  stipends, and training to help moderate community security actors to establish public  security and stand up local unarmed civilian police forces. State conducts this effort  through an implementing partner, and NEA manages this effort as part of the Syria  Transition Assistance Response Team based in U.S. Embassy Ankara. The program\u2019s  goal is to improve local stability, mitigate sectarian violence, and counter the influence  of violent extremists.\nState\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the  Building the Legitimacy of Local Councils effort through an implementing partner. NEA  manages this effort as part of the Syria Transition Assistance Response Team, which is  based in U.S. Embassy Ankara. The effort aims to build the capacity of local and  provincial councils and civilian networks through (1) organizational development,  standardized processes, and institutional capacity for effective civil administration; (2)  strengthened cooperation between local and provincial councils, civil society  organizations, Free Syrian Police, technical directorates, and moderate armed actors;  (3) increased engagement between citizens and opposition governance structures; (4)  increased inclusiveness in governance structures, especially with regard to  representation of women, religious and ethnic minorities, and other marginalized  populations; and (5) more effective provision of basic local governance services to meet  citizen priorities and needs through cash subgrants for essential services. The goal of  the effort is to strengthen the moderate Syrian institutions by building their capacity to  provide services, promote stability, counter extremism, and advocate for political  dialogue.\nState\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts the Civil  Society in Syria effort through an implementing partner. NEA manages this effort as  part of the Syria Transition Assistance Response Team, which is based in U.S.  Embassy Ankara. Through cash subgrants, this effort works to enhance civil society  and advocacy organizations in eastern and western Syria to implement activities that  (1) improve communication mechanisms with constituents and key stakeholders in  reconciliation, conflict mediation, and advocacy efforts; (2) increase citizen  understanding of rights and civic responsibilities; (3) enhance civil society advocacy  efforts to promote strengthened competitive, inclusive, and transparent political  processes; (4) improve organizational structures and internal processes that allow civil  society organizations to become more effective public advocates; and (5) provide  community services, such as vocational training for women and youth and essential  services in areas newly liberated from ISIS where governance bodies are still emerging.  The goal of the effort is to increase the ability of civil society organizations to serve,  represent, and advocate for all Syrians and hold local governance structures  accountable.\nState\u2019s description of effort and its goals   State\u2019s DRL conducts the Civil Society Support for Peacebuilding, Reconciliation, and  Conflict Mitigation effort through implementing partners. These efforts provide funding  to build local leadership and reconciliation processes and to support activities related to  inclusive peace-building and conflict mitigation that are specifically designed to be more  responsive to the evolving nature of the conflict. Current programming focuses on local  community members, including women, religious minorities, and other marginalized  populations, to use advocacy and other skills needed to effectively engage with armed  factions. This work also supports the political transition process by fortifying the  conditions for stabilization and empowering local leadership.\nState\u2019s Bureau of Political-Military Affairs supports ERW clearance efforts in areas of  northeast Syria recently liberated from ISIS, in particular the urban centers of Raqqa  and Tabqa cities. Following their defeat, ISIS placed mass-produced, technologically  advanced IEDs and booby-traps in homes, public spaces, farm land, and infrastructure  to discourage the return of IDPs and cut off essential services. As IDPs return to their  communities, these devices continue to perpetuate ISIS\u2019s reign of terror by  indiscriminately killing civilians and impeding stabilization operations. ERW clearance  programs, which State conducts through implementing partners, supports the urgent  marking, survey and clearance of explosive hazards from critical infrastructure  associated with the delivery of clean water, electricity, healthcare, education, and  governance to facilitate follow-on stabilization projects, the restoration of basic  community services, and the return of IDPs in coordination with USAID and other State  offices.\nState\u2019s DRL conducts the Meaningful Justice and Accountability for Syria efforts  through implementing partners. These efforts involve the documentation of human  rights violations committed by all parties; increased coordination among international  and local civil society groups on transitional justice processes, including  memorialization; and support to survivors of torture, sexual and gender-based violence,  and other gross human rights violations. The goal is to support the capacity of local civil  society groups to secure and preserve documentation of human rights abuses and  increase advocacy around accountability and transitional justice mechanisms, including  domestic and regional led efforts.\nState\u2019s Bureau of Political-Military Affairs delivers Mine Risk Education, through  nongovernmental organizations, to affected communities by teaching children and  young adults about the dangers posed by explosive hazards. Also, due to the lack of  national capacity, a mine action nongovernmental organization collects, stores, and  disseminates data on areas contaminated and cleared to the coalition,  nongovernmental organizations, humanitarian community, and military.\nState\u2019s DRL awarded funds to the U.S. Institute of Peace to conduct the Strengthening  Social Cohesion in Northern Syria effort, which aims to provide positive engagement  and lines of communication across religious and sectarian groups, particularly in key  districts prone to sectarian violence. The goals are to (1) support Syrian civilian  networks to maintain stabilization and mitigate violence and (2) manage localized  ceasefires, including reconciliation and stabilization of areas as they are being  liberated.\n\n\tConflict mitigation and stabilization effort Syria\u2019s Education Program (Idarah\/Injaz)\n\nState\u2019s description of effort and its goals   State\u2019s NEA, Office of Near Eastern Affairs Assistance Coordination, conducts Syria\u2019s  Education Program through an implementing partner that works closely with opposition  education directorates in Western Syria and moderate education actors in newly  liberated areas in the east to (1) support the development of the Syrian Interim  Government\u2019s aligned Provincial Education Directorates and other education actors to  better manage education in non\u2013regime-controlled communities; (2) provide stipends  and salaries for education staff to ensure schools have people to deliver education; (3)  engage in teacher training; (4) provide light refurbishments and supplies for damaged  schools, and; (5) provide psychosocial support and training to children, teachers, and  community members. NEA manages this effort as part of the Syria Transition  Assistance Response Team, which is based in U.S. Embassy Ankara. The goal of this  effort is to improve equitable access to Syrians to moderate, vital education services for  youth and children.\nWe did not independently verify whether State\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).\nFor the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d\nCountries for which State conducts efforts are shaded in gray.\n\nAppendix III: USAID Reported Conflict Mitigation and Stabilization Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017\n\n\tConflict mitigation and stabilization effort IRAQ\n\nUSAID\u2019s description of effort and its goals  The U.S. Agency for International Development (USAID), along with other international  donors, supplies funding to the UNDP FFS. The UNDP, at the request of the Prime  Minister of Iraq, and with support from leading members of the Coalition to Degrade and  Defeat the Islamic State of Iraq and the Levant (ISIL), established the FFS in June 2015  to help rapidly stabilize newly retaken areas. The FFS works in areas liberated from the  Islamic State of Iraq and Syria (ISIS)\u2014another name for ISIL\u2014to restore essential  services and kick-start the local economy. The FFS rehabilitates water, health, electricity,  education, and municipal light infrastructure. The FFS also provides temporary  employment to local laborers to remove rubble and grants to small businesses to restock  and reopen. The aim of the FFS is to help restore confidence in the leading role of the  Iraqi government in newly retaken areas, give populations a sense of progress and  forward momentum, and enable the voluntary return of internally displaced persons.\nUSAID\u2019s Office of Peace and Democratic Governance (PDG) is responsible for the  Building Bridges Between Herders and Farmers in Nasarawa, Plateau, and Kaduna States  effort. The overall goal is to strengthen engagement and understanding to reduce conflict  between the nomadic pastoralist and sedentary farming communities in the three states.  Given the herders\u2019 and farmers\u2019 ethnic, religious, economic, and lifestyle differences, these  two groups rarely come into contact with each other outside of confrontational scenarios or  passing encounters, creating a deadly social disconnect that risks dehumanizing each  community in the other\u2019s eyes. The program aims to achieve its goal by (1) improving  intercultural understanding between nomadic pastoralist and sedentary farming  communities and (2) building capable coalitions between community leaders, civil society,  and government to prevent conflict between nomadic pastoralist and sedentary farming  communities.\nUSAID\u2019s Education Office is responsible for the ECR, which, addresses the main learning  needs of internally displaced and host community pupils affected by the crisis in Northeast  Nigeria through nonformal learning centers, Youth Learning Centers, and Adolescent Girls  Learning Centers. The ECR provides learning in protective centers, supports integration of  pupils from nonformal to formal schools, and works within communities hosting internally  displaced persons. For example, the ECR established more than 935 nonformal learning  centers that provided services to internally displaced children and youth and their host  communities affected by violence in Adamawa, Bauchi, Borno, Gombe, and Yobe.  Nonformal centers may be located in churches, mosques, Qur\u2019anic schools, and other  locations. The services provided included access to quality education, psycho-social  counseling, child-friendly spaces, and opportunities for peer reading, mentoring,  counseling, and vocational skills training. The ECR also trains and mobilizes instructors to  provide conflict-sensitive lessons, while engaging communities and local leaders to  increase education options, such as nonformal learning centers. The ECR has provided  assistance to over 80,341 individuals since 2014. The overall goal is to support the efforts  of northeastern states and local governments to take full ownership for the continued  education of internally displaced children.\n\n\tConflict mitigation and stabilization effort Engaging Communities for Peace in Nigeria\n\nUSAID\u2019s description of effort and its goals  USAID\u2019s PDG is responsible for the Engaging Communities for Peace in Nigeria effort.  The initial goal was to reduce violence between farmers and pastoralists in Nigeria\u2019s  Middle Belt states in target sites by (1) strengthening the capacity of farmer and pastoralist  leaders to resolve disputes in an inclusive, sustainable manner; (2) leveraging social and  economic opportunities to build trust across lines of division; and (3) fostering engagement  among farmer-pastoralist communities, local authorities, and neighboring communities to  prevent conflict. Under a scope and cost extension, PDG expanded the effort to help with  conflict sensitivity integration throughout the USAID mission\u2019s portfolio, and build the  technical and operations capacity of nongovernmental organizations working on peace  building in the northeast. PDG intends to do this by providing (1) conflict mitigation,  monitoring and evaluation, and administrative\/financial management training to civil  society organizations in the northeast, and (2) conflict analysis and conflict mitigation  training for USAID mission personnel and implementing partners anywhere in the country.\nUSAID\u2019s Office of Transitional Initiatives (OTI) launched the Nigeria Regional Transition  Initiative in September 2014 to minimize conditions that allow terrorism to flourish, in turn  reducing Boko Haram and ISIS-West Africa recruitment and support for their ideology and  the insecurity they cause. Following a Strategic Review Session in September 2017, OTI  established a new program goal: to deny terrorists space to operate. The goal has a two  pronged focus: (1) to \u201ccompete\u201d with ISIS-West Africa, thereby reducing its appeal before  it is able to seize and hold significant territory and (2) to continue to work on issues that  weaken Boko Haram\u2019s ability to operate. OTI\u2019s two main objectives to achieve this goal  are to offer alternatives to extremist action for vulnerable individuals and increase  community resilience to extremist action.\nTraining of Religious Leaders for National  Coexistence (TOLERANCE)\nUSAID\u2019s PDG is responsible for the TOLERANCE effort, which aims to support stability in  Nigeria by enhancing the legitimacy and capacity of governance structures to defend  religious freedom. TOLERANCE supports community-based peacebuilding approaches by  strengthening the capacity of religious and traditional leaders, women and youth groups,  government officials, and civil society to mitigate and manage conflicts, and improve  responses to threats and outbreaks of violence. TOLERANCE is implemented in seven  states\u2014Borno, Bauchi, Imo, Kaduna, Kano, Plateau, and Sokoto. A human rights funding  component promotes the culture of interfaith peaceful coexistence between target states in  the North and South, respect for human rights, religious freedom and nonviolent elections.  The goal of TOLERANCE is to develop an active network of religious, government, and  civil society leaders that can effectively address ethno-religious violence in Northern  Nigeria and beyond through shared strategies and common messages that have strong  resonance and popular support from a wide range of stakeholders.\n\n\tConflict mitigation and stabilization effort SYRIA\n\nContributions to the Syria Recovery Trust  Fund (SRTF)\nUSAID contributes funding to the SRTF, a multidonor trust fund initiated by the Group of  Friends of the Syrian People and its Working Group on Economic Recovery and  Development. The SRTF\u2019s core objective is to relieve the suffering of the Syrian people  affected by the ongoing conflict through recovery and rehabilitation efforts undertaken in  partnership with the Interim Government of the Syrian Opposition Coalition, local councils,  local community organizations, and service providers. While the conflict continues, the  SRTF assists Syrian communities in opposition-controlled territories by funding essential  services and early recovery programming in critical sectors, including health, electricity,  water, agriculture and food security, education, and waste management. For example, the  SRTF completed the renovation of two gynecological operating rooms, two obstetrics  rooms, adult and pediatric intensive care units, and provided incubators, an oxygen  generation system, and 6 months\u2019 worth of essential medications to a hospital in Aleppo  Governorate so that it could treat an average of 1,000 patients each month. More than 2  million Syrians have received assistance through more than 30 SRTF projects. USAID  funds totaling almost $60 million to date have leveraged other donor funds totaling $190  million. USAID\u2019s goal is to support the restoration of essential services and early recovery.  USAID\u2019s Bureau for the Middle East (ME) provides support for the SRTF.\nUSAID\u2019s ME is responsible for the PRIDE program, which supports the establishment of  robust, inclusive, effective, and accountable democratic processes and institutions in  opposition-held areas and areas liberated from ISIS and advances freedom, dignity, and  development. The goal of the program is to increase political and civic participation and  representation of women, youth, and minorities, to foster public and stakeholder  confidence in peaceful and representative transitional political processes and bolster  opposition credibility. PRIDE is also intended to increase knowledge and understanding of  democratic processes among the Syrian population, including consensus building,  coalition formation, citizen and stakeholder engagement, and elections, which will enhance  an inclusive Syrian-led transition.\nUSAID\u2019s ME and the Offices of U.S. Foreign Disaster Assistance and Food for Peace are  responsible for the SLS program, which is intended to help increase production and  productivity of key products that have both food security and market potential, in  moderate, opposition-held areas and areas liberated from ISIS. The effort is based on the  theory that if communities have humanitarian support in the short-term and have access to  agricultural inputs and extension, they will adopt behaviors that increase productivity along  with household-level income, ultimately improving food security and resilience to shocks.  ME and the Office of Foreign Disaster Assistance have funded an implementing partner to  initiate this effort in fiscal year 2017. If this effort is successful, USAID intends to replicate  this effort in other barley-belt areas of Syria, including in the Idleb, Raqqa, and Hasakah  governorates.\nUSAID\u2019s ME is responsible for the SES II effort, which supports the restoration of essential  services through local councils in communities. The essential services include support for  water services, electricity, sewage systems, public use buildings, agricultural  infrastructure, and market access. The program provides technical and material  assistance, including capacity building for local councils and civil society, engineering  expertise and other training, and cash grants to communities. The goal of the program is  to restore essential services and strengthen institutions in non-regime areas.\n\n\tConflict mitigation and stabilization effort Syria Regional Program (SRP)\n\nUSAID\u2019s description of effort and its goals  USAID\u2019s OTI is responsible for the SRP. The SRP works closely with trusted and vetted  local organizations to implement quick-impact activities that promote an inclusive and  stable Syria. OTI has conducted this effort since 2012 through an implementing partner  that has implemented about 538 activities through about 155 local and provincial partners  and 570 subpartners with a budget of about $172.5 million. OTI works along three lines of  effort: (1) enable the early recovery of areas liberated from ISIS; (2) strengthen  communities\u2019 ability to resist extremist groups; and (3) maintain and increase the influence  of strategic moderate actors. For example, OTI partners restore services in communities  liberated from ISIS to reduce ISIS\u2019s appeal; support local councils and civil society  organizations, increasing the influence of moderate actors in strategic areas where  extremist groups are vying for control; and support Syrian Civil Defense and impartial  emergency responders who amplify the voice of Syrians struggling against extremism and  authoritarianism. OTI aims to support resistance to extremists, particularly ISIS, by  strengthening individuals and groups who are saving lives, meeting basic needs,  promoting moderate values, and engaging with vulnerable populations.\nWe did not independently verify whether USAID\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).\nFor the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d\nUSAID conducted its efforts through grants and contracts to implementing partners.\nCountries for which USAID conducts efforts are shaded in gray.\n\nAppendix IV: DOD Reported Stabilization Efforts for Iraq and Syria, Fiscal Year 2017\n\n\tConflict stabilization effort IRAQ\n\nDOD\u2019s description of effort and its goals  Medical Staff of the Combined Joint Forces Land Component Command\u2013Operation  Inherent Resolve provided immediate medical trauma supplies to the World Health  Organization to fill a gap in medical supplies available to treat injured civilians. The project  was coordinated with the Department of State (State) and the U.S. Agency for  International Development (USAID) and was funded through the Overseas Humanitarian,  Disaster, and Civic Aid (OHDACA) appropriation. The project was intended to increase the  chance of survival for civilians affected by military operations; increase civilian confidence  in the government and the humanitarian assistance community; and provide access,  influence, and visibility to the Department of Defense (DOD).\nU.S. Army Civil Affairs (CA) personnel of Special Operations Joint Task Force\u2013Operation  Inherent Resolve (SOJTF\u2013OIR) provided winterization kits including jackets, hats, gloves,  socks, and blankets to Syrian civilians displaced from their homes in the Raqqa region.  The project provided much needed cold weather items. This project was coordinated with  State and USAID and funded through the OHDACA appropriation. The project was  intended to alleviate human suffering; pull the population away from Islamic State of Iraq  and the Levant (ISIL) population centers; and provide access, visibility, and influence for  DOD forces.\nU.S. Army CA personnel of SOJTF\u2013OIR provided 1,200 winterization kits consisting of  jackets, hats, gloves, and socks to Syrian families in the Hamad desert. This project  addressed a critical need among the poorest and most vulnerable of the Syrian  population. The project was coordinated with State and USAID and was funded through  the OHDACA appropriation. The project was intended to alleviate human suffering;  support DOD efforts to diminish ISIL influence; and provide access, visibility, and influence  for DOD forces.\nU.S. Army CA personnel of SOJTF\u2013OIR provided assistance, including food, cooking fuel,  construction material, and garbage removal, for up to 31,000 civilians in Manbij, Syria.  DOD undertook this project because USAID and State were unable to provide any support  to the civilians in need. This project was coordinated with State and USAID and was  funded through the OHDACA appropriation. The project was intended to alleviate human  suffering and improve the civilian populace\u2019s perception of the local council.\nU.S. Army CA personnel of SOJTF\u2013OIR provided basic education supplies and  equipment, including desks, chairs, and whiteboards, to schools in Karamah. This project  was coordinated with State and USAID and funded through the OHDACA appropriation.  The project was intended to assist in reestablishment of education services in the area,  enhance the local council\u2019s ability to provide essential services and increase their standing  with the community, and provide access to DOD forces operating in the area.\nU.S. Army CA personnel of SOJTF\u2013OIR provided basic education supplies and  equipment, including desks, chairs, whiteboards, and backpacks, to schools in Kobani.  This project was coordinated with State and USAID and funded through the OHDACA  appropriation. The project was intended to assist in reestablishment of education services,  improve the capacity of the local government to provide essential services; improve the  perception of the local council; and provide access, visibility, and influence for DOD  forces.\n\n\tConflict stabilization effort Manbij School Supplies\n\nDOD\u2019s description of effort and its goals  U.S. Army CA personnel of SOJTF\u2013OIR provided classroom furniture and school supplies  to 4,000 students in Manbij. The project, managed through the local council, provided a  viable opportunity to resume attending classes for students who had not attended school  in over 4 years. The project was coordinated with State and USAID and funded through  the OHDACA appropriation. The project was intended to assist in reestablishment of  education services; improve the perception of the local council; and provide access,  visibility, and influence for DOD forces.\nU.S. Army CA personnel of SOJTF\u2013OIR provided winterization kits, including jackets,  hats, gloves, socks, and blankets, to civilians in the Raqqa region. The project provided  much needed winter clothing to civilians who had fled their homes due to ISIL operations.  The project was coordinated with State and USAID and funded through the OHDACA  appropriation. The project was conducted through the local council and intended to  alleviate human suffering, build the council\u2019s legitimacy, and provide access to DOD  forces.\nU.S. Army CA personnel of SOJTF\u2013OIR provided winterization kits, including jackets,  hats, gloves, socks, and blankets to civilians in the Manbij region. The project provided  cold weather items, through the local council, to civilians fleeing ISIL forces because State  and USAID were unable to provide support. The project was coordinated with State and  USAID and funded through the OHDACA appropriation. The project was intended to  alleviate human suffering, elevate the standing of the local council with the populace, and  improve access to DOD forces operating in the area.\nWe did not independently verify whether DOD\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).\nFor the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources referred to as  \u201cprograms,\u201d \u201cprogram-level initiatives,\u201d and \u201cprojects.\u201d\nCountries for which DOD conducts efforts are shaded in gray.\n\nAppendix V: USIP Reported Conflict Prevention and Resolution Efforts for Iraq, Nigeria, and Syria, Fiscal Year 2017\n\n\tConflict prevention and resolution effort IRAQ\n\nUSIP\u2019s description of effort and its goals  The U.S. Institute of Peace\u2019s (USIP) Middle East and Africa Center (MEA) is  responsible for the Advancing the Role of Iraqi Minorities in Stabilization and  Governance effort with funding from and in partnership with the Department of State\u2019s  (State) Bureau of Democracy, Human Rights, and Labor. This effort creates  mechanisms for gathering and sharing high-quality information with key Iraqi decision  makers and stakeholders on the minorities\u2019 situations, regardless of whether these  groups return home or remain displaced. The project utilizes and acts upon  information gathered through facilitated local dialogues that prevent violence  (especially violence stemming from revenge killing) and\/or reduce tensions between  displaced minorities and host communities. Improving access to this information is  intended to strengthen the role of civil society in stabilization and enable Iraqi decision  makers to enact more inclusive and information-based governance policies. The  specific objectives are to (1) improve key decision makers\u2019 understanding of conflict  drivers in liberated and minority-rich areas and (2) reduce tensions among and  between communities in Nineveh and other minority areas during the stabilization  process and in the build-up to provincial-level, Kurdish Regional Government, and  national elections. The goal of the effort is to improve stabilization and promote  inclusive governance in areas liberated from the Islamic State of Iraq and Syria (ISIS)  in Nineveh province and other minority-rich territories.\nUSIP\u2019s MEA and its strategic partner, Sanad for Peacebuilding, conduct the Facilitated  Dialogues effort in Iraq. The effort supports facilitated, outcome-oriented dialogue  processes that enable local reconciliation in areas liberated from ISIS. This type of  engagement has two main objectives in the current context: (1) preventing revenge  acts of violence by communities in conflict and (2) identifying and addressing the main  barriers impeding the return of internally displaced persons (IDP). Such engagement is  intended to increase the resilience of communities to the persistent threat of violent  extremism from ISIS remnants, the Popular Mobilization Forces, or others.\nUSIP\u2019s Center for Applied Conflict Transformation (ACT) is responsible for the JSD \u2013  Lessons Learned effort. Approximately 200 security and community representatives  from three major cities affected by the aftermath of ISIS participated in nine JSD  sessions as part of an assessment on preventing violent extremism in Iraq. The project  culminated in a conference attended by members of the JSD-Community of Practice  (COP), a network of local leaders committed to dialogue processes established by  USIP through its ongoing engagement in Iraq to support dialogue. The project\u2019s three  objectives are to (1) better understand local drivers of violent extremism through the  multiple perspectives included in the JSD-COP, (2) strengthen capacity of the JSD- COP to continue efforts to sustain local stability and promote the rule of law, and (3)  identify key lessons learned to further strengthen future JSD initiatives in the region.\nUSIP\u2019s ACT is responsible for the Mapping Post-ISIS Iraqi Religious Groups for Peace  and Reconciliation effort. ACT is partnering with country teams to undertake mappings  of influential religious actors, institutions, and ideas in conflict zones. This project  identifies and maps influential religious leaders in specific conflict zones with the long- term goal of including them in future Iraqi-led mediations, dialogues, and peace and  reconciliation efforts.\nUSIP\u2019s description of effort and its goals  USIP\u2019s MEA is responsible for the Problem-Solving Dialogues for Iraq\u2019s Religious  Minorities and Governance Issues with funding from and in partnership with State\u2019s  Bureau of Democracy, Human Rights, and Labor. The effort addresses tensions and  disputes between the Christian and Shabak communities in Nineveh in the wake of  ISIS, pushing toward outcome-oriented solutions through facilitated dialogues led by  experienced Iraqi facilitators. This effort also provides the USIP-created Alliance of  Iraqi Minorities (AIM) with experience in project development and execution as AIM  seeks to improve its impact on the provincial budget process, curriculum reform,  outreach, and influencing specific legislation pertaining to minorities. The effort  supports AIM\u2019s organizational capacity toward becoming more independent, self- reliant, and self-sustaining through developing the capacity and assuming total  responsibility for its organizational, administrative, programmatic, financial, and  logistical affairs. Establishing facilitated dialogues among Iraq\u2019s religious minorities  and, most importantly, between those groups and the majority Muslim communities, is  especially important as Nineveh is home to one of Iraq\u2019s largest concentration of  minorities. The goal of the effort is for Iraqis\u2014minorities in particular\u2014to prevent the  recurrence of violence through peaceful dialogue with each other and various  stakeholders, including national, provincial, and local governments.\nUSIP\u2019s MEA is responsible for the Support to Sanad for Peacebuilding effort. This  effort provides ongoing technical and financial support to USIP\u2019s strategic national  partner, Sanad, and the networks it manages, including the Network of Iraqi  Facilitators and the Alliance of Iraqi Minorities. Sanad and its affiliated networks serve  as a resource for conflict analysis, bringing disputing parties together through  facilitated dialogue and providing technical expertise for training and peacebuilding.  The goal, through helping Sanad become Iraq\u2019s leading and self-sustaining  peacebuilding organization, is to increase Iraqi capacity and leadership in conflict  prevention and mitigation.\nUSIP\u2019s MEA is responsible for the Training Iraqis in Conflict Management effort. This  project provides training to both governmental and nongovernmental organizations,  including officials and civil society activists in Kurdistan working to prevent the  escalation of tensions among the nearly 1.8 million IDPs located there and in local  communities. It also provides technical support to the Kurdish Regional Government  on the implementation of Iraq\u2019s national action plan under United Nations Security  Council Resolution 1325, and ongoing assistance to Iraq\u2019s National Reconciliation  Committee and other governmental bodies that play a key role in local and national  reconciliation. The goal of the project is to enable a variety of Iraqi organizations to use  the tools and skills taught to them by professional trainers and USIP staff to resolve  local tensions that have the potential to reignite sectarian tensions on a large scale.  Building the skills of Iraqis in this field is intended to enable them to solve issues  stemming from extremist violence and local sectarian conflict without external aid, thus  stopping violence at its sources before it spreads to other communities and causes  further destabilization.\nUSIP\u2019s description of effort and its goals  USIP\u2019s ACT was responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the  Middle East, including Iraq. Many of these countries grapple with the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.\nUSIP\u2019s MEA is responsible for the development of a USIP strategy for countering  violent extremism (CVE) for Nigeria that is integrated with its Nigeria country strategy  and consistent with USIP\u2019s overall CVE strategy. Working in collaboration with ACT,  MEA partners with a local organization for project implementation and uses local staff  for support. This effort is intended to further USIP\u2019s current process of strengthening  its Nigeria country strategy to guide program initiatives for its Africa team and USIP  more broadly. The goal is to deepen and expand USIP\u2019s programming and thought  leadership in the field of CVE through initiatives based on an evidence-based  assessment.\nUSIP\u2019s MEA and ACT are responsible for the Election Security Assessment. Together  with selected partners, USIP began three assessment rounds in Washington, D.C.,  and Nigeria focused on assessing election violence risks and gaps in electoral security  and peacebuilding planning. USIP works closely with State\u2019s Nigeria desk, USAID\u2019s  political section, the USAID\u2019s mission at U.S. Embassy Abuja, and relevant  international and local partners engaged in election programming. The assessment will  produce programmatic recommendations to address identified vulnerabilities and seize  opportunities for the promotion of peaceful elections. The goal of the effort is to help  ensure that the prevention activities by USIP, U.S. government partners and civil  society are better integrated and evidence-based.\nGeneration Change Fellows Program (GCFP)  USIP\u2019s ACT is responsible for the GCFP, which strengthens youth leaders\u2019  peacebuilding skills and creates a community of practice through which they can learn  from and mentor each other, share best practices, and work to create positive change  in their communities. GCFP carefully selects small cohorts of dedicated peacebuilders  aged 18\u201335 through a highly competitive application process. These Fellows hold  leadership roles within their local communities and tackle challenges, from countering  violent extremism to enhancing gender equality. The goal of the GCFP is to increase  youth leaders\u2019 participation in and contribution to conflict transformation and positive  social change in conflict-affected communities.\nUSIP\u2019s ACT, with funding from and in partnership with State\u2019s Bureau of International  Narcotics and Law Enforcement Affairs, is responsible for the Justice and Security  Dialogue Project in the Sahel and Maghreb. The project offers opportunities to  develop, refine, and test models and tools through field pilot experimentation in six  countries, including Nigeria. The project aims to strengthen the relationship between  civilian security services and communities at the local level and to pilot a model for  bridging the gap between police and citizens for use across the region. Through a  series of dialogues and activities supported by USIP and local partners, participants  will collaboratively identify and address concrete security challenges at the local level.\nConflict prevention and resolution effort  Lake Chad Basin and Sahel Working Group  USIP\u2019s MEA is responsible for the Lake Chad Basin and Sahel Working Group. USIP  USIP\u2019s description of effort and its goals  will convene a working group focused on addressing the drivers of violent extremism in  the Lake Chad Basin and the Sahel. This will include developing a research  framework, drawing on ACT\u2019s CVE assessment tool, and commissioning a series of  papers by academics, policy experts, and practitioners from countries across the  region. The goal is to advance USIP\u2019s thought leadership in the field of preventing  violent extremism by studying the impact of the Boko Haram crisis in the context of  broader regional dynamics and the potential for more regional approaches to foster  resilience to violent extremism.\nUSIP\u2019s MEA is responsible for the Lake Chad Basin Project, with funding from and in  partnership with State\u2019s Bureau of Conflict and Stabilization Operations. This project  builds upon over a decade of programming in Nigeria to implement a multiyear  program that seeks to strengthen the capacity of Nigerian opinion leaders and policy  makers, to foster sustainable and inclusive strategies toward addressing the root  causes of violent conflict, particularly in Northern Nigeria. Some activities included (1)  convening a 3-day symposium in Washington, D.C., of governors from states across  northern Nigeria to foster key exchanges and critical discussions with leading  American and international experts on the drivers of violent conflict in the region and  how to resolve them; (2) creating a senior working group of 11 Nigerian civic leaders  that can engage strategically with the governors and work collaboratively to articulate  a set of policy priority areas toward addressing the drivers of conflict; (3) conducting  quantitative and qualitative studies in Borno and Plateau states to understand citizen  perceptions to the drivers of violent conflict, and how policymakers should address  them; and (4) supporting sustained, facilitated engagement between the governors  and members of the senior working group to help to shape a more inclusive policy  platform toward preventing violent conflict and addressing stabilization needs in target  states across the north. The goal of this project is to have an invested group of  governors from across the northern states in Nigeria and a senior working group of  civic leaders identify a set of citizen-informed priority policy areas for northern Nigeria  to prevent and resolve violent conflict, increase stabilization efforts where appropriate,  and demonstrate a continued willingness to engage together on specific conflict- related issues.\nUSIP\u2019s MEA is responsible for the Network of Nigerian Facilitators. USIP is identifying  and supporting a group of community leaders, including youth, women, and religious  leaders with dialogue facilitation skills to prepare, convene, and facilitate intergroup  dialogues in their communities. In addition to building the abilities of the facilitators to  locally manage conflict, USIP will provide financial support to the facilitators to  implement localized conflict management activities. The goal is to build capacity and  provide ongoing support to a network of community facilitators that can prevent and  resolve conflict nonviolently.\nUSIP\u2019s MEA is responsible for the Nigeria Conversation Series. MEA partners with a  local organization to implement the series and uses local staff for support. The series  brings together a broad array of policy professionals for in-depth discussions on  current issues in Nigeria and to explore options for preventing and resolving violent  conflict in the country. The purpose of the series is to inform and influence Nigerian,  U.S., and international policies and programs that seek to address conflict in Nigeria.  The discussions seek to promote improved understanding and shared analysis of the  conflict dynamics in the country through engagement with informed researchers and  practitioners.\nConflict prevention and resolution effort  Nigeria\u2019s Imam and Pastor: Faith at the Front  USIP\u2019s MEA is responsible for Nigeria\u2019s Imam and Pastor project. In fiscal year 2017,  USIP\u2019s description of effort and its goals  the findings from USIP research were used to inform the production of a short USIP  video to contribute to understanding (1) the role of religious leaders in peacebuilding  and (2) that grassroots dialogues are necessary for reducing violence but are  complemented by changes in governance. Also, USIP produced a video series of  pieces to highlight the work and voices of USIP\u2019s country and partner organizations  and provide practical tools to inform policymakers and partners in their work in  reducing violent conflict.\nUSIP\u2019s ACT, with funding from and in partnership with USAID, is responsible for the  Research on Violent Extremism, Politics, Religion, and the Higher Education Sector in  the Lake Chad Basin effort. Under the rubric of the RESOLVE Network\u2014a global  consortium of research organizations established by USIP\u2014this project is intended to  enhance USAID\u2019s assistance to the educational sector in the Lake Chad Basin region  by providing research support for locally driven analysis in Nigeria, Chad, and  Cameroon. The primary purpose of the RESOLVE Network initiative in the Lake Chad  Basin is to assess the role of the state, civil society, and other nonstate actors in  shaping the political divides over the role of religion in education and community and  state responses to extremism in Chad, Nigeria, and Cameroon.\nUSIP\u2019s MEA is responsible for the Support to State Peacebuilding Institutions effort,  which is being implemented by a local partner with the support of local USIP staff in  Abuja. The Africa Team, in partnership with USIP\u2019s ACT, provides training for the  Plateau Peacebuilding Agency, the Kaduna Peace Commission and the relevant  peacebuilding entities in the Borno state administration on conflict analysis, conflict  management and facilitation. USIP delivers the training through a combination of  online and in-person training. The Africa team identifies ways to engage the Interfaith  Mediation Center (the Imam and the Pastor) to share their expertise and experiences.  The goal is to advance the skills of the practitioner peacebuilding community in Nigeria  to inform policy to prevent and resolve conflict at the state-level through online and in- person training.\nUSIP\u2019s MEA is responsible for the Supporting Transition to Civilian-Led Governance  and Security effort, which is being implemented by a local partner with the support of  local USIP staff in Abuja. The Africa team developed a framework for the transition  from military and vigilante security to community-oriented policing through (1) research  on comparative experiences in the transition from nonstate actors to civilian  governance and (2) a series of roundtables and engagements with The Multinational  Joint Task Force. The research seeks to incorporate USIP\u2019s experiences in  Afghanistan, Iraq, Colombia, Nepal, and Myanmar to offer concrete lessons, tools, and  approaches. The goal is to contribute evidence-based and comparative research that  will inform discussions on civil-military relationships, justice, security, and rule of law  reform in the Northeast and Lake Chad Basin.\nUSIP\u2019s MEA is responsible for the Women Preventing Violent Extremism effort, with  funding from and in partnership with State\u2019s Bureau of Counterterrorism. The project is  implemented by a local organization. This project began as a pilot project in 2012 and  is designed to increase women\u2019s agency and influence in strengthening community- level resilience to violent extremism through engagement and collaboration with  security actors. The project was piloted in Plateau and Kaduna states in Nigeria and in  Nairobi, Mombasa, and Garissa, Kenya. The project aims to understand ways in which  trust and cooperation between women in civil society and the security sector can best  be fostered and supported.\nUSIP\u2019s description of effort and its goals  USIP\u2019s ACT is responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, including  Nigeria; Asia; and the Middle East. Many of these countries face the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.\nUSIP\u2019s MEA is responsible for the Dialogues with the Interfaith and Other Key Leaders  effort in partnership with and with funding from State\u2019s Bureau of Democracy, Human  Rights, and Labor. In Northeastern Syria, USIP works with Syrian partners to  strengthen civil society\u2019s engagement and coordinating role with civic, religious, and  tribal leaders in al-Qamishli\/al-Qahtaniya. The effort aims to address drivers of  tensions and conflicts through an evidenced-based, outcome-oriented dialogue  process. The overall goal is to strengthen social cohesion among and between the  communities in Northern Syria, enable the return of displaced communities, and stem  potential conflict.\nUSIP\u2019s MEA is responsible for three ongoing grants related to the Syria conflict in  neighboring countries: The first is a grant to War Child to work with a local network of  Jordanian organizations training young Syrian refugees in Amman and vicinity on  youth leadership, peacebuilding, and conflict resolution skills. The two other grants  fund (1) a Lebanese civic group that supported mediation and training aimed at  reducing refugee-related tensions in Lebanon\u2019s Bekaa Valley and to enable Syrian  refugees to find jobs and register their children in schools, and (2) a nongovernmental  organization that trained Syrian and Lebanese journalists on conflict-sensitive  reporting about the Syrian refugee crisis and on raising awareness of the benefits the  refugees bring to the host community. These grants are aimed at reducing tensions  that threaten peace and stability in Lebanon and Jordan because of the burdens of  their absorption of Syrian refugees.\nUSIP\u2019s ACT was responsible for the Youth Leaders\u2019 Exchange with His Holiness the  Dalai Lama. In November 2017, USIP and the Dalai Lama hosted a second annual  dialogue with youth peacebuilders drawn from countries across Africa, Asia, and the  Middle East, including Syria. Many of these countries face the world\u2019s deadliest  conflicts, as well as campaigns by extremist groups to incite youth to violence. The  youth leaders are among their countries\u2019 most effective peacebuilders. The dialogue  with the Dalai Lama was intended to help them to build the practical skills and  personal resilience they need to work against the tensions or violence in their  homelands. The overarching goal was to strengthen the capacity of youth to create  positive change as leaders and peacebuilders in their communities by partnering with  more traditional leaders.\nWe did not independently verify whether USIP\u2019s reported list of conflict mitigation and stabilization  efforts included all such efforts in Iraq, Nigeria, and Syria (and in neighboring countries for Syria).\nFor the purposes of this list of efforts and goals, \u201cefforts\u201d includes what our sources also referred to as  \u201cprojects.\u201d\nCountries for which USIP conducts efforts are shaded in gray.\n\nAppendix VI: Comments from the Department of State\n\nAppendix VII: Comments from the U.S. Agency for International Development\n\nAppendix VIII: Comments from the Department of Defense\n\nAppendix IX: Comments from the U.S. Institute of Peace\n\nAppendix X: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, Godwin Agbara (Assistant  Director), Kathleen Monahan (Analyst-in-Charge), David Dayton, Martin  de Alteriis, Mark Dowling, Emily Gupta, and Jasmine Senior made key  contributions to this report. Additional assistance was provided by Michael  Fahy, Christopher Keblitis, Judith McCloskey, James Reynolds, Kira Self,  and Sarah Veale.","output":"Why GAO Did This Study\n\nThe United States has a national security interest in promoting stability in conflict-affected countries to prevent or mitigate the consequences of armed conflict, according to the 2017 National Security Strategy. State, USAID, and DOD have reported that a collaborative government approach is an essential part of maximizing the effectiveness of U.S. efforts in conflict-affected areas.\nGAO was asked to review U.S. conflict prevention, mitigation, and stabilization efforts abroad. This report (1) describes examples of conflict prevention, mitigation, and stabilization efforts that U.S. agencies and USIP conducted in Iraq, Nigeria, and Syria and their goals in fiscal year 2017 and (2) examines the extent to which U.S. agencies and USIP incorporated key collaboration practices to coordinate their efforts. GAO collected data from the agencies and USIP on their efforts and goals in Iraq, Nigeria, and Syria. GAO selected these countries based on U.S. national security interests, among other criteria. GAO reviewed agency and USIP documents, interviewed officials, and conducted fieldwork in Iraq, Nigeria, and Jordan. GAO assessed coordination against key practices identified by GAO to enhance interagency collaboration.\n\nWhat GAO Found\n\nThe Departments of State (State) and Defense (DOD), the U.S. Agency for International Development (USAID), and the U.S. Institute of Peace (USIP)\u2014an independent, federally funded institute\u2014reported conducting various efforts to address conflict prevention, mitigation, and stabilization for Iraq, Nigeria, and Syria in fiscal year 2017. For example, in Iraq, State supported efforts to remove improvised explosive devices from homes and infrastructure (see figure); USAID contributed to the United Nations to restore essential services; DOD provided immediate medical trauma supplies to the World Health Organization to treat injured civilians; and USIP conducted facilitated dialogs to enable local reconciliation in areas liberated from the Islamic State of Iraq and the Levant.\nIn conducting U.S. conflict prevention, mitigation, and stabilization efforts, State, USAID, DOD, and USIP have addressed aspects of key collaboration practices such as elements of bridging organizational cultures and leadership. However, the agencies have not formally documented their agreement on coordination for U.S. stabilization efforts through formal written guidance and agreements that address key collaboration practices. GAO found the following, for example, with regard to the extent key collaboration practices have been used by these entities.\nBridging organizational cultures: U.S. agencies have established various mechanisms to coordinate their efforts, such as interagency working groups and staff positions focused on coordination. USIP convenes interagency actors, including State, USAID, and DOD through various programs and events.\nDefining outcomes and accountability: One or more agencies have established some common outcomes and accountability mechanisms for their stabilization efforts in Iraq, Nigeria, and Syria. Moreover, through an interagency review of U.S. stabilization assistance, State, USAID, and DOD identified a need to develop an outcome-based political strategy outlining end states for U.S. stabilization efforts and strategic analytics to track and measure progress, among other needs.\nWritten guidance and agreements: Although State, USAID, and DOD have developed a framework for stabilization, they have not documented their agreement on the key collaboration practices identified, such as defining outcomes and accountability and clarifying roles and responsibilities. According to key practices for enhancing interagency collaboration, articulating agreements in formal documents can strengthen collaborative efforts, and reduce the potential for duplication, overlap, and fragmentation.\n\nWhat GAO Recommends\n\nState, USAID, and DOD should document agreement on their coordination for U.S. stabilization efforts though formal written guidance and agreements addressing key collaboration practices. The agencies concurred with the recommendations."}
{"id":"gao_GAO-18-34","pid":"gao_GAO-18-34_0","input":"\tBackground\n\nVA serves veterans of the U.S. armed forces and provides health,  pension, burial, and other benefits. The department\u2019s three operational  administrations\u2014VHA, Veterans Benefits Administration, and National  Cemetery Administration\u2014operate largely independently from one  another. Each has its own contracting authority, though all three also  work with national contracting organizations under the Office of  Acquisition, Logistics, and Construction for certain types of purchases,  such as medical equipment and information technology. VHA, which  provides medical care to about 7 million veterans at 170 medical centers,  is by far the largest of the three administrations. These medical centers  are organized into 18 VISNs, organizations that manage medical centers  and associated clinics across a given geographic area. Each VISN is  served by a corresponding Network Contracting Office. Figure 1 shows  the organizational structure of the procurement function at VA.\n\n\t\tMSPV-NG Program\n\nFor over a decade, each of VA\u2019s 170 medical centers used VHA\u2019s legacy  MSPV program to order medical supplies, such as bandages and  scalpels. Many of those items were purchased using the Federal Supply  Schedules, which provided medical centers with a great deal of flexibility.  As we reported in 2016, this legacy program, however, prevented VHA  from standardizing items used across its medical centers and affected its  ability to leverage its buying power to achieve greater cost avoidance.  Standardization is a process of narrowing the range of items purchased to  meet a given need in order to improve buying power, simplify supply  chain management, and provide clinical consistency. For example, a  hospital network might find that it purchases 100 varieties of bandages,  but might ultimately determine\u2014with input from clinicians\u2014that it can  narrow those choices down to 10 varieties to fill most needs, which would  provide greater consistency and allow the hospital to negotiate lower  prices. In part because the legacy MSPV program limited standardization,  VHA decided to transition to a new iteration, called MSPV-NG.\nVHA launched the MSPV-NG program in December 2016 but allowed a  4-month transition period. After April 2017, medical centers could no  longer use the legacy program. MSPV-NG now restricts ordering to a  narrow \u201cformulary\u201d\u2014a list of specific items that medical centers are  allowed to purchase. VA has had a formulary in place for pharmaceuticals  since 1997, and many leading hospital networks rely on a similar  formulary approach when it comes to purchasing their own medical  supplies. VHA policy requires medical centers to use MSPV-NG\u2014as  opposed to other means such as open market purchase card  transactions\u2014when purchasing items that are available in the formulary.  Figure 2 illustrates the program structure and key participants involved in  the transition to MSPV-NG.\nVA\u2019s primary MSPV-NG program goals are to:\nStandardize requirements for supply items for greater clinical  consistency.\nAchieve cost avoidance by leveraging VA\u2019s substantial buying power  when making competitive awards; VA set a goal of achieving $150  million in cost avoidance in 2016 through a supply chain  transformation effort, of which MSPV-NG is a primary part.\nAchieve greater efficiency in ordering and supply chain management,  including a metric of ordering 40 percent of medical centers\u2019 supplies  from the MSPV-NG formulary.\nInvolve clinicians in requirements development to ensure uniform  clinical review of medical supplies.\nVHA gave responsibility for developing and implementing MSPV-NG to its  Healthcare Commodity Program Executive Office (program office), an  organization within VHA\u2019s Procurement and Logistics Office. According to  documentation, the program office and SAC, a VA-wide contracting  organization, identified several steps to allow for a successful transition to  MSPV-NG. These steps included the following:  1.  Identify and develop requirements \u2013 Determine which types of  medical supplies should be made available to medical centers via the  MSPV-NG formulary and their key characteristics. The program office  was responsible for this aspect of the transition.  2.  Award contracts and establish agreements \u2013 SAC was responsible for  awarding distribution contracts to a select number of prime vendors  within certain geographic areas to deliver supplies to medical centers.  SAC was also responsible for awarding contracts and establishing  agreements with suppliers that provide the products themselves,  which set prices for individual items.  3.  Implement MSPV-NG at medical centers \u2013 MSPV-NG orders are  placed by ordering officers\u2014members of the logistics staff at each  medical center that are delegated authority by SAC contracting  officers to place orders for medical supplies. Each medical center\u2019s  most frequently purchased items\u2014referred to as their core list\u2014vary  based on the type of care provided, local preferences, and other  factors.\n\n\t\tLeading Practices for Organizational Transformation Efforts\n\nWe have previously reported that organizational transformations (such as  MSPV-NG) require careful planning and implementation to be  successful. For instance, one leading practice is for leadership to set  clear implementation goals and a timeline to achieve them. Likewise,  communicating a strategy and progress to stakeholders\u2014as well as  seeking feedback\u2014is a hallmark of successful organizational  transformations. We have reported that at the center of any serious  change management initiative are the people. Thus, to facilitate success,  is to recognize the \u201cpeople\u201d element and implement strategies to help  individuals maximize their full potential in the organization, while  simultaneously managing the risk of reduced productivity and  effectiveness that often occurs as a result of the changes. Building on the  lessons learned from the experiences of large private and public sector  organizations, the key practices and implementation steps that we  identified in our prior work can help agencies transform their cultures so  that they can be more results oriented, customer focused, and  collaborative in nature. Standards for Internal Control in the Federal  Government also identify related principles, such as the importance of the  tone from the top and ensuring that data used in decision-making are  reliable.\n\n\t\tSupply Chain Practices Identified by Selected Leading Hospital Networks\n\nLeading hospital networks we spoke with have similar goals to VA in  managing their supply chains, including clinical standardization and  reduced costs. In managing their supply chain efforts, the leading hospital  networks we identified take consistent approaches to drive change and  achieve savings. These hospitals reported they analyze their spending to  identify items purchased most frequently, and which ones would be the  best candidates to standardize first to yield cost savings. These hospitals  also acknowledge that this is an iterative process and do not attempt to  standardize all categories of medical supplies at a single time, but instead  prioritize categories of supplies based on the potential for standardization.  The hospitals\u2019 supply chain managers establish consensus with clinicians  through early and frequent collaboration on supply chain standardization.\nThese hospitals also continually involve clinicians in determining key  supply characteristics and evaluating potential items, understanding that  clinician involvement is critical to the success of any effort to standardize  their medical supply chain. For example, a supply chain official from one  large hospital we spoke with stated that selecting an item that does not  meet clinician needs could damage clinician buy-in for future efforts, so  they take great care to be thorough in taking clinician input into account.  Supply chain officials from these leading hospitals have reported positive  results from these efforts, such as increased cost savings and the  potential for improved patient care.\nBy tackling a few specific categories at a time and communicating with  clinicians on an ongoing basis about the outcomes of these processes  and the decisions taken, these hospitals are able to achieve efficiencies,  including significant cost savings in some cases, while maintaining buy-in  from their clinicians. Figure 3 depicts the key steps that selected  hospitals\u2019 supply chain managers reported following when standardizing  their medical supply chains, including the critical role of clinicians  throughout the process.\n\n\t\tEmergency Procurements\n\nThe Federal Acquisition Regulation (FAR) generally requires agencies to  contract using full and open competition, but permits contracting without  full and open competition in specified circumstances, such as when the  agency\u2019s need for supplies or services is of unusual and compelling  urgency. The VHA Procurement Manual describes an emergency as a  situation\u2014such as response to fires or floods\u2014where delay in award of a  contract would result in financial or physical injury to the VA or a veteran.  The manual also states that neither a lack of advance planning nor  concerns about a need to obligate funds before the end of the fiscal year  are valid justifications for an urgent or emergency procurement request.\nFor needs that cannot be met through MSPV-NG, medical centers submit  purchase requests to their local VHA contracting office\u2014the Network  Contracting Office. The contracting office provides medical centers with  expected lead times for various types of procurements, which can be from  days to months, depending on the complexity of the requested item.  However, if a medical center has an urgent need that must be met more  quickly than the expected lead times, the customer submitting the request  can identify it as an emergency. The purchase request is entered into two  VA data systems, the Integrated Funds Distribution Control Point Activity,  Accounting and Procurement and VA\u2019s Electronic Contract Management  System (eCMS). The medical center designates the priority level of the  request as:  1.  Emergency: life threatening cases, emergency physical plant repair,  and requires acquisition action within 24 hours;  2.  Special: urgent, non-life threatening, and requires acquisition action  within 72 hours; and  3.  Standard: all other cases and requires acquisition action within 40  days.\nIncoming requests are screened by Network Contracting Office managers  and assigned to individual contracting officers, who must prioritize  emergency requests over other pending contract actions. Figure 4  illustrates the typical process for submitting and awarding an emergency  procurement.\n\n\tVHA\u2019s Implementation of MSPV-NG Program Has Not Yet Achieved Its Goals\n\nVHA\u2019s implementation of the MSPV-NG program\u2014from its initial work to  identify a list of supply requirements in 2015, through its roll-out of the  formulary to medical centers in December 2016\u2014was not executed in line  with leading practices. Despite changes aimed at improving  implementation, the agency continues to face challenges that have  precluded achievement of program goals. Specifically, VHA lacked a  documented program strategy, leadership stability, and workforce  capacity for the transition that\u2014if in place\u2014could have facilitated buy-in  for the change throughout the organization. Furthermore, the initial  requirements development process and tight time frames contributed to  ineffective contracting processes. As a result, VHA developed an initial  formulary that did not meet the needs of the medical centers. VA made  some changes in the second phase of requirements development to  address deficiencies identified in the initial roll out, namely by increasing  the level of clinical involvement. However, VHA has not yet achieved its  goals for utilization and cost avoidance.\n\n\t\tVA Lacked an Overarching Strategy for Implementing MSPV-NG\n\nVA did not document a clear overall strategy for the MSPV-NG program  at the start and has not done so to date. According to program office and  SAC officials responsible for developing and executing the program, no  document existed at the outset of the MSPV-NG program that outlined  the overall strategy. About 6 months after our initial requests for a  strategy or plan, an official provided us with an October 2015 plan  focusing on the mechanics of establishing the MSPV-NG formulary.  However, this plan was used only within the VHA Procurement and  Logistics Office and had not been approved by VHA or VA leadership.  Leading practices for organizational transformation state that agencies  must have well-documented plans and strategies for major initiatives  (such as MSPV-NG) and communicate them clearly and consistently to  all involved\u2014which included VHA headquarters, the SAC, and all 170  medical centers. Without such a strategy, VA could not ensure that all  stakeholders understood VHA\u2019s approach for MSPV-NG and worked  together in a coordinated manner to achieve program goals. This is also  in contrast to the practices of several leading hospital networks we met  with, which placed an emphasis on designing and communicating a  strategy and governance structure for their medical supply  standardization efforts before making any changes to purchasing. If VA  continues to move forward with MSPV-NG without an overarching  strategy that it communicates to all stakeholders to ensure they  understand VHA\u2019s approach for MSPV-NG, VA will continue to face  challenges in meeting program goals.\n\n\t\tLeadership Instability and Staffing Shortages Were Obstacles to Effective Implementation of MSPV- NG\n\nLeadership instability and workforce challenges also made it difficult for  VA to execute its transition to MSPV-NG. Due to a combination of budget  and hiring constraints, and lack of prioritization within VA, the program  office, which has primary responsibility for implementing MSPV-NG, has  never been fully staffed and has experienced instability in leadership. As  of January 2017, 24 of the office\u2019s 40 positions were filled, and program  office officials stated that this lack of staff affected their ability to  implement certain aspects of the program within the planned time frames.  Our work has shown that leadership buy-in is necessary to ensure that  major programs like MSPV-NG have the resources and support they  need to execute their missions. We have also previously found that  leadership must set a tone at the top and demonstrate strong  commitment to improve and address key issues. However, leadership of  VHA\u2019s Procurement and Logistics Office changed frequently during the  implementation of MSPV-NG, and two of its leaders, the Chief  Procurement and Logistics Officer and the Deputy Chief Logistics Officer,  were serving in an acting capacity. A similar instability in leadership  affected the program office itself. Since the inception of MSPV-NG, the  program office has had four directors, two of whom were acting and two  of whom were fulfilling the director position while performing other  collateral duties. For instance, one of the acting MSPV-NG program office  directors was on detail from a VISN office to fulfill the position but had to  abruptly leave and return to her VISN position due to a federal hiring  freeze. Without prioritizing the hiring of the program director position on a  permanent basis, this lack of stability could continue to affect execution of  MSPV-NG.\nMoreover, VA\u2019s Chief Acquisition Officer (CAO), whose responsibilities  include oversight of VA acquisition programs such as MSPV-NG, is  serving in an acting capacity and is not a \u201cnon-career employee.\u201d By  statute, VA is required to appoint or designate a non-career employee as  the agency\u2019s CAO. VA provided information to show that since 2009, VA  has designated career employees as \u201cacting\u201d CAOs rather than  appointing or designating non-career employees to the CAO position. As  we reported in 2012, clear, strong, and effective leadership, including a  CAO, is key to an effective acquisition function that can execute  complicated procurements like MSPV-NG. By appointing a CAO in a  non-acting capacity, VA could improve the effectiveness of its acquisition  function. During our 2012 review, VA indicated that it sought to establish  an Assistant Secretary for Acquisition, Logistics, and Construction, who  would serve as VA\u2019s CAO. In connection with the current review, VA\u2019s  Office of General Counsel cited a statutory limitation on the number of  assistant secretaries that may be established within VA as the reason it  has not established that additional assistant secretary position. VA\u2019s  Office of General Counsel indicated that the agency was considering  requesting, in the reform plan that VA was required to submit to the Office  of Management and Budget in September 2017, a change to the statute  that limits the number of VA assistant secretaries. However,  subsequently, VA\u2019s Office of General Counsel indicated that the plan will  not include such a request. By not appointing or designating a non- career employee as CAO, VA will continue to be noncompliant with the  statute. Figure 5 summarizes the history of leadership changes in these  positions, which are all currently filled in an acting capacity.\nFurther, according to officials, leadership vacancies at medical centers  and competing demands on logistics staff time made implementation of  MSPV-NG more challenging at the selected VISNs and medical centers  we visited. For instance, longstanding vacancies in the Chief Supply  Chain Officer positions existed at one of the VISNs and its medical center  that we visited. The VISN-level position was vacant for about 4 years,  with Chief Supply Chain Officers from individual medical centers filling in  for periods of time, according to the current Chief Supply Chain Officer,  who took the position in January 2017. In one medical center within that  VISN, the local position was also vacant for several years, according to  the current Chief Supply Chain Officer, who took the position in 2016. He  stated that he found that the staffing of the office had suffered in the  absence of a leader, leaving it poorly-equipped to execute the transition  to MSPV-NG. Medical center logistics staff also had several other major  transformation efforts to manage alongside the MSPV-NG transition, such  as implementing a new system for managing equipment. Several Chief  Supply Chain Officers we interviewed stated that these additional  demands made it challenging for their staff to implement the MSPV-NG  program.\n\n\t\tThe MSPV-NG Initial Requirements Development Process Had Limited Clinician Involvement and Did Not Prioritize Categories of Supplies\n\nThe MSPV-NG program office initially developed requirements for  medical and surgical supply categories\u2014identifying items to include in the  formulary\u2014based almost exclusively on prior supply purchases, with  limited clinician involvement. The program office concluded in its October  2015 formulary plan that relying on data on previous clinician purchases  would be sufficient and that clinician input would not be required for  identifying which items to include in the initial formulary. Further, rather  than standardizing purchases of specific categories of supplies\u2014such as  bandages or scalpels\u2014program officials told us they identified medical  and surgical items on which VA had spent $16,000 or more annually and  ordered at least 12 times per year, and made this the basis for the  formulary. Officials said this analysis initially yielded a list of about 18,000  items, which the program office further refined to about 6,000 items by  removing duplicate items or those that were not considered consumable  commodities, such as medical equipment.\nIn 2015, the program office also took the lead in developing requirements  for these 6,000 items. In documentation, and as confirmed by agency  officials, we found that the program office did not solicit input from  clinicians for most items and did not prioritize categories of supplies.  Instead, the program office relied on historical purchase data to set  requirements across medical and surgical categories because officials  said they thought this would provide a good representation of medical  centers\u2019 needs. This approach to requirement development stood in sharp  contrast to those of the leading hospital networks we met with, which  relied heavily on clinicians to help drive the standardization process and  focused on individual categories of supplies rather than addressing all  categories simultaneously.\n\n\t\tInitial Requirements Development and Tight Time Frames Contributed to Ineffective Contracting Practices for Initial Formulary\n\nBased on the requirements developed by the program office, SAC began  to issue solicitations for the 6,000 items on the initial formulary in June  2015. From June 2015 to January 2016, medical supply companies  responded to only about 30 percent of the solicitations. As a result,  according to SAC officials, they conducted outreach and some of these  companies told SAC that VHA\u2019s requirements did not appear to be based  on clinical input and instead consisted of manufacturer-specific  requirements that favored particular products instead of broader  descriptions. Furthermore, SAC did not solicit large groups of related  items, but rather issued separate solicitations for small groups\u2014 consisting of 3 or fewer items\u2014of supply items. This is contrary to  industry practices of soliciting large groups of related supplies together.  Therefore, according to SAC officials, some medical supply companies  told them that submitting responses to SAC\u2019s solicitations required more  time and resources than they were willing to commit.\nBy its April 2016 deadline for having 6,000 items on the formulary, SAC  had been working on the effort for over a year and had competitively  awarded contracts for about 200 items, representing about 3 percent of  the items. Without contracts for the items on the formulary in place, VA  delayed the launch of the MSPV-NG program until December 2016. To  continue the legacy MSPV program through the new launch date, SAC  awarded bridge contracts\u2014short-term sole-source contracts\u2014to its  legacy prime vendor contractors for a second year. We previously  reported that bridge contracts had resulted in higher costs to the  government. In part because of these costs, SAC officials stated that VA  leadership did not view a third set of bridge contracts for the legacy  MSPV program as a viable option. As a result of the pressure not to miss  the revised December 2016 deadline, which VA documents we reviewed  stated would have been \u201ccatastrophic,\u201d SAC abandoned its original goal  of using competitive procedures and relied instead on a non-competitive  strategy for placing most of the items on the MSPV-NG initial formulary.  Starting in August 2016, SAC established 175 limited source blanket  purchase agreements with Federal Supply Schedule vendors to complete  the initial Phase 1 formulary. While this approach enabled the MSPV- NG program office to establish the formulary more quickly, it did so at the  expense of one of the primary goals of the MSPV-NG program\u2014 leveraging VA\u2019s buying power to obtain cost avoidance through  competition.\nWe previously reported that a senior VA procurement official said VA  could save 30 percent, on average, on the prices available under the  Federal Supply Schedules when awarding competitive contracts that  leveraged VA\u2019s buying power under the legacy MSPV program. The  discounts VA obtained from these limited source agreements were  generally much less. We reviewed a non-generalizable sample of 10  randomly-selected limited source blanket purchase agreements and  found that most items (332 of the 376 items covered by these  agreements) were discounted 5 percent or less. Competition is the  cornerstone of the acquisition system; its benefits are well established,  including saving the taxpayer money. As shown in figure 6, the non- competitive agreements awarded in the last few months before the launch  of MSPV-NG accounted for approximately 79 percent of the items on the  January 2017 version of the formulary.\n\n\t\tInitial Formulary and Unclear Communication Contributed to a Lack of Medical Center Buy-In for MSPV-NG Implementation\n\nOnce VA\u2019s MSPV-NG initial formulary was established in December  2016, each medical center was charged with implementing it. Previously,  medical centers had hundreds of thousands of items they could obtain  through the legacy MSPV program. In order to transition to the new  formulary\u2014consisting of around 6,000 items at launch\u2014the program  office directed medical centers to determine if items they had ordered in  the past could be fulfilled by the formulary. To do this, each medical  center\u2019s Chief Supply Chain Officer\u2014the head of the logistics office\u2014was  to review their center\u2019s core list of previously ordered items to try to  identify matches on the MSPV-NG formulary in three different categories:  1.  Direct matches \u2013 For some items, the exact same item a medical  center had been purchasing was available in the formulary. Identifying  these matches may not necessarily be simple, as the names and  identification numbers were not typically the same.  2.  Potential clinical equivalents \u2013 Many items that were no longer  available under the MSPV-NG formulary had close matches on the  formulary. However, because these were not exactly the same, work  was required to ensure that they were clinically equivalent\u2014in nearly  all cases, this required clinician input. Clinical Product Review  Committees at each medical center, which are comprised of clinicians  and others, are responsible for approving new supplies before they  are introduced to a medical center.  3.  Items without matches \u2013 Finally, there were some items that medical  centers had been purchasing for which logistics staff were not able to  identify a clinical equivalent in the MSPV-NG formulary. In these  cases, logistics staff sought non-MSPV methods of obtaining the  same items they had previously purchased\u2014usually via purchase  card transactions and, in a few cases, via requests to their local  contracting office to award new contracts for the items.\nFigure 7 shows the typical process for identifying MSPV-NG matches for  core list items at individual VA medical centers, as described by logistics  officials at the selected medical centers.\nAccording to logistics officials we spoke with, the MSPV-NG formulary  matching process was challenging for the selected medical centers, and  they had varying levels of success, in part, due to incomplete guidance  from the program office. The MSPV-NG program office provided some  guidance, including a tool for identifying direct matches, but three of the  Chief Supply Chain Officers at the selected medical centers stated that  they did not find it very helpful, in part, because it only included matches  for the highest-volume items. Based on our discussions with the MSPV- NG program office and selected medical centers, as well as our review of  communications provided to medical centers, the program office provided  various emails and held conference calls, but did not provide complete  guidance to summarize the steps medical centers should take to execute  the matching process. Without complete guidance, each selected VISN  and medical center approached the process somewhat differently. One  medical center devoted a great deal of effort to matching items early on,  had completed its review, and determined its purchasing strategy for  nearly all core list items before the transition period was complete. Others  devoted less attention to this and planned instead to rely on purchase  cards to continue buying the same items they had purchased under the  legacy MSPV program, which works against VA\u2019s goal of leveraging  buying power through MSPV-NG.\nThe amount of clinician input on the matching process varied among  medical centers in our review, in part, because the various  communications from the program office did not provide complete  information on how to involve clinicians and Clinical Product Review  Committees at medical centers. While the program office asked medical  centers to involve clinicians, it did not specify a process for how to do so,  and centers were left to develop their own approaches. For example, in  one selected VISN, the Deputy Chief Medical Officer became involved  with the logistics office coordination effort and obtained active  participation from clinicians at each medical center, who formed working  groups to review potential clinical equivalent matches. In other VISNs and  medical centers, there was little concerted effort to involve clinicians at  this stage of the process, and only a few clinical equivalent items were  reviewed and matched with clinical input. Without effective matching to  the formulary, VA cannot achieve the MSPV-NG utilization rates it needs  to meet the program\u2019s goals. Without complete guidance, these centers  may be unable to effectively match their core lists to the MSPV-NG  formulary and, thus, increase their utilization of it.\nThe MSPV-NG formulary also continued to change while the medical  centers were working to match their core list items, which made the  process more challenging. Several clinicians and logistics staff at the  medical centers we visited expressed frustration about the frequency by  which items were being added and deleted on the formulary and the  impact it had on their purchasing strategies. Our analysis found that in  April 2017, 690 items were added to the formulary, but, in June, 628  items were deleted. These medical center officials also noted that they  had not received any communications from the program office or SAC  regarding why items were being added and deleted, and were unsure  why the changes were taking place. SAC and MSPV-NG program office  officials stated that these continuing changes stemmed from several  factors, including elimination of duplicate items from multiple vendors and  addition of other items identified as necessary by VHA or medical centers.  In some cases, medical center officials told us that that they were less  willing to expend effort on the matching process because the formulary  was a moving target. Without visibility into or an understanding of the  criteria used by the program office on its process for adding or removing  items on the formulary, medical centers will likely continue to face  challenges in matching their items to the formulary. See Table 1 for the  number of items added and deleted from the formulary from January to  July 2017.\nMany medical centers were unable to find direct matches or substitutes  for a substantial number of items on their core lists, which negatively  impacted utilization rates for the initial formulary. In October 2015, the  program office estimated that the items on the initial formulary would  meet 80 percent or more of the medical centers\u2019 needs. However,  according to SAC, as of June 2017, only about a third of the items on the  initial version of the formulary were being ordered in any significant  quantity by medical centers, indicating that many items on the formulary  may not be those that are needed by medical centers. Senior VHA  acquisition officials attributed this mismatch to shortcomings in their initial  requirements development process as well as with VA\u2019s purchase data.\nVA set out a target that medical centers would order 40 percent of their  supplies from the MSPV-NG formulary, but utilization rates are below this  target with a nationwide average utilization rate across medical centers of  about 24 percent as of May 2017. Instead of fully using MSPV-NG, the  selected medical centers are purchasing many items through other  means, such as purchase cards or new contracts awarded by their local  contracting office, in part, because they said the formulary does not meet  their needs. These approaches run counter to the goals of the MSPV-NG  program and result in VA not making the best use of taxpayer dollars.  Specifically, Chief Supply Chain Officers\u2014who are responsible for  managing the ordering and stocking of medical supplies at the six  selected medical centers\u2014told us that many items they needed were not  included in the MSPV-NG formulary. As discussed above, the difficult  transition process also created a lack of clinician desire to find substitutes  on the formulary. As such, we found that these six medical centers  generally fell below VA\u2019s stated utilization target that medical centers  order 40 percent of their items from the MSPV-NG formulary. As shown in  figure 8, among the six selected medical centers we reviewed, one met  the target, while the remaining five were below 25 percent utilization. The  one facility that met the target, Hampton VA Medical Center, is  categorized by VA as a smaller, less complex facility, and had fewer  items to match, which could contribute to its higher utilization.\nThe utilization rate is VA\u2019s primary metric for the success of MSPV-NG\u2014 broad usage of the formulary is necessary for VA to meet its goals of  more efficient supply purchasing, standardization, and cost avoidance.  Utilization is calculated by dividing the purchases made via MSPV-NG by  the total purchases under the medical supply budget category. This is the  same metric used under the legacy MSPV program, and most medical  centers were meeting the 40 percent target prior to the transition to  MSPV-NG. Officials stated that the current metric does not provide  enough information and, as a result, VHA is in the process of preparing a  new metric to more precisely assess MSPV-NG use and effectiveness,  and has begun conducting routine surveys of its medical centers to obtain  their feedback on MSPV-NG.\nGreater utilization of MSPV-NG is essential to VA achieving the cost  avoidance goal of $150 million for its supply chain transformation effort.  Under the legacy MSPV program, the National Acquisition Center tracked  cost avoidance achieved by comparing prices for competitively-awarded  MSPV supply contracts with prices available elsewhere. However, VHA  officials stated that they are not currently tracking cost avoidance related  specifically to MSPV-NG. VHA officials told us they plan to use a new  cost avoidance metric that compares total supply spending for VHA as a  whole across fiscal years. This new metric, however, does not measure  whether cost savings are being achieved specifically through MSPV-NG.  Officials stated the broader metric was more useful than measuring cost  avoidance specific to MSPV-NG.\nVA\u2019s practices are in contrast with those of the leading hospitals we met  with, which maintain detailed, item-level data on cost avoidance and use  them to inform future supply requirements and contracting. These  hospitals we interviewed reported substantial cost savings from their  standardization efforts. For example, the director of supply chain  management at one leading hospital network stated that it achieved a  goal of $100 million in cost savings on medical supplies in the first 2 years  of their standardization effort, and an additional $35 million annually in the  several years since. This hospital achieved these results despite its  purchasing power being less than VA\u2019s. Without calculating cost  avoidance attributable to MSPV-NG, VHA cannot assess whether the  program is meeting its goals, nor can it use cost avoidance data to guide  future MSPV-NG requirement development and contracting strategy  efforts.\n\n\t\tVA Encouraged Greater Clinical Involvement in the Second Phase of Requirements Development, but Faced Further Staffing and Schedule Constraints\n\nIn Phase 2 of MSPV-NG, the program office has taken some steps to  incorporate greater clinical involvement in subsequent requirement  development, but both its requirements development and SAC\u2019s  contracting efforts have been hampered by staffing and schedule  constraints. Work on Phase 2 began while medical centers were  implementing Phase 1 and beginning to order from the MSPV-NG  formulary. Figure 9 shows key dates in the concurrent requirements  development, contracting, and implementation processes for Phases 1  and 2.\nIn the fall of 2016, the program office began to establish panels of  clinicians\u2014including physicians, surgeons, and nurses working in the  medical centers\u2014to serve on MSPV-NG integrated product teams (IPT)  assigned to the task of developing updated requirements for the second  phase of the formulary. The IPTs were to review categories of medical  supplies such as operating room surgical supplies and patient exam room  instruments and supplies. According to VA officials and our analysis, this  revised approach was based on a recognition that more robust  mechanisms were needed for incorporating clinician input, in part,  because VA had sought information on best practices from leading  hospital networks, and because of shortcomings with the Phase 1  requirements that became apparent in the contracting process. Similar to  the analysis performed in support of the initial formulary, the MSPV-NG  program office analyzed updated data on medical center supply  purchases to generate a list that had grown from the 6,000 items  established for the initial formulary to a new total of about 9,900 items for  these new IPTs to review.\nThe program office set a March 2017 deadline to complete this second,  IPT-based phase of requirements development\u2014VHA ultimately met this  compressed timeline, but in a rushed manner that limited the impact of  the clinical involvement. Program officials said they had difficulty  recruiting clinicians to participate, and the program office\u2019s first IPTs were  not established until the fall of 2016. In December 2016, slightly more  than half (20 of the 38) of the IPTs had begun their work to review items  and develop updated requirements. Many of the remaining IPTs were still  looking for additional clinicians to participate. Program officials said they  received assistance from the Assistant Deputy Under Secretary for Health  for Administrative Operations in December 2016. According to program  officials, this involvement proved critical in successfully recruiting staff to  participate in some of the remaining IPTs, which were then able to make  progress in reviewing each item in the formulary.\nHowever, the program office did not provide training for the IPTs on how  to carry out their work until late January 2017, about 2 months before the  IPTs were scheduled to complete the development of all medical and  surgical requirements. Further, staff on the IPTs had to complete their  responsibilities while simultaneously managing their regular workload as  physicians, surgeons, or nurses. By early March 2017, the IPTs still had  about 4,200 of the 9,900 items to review. Faced with meeting this  unrealistic time frame, the MSPV-NG program office had 9 IPT members  travel to one location\u2014with an additional 10 members participating  virtually\u2014to meet for 5 days to review the remaining items. Members told  us that this time pressure limited the extent to which they were able to  pursue the goal of standardizing supplies, and that their review ended up  being more of a data validation exercise than a standardization review.\nIn addition, the program office attempted to pursue standardization across  all supply categories rather than those with the greatest potential for  standardization and cost avoidance and continues to lack a strategy for  doing so going forward. Standards for Internal Control in the Federal  Government state that management should define what is to be achieved  and who is to achieve it, how it will be achieved, and the time frames for  achievement. In addition, this approach runs counter to how leading  hospitals standardize their supply chains by tackling individual categories  one at a time and obtaining deep clinician involvement. Without a strategy  for how best to prioritize these items by category for future phases of the  requirement development process, these IPTs will be limited in fully  contributing to VHA\u2019s goals of more efficient supply purchasing,  standardization, and cost avoidance.\n\n\t\t\tVA Plans to Replace Limited Source Blanket Purchase Agreements, but Faces Challenges Doing So Before They Expire\n\nSAC\u2019s ongoing Phase 2 contracting effort also faces an unrealistic  schedule. The SAC plans to replace the existing Phase 1 limited source  agreements with competitive awards based on the Phase 2 requirements  generated by the IPTs, but it may not be able to keep up with expiring  agreements. Because they were made on a non-competitive basis, the  Phase 1 limited source blanket purchase agreements were established  for a period of one year. In order to keep the full formulary available, the  SAC director said his staff must award several hundred contracts before  the Phase 1 limited source agreements expire later this year. However,  the SAC director stated that doing so will be difficult because his staff  must award between 200 to 250 contracts in a 3-month period from the  end of September 2017 through December 2017. To adhere to this  ambitious schedule, each of the 15 contracting staff on the MSPV-NG  team would need to award between 13 to 17 contracts within 3 months,  equaling one contract per staff member every 5 to 6 days, which is  significantly faster than SAC\u2019s typical pace. SAC officials acknowledged  that it is unlikely that they will be able to award the 200 to 250 contracts  by the time the existing limited source agreements expire. According to  SAC officials, they are in the process of hiring more staff to deal with the  increased workload. Further, the SAC division director told us that they  cancelled all outstanding Phase 2 solicitations in September 2017 due to  low response rates, protests from service-disabled veteran-owned small  businesses, and changes in overall MSPV-NG strategy. SAC is still  assessing alternative approaches, which poses additional challenges for  replacing expiring agreements by December 2017.\nFor cases where limited source agreements expire without new contracts  in place, SAC officials said they intend to use a different type of  agreement called a distribution and pricing agreement as a stopgap. They  stated that the use of these agreements with suppliers who have existing  limited source agreements would prevent items from falling off the  formulary. However, like BPAs, the agreements are not contracts\u2014the  supplier informally agrees to continue to sell its products to VA at the  same price and terms. SAC officials stated that VA has not used these  types of agreements previously, and they pose a risk in that the supplier  is not required to perform and VA has no remedy if the supplier opts to  end the agreement or raise the price. These agreements also do not  allow VA to achieve its goal of achieving greater cost avoidance through  supply standardization and competitive contracts. Despite the unrealistic  time frames and the risks of the stopgap approach, VA has not developed  a plan for how to mitigate these risks, established an achievable schedule  for making the competitive Phase 2 contract awards, or prioritized the  various categories of supplies. Establishing such a plan would help  ensure that VA is better positioned to mitigate risks and prioritize supply  categories that are most likely to yield cost avoidance.\n\n\t\tVA Is Revising Its Approach to MSPV-NG\n\nVA is currently revising its approach to MSPV-NG requirement  development to adopt a model that focuses on clinician-driven sourcing, a  key step that leading hospital networks reported following in standardizing  their medical supply chains. The MSPV-NG program office continues to  refine its strategy for requirement development and is seeking greater  clinician involvement in future requirement development efforts, which it  refers to as clinician-driven sourcing. For example, program officials said  they plan to involve VHA\u2019s national clinical program offices\u2014groups of  clinicians at VHA that provide national policy and leadership within their  clinical specialty\u2014to obtain greater buy-in from senior clinical leaders and  to implement a more structured approach for identifying clinicians willing  to serve on integrated product teams. This approach, if implemented  effectively, could mitigate some of the prior challenges in recruiting  clinicians to participate. However, these efforts are in their early stages,  and the MSPV-NG program office has not outlined whether or how it will  use input from these clinical groups to prioritize its requirements  development and standardization efforts. Without input from these  national clinical program offices, VA will continue to be challenged to  focus on supply categories that offer the best opportunity for  standardization and cost avoidance.\nSenior VHA and MSPV-NG program officials also told us each VA  medical center was expected to use a standing committee, known as the  Clinical Product Review Committee, to review new items to include on the  formulary and to evaluate opportunities to streamline the formulary  through standardization. This approach will likely require additional effort  on the part of the MSPV-NG program office to implement, as some  centers\u2019 clinicians said the Clinical Product Review Committees were not  operating as intended.\nVA is also exploring major changes in its contracting strategy for MSPV- NG. Specifically, MSPV-NG program office and SAC officials plan to  replace the current contract and formulary process with a new contract  where the vendor would not only provide distribution services, but also  develop the formulary. In October 2017, VA sought information from  industry on their capabilities to support such a program. VA stated that its  target completion date for this new MSPV-NG contracting strategy is  December 2018. To date, VA has provided only limited details on this  potential new approach, thus, we cannot assess whether it has the  potential to address the shortcomings with the current MSPV-NG  approach described in this report.\n\n\tFrequent Use of Emergency Procurements Impacts VHA\u2019s Ability to Strategically Manage Its Acquisitions\n\nSome emergencies are to be expected, as VHA operates one of the  largest health care systems in the country. However, VHA designated a  substantial number of its procurements in fiscal year 2016 as  emergencies, and we found that it frequently uses emergency  procurements to buy routine supplies and on-going services that do not  warrant the emergency designation defined in VHA guidance. Among the  18 contract actions we reviewed from three VISNs, we found instances of  emergency procurements caused by shortcomings in planning, funding,  and communication. These emergency procurements strain the capacity  of VA\u2019s acquisition workforce and put the government at risk of paying  more than it should for goods and services.\n\n\t\tEmergency Procurements Account for Almost Two Billion Dollars\u2019 Worth of VHA Contract Obligations\n\nBased on our analysis of VA data, we found that emergency  procurements accounted for approximately 20 percent of VHA\u2019s overall  contract actions in fiscal year 2016, with obligations totaling about $1.9  billion. As shown in figure 10, we found that the percentage of requests  designated as emergencies varied across the 19 VISNs.\n\n\t\tSome Selected Procurements Identified as Emergencies Stemmed from Lack of Planning, Communication Problems, and Other Factors\n\nWe selected a non-generalizable sample of 18 contract actions  designated by customers as emergencies. Most of these contracts were  not awarded on a competitive basis, and half cited the unusual and  compelling urgency exception to full and open competition. Table 2 shows  instances in which the 18 contract actions were awarded without  competition, those that cited unusual and compelling urgency as the basis  for use of non-competitive procedures, and our observations on the main  contributing factor to designating these procurements as emergencies.\nAdditional information on each of the contributing factors follows.\n\n\t\t\tPlanning Challenges\n\nVHA guidance specifies that neither a lack of acquisition advance  planning nor concerns about a need to obligate funds before the end of  the fiscal year are valid justifications for an urgent or emergency  procurement request. However, among our selected contract actions, lack  of planning by customers was a principal contributing cause, leading to 7  of the 18 contract actions being procured as emergencies, resulting in  some non-competitive awards to the incumbent vendor for the same  requirement. For instance, one medical center procured medical gas on  an emergency basis through consecutive non-competitive contracts. The  initial contract was terminated because the company was not licensed by  the state where services were being provided, which led to a 3-month  emergency contract being awarded to a different vendor. This was  followed by a series of non-competitive bridge contracts to that incumbent  vendor over a 3-year period. In another case, a medical center routinely  procured custom surgical packs through consecutive emergency sole- source purchase orders. The contracting officer\u2019s representative told us  the medical center may be paying more for custom surgical packs  ordered on an emergency basis than it would under a competitive, long- term contract.\n\n\t\t\tFunding Issues\n\nFunding uncertainty also contributed to three awards being designated as  emergencies. For example, one medical center submitted an emergency  request to outsource patient laundry due to funding uncertainties for  repairs of on-site, VA-owned and operated laundry equipment. The  contracting officer\u2019s representative stated that the VISN could not provide  funds to repair the equipment, leading to a series of last-minute  emergency requests, a few months at a time, for contracted patient  laundry services to prevent a gap in service.\nAt another VISN, a large amount of funding became available late in the  fiscal year, which led to an emergency request to purchase postage to  ensure the funding was spent before it expired at the end of that fiscal  year. The contracting office issued an order for $890,000 worth of  metered mail postage, which medical center staff told us would cover 1 to  2 years of usage.\n\n\t\t\tLack of Communication\n\nWe found that shortcomings in communication between customers and  contracting offices also contributed to eight awards made on an  emergency basis for routine items. For one of the contracts in our review,  a medical center resubmitted a request in January 2016 to purchase  equipment for a new operating room that had previously been submitted  as a standard request months earlier. However, the contracting officer\u2019s  representative at the medical center told us that no action was taken by  the contracting office, and he did not receive a response for 6 months.  The medical center then upgraded the request to an emergency since the  operating room was scheduled to open in June 2016. The contracting  officer\u2019s representative noted that delays procuring the equipment past  the scheduled opening date would delay the opening of the new operating  room and possibly result in the rescheduling or cancelling of procedures,  affecting patient care. After the order was upgraded to an emergency, the  equipment was ultimately delivered before the operating room was  opened.\nIn another case, an inventory manager routinely submitted emergency  purchase requests for cardiac catheters as a strategy to manage stock  levels. The reason he cited was that he was uncertain how long it would  take the contracting office to fulfill standard requests. He stated that the  contracting office\u2019s time frames for standard orders are unpredictable,  and more consistent communication about the expected delivery date of  any given order would reduce his need to place emergency orders. He  noted that being able to plan around delivery dates was important for  maintaining stock at designated levels for the various types of catheters  used in the cardiology department. Figure 11 shows a medical center  stock room and designated stock levels for one type of catheter. The \u201cL\u201d  indicates the standard stock level, and \u201cR\u201d indicates the level of stock at  which refill is needed. Ordering officers use these levels to inform when  they should place orders.\n\n\t\tOverreliance on Emergency Procurements Can Drive Up Costs and Overtax the Workforce\n\nIn addition to being contrary to VHA guidance, overuse of emergency  procurement requests has negative effects on the overall operation of  VA\u2019s procurement system. In reviewing the 18 selected contracts, we  identified two primary effects\u2014the potential for increased costs and  increased burden on the contracting workforce that could take resources  away from other important efforts.\n\n\t\t\tIncreased Costs\n\nAs noted above, half of the contract actions we reviewed (9 out of 18)  cited unusual and compelling urgency as the basis for the use of non- competitive procedures. When unusual and compelling urgency exists, an  agency may limit competition to the firms it reasonably believes can  perform the work in the time available. In all nine cases, however, there  was no competition at all, which puts the government at risk of paying  more than it should for goods and services. Promoting competition\u2014 even in a limited form\u2014increases the potential for quality goods and  services at a lower price. We have previously reported that competition in  contracting is a critical tool for achieving the best return on investment  and that it can improve contractor performance and promote  accountability for results.\n\n\t\t\tBurden on the Contracting Workforce\n\nEmergency procurement requests must be processed quickly, and  contracting officers have limited ability to question the validity of an  emergency request. Nevertheless, many of the contracting officials we  spoke with that had responsibility for our 18 selected contracts told us  they generally communicate directly with the requestor to clarify the  requirement and assess the nature of the request. As stated in the VHA  procurement manual, contracting officers generally must process  emergencies within 5 days or less. However, the manual acknowledges  that different Network Contracting Offices assign different time frames to  priority categories. For instance, officials from all three selected Network  Contracting Offices told us they generally process emergencies  immediately. Several contracting officials we interviewed stated that,  because they do not have clinical expertise, they infrequently question the  medical center staff customer about whether their request is truly an  emergency. Even if they work with customers to reach a compromise,  such as purchasing a smaller quantity to fill just the immediate need,  emergencies still require immediate attention and result in deprioritizing  other tasks. The impact on the contracting officer workload can be  exacerbated by low staffing levels. For example, none of the three  Network Contracting Offices we visited were staffed to their authorized  levels. Table 3 shows the number of emergency actions processed by  each selected Network Contracting Office in fiscal year 2016, along with  staff levels.\nWe have previously reported that when contracting officers process  frequent and emergency small-dollar transactions, it reduces their ability  to plan ahead and take a strategic view of procurement needs. Several  of the VA contracting officials we spoke with noted that regularly  processing emergency contracts and extensions affects their ability to  work on bigger-picture efforts, some of which would reduce workload. For  instance, one contracting officer stated that awarding emergency contract  extensions has prevented him from competitively awarding more than 40  lab contracts. In these cases, the contracting officer stated that he instead  extended the period of performance of the non-competitive contracts to  the incumbent vendors. In addition, emergency contracts are generally  awarded for short periods of time\u2014often 1 year or less\u2014while  competitive contracts often have terms of 5 years. According to some  contracting officers we spoke with, this can result in contracting officers  spending much of their time tending to a large number of short-term  contracts, instead of a smaller number of fully-competed contracts with  longer periods of performance.\n\n\t\tBetter Planning and Management of Contracting Strategies May Help Reduce Emergencies\n\nWe found that greater planning and coordination between medical center  and contracting staff can help to leverage VA\u2019s buying power by  employing principles of strategic sourcing\u2014a process that moves away  from numerous individual procurements to a broader aggregate  approach\u2014and thereby reducing the need for emergencies. For  example, inventory managers responsible for two of the selected cardiac  catheter contracts in our sample stated that managing catheter inventory  was difficult because of the unpredictability of the needs, the high cost of  the items, and the long turnaround times from their respective contracting  offices. As a result, they had to place frequent emergency orders to keep  stock at safe levels. One inventory manager noted, however, that there is  no longer a need to place emergency orders for catheters because the  SAC has since put in place a purchasing agreement that enabled her to  place orders directly, without requiring involvement from the contracting  office. In addition to reducing contracting office workload, the supply  technician said this agreement greatly reduced the amount of work  required to place an order and allowed her to more effectively maintain  her inventory with short and predictable turnaround times. She also stated  that the agreement protected against the frequent price increases she  experienced when purchasing the catheters on the open market through  the contracting office. The agreement also reduced workload for the local  VISN contracting office. In analyzing eCMS data on awards from fiscal  years 2014 through 2016, we identified several types of goods and  services that were repeatedly purchased on an emergency basis through  stand-alone contract actions. This suggests there may be additional  opportunities, at both the VISN and national levels, to reduce  emergencies by making supplies and services available through more  efficient, competitively-awarded contract vehicles. In addition to reducing  burden on logistics and contracting staff, reviewing existing spending to  find opportunities to leverage buying power is also in line with strategic  sourcing best practices.\nMSPV-NG is one such contracting mechanism for procuring routine  supplies, and a more strategic approach to developing requirements for  the formulary could help avoid some emergency procurements. Our  analysis of VA eCMS data found that many awards designated as  emergencies were for medical-surgical items, some of which could likely  be purchased through MSPV-NG. Figure 12 shows the number of  medical-surgical procurements designated as emergencies within each  VISN in fiscal year 2016.\nWithin our sample of 18 contract actions, we found several instances of  reoccurring emergency procurements for medical-surgical supplies, such  as custom surgical packs and catheters. Procuring routine supplies on an  emergency basis defeats the objectives of MSPV-NG to leverage VA\u2019s  large buying power and make the process of ordering supplies more  efficient and transparent. However, while data on emergency  procurements are available, VHA\u2019s Procurement and Logistics Office  does not currently analyze this data to identify items frequently purchased  on an emergency basis to determine whether such items could be  referred to SAC to be added to the MSPV-NG formulary. In addition, local  VISN Network Contracting Offices have also not used available data on  emergency purchases to identify items frequently purchased on an  emergency basis. Steps by VHA\u2019s Procurement and Logistics Office and  individual VISN contracting offices to review such data and identify  opportunities for leveraging MSPV-NG or other national contracts could  help VA achieve greater efficiency. Purchasing medical supplies through  individual emergency contract actions is much less efficient than using  MSPV-NG; moreover, by making numerous individual procurements at  the local level and not leveraging its aggregate buying power, VA is  paying more for items than it needs to.\n\n\tConclusions\n\nAny major organizational change requires a solid strategic plan that is  communicated with stakeholders, stable leadership, and stakeholder  involvement and buy-in. VHA was missing all of these elements when it  rolled out the MSPV-NG program, which presented obstacles to effective  implementation and buy-in and affected the program\u2019s ability to meet its  goals. Moving forward, without an overall strategy that is communicated  to all stakeholders and enhanced leadership stability, VHA will likely  continue to face these challenges. In addition, in the initial requirements  development process, VHA relied on prior purchase data\u2014rather than  clinician input\u2014and did not prioritize categories of medical supplies, both  of which veered from practices employed by leading hospital networks.  Once the initial formulary was established, medical centers faced  challenges matching supply items to the formulary and took varying  approaches, in part, due to incomplete guidance on key aspects of the  process and frequent changes in the items on the formulary. Providing  complete guidance and communicating the criteria and processes for  adding or removing items from the formulary would help centers more  effectively match items to the formulary, thereby increasing utilization,  which as of May 2017 was below VA\u2019s established target. Further,  because it does not calculate cost avoidance attributable to MSPV-NG,  VA cannot accurately measure the extent to which the program is  contributing to its overall cost avoidance goal.\nVA made changes during the second phase of requirements  development, in particular to encourage greater clinician involvement.  However, the program faces an unrealistic contracting schedule and has  not yet developed a plan for how to manage or mitigate the associated  risks.  Establishing such a plan is essential for risk mitigation, and supply  category prioritization could help VA target those categories most likely to  yield cost avoidance. In addition, while the program is planning to involve  national clinical program offices to obtain greater clinician buy-in, it has  not outlined whether or how it will use input from these groups to prioritize  its requirements development efforts. Without such input, VA will continue  to face challenges focusing on those supply categories that offer the best  opportunity for standardization and cost avoidance. Further, VA is  considering another major change in its MSPV program in which the  prime vendor may absorb some of the work currently conducted by SAC.   However, VA may face challenges in this new approach until it addresses  the existing shortcomings in the MSPV-NG program, such as the absence  of a documented overall strategy, insufficient clinician involvement in the  requirements development process, and lack of medical center buy-in.\nMeanwhile, among the 18 contract actions we reviewed, we found  shortcomings in planning and communication that led to medical centers\u2019  overreliance on emergency procurements to obtain routine goods and  services\u2014some of which could be made available via MSPV-NG\u2014 bypassing effective contracting practices like competition. These  emergency procurements can be a particular drain on resources,  especially those of contracting officers who must respond immediately to  fulfill emergency orders. Identifying opportunities to more strategically  purchase frequently purchased goods and services\u2014both at the local  levels and nationwide through the MSPV-NG program\u2014could help  minimize these workforce challenges and minimize costs.\n\n\tRecommendations for Executive Action\n\nWe are making 10 recommendations to VA.\nThe Director of the MSPV-NG program office should, with input from the  Strategic Acquisition Center (SAC), develop, document, and  communicate to stakeholders an overarching strategy for the program,  including how the program office will prioritize categories of supplies for  future phases of requirement development and contracting.  (Recommendation 1)\nThe VHA Chief Procurement and Logistics Officer should take steps to  prioritize the hiring of the MSPV-NG program office\u2019s director position on  a permanent basis. (Recommendation 2)\nThe Secretary of Veterans Affairs should assign the role of Chief  Acquisition Officer to a non-career employee, in line with statute.  (Recommendation 3)\nThe Director of the MSPV-NG program office should provide complete  guidance to medical centers for matching equivalent supply items, which  could include defining the roles of clinicians and local Clinical Product  Review Committees. (Recommendation 4)\nThe Director of the MSPV-NG program office should, with input from  SAC, communicate to medical centers the criteria and processes for  adding or removing items from the formulary. (Recommendation 5)\nThe VHA Chief Procurement and Logistics Officer, in coordination with  SAC, should calculate cost avoidance achieved by MSPV-NG on an  ongoing basis. (Recommendation 6)\nThe MSPV-NG program office and SAC should establish a plan for how  to mitigate the potential risk of gaps in contract coverage while SAC is still  working to make competitive Phase 2 awards, which could include  prioritizing supply categories that are most likely to yield cost avoidance.  (Recommendation 7)\nThe VHA Chief Procurement and Logistics Officer should use input from  national clinical program offices to prioritize its MSPV-NG requirements  development and standardization efforts beyond Phase 2 to focus on  supply categories that offer the best opportunity for standardization and  cost avoidance. (Recommendation 8)\nThe VHA Chief Procurement and Logistics Officer should direct VISN  Network Contracting Offices to work with medical centers to identify any  opportunities to more strategically purchase goods and services  frequently purchased on an emergency basis. For example, offices could  do this by analyzing existing data. (Recommendation 9)\nVHA Chief Procurement and Logistics Officer should analyze data on  items that are frequently purchased on an emergency basis, determine  whether such items are suitable to be added to the MSPV-NG formulary,  and work with SAC to make any suitable items available via MSPV-NG.  (Recommendation 10)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Department of Veterans Affairs  for review and comment. VA provided written comments on a draft of this  report. In its written comments, reprinted in appendix II, VA concurred  with all of our 10 recommendations.\nIn its response to our recommendation that VA assign the role of Chief  Acquisition Officer to a non-career employee, as required by statute, VA  stated that it is unable to implement the recommendation without  congressional action and requested closure of the recommendation. We  asked VA officials what congressional action they believe is necessary to  follow the recommendation. The officials told us they believe the CAO  position should be assigned to an assistant secretary, but that the number  of assistant secretaries within VA is limited by statute. We decline to close  this recommendation. VA should assign the role of CAO to a non-career  employee, as required by statute. If VA maintains its view that it cannot  meet this requirement without congressional action, then VA should  request the specific congressional action that VA believes is necessary.\nVA provided technical comments on the draft report, which we  incorporated as appropriate.\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 send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III.\n\nAppendix I: Objectives, Scope, and Methodology\n\nYou requested that we examine the Department of Veterans Affairs\u2019 (VA)  transition to the Medical Surgical Prime Vendor-Next Generation (MSPV- NG) program and the extent to which the department contracts for good  and services on an emergency basis. This report addresses the extent to  which: (1) VA\u2019s implementation of MSPV-NG was effective in meeting  program goals, and (2) Veterans Health Administration (VHA) awards  contracts on an emergency basis for routine supplies and ongoing  services, and what impact, if any, these awards have on VHA\u2019s  acquisition function.\nTo review the extent to which implementation of MSPV-NG was effective,  we reviewed policy and guidance related to the program. We obtained  and analyzed the MSPV-NG program\u2019s formulary development plan,  which explained the program\u2019s rationale for pursuing its initial  requirements development approach. We also obtained and reviewed  additional program documentation, including communications to medical  centers and other stakeholders, briefings, and training and tools provided  to medical centers. We interviewed leaders in the VHA Procurement and  Logistics Office and Healthcare Commodity Program Executive Office  (the program office for MSPV-NG), as well as other staff involved in  planning and executing aspects of MSPV-NG. We also interviewed VA\u2019s  Chief Acquisition Officer during the development of MSPV-NG, cognizant  Office of General Counsel staff, and others regarding the program. We  also interviewed supply chain managers from four leading hospital  networks regarding their medical supply management practices. We  selected the hospital networks because they were identified by an  industry study as having leading supply chain practices.  During  interviews, we asked each of these supply chain managers a standard set  of questions about processes followed to standardize their hospital  networks\u2019 supply chain. VA had also identified two of these hospital  networks as having leading supply chain practices and used the industry  study to identify these hospital networks. We used this information from  the leading hospital networks to compare the key steps\u2014identified by  each of the four hospital networks\u2014followed in standardizing their  medical supply chains to those steps that VA followed when implementing  the MSPV-NG program. We also confirmed these key steps with the  leading hospital networks.\nWe conducted site visits at a non-generalizable selection of three  Veterans Integrated Service Networks (VISNs), and two medical centers  within each selected VISN:\nVISN 6: Durham, North Carolina\nDurham, North Carolina VA Medical Center\nHampton, Virginia VA Medical Center\nVISN 8: St. Petersburg, Florida\nTampa, Florida VA Medical Center\nGainesville, Florida VA Medical Center\nVISN 22: Long Beach, California\nLong Beach, California VA Medical Center\nSan Diego, California VA Medical Center  The VISNs were selected primarily based on highest total contract  obligations in fiscal years 2014 through 2016 and representation of  multiple geographic areas and prime vendor contractors. The first site  visit to VISN 22 was also chosen based on the rollout schedule for the  graphical user interface, an IT system related to MSPV-NG. The final site  visit to VISN 6 was also chosen as the VISN with the highest percentage  of contract actions designated as emergencies over the fiscal year 2014  through 2016 period. The selected medical centers in each VISN were  chosen based on our review of VA Electronic Contract Management  System (eCMS) data on emergency procurements within each VISN  (see  below) and geographic proximity to the VISN office location. At each  selected VISN, we interviewed the Chief Supply Chain Officer and other  members of leadership. At medical centers in each selected VISN, we  met with the Chief Supply Chain Officer, ordering officers, other logistics  staff, clinicians involved in the MSPV-NG transition, and on-site  representatives of the prime vendor contractors.\nWe evaluated MSPV-NG program office status briefings and integrated  product team training briefings, which documented the planned role of  clinicians in the Phase 2 requirements development process. We  interviewed VHA Procurement and Logistics Office leadership, other  MSPV-NG program office staff, and integrated product team managers  and clinicians about the evolution of the program office\u2019s requirements  development approach, including the role of clinicians in preparing item  descriptions and evaluating items. Three integrated product teams were  selected for interviews based on those that covered the greatest number  of items, as well as for diversity of types of medical supplies. We also met  with members of additional integrated product teams during site visits to  the selected medical centers.\nWe obtained and analyzed the Strategic Acquisition Center\u2019s acquisition  strategy for MSPV-NG supply contracts and discussed its evolution with  the Center\u2019s acquisition staff. We analyzed the MSPV-NG formulary as of  January 2017 to determine what acquisition instrument was used to add a  particular item to the formulary, how the cumulative total of items by  award type changed from fiscal year 2014 to fiscal year 2017, and when  certain MSPV-NG items would be removed from the formulary because  the underlying acquisition instrument had expired. We also analyzed the  contents of the formulary monthly from January to July 2017 to determine  the number of items added and deleted each month. We determined that  the MSPV-NG formulary data were sufficiently reliable for the purposes of  our reporting objectives. For the formulary data, we corroborated the  supplier\u2019s name, award number, award type, and the award\u2019s effective  and expiration dates with data in the Federal Procurement Data System- Next Generation. We were also able to corroborate the total number of  items on the January 2017 MSPV-NG formulary through other  documentation, such as program briefings. To determine the level of  discounts obtained by the MSPV-NG program office, we randomly  selected 10 limited source blanket purchase agreements. We reviewed  each agreement and compared the price for each item on the supplier\u2019s  price list with the item\u2019s Federal Supply Schedule price. We obtained and  analyzed the current MSPV-NG indefinite delivery, indefinite quantity  solicitations and the Defense Logistics Agency\u2019s documentation on  distribution and pricing agreements. We also reviewed related prior GAO  reports and relevant parts of the Federal Acquisition Regulation.\nWe obtained information on the metrics used by VA to assess the  performance of MSPV-NG, primarily the utilization metric, which is  calculated by VA based on budget object code spending data from the  financial system and MSPV-NG spending data. We obtained data on the  performance of the six selected medical centers for May 2017 and July  2017. We also interviewed officials responsible for maintaining this data  to gather information on processes, accuracy, and completeness, as well  as on planned changes in the metric. We found the utilization metric data  to be sufficiently reliable for our purposes.\nTo assess the extent to which VA has awarded contracts on an  emergency basis for routine supplies and ongoing services, and the effect  on VA\u2019s acquisition function, we obtained and analyzed VA and VHA  policy and guidance documents, reviewed relevant parts of the Federal  Acquisition Regulation, and reviewed prior GAO reports. We obtained  eCMS data for fiscal years 2014 through 2016, and analyzed these data  to determine the number of actions designated by customers as  emergencies, the percentage of actions designated as emergencies in  each VISN, and the total obligations attributed to these actions. We also  calculated the number and value of all actions designated as  emergencies in selected Product and Service Codes related to medical  supplies and services for fiscal year 2016. We determined that these  eCMS data were sufficiently reliable for the purposes of determining the  extent of emergency procurements by reviewing information on system  controls and conducting validation of data, including tracing selected  information to source documents for the contracts that we selected.\nWe selected a non-generalizable sample of 18 contracts from the three  selected VISNs. The selection was based primarily on:  contracts designated by the customer as emergencies in eCMS data; use of the term \u201cemergency\u201d or \u201curgent\u201d in the description field; high dollar value; and\nProduct and Service Codes for services and medical supplies.\nWe obtained and reviewed the contract files for each of the selected  contracts, which are also stored in eCMS, including signed awards,  limited competition justifications, work statements, and other documents.  We compared key information, such as extent of competition, against  data reported in eCMS. We interviewed the requesters\u2014in most cases  the contracting officer\u2019s representative\u2014for all selected contracts. We  also visited Network Contracting Offices for each of the three selected  VISNs and interviewed leadership at each location, as well as the  contracting officials responsible for each selected contract. Finally, we  met with a Strategic Acquisition Center contracting officer to discuss a  related contract award.\nWe conducted this performance audit from November 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\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 individual named above, Lisa Gardner, Assistant  Director; Emily Bond; Matthew T. Crosby; Lorraine Ettaro; Michael  Grogan; Jeff Hartnett; Katherine Lenane; Teague Lyons; Roxanna Sun;  and Colleen Taylor made key contributions to this report.","output":"Why GAO Did This Study\n\nVA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies\u2014the MSPV-NG program\u2014to gain effectiveness and efficiencies.\nGAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation.\n\nWhat GAO Found\n\nThe Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG.\nThe roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals.\nMedical centers often rely on emergency procurements to obtain routine goods and services\u2014some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition.\n\nWhat GAO Recommends\n\nGAO is making 10 recommendations, including that VA expand clinician input in requirements development, calculate MSPV-NG cost avoidance, establish a plan for awarding future competitive contracts, and identify opportunities to strategically procure supplies and services frequently purchased on an emergency basis. VA agreed with GAO's recommendations."}
{"id":"gao_GAO-18-520T","pid":"gao_GAO-18-520T_0","input":"\tBackground\n\nFederal agencies and our nation\u2019s critical infrastructures\u2014such as  energy, transportation systems, communications networks, and financial  services\u2014are dependent on computerized (cyber) information systems  and electronic data to process, maintain, and report essential information,  and to operate and control physical processes. Virtually all federal  operations are supported by computer systems and electronic data, and  agencies would find it difficult, if not impossible, to carry out their missions  and account for their resources without these information assets. Hence,  the security of these systems and data is vital to public confidence and  the nation\u2019s safety, prosperity, and well-being. Ineffective security controls  to protect these systems and data could have a significant impact on a  broad array of government operations and assets.\nYet, computer networks and systems used by federal agencies are often  riddled with security vulnerabilities\u2014both known and unknown. These  systems are often interconnected with other internal and external systems  and networks, including the Internet, thereby increasing the number of  avenues of attack and expanding their attack surface.\nFurthermore, safeguarding federal computer systems has been a long- standing concern. This year marks the 21st anniversary of when GAO  first designated information security as a government-wide high-risk area  in 1997. We expanded this high-risk area to include safeguarding the  systems supporting our nation\u2019s critical infrastructure in 2003 and  protecting the privacy of personally identifiable information in 2015.\nOver the last several years, we have made about 2,500  recommendations to agencies aimed at improving the security of federal  systems and information. These recommendations identified actions for  agencies to take to strengthen their information security programs and  technical controls over their computer networks and systems.  Nevertheless, many agencies continue to be challenged in safeguarding  their information systems and information, in part because they have not  implemented many of these recommendations. As of March 2018, about  885 of our prior information security-related recommendations had not  been implemented.\n\n\t\tFederal Law and Policy Provide DHS with Broad Authorities to Improve and Promote Cybersecurity\n\nDHS has broad authorities to improve and promote cybersecurity of  federal and private-sector networks. The federal laws and policies that  underpin these authorities include the following:\nThe Federal Information Security Modernization Act (FISMA) of  2014 clarified and expanded DHS\u2019s responsibilities for assisting with  the implementation of, and overseeing, information security at federal  agencies. These responsibilities include requirements to: develop, issue, and oversee agencies\u2019 implementation of binding  operational directives to agencies, including directives for incident  reporting, contents of annual agency reports, and other  operational requirements; monitor agencies\u2019 implementation of information security policies provide operational and technical assistance to agencies,  including by operating the federal information security incident  center, deploying technology to continuously diagnose and  mitigate threats, and conducting threat and vulnerability  assessments of systems.\nAct of 2014, among other things, requires DHS to assess its  cybersecurity workforce. In this regard, the Secretary of Homeland  Security is to identify all positions in DHS that perform cybersecurity  functions and to identify cybersecurity work categories and specialty  areas of critical need.\nThe National Cybersecurity Protection Act of 2014 codified the  role of the National Cybersecurity and Communications Integration  Center (NCCIC)\u2014a center established by DHS in 2009\u2014as the  federal civilian interface for sharing information concerning  cybersecurity risks, incidents, analysis, and warnings to federal and  non-federal entities, including owners and operators of information  systems supporting critical infrastructure.\nThe Cybersecurity Act of 2015, among other things, sets forth  authority for enhancing the sharing of cybersecurity-related  information among federal and non-federal entities. The act gives  DHS\u2019s NCCIC responsibility for implementing this information sharing  authority. The act also requires DHS to:  Jointly develop with other specified agencies and submit to  Congress, procedures for sharing federal cybersecurity threat  information and defensive measures with federal and non-federal  entities.\nDeploy, operate, and maintain capabilities to prevent and detect  cybersecurity risks in network traffic traveling to or from an  agency\u2019s information system. DHS is to make these capabilities  available for use by any agency. In addition, the act requires DHS  to improve intrusion detection and prevention capabilities, as  appropriate, by regularly deploying new technologies and  modifying existing technologies.\nLong-standing federal policy as promulgated by a presidential  policy directive, executive orders, and the National Infrastructure  Protection Plan have designated DHS as a lead federal agency for  coordinating, assisting, and sharing information with the private-sector  to protect critical infrastructure from cyber threats.\n\n\tDHS Has Acted to Improve and Promote the Cybersecurity of Federal and Private- Sector Computer Systems, but Further Improvements Are Needed\n\nWe have reviewed several federal programs and activities implemented  by DHS that are intended to mitigate cybersecurity risk for the computer  systems and networks supporting federal operations and our nation\u2019s  critical infrastructure. These programs and activities include deploying the  National Cybersecurity Protection System, providing continuous  diagnostic and mitigation services, issuing binding operational directives,  sharing information through the National Cybersecurity and  Communications Integration Center, promoting adoption of a  cybersecurity framework, and assisting private-sector partners with cyber  risk mitigation activities. We also examined DHS\u2019s efforts to assess its  cybersecurity workforce. DHS has made important progress in  implementing these programs and activities. However, the department  needs to take additional actions to ensure that it successfully mitigates  cybersecurity risks on federal and private-sector computer systems and  networks.\n\n\t\tDHS Needs to Enhance Capabilities, Improve Planning, and Support Greater Adoption of Its National Cybersecurity Protection System\n\nDHS is responsible for operating its National Cybersecurity Protection  System (NCPS), operationally known as EINSTEIN. NCPS is intended to  provide intrusion detection and prevention capabilities to entities across  the federal government. It also is intended to provide DHS with  capabilities to detect malicious traffic traversing federal agencies\u2019  computer networks, prevent intrusions, and support data analytics and  information sharing.\nIn January 2016, we reported that the NCPS was partially, but not fully,  meeting most of its stated four system objectives:  Intrusion detection: We noted that NCPS provided DHS with a  limited ability to detect potentially malicious activity entering and  exiting computer networks at federal agencies. Specifically, NCPS  compared network traffic to known patterns of malicious data, or  \u201csignatures,\u201d but did not detect deviations from predefined baselines  of normal network behavior. In addition, the system did not monitor  several types of network traffic and its \u201csignatures\u201d did not address  threats that exploited many common security vulnerabilities and, thus  was not effective in detecting certain types of malicious traffic.\nIntrusion prevention: The capability of NCPS to prevent intrusions  (e.g., blocking an e-mail determined to be malicious) was limited to  the types of network traffic that it monitored. For example, the  intrusion prevention function monitored and blocked e-mail. However,  it did not address malicious content from other types of network traffic.\nAnalytics: NCPS supports a variety of data analytical tools, including  a centralized platform for aggregating data and a capability for  analyzing the characteristics of malicious code. In addition, DHS had  further enhancements to this capability planned through 2018.\nInformation sharing: DHS had not developed most of the planned  functionality for NCPS\u2019s information-sharing capability, and  requirements had only recently been approved. Moreover, we noted  that agencies and DHS did not always agree about whether  notifications of potentially malicious activity had been sent or received,  and agencies had mixed views about the usefulness of these  notifications. Further, DHS did not always solicit\u2014and agencies did  not always provide\u2014feedback on the notifications.\nWe recommended that DHS take nine actions to enhance NCPS\u2019s  capabilities for meeting its objectives, better define requirements for  future capabilities, and develop network routing guidance. The  department agreed with our recommendations; however, as of April 2018,  it had not fully implemented 8 of the 9 recommendations. As part of a  review mandated by the Federal Cybersecurity Enhancement Act of  2015, we are currently examining DHS\u2019s efforts to improve its intrusion  detection and prevention capabilities.\n\n\t\tDHS Needs to Continue to Advance CDM Program to Protect Federal Systems\n\nThe Continuous Diagnostics and Mitigation (CDM) program was  established to provide federal agencies with tools and services that have  the intended capability to automate network monitoring, correlate and  analyze security-related information, and enhance risk-based decision  making at agency and government-wide levels. These tools include  sensors that perform automated scans or searches for known cyber  vulnerabilities, the results of which can feed into a dashboard that alerts  network managers and enables the agency to allocate resources based  on the risk.\nDHS, in partnership with, and through the General Services  Administration, established a government-wide acquisition vehicle for  acquiring CDM capabilities and tools. The CDM blanket purchase  agreement is available to federal, state, local, and tribal government  entities for acquiring these capabilities.\nThere are three phases of CDM implementation and the dates for  implementing Phase 2 and Phase 3 appear to be slipping:  Phase 1: This phase involves deploying products to automate hardware  and software asset management, configuration settings, and common  vulnerability management capabilities. According to the Cybersecurity  Strategy and Implementation Plan, DHS purchased Phase 1 tools and  integration services for all participating agencies in fiscal year 2015.\nPhase 2: This phase intends to address privilege management and  infrastructure integrity by allowing agencies to monitor users on their  networks and to detect whether users are engaging in unauthorized  activity. According to the Cybersecurity Strategy and Implementation  Plan, DHS was to provide agencies with additional Phase 2 capabilities  throughout fiscal year 2016, with the full suite of CDM phase 2  capabilities delivered by the end of that fiscal year. However, according to  the Office of Management and Budget\u2019s (OMB) FISMA Annual Report to  Congress for Fiscal Year 2017, the CDM program began deploying  Phase 2 tools and sensors during fiscal year 2017.\nPhase 3: According to DHS, this phase is intended to address boundary  protection and event management throughout the security life cycle. It  focuses on detecting unusual activity inside agency networks and alerting  security personnel. The agency had planned to provide 97 percent of  federal agencies the services they need for CDM Phase 3 in fiscal year  2017. However, according to OMB\u2019s FISMA report for fiscal year 2017,  the CDM program will continue to incorporate additional capabilities,  including Phase 3, in fiscal year 2018.\nIn May 2016, we reported that most of the 18 agencies covered by the  CFO Act that had high-impact systems were in the early stages of  implementing CDM. All 17 of the civilian agencies that we surveyed  indicated they had developed their own strategy for information security  continuous monitoring. Additionally, according to the survey responses,  14 of the 17 civilian agencies had deployed products to automate  hardware and software asset configuration settings and common  vulnerability management.\nFurther, more than half of these agencies noted that they had leveraged  products\/tools provided through the General Services Administration\u2019s  acquisition vehicle. However, only 2 of the 17 agencies reported that they  had completed installation of agency and bureau\/component-level  dashboards and monitored attributes of authorized users operating in  their agency\u2019s computing environment. Agencies noted that expediting the implementation of the CDM phases could be of benefit to them in  further protecting their high-impact systems.\nSubsequently, in March 2017, we reported that the effective  implementation of the CDM tools and capabilities can assist agencies in  overcoming the challenges of securing their information systems and  information. We noted that our audits often identify insecure  configurations, unpatched or unsupported software, and other  vulnerabilities in agency systems. Thus, the tools and capabilities  available under the CDM program, when effectively used by agencies,  can help them to diagnose and mitigate vulnerabilities to their systems.  We reported that, by continuing to make these tools and capabilities  available to federal agencies, DHS can also have additional assurance  that agencies are better positioned to protect their information systems  and information.\n\n\t\tOther DHS Services Are Available to Help Protect Systems but Are Not Always Used by Agencies\n\nBeyond the NCPS and CDM programs, DHS also provides a number of  services that could help agencies protect their information systems. Such  services include, but are not limited to:\nUS-CERT monthly operational bulletins, which are intended to provide  senior federal government information security officials and staff with  actionable information to improve their organization\u2019s cybersecurity  posture based on incidents observed, reported, or acted on by DHS  and US-CERT.\nCyberStat reviews, which are in-depth sessions attended by National  Security Staff, as well as officials from OMB, DHS, and an agency to  discuss that agency\u2019s cybersecurity posture and opportunities for  collaboration. According to OMB, these interviews are face-to-face,  evidence-based meetings intended to ensure agencies are  accountable for their cybersecurity posture. The sessions are  intended to assist the agencies in developing focused strategies for  improving their information security posture in areas where there are  challenges.\nDHS Red and Blue Team exercises that are intended to provide  services to agencies for testing their systems with regard to potential  attacks. A Red Team emulates a potential adversary\u2019s attack or  exploitation capabilities against an agency\u2019s cybersecurity posture.  The Blue Team defends an agency\u2019s information systems when the  Red Team attacks, typically as part of an operational exercise  conducted according to rules established and monitored by a neutral  group.\nIn May 2016, we reported that, although participation in these services  varied among the 18 agencies we surveyed, most of those that chose to  participate reported that they generally found these services to be useful  in aiding the cybersecurity protection of their high-impact systems.  Specifically,\n15 of 18 agencies reported that they participated in US-CERT monthly  operational bulletins, and most said they found the service very or  somewhat useful.\nAll 18 agencies reported that they participated in the CyberStat  reviews, and most said they found the service very or somewhat  useful.\n9 of 18 agencies reported that they participated in DHS\u2019 Red\/Blue  team exercises, and most said they found the exercises to be very or  somewhat useful.\nHalf of the 18 agencies in our survey reported that they wanted an  expansion of federal initiatives and services to help protect their high- impact systems. For example, these agencies noted that expediting the  implementation of CDM phases, sharing threat intelligence information,  and sharing attack vectors, could be of benefit to them in further  protecting their high-impact systems. We believe that by continuing to  make these services available to agencies, DHS will be better able to  assist agencies in strengthening the security of their information systems.\n\n\t\tDHS Has Issued Binding Operational Directives to Federal Agencies\n\nFISMA authorizes DHS to develop and issue binding operational  directives to federal agencies and oversee their implementation by  agencies. The directives are compulsory and require agencies to take  specific actions that are intended to safeguard federal information and  information systems from a known threat, vulnerability, or risk.\nIn September 2017, we reported that DHS had developed and issued  four binding operational directives as of July 2017, instructing agencies  to: mitigate critical vulnerabilities discovered by DHS\u2019s NCCIC through its  scanning of agencies\u2019 Internet-accessible systems; participate in risk and vulnerability assessments as well as DHS  security architecture assessments conducted on agencies\u2019 high-value  assets; address several urgent vulnerabilities in network infrastructure  devices identified in a NCCIC analysis report within 45 days of the  directive\u2019s issuance; and  report cyber incidents and comply with annual FISMA reporting  requirements.\nSince July 2017, DHS has issued two additional binding operational  directives instructing agencies to:  identify and remove the presence of any information security products  developed by AO Kaspersky Lab on their information systems and  discontinue the use of such products; and enhance e-mail by, among other things, removing certain insecure  protocols, and ensure public facing web sites provide services through  a secure connection.\nWe plan to initiate work later this year to identify and assess DHS\u2019s  process for developing and overseeing agencies\u2019 implementation of  binding operational directives.\n\n\t\tDHS\u2019s National Integration Center Generally Performs Required Functions but Needs to Evaluate Its Activities More Completely\n\nIn February 2017, we reported that NCCIC had taken steps to perform  each of its 11 statutorily required cybersecurity functions, such as being  a federal civilian interface for sharing cybersecurity-related information  with federal and nonfederal entities. NCCIC managed several programs  that provided data used in developing 43 products and services that the  center made available to its customers in the private-sector; federal,  state, local, tribal and territorial government entities; and other partner  organizations. For example, NCCIC issued indicator bulletins, which  could contain information related to cyber threat indicators, defensive  measures, and cybersecurity risks and incidents, and helped to fulfill its  function to coordinate the sharing of such information across the  government. Respondents to a survey that we administered to NCCIC\u2019s  customers varied in their reported use of NCCIC\u2019s products but had  generally favorable views of the center\u2019s activities.\nThe National Cybersecurity Protection Act also required NCCIC to carry  out its functions in accordance with nine implementing principles, to the  extent practicable. However, as we reported, the extent to which NCCIC  adhered to the 9 principles when performing the functions was unclear  because the center had not yet determined the applicability of the  principles to all 11 functions. It also had not established metrics and  methods by which to evaluate its performance against the principles.\nWe also identified several impediments to NCCIC performing its  cybersecurity functions more efficiently. For example, the center did not  have a centralized system for tracking security incidents and, as a result,  could not produce a report on the status of all incidents reported to the  center. In addition, the center did not keep current and reliable customer  information and was unable to demonstrate that it had contact information  for all owners and operators of the most critical cyber-dependent  infrastructure assets.\nWe made nine recommendations to DHS for enhancing the effectiveness  and efficiency of NCCIC. Among other activities, these recommendations  called for the department to determine the applicability of the  implementing principles and establish metrics and methods for evaluating  performance; and address identified impediments. DHS agreed with the  recommendations; however, as of April 2018, all nine recommendations  remained unimplemented.\n\n\t\tAdditional Actions by DHS Are Needed for Promoting and Assessing Private- Sector Adoption of the Cybersecurity Framework\n\nAn executive order issued by the President in February 2013 (E.O.  13636) states that sector-specific agencies (SSA), which include DHS,  are to review the National Institute of Standards and Technology  Framework for Improving Critical Infrastructure Cybersecurity  (cybersecurity framework)  and, if necessary, develop implementation  guidance or supplemental materials to address sector-specific risks and  operating environments.\nIn February 2014, DHS launched the Critical Infrastructure Cyber  Community Voluntary Program to assist the enhancement of critical  infrastructure cybersecurity and to encourage adoption of the framework  across the critical infrastructure sectors. In addition, DHS, as the SSA  and co-SSA for 10 critical infrastructure sectors, had developed  framework implementation guidance for some of the sectors it leads.\nNevertheless, we reported weaknesses in DHS\u2019s efforts to promote the  use of the framework across the sectors and within the sectors it leads.  Specifically, in December 2015, we reported that DHS did not measure  the effectiveness of cyber community voluntary program to encourage  use of the Cybersecurity Framework. In addition, DHS and GSA, which  are the co-SSAs for the government facilities sector, had yet to determine  if sector implementation guidance should be developed for the  government facilities sector. Further, in February 2018, we reported that  none of the SSAs, to include DHS, had measured the cybersecurity  framework\u2019s implementation by entities within their respective sectors, in  accordance with the nation\u2019s plan for national critical infrastructure  protection efforts.\nWe made two recommendations to DHS to better facilitate adoption of the  Cybersecurity Framework across the critical infrastructure sectors and  within the government facilities sector. We also recommended that DHS  develop methods for determining the level and type of framework  adoption by entities across their respective sectors. DHS concurred with  the three recommendations. As of April 2018, only the recommendation  related to the government facilities sector has been implemented.\n\n\t\tDHS Needs to Better Measure Effectiveness of Cyber Risk Mitigation Activities with Critical Infrastructure Sector Partners\n\nPresidential Policy Directive-21 issued by the President in February 2013,  states that SSAs are to collaborate with critical infrastructure owners and  operators to strengthen the security and resiliency of the nation\u2019s critical  infrastructure.\nIn November 2015, we reported that the SSAs, including DHS, generally  used multiple public-private mechanisms to facilitate the sharing of  cybersecurity related information. For example, DHS used coordinating  councils and working groups of federal and nonfederal stakeholders to  facilitate coordination with each other. In addition, the department\u2019s  NCCIC received and disseminated cyber-related information for public  and private-sector partners.\nNevertheless, we identified deficiencies in critical infrastructure partners\u2019  efforts to collaborate to monitor progress towards improving cybersecurity  within the sectors. Specifically, the SSAs for 12 sectors, including DHS  for 8 sectors, had not developed metrics to measure and report on the  effectiveness of their cyber risk mitigation activities or their sectors\u2019  cybersecurity posture. This was because, among other reasons, the  SSAs rely on their private-sector partners to voluntarily share information  needed to measure efforts.\nWe made two recommendations to DHS\u2014one recommendation based on  its role as the SSA for 8 sectors and one recommendation based on its  role as the co-SSA for 1 sector\u2014to collaborate with sector partners to  develop performance metrics and determine how to overcome challenges  to reporting the results of their cyber risk mitigation activities. DHS  concurred with the two recommendations. As of April 2018, DHS has not  demonstrated that it has implemented these recommendations.\n\n\t\tDHS has taken Steps to Identify its Workforce Gaps; However, It Urgently Needs to Take Actions to Identify Its Position and Critical Skill Requirements\n\nIn February 2018, we reported that DHS had taken actions to identify,  categorize, and assign employment codes to its cybersecurity positions,  as required by the Homeland Security Cybersecurity Workforce  Assessment Act of 2014. However, its actions had not been timely and  complete. For example, DHS had not met statutorily defined deadlines  for completing actions to identify and assign codes to cybersecurity  positions or ensured that its procedures to identify, categorize, and code  its cybersecurity positions addressed vacant positions, as required by the  act. The department also had not (1) identified the individual within each  DHS component agency who was responsible for leading and overseeing  the identification and coding of the component\u2019s cybersecurity positions or  (2) reviewed the components\u2019 procedures for consistency with  departmental guidance.\nIn addition, DHS had not yet completed its efforts to identify all of the  department\u2019s cybersecurity positions and accurately assign codes to all  filled and vacant cybersecurity positions. In August 2017, DHS reported to  the Congress that it had coded 95 percent of the department\u2019s identified  cybersecurity positions. However, we determined that the department  had, at that time, coded approximately 79 percent of the positions. DHS  overstated the percentage of coded positions primarily because it  excluded vacant positions, even though the act required the department  to report such positions.\nFurther, although DHS had taken steps to identify its workforce capability  gaps, it had not identified or reported to the Congress on its department- wide cybersecurity critical needs that align with specialty areas. The  department also had not annually reported its cybersecurity critical needs  to the Office of Personnel Management (OPM), as required; and it had  not developed plans with clearly defined time frames for doing so.\nWe recommended that DHS take six actions, including ensuring that its  cybersecurity workforce procedures identify position vacancies and  responsibilities; reported workforce data are complete and accurate; and  plans for reporting on critical needs are developed. DHS concurred with  the six recommendations and stated that it plans to take actions to  address them by June 2018.\nIn conclusion, DHS is unique among federal civilian agencies in that it is  responsible for improving and promoting the cybersecurity of not only its  own internal computer systems and networks but also those of other  federal agencies and the private-sector owners and operators of critical  infrastructure. Consistent with its statutory authorities and responsibilities  under federal policy, the department has acted to assist federal agencies  and private-sector partners in bolstering their cybersecurity capabilities.\nHowever, the effectiveness of DHS\u2019s activities has been limited or not  clearly understood because of shortcomings with its programs and a lack  of useful performance measures. DHS needs to enhance its capabilities;  expedite delivery of services; continue to provide guidance and  assistance to federal agencies and private-sector partners; and establish  useful performance metrics to assess the effectiveness of its  cybersecurity-related activities. In addition, developing and maintaining a  qualified cybersecurity workforce needs to be a priority for the  department. Until it fully and effectively performs its cybersecurity  authorities and responsibilities, DHS\u2019s ability to improve and promote the  cybersecurity of federal and private-sector networks will be limited.\nChairman Johnson, Ranking Member McCaskill, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to your questions.\n\n\tGAO Contacts and Staff Acknowledgments\n\nIf you or your staffs have any questions about this testimony, please  contact Gregory C. Wilshusen at (202) 512-6244 or  wilshuseng@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement.\nGAO staff who made key contributions to this testimony are Nabajyoti  Barkakati, Chris Currie, Larry Crosland, Tammi Kalugdan, David Plocher,  Di\u2019Mond Spencer, and Priscilla Smith.\n\nRelated GAO Products\n\nGAO, Critical Infrastructure Protection: Additional Actions Are Essential  for Assessing Cybersecurity Framework Adoption, GAO-18-211  (Washington, D.C.: Feb. 15, 2018).\nGAO, Cybersecurity Workforce: Urgent Need for DHS to Take Actions to  Identify Its Position and Critical Skill Requirements, GAO-18-175  (Washington, D.C.: Feb. 6, 2018).\nGAO, Federal Information Security: Weaknesses Continue to Indicate  Need for Effective Implementation of Policies and Practices, GAO-17-549  (Washington, D.C.: Sept. 28, 2017).\nGAO, Cybersecurity: Federal Efforts Are Under Way That May Address  Workforce Challenges, GAO-17-533T (Washington, D.C.: Apr. 4, 2017).\nGAO, Information Security: DHS Needs to Continue to Advance Initiatives  to Protect Federal Systems, GAO-17-518T (Washington, D.C.: Mar. 28,  2017).\nGAO, High-Risk Series: Progress on Many High-Risk Areas, While  Substantial Efforts Needed on Others, GAO-17-317 (Washington, D.C.:  Feb. 15, 2017).\nGAO, Cybersecurity: Actions Needed to Strengthen U.S. Capabilities,  GAO-17-440T (Washington, D.C.: Feb. 14, 2017).\nGAO, Cybersecurity: DHS\u2019s National Integration Center Generally  Performs Required Functions but Needs to Evaluate Its Activities More  Completely, GAO-17-163 (Washington, D.C.: Feb. 1, 2017).\nGAO, Information Security: DHS Needs to Enhance Capabilities, Improve  Planning, and Support Greater Adoption of Its National Cybersecurity  Protection System, GAO-16-294 (Washington, D.C.: Jan. 28, 2016).\nGAO, Critical Infrastructure Protection: Measures Needed to Assess  Agencies\u2019 Promotion of the Cybersecurity Framework, GAO-16-152  (Washington, D.C.: Dec. 17, 2015).\nGAO, Critical Infrastructure Protection: Sector-Specific Agencies Need to  Better Measure Cybersecurity Progress, GAO-16-79 (Washington, D.C.:  Nov. 19, 2015).\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":"Why GAO Did This Study\n\nThe emergence of increasingly sophisticated threats and continuous reporting of cyber incidents underscores the continuing and urgent need for effective information security. GAO first designated information security as a government-wide high- risk area in 1997. GAO expanded the high-risk area to include the protection of cyber critical infrastructure in 2003 and protecting the privacy of personally identifiable information in 2015.\nFederal law and policy provide DHS with broad authorities to improve and promote cybersecurity. DHS plays a key role in strengthening the cybersecurity posture of the federal government and promoting cybersecurity of systems supporting the nation's critical infrastructures.\nThis statement highlights GAO's work related to federal programs implemented by DHS that are intended to improve federal cybersecurity and cybersecurity over systems supporting critical infrastructure. In preparing this statement, GAO relied on a body of work issued since fiscal year 2016 that highlighted, among other programs, DHS's NCPS, national integration center activities, and cybersecurity workforce assessment efforts.\n\nWhat GAO Found\n\nIn recent years, the Department of Homeland Security (DHS) has acted to improve and promote the cybersecurity of federal and private-sector computer systems and networks, but further improvements are needed. Specifically, consistent with its statutory authorities, DHS has made important progress in implementing programs and activities that are intended to mitigate cybersecurity risks on the computer systems and networks supporting federal operations and our nation's critical infrastructure. For example, the department has:\nissued cybersecurity related binding operational directives to federal agencies;\nserved as the federal-civilian interface for sharing cybersecurity related information with federal and nonfederal entities;\nFramework for Improving Critical Infrastructure Cybersecurity ; and\nNevertheless, the department has not taken sufficient actions to ensure that it successfully mitigates cybersecurity risks on federal and private-sector computer systems and networks. For example, GAO reported in 2016 that DHS's National Cybersecurity Protection System (NCPS) had only partially met its stated system objectives of detecting and preventing intrusions, analyzing malicious content, and sharing information. GAO recommended that DHS enhance capabilities, improve planning, and support greater adoption of NCPS.\nIn addition, although the department's National Cybersecurity and Communications Integration Center generally performed required functions such as collecting and sharing cybersecurity related information with federal and non-federal entities, GAO reported in 2017 that the center needed to evaluate its activities more completely. For example, the extent to which the center had performed its required functions in accordance with statutorily defined implementing principles was unclear, in part, because the center had not established metrics and methods by which to evaluate its performance against the principles. Further, in its role as the lead federal agency for collaborating with eight critical infrastructure sectors including the communications and dams sectors, DHS had not developed metrics to measure and report on the effectiveness of its cyber risk mitigation activities or on the cybersecurity posture of the eight sectors.\nGAO reported in 2018 that DHS had taken steps to assess its cybersecurity workforce; however, it had not identified all of its cybersecurity positions and critical skill requirements.\nUntil DHS fully and effectively implements its cybersecurity authorities and responsibilities, the department's ability to improve and promote the cybersecurity of federal and private-sector networks will be limited.\n\nWhat GAO Recommends\n\nSince fiscal year 2016, GAO has made 29 recommendations to DHS to enhance the capabilities of NCPS, establish metrics and methods for evaluating performance, and fully assess its cybersecurity workforce, among other things. As of April 2018, DHS had not demonstrated that it had fully implemented most of the recommendations."}
{"id":"crs_R45456","pid":"crs_R45456_0","input":"\tIntroduction\n\nThe Fifth Amendment to the U.S. Constitution provides that \"[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury.\" This provision requires that a federal prosecutor, in order to charge a suspect with a serious federal crime, secure the assent of an independent investigative and deliberative body comprising citizens drawn from the jurisdiction in which the crime would be tried. Federal grand juries serve two primary functions: (1) they aid federal prosecutors in investigating possible crimes by issuing subpoenas for documents, physical evidence, and witness testimony; and (2) they determine whether there is sufficient evidence to charge a criminal suspect with the crime or crimes under investigation.\nTraditionally, the grand jury has done its work in secret. Secrecy prevents those under scrutiny from fleeing or importuning the grand jurors, encourages full disclosure by witnesses, and protects the innocent from unwarranted prosecution, among other things. The long-established rule of grand jury secrecy is enshrined in Federal Rule of Criminal Procedure 6(e), which provides that government attorneys and the jurors themselves, among others, \"must not disclose a matter occurring before the grand jury.\" Accordingly, as a general matter, persons and entities external to the grand jury process are precluded from obtaining transcripts of grand jury testimony or other documents or information that would reveal \"what took place\" in the proceedings, even if the grand jury has concluded its work and even if the information is sought pursuant to otherwise-valid legal processes.\nAt times, the rule of grand jury secrecy has come into tension with Congress's power of inquiry when an arm of the legislative branch has sought protected materials pursuant to its oversight function. For example, some courts have determined that the information barrier established in Rule 6(e) extends to congressional inquiries, noting that the Rule \"contains no reservations in favor of . . . congressional access to grand jury materials\" that would otherwise remain secret. Nevertheless, the rule of grand jury secrecy is subject to a number of exceptions, both codified and judicially crafted, that permit grand jury information to be disclosed in certain circumstances (usually only with prior judicial authorization). And because Rule 6(e) covers only \"matters occurring before the grand jury,\" courts have recognized that documents and information are not independently insulated from disclosure merely because they happen to have been presented to, or considered by, a grand jury. As such, even if Rule 6(e) generally limits congressional access to grand jury information, Congress has a number of tools at its disposal to seek materials connected to a grand jury investigation.\nThis report begins with an overview of the standards governing\u2014and exceptions applicable to\u2014grand jury secrecy under Federal Rule of Criminal Procedure 6(e). The report also addresses whether and how the rule of grand jury secrecy and its exceptions apply to Congress, including the circumstances under which Congress may obtain grand jury information and what restrictions apply to further disclosures. Concluding this report is a discussion of past legislative efforts to amend Rule 6(e) in order to provide congressional committees with access to grand jury materials.\n\n\tBrief Overview of the Federal Grand Jury12\n\nFederal law requires the various United States District Courts to order one or more grand juries to be summoned when the public interest requires. Grand jurors must be \"selected at random from a fair cross section of the community in the district or division wherein the court convenes,\" among other things. Grand jury panels consist of 16 to 23 members.\nAfter selection, the court swears in members of the grand jury; names a \"foreperson and deputy foreperson\"; and instructs the panel. Federal grand juries sit until discharged by the court, but generally for no longer than 18 months, with the possibility of one six-month extension.\nThe authority of a federal grand jury is sweeping, but it is limited to the investigation of possible violations of federal criminal law triable in the district in which it is sitting. The grand jury may begin its examination even in the absence of probable cause or any other level of suspicion that a crime has been committed within its reach.\nThe grand jury does not conduct its business in open court, nor does a federal judge preside over its proceedings. The grand jury meets behind closed doors, with only the jurors, attorney for the government, witnesses, someone to record testimony, and possibly an interpreter present.\nThe grand jury acts on the basis of evidence presented by witnesses called for that purpose. The attorney for the government will ordinarily arrange for the appearance of witnesses before the grand jury, will suggest the order in which they should be called, and will take part in questioning them. The grand jury most often turns to the prosecutor for legal advice and to draft most of the indictments, which the grand jury returns.\nGrand jury witnesses usually appear before the grand jury under subpoena. Subpoenas may be issued and served at the request of the panel itself, although the attorney for the government usually arranges the case to be presented to the grand jury. Unjustified failure to comply with a grand jury subpoena may result in a witness being held in contempt. A witness who lies to a grand jury may be prosecuted for perjury or for making false declarations to the grand jury.\nNeither a potential defendant nor a grand jury target nor any of their counsel has any right to appear before the grand jury unless invited or subpoenaed. Nor does a potential defendant, a grand jury target, or their counsel have any right to present exculpatory evidence or substantive objection to the grand jury.\nThere are four possible outcomes of convening a grand jury\u2014(1) indictment; (2) a vote not to indict; (3) discharge or expiration without any action; or (4) submission of a report to the court under certain circumstances. A grand jury indictment may issue upon the vote of 12 of its members that probable cause exists to believe the accused committed the crime charged.\n\n\tOverview of Grand Jury Secrecy\n\n\t\tHistorical Underpinnings\n\n\"Since the 17th Century, grand jury proceedings have been closed to the public, and records of such proceedings have been kept from the public eye.\" An early justification for maintaining the secrecy of grand jury proceedings in England was to prevent suspected criminals from learning of an inquest and absconding. By the late 17th century, legal scholars had begun to recognize the need for secrecy in most matters pertaining to grand jury inquiries\u2014including the identities of subjects and witnesses, the evidence collected, and the plans and deliberations of the jury\u2014in order to realize the additional aims of preserving juror independence, sussing out witness bias and mendacity, and allowing evidence to be fully developed.\nWhen the right to grand jury indictment crossed the Atlantic Ocean from England to the American colonies, the rule of grand jury secrecy came with it. Prior to the adoption of the Federal Rules of Criminal Procedure, the federal courts developed a fairly robust, though not unyielding, conception of grand jury secrecy at common law. Secrecy challenges most often arose in the context of criminal defendants' motions to dismiss their indictments on the grounds that the evidence considered by the grand jury could not justify the charges or that some type of misconduct had occurred. Recognizing that these motions called for inspecting records of the proceedings before the grand jury, courts typically acknowledged that they had the discretionary power to permit such inspection \"in the furtherance of justice\" but found that the power should be \"sparingly exercised\" in light of the traditional rule of secrecy. Thus, although a number of courts identified a theoretical imperative for \"removing the veil of secrecy whenever evidence of what has transpired before [the jury] becomes necessary to protect public or private rights,\" courts often declined to engage in such unveiling based merely on a defendant's \"general allegations\" or a potential \"fishing expedition.\"\nNevertheless, when deemed \"essential\" to \"the purposes of justice,\" some courts would consider evidence of what occurred before a grand jury to determine whether an indictment against a criminal defendant should be dismissed. This unveiling apparently reflected an understanding that grand juries served not only an investigative function in furtherance of the governmental interest in law enforcement, but also as a \"protector of citizens against arbitrary and oppressive governmental action.\" Thus, as these decisions suggested, disclosure could be appropriate when continuing secrecy would be inconsistent with the citizen-protective function.\n\n\t\tFederal Rule of Criminal Procedure 6(e)\n\n\t\t\tBackground and Overview\n\n\"[T]he federal courts' modern version\" of the traditional rule of grand jury secrecy is established by Federal Rule of Criminal Procedure 6(e), in effect since 1946 and amended numerous times over the following 60 years. The Supreme Court has recognized that Rule 6(e) simply \"codifie[d]\" the pre-existing common law requirement \"that grand jury activities generally be kept secret,\" an \"integral part of [the United States] criminal justice system.\" An Advisory Committee Note reflects this understanding, making clear that the Rule \"continues the traditional practice of secrecy . . . except when the court permits a disclosure.\"\nCourts have identified five principal justifications underlying Rule 6(e)'s secrecy requirement:\n1. to prevent the escape of those whose indictment may be contemplated; 2. to insure the utmost freedom to the grand jury in its deliberations, and to prevent persons subject to indictment or their friends from importuning the grand jurors; 3. to prevent subornation of perjury or tampering with the witnesses who may testify before [the] grand jury and later appear at the trial of those indicted by it; 4. to encourage free and untrammeled disclosures by persons who have information with respect to the commission of crimes; 5. to protect [the] innocent accused who is exonerated from disclosure of the fact that he has been under investigation, and from the expense of standing trial where there was no probability of guilt.\nAt the time of its adoption, Rule 6(e) ensured the secrecy of grand jury proceedings by authorizing \"[d]isclosure of matters occurring before the grand jury\" in only limited circumstances. First, such matters \"other than [the jury's] deliberations and the vote of any juror\" automatically could be disclosed to \"the attorneys for the government for use in the performance of their duties.\" Beyond this, \"a juror, attorney, interpreter or stenographer\" could disclose matters occurring before the grand jury only with court authorization (1) \"preliminarily to or in connection with a judicial proceeding,\" or (2) \"at the request of the defendant upon a showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury.\"\nAmendments to Rule 6(e) from 1966 to 2014 have sought, among other things, to align the Rule's text with court-developed exceptions and clarifications that have sometimes extended beyond the literal terms of the version of the Rule in force at a given point in time. The current iteration of Rule 6(e) establishes a general rule of secrecy by setting out a list of persons, including grand jurors and attorneys for the government, who \"must not disclose a matter occurring before the grand jury\" unless the Federal Rules of Criminal Procedure \"provide otherwise.\" Rule 6(e) then \"provide[s] otherwise\" by listing complex exceptions to the prohibition. The exceptions generally fall into two categories: (1) disclosures permitted without judicial authorization, and (2)\u00a0disclosures permitted with judicial authorization.\nIn the first category, persons prohibited by the Rule from disclosing matters occurring before the grand jury may nevertheless disclose such matters (other than grand jury deliberations or grand juror votes) to an attorney for the government \"for use in performing that attorney's duty\" and to non-attorney \"government personnel\" who are needed to help a government attorney enforce federal criminal law. Government attorneys may also disclose such matters (1) to another federal grand jury; (2) to federal law enforcement, intelligence, protective, immigration, national defense, or national security officials only with respect to matters involving foreign intelligence or counterintelligence; and (3) to \"any appropriate . . . government official\" only with respect to matters involving threats of attack or intelligence gathering by foreign powers or threats of sabotage or terrorism.\nIn the second category of exceptions, the court under whose auspices the grand jury was empaneled may authorize disclosure of a grand jury matter (1) preliminarily to or in connection with a judicial proceeding; (2) to a defendant who shows grounds may exist to dismiss the indictment because of something that occurred before the grand jury; or (3) at the request of the government, to a foreign court or prosecutor or to an \"appropriate\" state, state-subdivision, Indian tribal, military, or foreign government official for the purpose of enforcing or investigating a violation of the respective jurisdiction's criminal law.\nBeyond the express terms of Rule 6(e), three circuits and a number of district courts have held that courts have inherent authority to disclose grand jury materials in situations where an enumerated Rule 6(e) exception is not otherwise applicable, though the authority may be exercised only in rare or special cases. Additional Rules and statutes also permit disclosure in particular circumstances.\nWhen a court-authorized disclosure is at issue, the person or entity seeking grand jury information must make a \"strong showing of particularized need\" that \"outweighs the public interest in secrecy.\" If that showing is made, the court may authorize disclosure \"at a time, in a manner, and subject to any other conditions that it directs.\"\nThe following sections of this report provide more detail on the various provisions of Rule 6(e).\n\n\t\t\tPersons Subject to Rule 6(e)\n\nRule 6(e)(2)(B) lists eight categories of persons who \"must not disclose a matter occurring before the grand jury\" unless an exception applies:\n1. grand jurors; 2. interpreters; 3. court reporters; 4. operators of recording devices ; 5. persons who transcribe recorded testimony; 6. attorneys for the government; 7. government personnel needed to assist attorneys for the government; 8. persons authorized to receive grand jury materials under 18 U.S.C. \u00a7 3322.\nIn other words, the Rule generally imposes an obligation of secrecy on each person permitted to be present while the grand jury is in session, as well as certain persons given access to grand jury information. Yet there is a notable exception to this general imperative: though a \"witness being questioned\" is authorized by Rule 6(d) to be present during grand jury proceedings (for obvious reasons), grand jury witnesses are not included on the list of persons precluded from disclosing grand jury matters. Viewed in conjunction with Rule 6(e)(2)(A)'s admonition that \"[n]o obligation of secrecy may be imposed on any person except in accordance with Rule 6(e)(2)(B),\" the Rule by its plain terms does not obligate grand jury witnesses to maintain the secrecy of the proceedings or their testimony. An Advisory Committee note to the original adoption of Rule 6(e) supports this reading, stating that \"[t]he rule does not impose any obligation of secrecy on witnesses.\" According to the note, such an obligation would constitute \"an unnecessary hardship [that] may lead to injustice if a witness is not permitted to make a disclosure to counsel or to an associate.\" Court decisions generally have been in accord, although a handful of courts have taken the position that an order requiring a witness to refrain from discussing grand jury matters may be entered in rare circumstances when justified by a compelling need. Courts taking this position have relied on \"inherent judicial power\" to \"protect the integrity of the grand jury process,\" which the adoption of Rule 6(e) ostensibly did not undermine.\nThough a witness is ordinarily free to disclose grand jury information of which he is aware, witnesses cannot be compelled to disclose such information to investigation targets or in separate proceedings. Relatedly, courts have recognized that federal prosecutors may request (but not demand) that witnesses refrain from disclosing the existence of a subpoena or their testimony.\nBecause Rule 6(e)'s language suggests that the list of persons prohibited from disclosing grand jury matters is exclusive, unlisted third parties who obtain grand jury information\u2014even from persons obligated to maintain grand jury secrecy\u2014are also generally not required to keep the information secret. That said, a court authorizing a disclosure under a Rule 6(e) exception may impose a condition that further disclosures not be made, subject to First Amendment limitations.\nAt least one court has observed that courts themselves are not included on the list of those who must refrain from \"disclos[ing] a matter occurring before the grand jury\" under Rule 6(e)(2)(B), interpreting this omission to mean that courts have inherent authority to release grand jury materials regardless of whether a textual exception to grand jury secrecy in Rule 6(e) otherwise applies. This judicial \"inherent authority\" exception, which the Supreme Court has never endorsed, is discussed in more detail infra in the section addressing exceptions to grand jury secrecy.\n\n\t\t\tDisclosure of Matters Occurring Before the Grand Jury\n\nRule 6(e) prohibits only \"disclosure of matters occurring before the grand jury.\" Accordingly, the Rule is not contravened unless something is \"disclos[ed],\" meaning that a person \"with information about the workings of the grand jury . . . [has] reveal[ed] such information to other persons who are not authorized to have access to it under the Rule.\" Thus, mere use of grand jury information by a person who has already been legitimately exposed to it does not constitute \"disclosure\" within the meaning of Rule 6(e).\nA more difficult issue is determining what types of information or materials fall within the meaning of \"matters occurring before the grand jury.\" Though not defined in Rule 6(e), courts have tended to view the phrase as broadly encompassing anything that might reveal what took place in the grand jury room. Clear examples include transcripts of proceedings and witness testimony, as well as written \"summaries\" or \"discussions\" of the proceedings or evidence presented. Information about the composition and focus of the grand jury\u2014including the identities of witnesses and jurors, the targets and subjects of the investigation, and even the dates and times a grand jury is in session \u2014are also covered by the Rule.\nParticular challenges arise in the context of documents such as business records that have been subpoenaed or considered by the grand jury but do not on their face relate to the grand jury itself. In general, \"[t]here is no per se rule against disclosure of any and all information which has reached the grand jury chambers,\" and thus \"[t]he mere fact that information [or documents have] been presented to the grand jury\" does not bar independent disclosure in other proceedings. For example, an agency or litigant may seek corporate records directly from a company, and the company has no basis to claim that the records are insulated from disclosure simply because a federal grand jury separately has subpoenaed them.\nHowever, utilizing various (and sometimes conflicting) tests, courts have acknowledged that independently generated documents presented to a grand jury may sometimes constitute \"matters occurring before the grand jury\" in a particular case if the context of a request would make production revelatory of the substance of the grand jury's investigation. For instance, a request for \"documents subpoenaed by the grand jury\" might impermissibly call for disclosure of grand jury matters, as production \"would reveal to the requester that [the documents] had been subpoenaed\" and potentially suggest the focus of the grand jury's investigation. By contrast, a request for documents presented to a grand jury, when coupled with broader requests for \"all evidence\" or documents related to a factual matter, would not necessarily call for disclosure of grand jury matters if production would leave the requester unable to \"determine which documents,\" if any, \"had been submitted to the grand jury.\" The framing of a particular request for documents, and the context in which the request is made, will thus impact whether documents presented to or obtained by a grand jury are considered \"matters occurring before\" it within the meaning of Rule 6(e).\nOne court has addressed the difficulty inherent in parsing when and to what extent documents subpoenaed or reviewed by a grand jury constitute grand jury \"matters\" by applying a presumption that \"confidential documentary information not otherwise public obtained by the grand jury by coercive means\" is covered by the Rule. A party seeking disclosure may rebut the presumption, however, \"by showing that the information is public or was not obtained through coercive means or that disclosure would be otherwise available by civil discovery and would not reveal the nature, scope, or direction of the grand jury inquiry.\" In practice, then, the showing required to rebut the presumption may result in an inquiry similar to that employed by other courts.\nIn addition to the substance of grand jury matters themselves (e.g., transcripts of testimony), Rule 6(e) protects against the indirect revelation of grand jury matters in ancillary proceedings and filings, such as hearings or orders addressing claims of privilege or efforts to quash a subpoena. The Rule provides that the court must \"close any hearing\" and keep \"[r]ecords, orders, and subpoenas relating to grand-jury proceedings\" under seal \"to the extent and as long as necessary\" to prevent unauthorized disclosure of a grand jury matter. Arguing that the public ordinarily has a First Amendment or common law right of access to criminal proceedings, members of the media have sometimes sought to obtain sealed records and orders notwithstanding these provisions, but multiple circuits have rejected such efforts.\nThe prohibition on disclosure of matters occurring before a grand jury is indefinite\u2014in other words, the veil of secrecy is not lifted merely because a grand jury has completed its investigation and either issued an indictment or declined to do so. That said, because some of the \"interests\" underlying the rule of secrecy are \"reduced\" once a grand jury's work is completed, the passage of time may be relevant to whether a court will authorize disclosure pursuant to a Rule 6(e) exception in a particular case.\n\n\t\tExceptions to Grand Jury Secrecy\n\nFederal Rule of Criminal Procedure 6(e)(3) contains a series of \"[e]xceptions\" to the general rule of grand jury secrecy that permit disclosure of grand jury matters to specified persons or in certain situations. The exceptions fall into two general categories: (1) disclosures that may be made without judicial authorization (though notice must in some cases be provided), and (2) disclosures that may be made only upon order of the court. Certain statutes and Federal Rules of Criminal Procedure beyond Rule 6(e) also permit disclosure of grand jury information in particular circumstances.\n\n\t\t\tDisclosures Without Judicial Authorization\n\n\t\t\t\tDisclosure to a Government Attorney\n\nRule 6(e)(3)(A)(i) provides that disclosure of a grand jury matter \"other than the grand jury's deliberations or any grand juror's vote\" may be made without court authorization to \"an attorney for the government for use in performing that attorney's duty.\" The term \"attorney for the government\" is defined elsewhere in the Federal Rules of Criminal Procedure as, in relevant part, (1) the Attorney General \"or an authorized assistant\"; (2) a United States attorney or an authorized assistant; or (3) \"any other attorney authorized by law to conduct proceedings under these rules as a prosecutor.\" Thus, an \"attorney for the government\" under Rule 6(e)(3)(A)(i) encompasses attorneys within the United States Department of Justice, as well as local or federal agency attorneys that have been appointed to act as federal prosecutors. Attorneys outside the Department of Justice who have not been so appointed, however, are excluded.\nConcerning the Rule's limitation that disclosure to a government attorney be \"for use in performing that attorney's duty,\" an Advisory Committee note states that attorneys are entitled to disclosure \"inasmuch as they may be present in the grand jury room during the presentation of evidence.\" The Supreme Court accordingly has determined that disclosure under the Rule \"is limited to use by those attorneys who conduct the criminal matters to which the materials pertain.\" Accordingly, \"every attorney (including a supervisor) who is working on a [particular] prosecution,\" but not a related civil matter, \"may have access to grand jury materials\" underlying that prosecution. And at least one court has taken a more expansive view, reading the Rule as permitting disclosure to \"government attorneys conducting other criminal matters to which the materials disclosed are relevant,\" even if such attorneys are located in a different jurisdiction than the empaneled grand jury.\nOnce an attorney for the government has access to grand jury materials, he may use the materials as needed for the continued investigation and prosecution of the violations of federal criminal law to which they pertain, including in preparation for trial or during the examination of witnesses. Disclosures not connected to such violations of federal criminal law, however, are prohibited.\n\n\t\t\t\tDisclosure to Government Personnel\n\nUnder Rule 6(e)(3)(A)(ii), disclosure of a grand jury matter, excluding grand jury deliberations and votes, may be made to \"any government personnel\u2014including those of a state, state subdivision, Indian tribe, or foreign government\u2014that an attorney for the government considers necessary to assist in performing that attorney's duty to enforce federal criminal law.\" This provision was added to Rule 6(e) in 1977 to address the need of Justice Department attorneys \"for active assistance from outside personnel\" in the course of grand jury investigations, including \"investigators from the F[ederal Bureau of Investigation], I[nternal Revenue Service], and other law enforcement agencies[,]\" without the \"time-consuming requirement of prior judicial interposition.\"\nThe term \"government personnel\" has been interpreted to extend to non-attorney government employees such as law enforcement agents and subject-matter experts, as well as agency attorneys outside the Department of Justice who, because they have not been authorized to act as federal prosecutors, would not be entitled to disclosure under Rule 6(e)(3)(A)(i). One question that has arisen is the extent to which employees of private entities that are controlled by or connected to the government may be considered \"government personnel.\" The few cases addressing this question have tended to find that purely private entities and contractors are excluded from the Rule, though a \"quasi-governmental entity\" that has both public and private attributes may not be, \"depending on the facts of the situation.\"\nAs the text of the Rule indicates, government personnel to whom disclosure of information is made may use that information only to assist government attorneys in enforcing federal criminal law. Resultantly, disclosure to government personnel is constrained to an equal degree as disclosure to government attorneys under Rule 6(e)(3)(A)(i), that is, for use in the investigation and prosecution of criminal law violations\u2014but not related civil matters\u2014to which the information pertains.\nTo balance the benefit of disclosure to government personnel as needed against the risk that secrecy will thereby be compromised, Rule 6(e)(3)(B) requires prosecuting attorneys to \"promptly\" provide the court that impaneled the grand jury with the names of all government personnel to whom a disclosure is made under Rule 6(e)(3)(A)(ii). Though the text of this provision suggests that the names need only be provided after disclosure, the legislative history and an Advisory Committee note \"contemplate[] that the names of such personnel will generally be furnished to the court before disclosure is made to them.\"\nThe attorney who provides the court with the names of government personnel to whom disclosure has been made must also \"certify\" that he has \"advised\" those personnel \"of their obligation of secrecy\" under Rule 6(e). Added in 1985, this requirement stemmed from concern that, particularly with respect to state and local government personnel who \"otherwise would likely be unaware of th[e] obligation[,]\" disclosure could result in \"inadvertent breach[es] of grand jury secrecy\" if personnel were not expressly advised to keep the information secret.\n\n\t\t\t\tDisclosure to Another Grand Jury\n\nRule 6(e)(3)(C) permits an attorney for the government to disclose \"any grand jury-matter to another federal grand jury\" without court authorization. The Advisory Committee note to the Rule's 1983 addition reflects practical reasons for the exception: courts already \"permitted such disclosure in some circumstances\" despite the absence of a specific provision to that effect, and secrecy would \"be protected almost as well by the safeguards at the second grand jury proceeding . . . as by judicial supervision of the disclosure of such materials.\" In other words, when materials from one grand jury are disclosed to a second grand jury, \"secrecy is not thereby compromised, since the second grand jury is equally under Rule 6's requirement of secrecy.\"\nCourts have held that the exception allows grand jury materials to be transferred not only to \"successor\" grand juries within the same judicial district, but to grand juries in other jurisdictions pursuing separate investigations as well.\n\n\t\t\t\tDisclosure of Intelligence and National Security Information\n\nTwo of the most recent, and unique, exceptions to grand jury secrecy in Rule 6(e) permit disclosure of certain information to specified government officials based on the subject matter of that information. First, as part of the USA PATRIOT Act of 2001, Congress amended Rule 6(e) to allow an attorney for the government to disclose any grand jury matter involving foreign intelligence , counterintelligence , or foreign intelligence information to \"any federal law enforcement, intelligence, protective, immigration, national defense, or national security official to assist the official receiving the information in the performance of that official's duties.\" The terms \" foreign intelligence \" and \" counterintelligence \" are respectively defined in a separate statute as\ninformation relating to the capabilities, intentions, or activities of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorist activities,\" and \"information gathered, and activities conducted, to protect against espionage, other intelligence activities, sabotage, or assassinations conducted by or on behalf of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorist activities.\nThe Rule itself defines the term \" foreign intelligence informati on \" as\n(a) information, whether or not it concerns a United States person, that relates to the ability of the United States to protect against\u2014\n\u2022 actual or potential attack or other grave hostile acts of a foreign power or its agent;\n\u2022 sabotage or international terrorism by a foreign power or its agent; or\n\u2022 clandestine intelligence activities by an intelligence service or network of a foreign power or by its agent; or\n(b) information, whether or not it concerns a United States person, with respect to a foreign power or foreign territory that relates to\u2014\n\u2022 the national defense or the security of the United States; or\n\u2022 the conduct of the foreign affairs of the United States.\nThe Intelligence Reform and Terrorism Prevention Act of 2004 added another exception, allowing an attorney for the government to disclose any grand jury matter \"involving, within the United States or elsewhere, a threat of attack or other grave hostile acts of a foreign power or its agent, a threat of domestic or international sabotage or terrorism, or clandestine intelligence gathering activities by an intelligence service or network of a foreign power or by its agent\" to \"any appropriate federal, state, state subdivision, Indian tribal, or foreign government official, for the purpose of preventing or responding to such threat or activities.\"\nAs commentators have noted, these contemporary exceptions are fairly expansive in that they allow prosecutors to unilaterally disclose grand jury materials to persons not involved in the prosecution of federal crimes based on definitions that could arguably encompass a \"broad range of information.\" In this sense, the exceptions appear to be a significant departure from the traditional practice of strictly limiting dissemination of grand jury materials. In recognition of the potentially expansive application of the new exceptions, the Rule stipulates that any official to whom a disclosure is made \"may use the information only as necessary in the conduct of that person's official duties subject to any limitations on the unauthorized disclosure of such information.\" Additionally, with respect to state, local, Indian tribal, and foreign government officials, Rule 6(e) provides that they may \"use the information only in a manner consistent with any guidelines issued by the Attorney General and the Director of National Intelligence.\" Finally, within a \"reasonable time after\" any disclosure is made under Rule 6(e)(3)(D), an attorney for the federal government must file a sealed notice with the court indicating that \"such information was disclosed\" and identifying \"the departments, agencies, or entities to which the disclosure was made.\"\nDespite the facial breadth of the recently added exceptions, it does not appear that they have yet been subject to substantial judicial scrutiny or interpretation. At least one commentator, however, has anticipated that a constitutional challenge is inevitable, given the degree to which the exceptions impact grand jury secrecy (and thus potentially undermine the Fifth Amendment's grand jury requirement).\n\n\t\t\tDisclosures with Judicial Authorization\n\n\t\t\t\tDisclosure Related to a Judicial Proceeding\n\nFederal Rule of Criminal Procedure 6(e)(3)(E)(i) permits a court to authorize disclosure of a grand jury matter \"preliminarily to or in connection with a judicial proceeding.\" This exception, which has been part of the Rule since its inception in 1946, is one of the most frequently litigated.\nAn oft-cited definition of the term \"judicial proceeding\" comes from an early U.S. Court of Appeals for the Second Circuit opinion: \"[A]ny proceeding determinable by a court, having for its object the compliance of any person, subject to judicial control, with standards imposed upon his conduct in the public interest, even though such compliance is enforced without the procedure applicable to the punishment of crime.\" Criminal and civil litigation qualify as judicial proceedings, but so too may quasi-judicial matters such as impeachment proceedings and certain disciplinary hearings. Purely administrative or nonjudicial investigations or hearings, on the other hand, typically do not qualify.\nOne question that has arisen is whether the grand jury investigation itself is a \"judicial proceeding\" such that a court may permit materials generated by the investigation to be disclosed for use in connection with those proceedings. Answering this question in the affirmative would, for example, allow an expert witness to review grand jury material prior to testifying before the grand jury. Some courts have concluded either that a grand jury investigation is a judicial proceeding for these purposes or that it is \"preliminary\" to a judicial proceeding\u2014the criminal trial that would follow indictment. Consistent with this approach, said criminal trial generally has been viewed as a judicial proceeding permitting disclosure of materials from the underlying grand jury, though there is authority to the contrary. Conversely, courts have rejected the argument that a proceeding instituted primarily or solely to obtain grand jury materials can itself be considered the \"judicial proceeding\" needed to justify disclosure, recognizing that such a reading of the exception would be circular and \"rule-swallowing.\"\nWith respect to the \"preliminarily to or in connection with\" requirement, the Supreme Court has said that the relevant inquiry is the use for which the grand jury information is being requested: \"the Rule contemplates only uses related fairly directly to some identifiable litigation, pending or anticipated.\" Thus, \"it is not enough to show that some litigation may emerge from the matter in which the material is to be used, or even that litigation is . . . likely to emerge . . . . If the primary purpose of disclosure is not to assist in preparation or conduct of a judicial proceeding, disclosure . . . is not permitted.\" What this limitation on the exception means is that a request for grand jury materials pursuant to a preliminary inquiry or investigation does not come within the scope of the exception where the prospect of a judicial proceeding stemming from the investigation is merely speculative. That said, an administrative or other investigative inquiry may be considered \"preliminar[y]\" to a judicial proceeding if \"a clear pathway exists\" between that process \"and the judicial process and the ultimate judicial role is a very substantial one.\"\n\n\t\t\t\tDisclosure to Defendant on Showing of Ground to Dismiss Indictment\n\nRule 6(e)(3)(E)(ii) permits a court to order disclosure \"at the request of a defendant who shows that a ground may exist to dismiss the indictment because of a matter that occurred before the grand jury.\" Along with the \"judicial proceeding\" exception, this exception is the only other mechanism for seeking court authorization to disclose grand jury materials that has been in the Rule since its inception in 1946.\nThere is a strong \"presumption of regularity\" in grand jury proceedings, and thus a defendant requesting court authorization for disclosure under this exception carries a heavy burden in seeking to make the requisite showing. First, dismissal of an indictment itself is a remedy only for misconduct before the grand jury that \"amounts to a violation of one of those 'few, clear rules which were carefully drafted and approved by [the Supreme] Court and by Congress to ensure the integrity of the grand jury's functions'\"\u2014such as violations of Rule 6 or certain statutory provisions establishing prosecutorial standards of conduct. For example, indictment dismissal may be warranted where the prosecutor secures the indictment by actively misleading the grand jury about key evidence, but mere failure to present evidence favorable to the defendant will not justify dismissal.\nSecond, to make the requisite showing that one of the above-mentioned grounds exists, the defendant must do more than make \"conclusory or speculative allegations of misconduct.\" Rather, the defendant must identify a factual basis for inferring that misconduct warranting indictment dismissal has occurred. At least one court has described this as an \"exceedingly high burden.\" For this reason, courts rarely grant requests by defendants under Rule 6(e)(3)(E)(ii), as \"a defendant often can make the necessary showing only with the aid of the [very] materials he seeks to discover.\" Defendants have, at times, pointed out this conundrum, but courts have not been particularly sympathetic.\n\n\t\t\t\tDisclosure to a Foreign Court or Prosecutor\n\nUnder Rule 6(e)(3)(E)(iii), a court \"at the request of the government\" may authorize disclosure of a grand jury matter \"when sought by a foreign court or prosecutor for use in an official criminal investigation.\" This provision was added to the Rule as part of the Intelligence Reform and Terrorism Prevention Act of 2004, and appears to have been intended to address uncertainty as to whether a foreign criminal investigation could be considered \"preliminar[y] to . . . a judicial proceeding\" within the meaning of that separate exception. With the 2004 addition, the Rule now expressly recognizes that government attorneys may seek court authorization to disclose materials for use in the course of a foreign criminal investigation, rather than having to separately subpoena the same documents in order to provide them to foreign prosecuting authorities.\n\n\t\t\t\tDisclosure for State, Foreign, or Military Law Enforcement\n\nClosely related to the exception for court-authorized disclosures to foreign courts and prosecutors, Rule 6(e)(3)(E)(iv) permits a court, \"at the request of the government\" and upon a showing by the government that a grand jury matter \"may disclose a violation of State, Indian tribal, or foreign criminal law,\" to order disclosure of a grand jury matter \"to an appropriate state, state-subdivision, Indian tribal, or foreign government official for the purpose of enforcing that law.\" Rule 6(e)(3)(E)(v) extends the same exception to \"an appropriate military official\" for enforcement of \"military criminal law under the Uniform Code of Military Justice.\"\nBefore these exceptions were adopted in 1985, non-federal law enforcement officials could obtain federal grand jury materials for purposes other than federal law enforcement only with court authorization pursuant to the exception permitting disclosure \"preliminarily to or in connection with a judicial proceeding.\" The judicial proceeding exception proved to be \"of limited practical value\" in such circumstances, however, given the requirement that there be some \"identifiable litigation\" to which the disclosure related; where state or other non-federal officials were not already aware of the facts tending to show a violation of the relevant jurisdiction's criminal law, there would likely be no \"pending or anticipated\" judicial proceeding prior to disclosure that would justify such disclosure under the \"judicial proceeding\" exception.\nAccording to an Advisory Committee note, \"[t]his inability lawfully to disclose evidence of a [non-federal] criminal violation\u2014evidence legitimately obtained by the grand jury\"\u2014was perceived as \"an unreasonable barrier to the effective enforcement\" of criminal law across jurisdictions. Thus, pursuant to the exceptions, courts may now permit disclosure to a non-federal official \"when an attorney for the government so requests and makes the requisite showing.\" Department of Justice guidelines require that federal prosecutors request and receive internal authorization to apply for a court order under these exceptions before doing so.\nWith respect to which officials are \"appropriate\" within the meaning of the Rule, the Department of Justice takes the position that the term \"shall be interpreted to mean any official whose official duties include enforcement of the . . . criminal law whose violation is indicated in the matters for which disclosure authorization is sought.\" The few court decisions construing the term appear to take a similar view.\n\n\t\t\t\tCourts' Inherent Authority to Order Disclosure\n\nThe Supreme Court has said that where a statute \"explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of evidence of a contrary legislative intent.\" As discussed above, Rule 6(e) provides that a matter occurring before a grand jury must not be disclosed \"[u]nless these rules provide otherwise.\" Rule 6(e) then explicitly \"provide[s] otherwise\" by granting authority to courts to order disclosure of grand jury matters in particular, enumerated circumstances. Thus, based solely on Rule 6(e)'s text and general principles of statutory construction, it would seem that courts can authorize disclosure of grand jury matters only if one of the express exceptions in Rule 6(e) applies. Some courts have appeared to agree with this proposition, at least in the abstract.\nNevertheless, a number of federal courts have determined that the list of court-authorized exceptions in Rule 6(e) is not exclusive, and that courts have \"inherent authority\" to permit disclosure of grand jury information and materials in circumstances not expressly provided for in the Rule. Courts in this camp have pointed to various justifications for recognizing such extra-textual judicial authority to breach grand jury secrecy, including that\ncourts have always had supervisory authority over the grand juries that they impanel, which historically included the discretion to determine when grand jury materials should be released; the advent of the Federal Rules of Criminal Procedure did not eliminate a court's supervisory authority as a general matter, meaning that courts may still take certain actions that are consistent with, though not explicitly authorized by, the Rules; Rule 6(e)(2)(B)'s list of persons who are prohibited from disclosing a matter occurring before the grand jury does not include the court itself; Rule 6(e)(3)(E)'s list of circumstances in which a court \"may\" authorize disclosure does not indicate that those circumstances are exclusive, and the presence of limiting language elsewhere in Rule 6 suggests its absence in (e)(3)(E) was intentional; and the history of the Rules and Advisory Committee notes indicates that Rule 6(e) was meant to be responsive to and reflective of common exceptions that courts developed of their own volition over time.\nFearing that an exception to grand jury secrecy not textually constrained could undermine secrecy writ large, courts recognizing their \"inherent authority\" to release grand jury materials in situations not governed by Rule 6(e) have generally cabined the exercise of such authority to \"special\" or \"exceptional\" circumstances. Though a determination that such circumstances exist is \"highly discretionary and fact sensitive,\" factors that courts have considered include\nthe identity of the party seeking disclosure; whether the defendant to the grand jury proceeding or the government opposes the disclosure; why disclosure is being sought in the particular case; what specific information is being sought for disclosure; how long ago the grand jury proceedings took place; the current status of the principals of the grand jury proceedings and that of their families; the extent to which the desired material\u2014either permissibly or impermissibly\u2014has been previously made public; whether witnesses to the grand jury proceedings who might be affected by disclosure are still alive; and the additional need for maintaining secrecy in the particular case in question.\nThe circumstances in which courts have most often ordered disclosure of grand jury materials using their inherent authority have involved matters of significant public or historical interest related to grand jury proceedings that have long since concluded. For instance, one district court in the District of Columbia recently unsealed certain dockets associated with the 1998 investigation into the relationship between former President Clinton and a White House intern, citing the length of time that had elapsed and the substantial public interest in the information.\nAlthough the trend appears to be in favor of recognizing a court's extra-textual inherent authority to release grand jury materials, at least in exceptional circumstances, there is some reason to question whether the Supreme Court would agree that this authority exists if faced squarely with the question. Setting aside the text of Rule 6(e) and the general principles discussed above, the Supreme Court in recent years has expressed \"reluctan[ce] to invoke the judicial supervisory power as a basis for prescribing modes of grand jury procedure,\" as the grand jury's status as an independent constitutional fixture \"suggest[s] that any power federal courts may have to fashion\" such procedures \"is a very limited one[.]\" These statements have led one treatise to refer to the existence of judicial inherent authority to release grand jury materials beyond the terms of Rule 6(e) as \"exceedingly doubtful.\"\n\n\t\t\t\tShowings Required for Court Authorization to Disclose Grand Jury Matters\n\nAlthough Rule 6(e) enumerates the contexts in which a court is authorized to order disclosure of grand jury matters, courts have had to grapple with determining what standard governs the exercise of a court's discretion to order disclosure in a particular case\u2014that is, the showing a requester must make in order for a court to agree that releasing grand jury material is warranted under one of the exceptions for court-authorized disclosure in Rule 6(e).\nThe Supreme Court has said that \"disclosure is appropriate only in those cases where the need for it outweighs the public interest in secrecy,\" and \"the burden of demonstrating this balance\" rests on the party seeking disclosure. Put differently, the secrecy of grand jury proceedings \"must not be broken except where there is a compelling necessity,\" and the \"instances when that need will outweigh the countervailing policy\" of secrecy \"must be shown with particularity\" by the requester.\nFrom these general principles has emerged the standard that Rule 6(e) \"require[s] a strong showing of particularized need for grand jury materials before any disclosure will be permitted.\" The Supreme Court announced the contours of this so-called \"particularized need\" standard in the context of the \"judicial proceeding\" exception to Rule 6(e), explaining that \"[p]arties seeking grand jury transcripts under Rule 6(e) must show that the material they seek is needed to avoid a possible injustice in another judicial proceeding, that the need for disclosure is greater than the need for continued secrecy, and that their request is structured to cover only material so needed.\"\nWhen the cases describing the \"particularized need\" standard were decided, the only Rule 6(e) exceptions permitting a court to authorize disclosure of grand jury matters were (1) the \"judicial proceeding\" exception, and (2) the exception for a defendant upon showing grounds to dismiss the indictment. As the number of Rule 6(e) exceptions permitting court-authorized disclosure has grown over time, however, one question that has arisen is whether and how the Supreme Court's \"particularized need\" standard applies outside of the \"judicial proceeding\" context in which it was announced. Courts have typically recognized that the general requirement imposed on a requester to show a need for the grand jury materials at issue extends to any exception authorizing court-ordered disclosure. This requirement, whether given the appellation \"particularized need\" or not, will obligate a person seeking court authorization for disclosure to show some factual exigency outweighing the interest in secrecy, which will vary depending on the precise exception being invoked. Thus, for example and as discussed above, a defendant seeking an order authorizing disclosure under Rule 6(e)(3)(E)(ii) must be able to present a factual basis for inferring that misconduct that would warrant dismissal of the indictment has occurred, and a government attorney seeking authorization under Rule 6(e)(3)(E)(iv) must show that the grand jury matter for which disclosure is sought may disclose a violation of State, Indian tribal, or foreign criminal law. Likewise, courts addressing whether to authorize release of grand jury materials pursuant to their inherent authority engage in \"a nuanced and fact-intensive assessment\" of whether the need for the materials is greater than the need to maintain secrecy.\nCourts considering whether a \"particularized need\" exists in a given case have emphasized that although the standard is \"highly flexible,\" a showing of \"mere relevance, economy, and efficiency will not suffice\" to meet it. Thus, the inquiry often focuses on the contemplated use of the materials at issue and whether alternative channels exist to obtain them. In the context of judicial proceedings, the need to impeach or refresh the recollection of a witness is a well-recognized and valid need, so long as the need is \"real\" and not merely a \"bald assertion[.]\" Other needs that courts have found valid include (1) to substantiate malicious prosecution allegations based on prosecutorial and witness misconduct; (2) to rehabilitate a witness at trial after he has been impeached on cross-examination; and (3) to avoid stymieing an investigation of official improprieties. On the other hand, the mere desire to discover what evidence the grand jury considered has been held to be insufficient. \nConsistent with the flexible and fact-dependent nature of the \"particularized need\" inquiry, the Supreme Court has said that \"as the considerations justifying secrecy become less relevant, a party asserting a need for grand jury transcripts will have a lesser burden in showing justification.\" Thus, factors courts consider in weighing need against the interest in secrecy may include (1) the nature of the materials sought; (2) whether the requester is a government official or a private party; (3) the time that has elapsed between the grand jury proceedings and the request for disclosure; and (4) whether, in the case of witness testimony or documents, the witness objects to disclosure.\n\n\t\t\tDisclosures Authorized by Another Statute or Rule\n\nDespite the general presumption of grand jury secrecy established by Federal Rule of Criminal Procedure 6(e), other federal statutes and procedural rules sometimes permit (or even mandate) disclosure of grand jury information in particular circumstances. These statutes and rules are explicit in their limited retraction of grand jury secrecy, as they must be, for the Supreme Court has made clear that it \"will not infer\" that Congress has exercised its power to modify the secrecy requirement unless Congress has \"affirmatively express[ed] its intent to do so.\" \nFirst, Rule 6(e) itself explicitly cross-references 18 U.S.C. \u00a7 3322, part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which authorizes government attorneys and personnel who are privy to grand jury information to disclose that information, without a court order, to any other government attorney for use in enforcing the civil penalty provisions of FIRREA or \"in connection with any civil forfeiture provision of Federal law.\" In other words, in the specified circumstances, Section 3322 acts as a statutory exception to the rule that government attorneys and personnel may not disclose grand jury matters for use in separate civil proceedings without a court order. The statute also establishes other specific circumstances in which a court may order disclosure of grand jury matters: during an investigation of a \"banking law violation,\" a court may direct disclosure \"to identified personnel of a Federal or State financial institution regulatory agency\" for use \"in relation to any matter within the jurisdiction of such regulatory agency\" or \"to assist an attorney for the government to whom matters have been disclosed\" under the statute.\nIn addition, Federal Rule of Criminal Procedure 16 requires that a criminal defendant be given access to any grand jury testimony he has given relating to the charged offense. With respect to the grand jury testimony of other witnesses, Federal Rule of Criminal Procedure 26.2 and the Jencks Act require that such testimony be provided to the defendant only after the witness in question has testified on direct examination at trial. Disclosure is limited to grand jury testimony that \"relate[s] to the subject matter of the [trial] testimony of the witness.\" The purpose of these limitations is to balance a defendant's right to confront his accusers using information that may impeach their testimony with the need to protect government files \"from unnecessary and vexatious fishing expeditions by defendants.\"\n\n\t\tDisclosure Mechanics and Review\n\nFederal Rules of Criminal Procedure 6(e)(3)(F) and (G) address the procedures for seeking court-authorized disclosure of grand jury materials for use in connection with another judicial proceeding. A party seeking disclosure must file a petition in the district \"where the grand jury convened.\" If the petition is filed by \"the government,\" the court may\u2014but is not required to\u2014hear the matter ex parte . Otherwise, the petitioner must provide notice of the petition to (1)\u00a0an attorney for the government, (2) the parties to the judicial proceeding for which disclosure of the grand jury materials is sought, and (3) \"any other person whom the court may designate.\" The court must \"afford a reasonable opportunity\" to these persons \"to appear and be heard.\"\nChallenges arise when the judicial proceeding for which grand jury materials are sought is pending in a different judicial district than the district where the grand jury convened, as the latter court may be ill-suited to decide the disclosure question. The Supreme Court addressed this situation in Douglas Oil Co. v. Petrol Stops Northwest , and the Court's conclusions have essentially been adopted in Rule 6(e)(3)(G). The Rule provides that unless the court in which the petition is filed\u2014that is, the court in the district where the grand jury convened\u2014\"can reasonably determine whether disclosure is proper,\" it must transfer the matter to the district where the separate judicial proceeding is pending for determination. This provision reflects \"a preference for having the disclosure issue decided by the grand jury court,\" while recognizing that that court may be unable to reach a decision because it \"will have no first-hand knowledge of the litigation in which the transcripts allegedly are needed, and no practical means by which such knowledge can be obtained.\"\nTo facilitate resolution by the transferee court, the grand jury court must transmit to the transferee court \"the material sought to be disclosed, if feasible, and a written evaluation of the need for continued grand jury secrecy.\" The first requirement \"facilitate[s] timely disclosure if it is thereafter ordered\" and assists the transferee court \"in deciding how great the need for disclosure actually is.\" The Rule does not require transmittal of the grand jury material if it is impracticable to do so, as, for example if the material is \"exceedingly voluminous.\" The requirement of a written evaluation of the need for continuing secrecy recognizes that the grand jury court \"is in the best position to assess the interest in continued grand jury secrecy in the particular instance,\" and it is thus \"important that the court which will now have to balance that interest against the need for disclosure receive the benefit of the [grand jury] court's assessment.\"\nUpon transfer, the same persons specified in Rule 6(e)(3)(F) must be given a reasonable opportunity to appear and be heard. The transferee court then makes the ultimate decision whether to disclose \"based on its own determination of the need for disclosure and the transferring court's evaluation of the competing need for continued secrecy.\"\nGenerally, a court's order regarding disclosure under Rule 6(e) is immediately appealable. Because the determination of whether \"particularized need\" exists to justify disclosure in a given case is highly fact-specific and discretionary, an appellate court's review will be under the deferential \"abuse of discretion\" standard.\n\n\t\tEstablishing and Remedying Violations of Grand Jury Secrecy\n\nA knowing violation of Rule 6, including the obligation of secrecy, \"may be punished as a contempt of court.\" Though not explicit in the Rule, courts have held that both criminal and civil contempt may be imposed, meaning that the remedy may include imprisonment, monetary sanctions, or equitable relief. In limited circumstances, an indictment may also be dismissed or evidence suppressed. For example, where the government unilaterally disclosed a defendant's grand jury testimony in a separate civil forfeiture proceeding to establish probable cause for seizure of the defendant's car, one court suggested that suppression of the testimony could be necessary to \"protect the integrity of the grand jury system.\"\nCourts disagree on whether the contempt provision of Rule 6 establishes a private right of action based on an alleged violation of grand jury secrecy.\nA party seeking one of the remedies noted above will be required to establish a prima facie case that a violation of grand jury secrecy has occurred. This showing will ordinarily require some basis to infer that the source of any leaked grand jury information was one prohibited under Rule 6(e), and the court may consider evidence submitted to rebut the allegation of wrongdoing. If a prima facie case is established, the court will hold an evidentiary hearing in which the alleged source of the unauthorized disclosure (typically the government) will bear the burden of \"attempt[ing] to explain its actions.\" For instance, the movants in one case made a prima facie showing that an independent counsel breached grand jury secrecy by submitting to the court \"various news articles indicating that information relating to grand jury proceedings or witnesses was obtained from sources associated with the\" independent counsel's office. The court thus recognized that the independent counsel would be called upon to attempt to rebut the inferences drawn from the news articles by submitting evidence (potentially including affidavits, documents, or live testimony) to show either that the information disclosed to the media did not constitute \"matters occurring before the grand jury\" or that the source of the information was not the government.\nAn order denying a defendant's motion to dismiss the indictment based on a violation of Rule 6(e) is not immediately appealable, and any error may be considered harmless if the defendant is subsequently convicted.\n\n\tGrand Jury Secrecy and Congressional Oversight\n\nAs the discussion of grand jury secrecy and Federal Rule of Criminal Procedure 6(e) above reflects, no exception to the general rule of secrecy explicitly authorizes disclosure of grand jury matters to Congress, either by agreement or pursuant to a congressional subpoena. Nevertheless, a few courts have addressed the applicability of Rule 6(e) and its exceptions to congressional requests for information, including in the course of committee investigations and preliminary to impeachment proceedings. At a minimum, these decisions indicate that Congress may be able to obtain grand jury materials by invoking a Rule 6(e) exception before a court under certain circumstances. Congress has also previously considered legislation that would have expressly permitted a court to authorize disclosure of grand jury matters to congressional committees, though the congressional-access provision ultimately did not become law.\nThis section of the report addresses the circumstances in which Congress may obtain and disseminate grand jury materials under Rule 6(e) as it is presently construed; it then addresses legal issues to consider if Congress seeks to create a new Rule 6(e) exception for congressional committees.\n\n\t\tCongressional Investigative Authority\n\nCongress generally has broad authority to obtain information for oversight and investigative purposes. The power of Congress to conduct investigations is \"inherent in the legislative process,\" and such power is \"as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution.\" As a corollary, the \"[i]ssuance of subpoenas .\u00a0.\u00a0.\u00a0has long been held to be a legitimate use by Congress of its power to investigate.\" Beyond subpoenas, Congress has exercised its power of inquiry through less formal means, such as by submitting letter requests for information.\nCongressional inquiries are broadly protected from judicial scrutiny. Provided that a committee's investigation is authorized and conducted pursuant to a valid legislative purpose, the Speech or Debate Clause of Article I of the Constitution creates \"an absolute bar to [judicial] interference.\"\n\n\t\tApplication of Grand Jury Secrecy to Congressional Disclosures\n\nPursuant to its broad authority to investigate, Congress has on several occasions sought grand jury information based on legislative interest in particular executive branch activities, either through letters or subpoenas to executive branch officials or through petitions filed with the court. Faced with these legislative efforts to obtain otherwise-secret grand jury materials, courts have reached conflicting conclusions as to whether the rule of grand jury secrecy enshrined in Rule 6(e) applies to disclosures to Congress at all.\nRelying on an apparently novel conception of the \"authority of Congress under the Speech or Debate Clause,\" two courts have held that Congress has a \"constitutionally independent legal right\" to obtain documents in furtherance of \"legitimate legislative activity\" regardless of whether the documents disclose matters occurring before a grand jury. First, in In re Grand Jury Investigation of Ven-Fuel , the chairman of the Subcommittee on Oversight and Investigations of the House of Representatives' Committee on Interstate and Foreign Commerce petitioned a district court for an order authorizing disclosure of documents presented to a federal grand jury in Florida in the course of its investigation of possible criminal conduct by a company called Ven-Fuel, Inc. The court recognized that the subcommittee's request implicated \"the powers and operations of the coequal, but interdependent, branches of the federal government . . . over theoretical fault lines,\" but concluded there was no \"direct conflict\" because the subcommittee's legitimate legislative purpose in seeking the documents meant that it was \"entitled to disclosure\" regardless of grand jury secrecy rules.\nTen years after the decision in Ven-Fuel , the issue of congressional access to grand jury materials came before a different court in connection with the potential impeachment of a federal judge. The judge had been indicted for conspiring to solicit a bribe to influence a judicial decision, causing the House of Representatives to introduce a resolution calling for his impeachment. The resolution was referred to the House Committee on the Judiciary, which subsequently requested that the district court deliver all records of the grand jury that had indicted the judge. The judge objected, but the district court concluded that the committee was entitled to the records for several reasons, one of which was that, in accordance with Ven-Fuel , a \"congressional investigation relating to the impeachment of a federal judge\" falls within the authorized legislative activities \"embraced\" by the Speech or Debate Clause.\nCriticizing the decision in Ven-Fuel , other courts have sharply disagreed with the conclusion that the Speech or Debate Clause provides a basis to ignore grand jury secrecy when Congress is the requester. In In re Grand Jury Investigation of Uranium Industry , for instance, the Senate Judiciary Committee petitioned a court for an order authorizing disclosure of documents in the possession of the Department of Justice related to its investigation of the uranium industry. The committee's interest in the documents apparently stemmed from the fact that an expansive grand jury investigation conducted by the department's Antitrust Division had yielded no indictments. In seeking court-ordered disclosure of the grand jury materials, the committee asserted, among other things, that it was not required to establish the applicability of a Rule 6(e) exception or make a showing of particularized need because the Speech or Debate Clause entitled it to the materials. The court, however, considered \"the suggestion that Rule 6(e) does not apply to disclosures to Congress\" to be \"[un]acceptable.\" The court noted that Rule 6(e) \"contains no reservations in favor of Congress\" and rejected the Ven-Fuel court's suggestion that the Speech or Debate Clause may be \"used as a sword to enable Congress to penetrate an otherwise secret function of one of the other branches.\" While, in the court's view, the Clause would protect Congress from collateral interference if it were attempting to \"acquire materials which it has a legal right to obtain,\" the Clause would not sanction expansion of Congress's legal rights \"to manufacture a new right to obtain grand jury materials\" that could be affirmatively employed.\nAs the court in Uranium Industry recognized, the Ven-Fuel decision's reliance on the Speech or Debate Clause as a font of constitutional authority permitting congressional access to grand jury materials finds little support in the broader case law on the Clause. Though the Clause functions to protect congressional activity, including lawful use of the subpoena power, from judicial interference when such activity is challenged by a third party, courts have not viewed the Clause to constitute a sword that Congress may use to affirmatively seek judicial authorization for disclosure of information in the possession of a coordinate branch. That said, the extent to which the rule of grand jury secrecy applies more generally along the \"theoretical fault line[]\" that exists between executive branch activity and Congress's Article I investigative authority remains unsettled. It is worth noting in this regard that although Congress's power to obtain information for legitimate legislative purposes is broad, it is not limitless.\nThough no federal appellate courts have spoken directly to the issue, decisions addressing the now-lapsed independent counsel statute appear to lend some support to the position that Congress enjoys no special constitutional solicitude in obtaining otherwise-secret grand jury materials. That statute required a duly appointed independent counsel to file a pre-termination \"final report\" with the court \"setting forth fully and completely a description of the work of the independent counsel,\" and the statute permitted the court to release \"to the Congress, the public, or any appropriate person, such portions of [the] report . . . as the division of the court considers appropriate.\" In several decisions considering whether to authorize such release of independent counsel reports to Congress and the public, the D.C. Circuit has recognized that Rule 6(e) applies to an independent counsel, meaning that \"any release of grand jury material\" in the final report authorized by statute \"falls within the protective provisions\" of the Rule unless an exception applies. Nevertheless, the court has read a provision of the independent counsel statute permitting a court to authorize disclosure of the report as establishing a \"judicial proceeding\" such that release of the report may fall within that exception to Rule 6(e). Pursuant to the exception, the court has proceeded to consider multiple factors in deciding whether to authorize the report's release. In other words, rather than finding an independent constitutional entitlement to grand jury material when faced with the question of whether to authorize the release to Congress of a report containing such material, the D.C. Circuit has simply applied Rule 6(e). It could be argued, however, that because these cases did not involve a congressional subpoena, the court was not faced with a direct exercise of Congress's constitutional power of inquiry. \nThe Department of Justice, for its part, agrees that it may release grand jury material to Congress in response to a subpoena only to the extent that disclosure is permitted under Rule 6(e). It takes the opposite position from the Ven-Fuel court with respect to separation-of-powers implications when Congress requests grand jury material: in the department's view, recognizing a congressional \"independent right of access\" to grand jury material would amount to \"legislative encroachment into the Executive's exclusive authority to enforce the law.\"\n\n\t\tRequests for Materials Not Constituting Grand Jury Matters\n\nAssuming that Rule 6(e) does apply to congressional requests, it is clear that Congress may nevertheless obtain materials that do not constitute \"matters occurring before the grand jury\" within the meaning of the Rule.\nRule 6(e) protects from disclosure only those materials that \"tend to reveal some secret aspect of the grand jury's investigation.\" Thus, where a congressional committee has an interest in the subject matter of an ongoing grand jury investigation, the committee may be able to obtain most, if not all, of the same evidence the grand jury is considering from other sources.\nFor instance, although the court in Ven-Fuel viewed Congress as constitutionally entitled to disclosure of documents that had been presented to a grand jury, the court also determined that the documents were not necessarily cloaked in secrecy under Rule 6(e) in the first instance. And while not all courts may take such a narrow view of grand jury \"matters,\" the principle that \"[t]here is no per se rule against disclosure of any and all information which has reached the grand jury chambers\" is a well-recognized one.\n\n\t\tApplicability of Rule 6(e) Exceptions to Congress\n\nAlthough no exception to grand jury secrecy explicitly encompasses disclosures to Congress, a few of the exceptions could apply to Congress in particular situations, which are discussed below in turn.\n\n\t\t\tDisclosures to Congress Without Judicial Authorization\n\n\t\t\t\tMembers of Congress as Government Personnel\n\nAs discussed, Rule 6(e) permits disclosure of grand jury matters, excluding grand jury deliberations and votes, to \"any government personnel\u2014including those of a state, state subdivision, Indian tribe, or foreign government\u2014that an attorney for the government considers necessary to assist in performing that attorney's duty to enforce federal criminal law.\"\nThe term \"government personnel\" is not defined in the Rule, and the provision's legislative history reflects a concern with information-sharing between federal prosecutors and federal law enforcement officers or agency subject-matter experts who were needed to understand certain issues in complex cases. That said, during the hearings on the proposed amendments that added the exception, there was some testimony indicating that the breadth of the term \"government personnel\" could mean that \"even Members of Congress or the military\" would be included.\nIt is thus possible that a Member of Congress, or congressional staff, could be considered \"government personnel\" to whom disclosure could be made without a court order under this exception.\nAny such disclosure, however, would be exceedingly circumscribed in light of the exception's other requirements. First, disclosure would be at the discretion of the attorney for the government, and would be limited to a situation in which the attorney believed that the Member or staff was needed to assist the attorney in enforcing federal criminal law. Second, the Member or staff to whom disclosure was made could use the grand jury information only for the same purpose, that is, to assist the attorney in prosecuting the federal crimes to which the information related. Third, the Member or staff would be obligated to maintain the secrecy of the information and could further disclose it only in accordance with Rule 6(e).\nAs such, even assuming Members of Congress or congressional staff fall within the meaning of \"government personnel,\" the exception would not permit Congress to seek grand jury materials for broader independent investigative or legislative purposes.\n\n\t\t\t\tCongressional Access to Intelligence and National Security Information\n\nRule 6(e)(3)(D) permits an attorney for the government to disclose, among other things, any grand jury matter involving threats of attack or intelligence gathering by foreign powers or threats of sabotage or terrorism to \"any appropriate federal . . . government official\" (among others). Similar to the exception for \"government personnel,\" the Rule does not define the term \"appropriate . . . government official.\" Nonetheless, other statutory provisions suggest that the term \"government official\" could be construed to include a Member of Congress. As with the \"government personnel\" exception, however, disclosure under this exception would be limited: only grand jury information pertaining to the specified subject matter would be available, at the discretion of the attorney for the government, and the Member receiving the information could use it \"only as necessary in the conduct of [her] official duties subject to any limitations on the unauthorized disclosure of such information.\"\n\n\t\t\tDisclosures to Congress with Judicial Authorization\n\n\t\t\t\tCongressional Activities as \"Judicial Proceedings\"\n\nRule 6(e)'s \"judicial proceeding\" exception may also be relevant to Congress. As previously described, the Rule provides that a court may authorize disclosure of a grand jury matter \"preliminarily to or in connection with a judicial proceeding,\" with the term \"judicial proceeding\" generally contemplating some necessary resort to the judicial system. Two courts have determined that a congressional committee's request for grand jury materials pursuant to its ordinary investigative and oversight functions does not qualify under this exception, as the possibility that \"the actions it is investigating may wind up in the courts if wrongdoing is uncovered\" is \"too remote to trigger the Rule 6(e) exception.\" By contrast, where a congressional committee has sought grand jury materials in connection with the contemplated impeachment of a specific public official, several courts have recognized that court-ordered disclosure may be available pursuant to the \"judicial proceeding\" exception. Under this view, though \"impeachment proceedings before Congress . . . are not by a 'court,'\" a \"contemplated trial\" in the Senate is still \"very much a judicial proceeding.\"\nA committee seeking court-authorized disclosure on the basis of this exception must establish a \"particularized need\" for the materials at issue, which requires a showing that the need outweighs the public interest in secrecy. In the context of impeachment, courts have concluded that a congressional committee's need is sufficient to warrant disclosure, at least where the grand jury's work has concluded. Nevertheless, given that mere \"relevance\" or \"efficiency\" is generally insufficient to establish a particularized need for grand jury materials, the context of the request and the materials at issue could influence whether a committee can show such a need.\n\n\t\t\t\t\"Inherent Authority\" to Release Grand Jury Materials to Congress\n\nAs discussed, some federal courts have recognized that courts have \"inherent authority\" to order the release of grand jury information in \"special\" or \"exceptional\" circumstances, regardless of whether an explicit Rule 6(e) exception would otherwise apply.\nOne lower court has relied on this inherent authority over grand jury matters, among other things, to authorize the release to the House Judiciary Committee of a report prepared by the grand jury investigating the alleged\u2014and potentially impeachable\u2014improprieties of President Nixon. The D.C. Circuit essentially affirmed that decision, expressing \"general agreement\" with the lower court decision.\nAnother court has also relied on its inherent authority to order the release of the records of a grand jury that had indicted a federal judge to an investigating committee of the judiciary, relying on the \"exceptional circumstance[]\" that the \"question under investigation\"\u2014whether a federal judge should be recommended for impeachment or otherwise disciplined\u2014was \"of great societal importance.\" Recognizing that the investigating committee still was required to show a sufficient need for the grand jury materials, the court concluded such a showing had been made (and was not outweighed by the interest in secrecy) because (1) the investigating committee was composed of federal judges who were acting pursuant to express statutory authority; (2) the grand jury investigation and trial of the judge had already concluded; and (3) only by \"examining all of the record\" could the committee \"determine the true state of the evidence for or against the charge.\"\nAssuming a court adopts the inherent authority view of Rule 6(e) based on the above decisions, it is possible that a court would be willing to authorize the disclosure of grand jury materials to a congressional committee pursuant to the court's inherent authority. Precedential support for disclosure is strongest in the context of an impeachment inquiry (assuming the court did not view such an inquiry as being \"preliminar[y] to . . . a judicial proceeding\"). It is less certain that an \"inherent authority\" disclosure order would be available to a congressional petitioner when not tied to a contemplated impeachment proceeding. In an appropriately \"exceptional\" situation, a court could be amenable to exercising its inherent authority to order the release of grand jury information in the face of a pressing congressional request. The outcome would depend in large part on whether Congress could establish a sufficiently weighty need for the materials, which would implicate a variety of circumstantial factors.\n\n\t\tLimitations on Further Disclosure by Congress\n\nOnce grand jury materials find their way into the possession of a Member or committee of Congress, the question arises as to what limits exist on further dissemination of those materials. As previously discussed, Federal Rule of Criminal Procedure 6(e) imposes an obligation of secrecy only on specified persons, of which Congress (or, more generally, a recipient of grand jury information pursuant to the \"judicial proceeding\" or \"inherent authority\" exceptions) is not one.\nThat said, Rule 6(e) does explicitly make court-authorized disclosures \"subject to any . . . conditions that [the court] directs.\" It is thus conceivable that in ordering the release of grand jury information, a court could impose a requirement that the information not be further distributed. However, such a requirement would be in tension with the Constitution's Speech or Debate Clause in the case of Congress, at least where further dissemination occurs in the course of legitimate legislative activity, as the Clause prevents a court from blocking disclosure of information in Congress's possession in such a circumstance. In any event, courts will \"presume that the committees of Congress will exercise their powers responsibly and with due regard for the rights of affected parties,\" though a court may consider the extent to which Congress has taken specific precautions to protect against further dissemination of grand jury materials in deciding whether disclosure is appropriate.\n\n\t\tLegal Considerations for Congress\n\nPast Congresses, faced with potential limitations on the ability to obtain grand jury materials, have considered legislation that would amend Federal Rule of Criminal Procedure 6(e) to, among other things, permit a court to authorize disclosure of grand jury matters \"upon a showing of substantial need\" to \"any committee of Congress . . . for use in relation to any matter within the jurisdiction of such . . . congressional committee.\"\nA bill to this effect was introduced during the 99th Congress, prompting the Department of Justice's Office of Legal Counsel to issue a memorandum opinion \"strongly oppos[ing] any provision that would permit Congress independently to petition the courts for Rule 6(e) material.\" In the Office's view, such a provision would \"codify legislative encroachment into the Executive's exclusive authority to enforce the law.\" In other words, the Office took the position that creating a mechanism for Congress to obtain grand jury materials from the court, without any opportunity for interposition by the executive branch, would be inconsistent with the Constitution's separation of powers and would invite \"legislative pressures\" that would interfere with prosecutorial discretion and due process of law.\nThe Senate Judiciary Committee held a hearing on the legislation and a similar bill as to their impacts on Rule 6(e) and grand jury disclosure practices, during which the bill's sponsor, Senator Charles Grassley, expressed concern that Rule 6(e) had been \"utilized by the Justice Department as a shield against legitimate congressional inquiry.\" The Senator pointed out that the bill did not provide \"automatic congressional access to grand jury information,\" but rather allowed \"congressional committees[,] in performance of their constitutional duty to oversee the executive agencies, an opportunity to demonstrate to the court a 'substantial need' for access[.]\"\nAn Associate Deputy Attorney General reiterated in testimony the Department of Justice's position that the provision for congressional access \"would raise substantial constitutional concerns in terms of separation of powers as to where the enforcement authority lies; due process issues in terms of fairness and the application of decisionmaking with respect to criminal prosecutions; as well as the issue of opening the door for raising concerns about potential political influence or persuasion upon criminal prosecutions.\" He did point out, however, that the department had \"accommodate[d] requests from particular congressional committees for investigative materials on an ad hoc basis by appropriate application to the courts, and subject to necessary protective conditions,\" which it would continue to do.\nIn separate testimony, representatives of the American Bar Association and the National Association of Criminal Defense Lawyers argued that the provision under consideration could violate the separation-of-powers doctrine and undermine the \"fundamental tradition of grand jury secrecy\" by \"subvert[ing] the purpose of the grand jury\" to legislative ends.\nAn attorney with expertise on the subject of congressional access to information also testified at the hearing and expressed the view that a bill permitting a court to provide grand jury materials to a congressional committee \"with legitimate oversight functions would not violate separation-of-powers principles.\" However, he believed that Congress should have access to grand jury materials only \"in very limited circumstances\" and suggested that an amendment to Rule 6(e) \"should instruct a Federal court to weigh congressional needs against grand jury secrecy requirements in determining whether to grant access.\" In the attorney's view, this weighing would include consideration of whether the committee could acquire sufficient information from non-grand-jury sources, whether the grand jury proceedings for which information was sought had terminated or were ongoing, and whether the committee had \"in place special provisions to protect the confidentiality of grand jury material.\" The attorney did not view the provision under consideration, as written, to be adequate in light of the considerations he identified.\nUltimately, the bill was reported out of committee with the changes to Rule 6(e), including the congressional-access provision, excised, and it does not appear that the legislation was further pursued. Consequently, ambiguity remains regarding the relationship between grand jury secrecy and congressional access to grand jury materials. As the debate in the 99th Congress reflects, any change to the Rule could raise potentially difficult constitutional, interpretive, and policy questions. In any event, should Congress desire to create further exceptions to the secrecy framework beyond Rule 6(e), the Supreme Court has instructed that it must \"affirmatively express its intent to do so.\"","output":"The Fifth Amendment to the U.S. Constitution states that \"[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury.\" This provision requires that a federal prosecutor, in order to charge a suspect with a serious federal crime, secure the assent of an independent investigative and deliberative body comprising citizens drawn from the jurisdiction in which the crime would be tried. Federal grand juries serve two primary functions: (1) they aid federal prosecutors in investigating possible crimes by issuing subpoenas for documents, physical evidence, and witness testimony; and (2) they determine whether there is sufficient evidence to charge a criminal suspect with the crime or crimes under investigation.\nTraditionally, the grand jury has conducted its work in secret. Secrecy prevents those under scrutiny from fleeing or importuning the grand jurors, encourages full disclosure by witnesses, and protects the innocent from unwarranted prosecution, among other things. The long-established rule of grand jury secrecy is enshrined in Federal Rule of Criminal Procedure 6(e), which provides that government attorneys and the jurors themselves, among others, \"must not disclose a matter occurring before the grand jury.\" Accordingly, as a general matter, persons and entities external to the grand jury process are precluded from obtaining transcripts of grand jury testimony or other documents or information that would reveal what took place in the proceedings, even if the grand jury has concluded its work and even if the information is sought pursuant to otherwise-valid legal processes.\nAt times, the rule of grand jury secrecy has come into tension with Congress's power of inquiry when an arm of the legislative branch has sought protected materials pursuant to its oversight function. For instance, some courts have determined that the information barrier established in Rule 6(e) extends to congressional inquiries, observing that the Rule contains no reservations for congressional access to grand jury materials that would otherwise remain secret. Nevertheless, the rule of grand jury secrecy is subject to a number of exceptions, both codified and judicially crafted, that permit grand jury information to be disclosed in certain circumstances (usually only with prior judicial authorization). Perhaps the most significant of these for congressional purposes are (1) the exception that allows a court to authorize disclosure of grand jury matters \"preliminarily to or in connection with a judicial proceeding,\" and (2) the exception, recognized by a few courts, that allows a court to authorize disclosure of grand jury matters in special or exceptional circumstances. In turn, some courts have determined that one or both of these exceptions applies to congressional requests for grand jury materials in the context of impeachment proceedings, though there is authority to the contrary.\nAdditionally, because Rule 6(e) covers only \"matters occurring before the grand jury,\" courts have recognized that documents and information are not independently insulated from disclosure merely because they happen to have been presented to, or considered by, a grand jury. As such, even if Rule 6(e) generally limits congressional access to grand jury information, Congress has a number of tools at its disposal to seek materials connected to a grand jury investigation.\nPrior Congresses have considered legislation that would have expressly permitted a court to authorize disclosure of grand jury matters to congressional committees on a showing of substantial need. However, in response to such proposals, the executive branch has voiced concerns that the legislation would raise due-process and separation-of-powers issues and potentially undermine the proper functioning of federal grand juries. These concerns may have resulted in Congress declining to alter Rule 6(e). As a result, to the extent Rule 6(e) constrains Congress's ability to conduct oversight, legislation seeking to amend the rules governing grand jury secrecy in a way that would give Congress independent access to grand jury materials may raise additional legal and pragmatic issues for the legislative branch to consider."}
{"id":"gao_GAO-18-187T","pid":"gao_GAO-18-187T_0","input":"\tFirstNet\u2019s Progress Establishing and Financing the Network and Consulting Stakeholders\n\nIn our June 2017 report, we found that FirstNet has conducted key efforts  to establish the network, namely releasing the request for proposal for the  network in January 2016 and awarding the network contract to AT&T in  March 2017. As the contractor, AT&T will be responsible for the overall  design, development, production, operation, and evolution of the network,  as well as the marketing, product management, sales, distribution, and  customer care. Further, we found that FirstNet has established a  framework to meet the financial requirements established in the 2012 Act,  as depicted in figure 1. This framework focuses on leveraging FirstNet\u2019s  spectrum through the use of payments and fees with the aim of ensuring  that the network is financially sustainable over the life of the contract and  that FirstNet sustains self-funding operations.\nBy establishing a single, dedicated network for public safety use,  FirstNet\u2019s network is expected to foster greater interoperability and meet  public safety officials\u2019 reliability and other needs. However, the actual use  (or \u201cadoption\u201d) of the network by public safety users will be voluntary.  Thus, even with the establishment of this framework, substantial  unknowns remain regarding how many public safety users will adopt the  network, the extent to which AT&T will be successful in monetizing the  spectrum to retain revenue from commercial users, and the extent to  which this revenue will be sufficient or appropriate in relation to the capital  needed to build, operate, and maintain the network. Therefore, we noted  that, at the time of our report, we could not assess the viability of this  framework and whether FirstNet\u2019s structures for overseeing the  contractor\u2019s use of the spectrum for commercial users will be appropriate.\nWe also found that FirstNet has made progress consulting with state and  local, federal, and tribal stakeholders through a variety of mechanisms.  State officials we contacted were generally satisfied with FirstNet\u2019s efforts  to engage them. However, tribal stakeholders we contacted expressed  concern with FirstNet\u2019s efforts to consult with tribes per the 2012 Act\u2019s  requirements. In particular, four of the five tribal organizations we  contacted said that FirstNet has not fully engaged in effective  communication or has relied on state points of contact too much as  opposed to engaging directly with tribes; the other tribal organization was  not aware of FirstNet or its mission at all. Further, tribes noted that  individuals with first-hand knowledge of tribes\u2019 experiences are not able to  represent tribal views directly among FirstNet\u2019s key decision makers.  FirstNet has stated that, indeed, the 2012 Act requires that it consult with  tribes through state points of contact. Nevertheless, several federal  agencies have identified seeking a full understanding of tribal concerns\u2014 and reaching consensus where possible\u2014as a key principle of effective  tribal communication, noting that agencies should adapt to changing  circumstances, contemplate creative problem solving, identify options for  addressing concerns, and exhaust alternatives to achieve mutually  agreeable solutions.\nWe concluded that, by fully exploring and proposing actions to address  tribal stakeholders\u2019 concerns, FirstNet could help improve its relations  with tribes and better meet stakeholders\u2019 needs. As such, we  recommended in our report that FirstNet fully explore tribal concerns and  propose actions, as needed, to address those concerns. FirstNet agreed  with this recommendation and, in September 2017, described to us the  actions it has taken to implement it. For example, according to FirstNet, in  September 2017 it began a process to formally explore the tribal outreach  concerns raised in our report and expects to propose improvements by  the end of this year. FirstNet has also said that it adopted an  organization-wide tribal consultation policy which it expects to take effect  towards the end of this year. If implemented as planned, these actions  should address the intent of the recommendation.\n\n\tFirstNet\u2019s Network Reliability, Security, and Interoperability Challenges and Efforts to Address Them\n\nIn our report, we found that\u2014according to stakeholders we contacted\u2014 FirstNet faces various challenges to ensure the network\u2019s reliability,  security, and interoperability. For example, stakeholders raised concerns  related to: providing network coverage to rural areas, in buildings, or ensuring the network\u2019s overall resiliency and cybersecurity; and managing frameworks for user identity, credentialing of users, access  management, and prioritization of users on the network.\nHowever, we also found that both FirstNet and the PSCR have begun  research and other efforts to help ensure the reliability, security, and  interoperability of the network and address the challenges raised by  stakeholders. For example, in November 2016, FirstNet opened an  Innovation and Test Lab at its technical headquarters in Boulder,  Colorado. According to FirstNet documentation, FirstNet plans to use\u2014 and allow AT&T to use\u2014the lab to test public safety devices and  applications before deploying them on the network. Additionally, the  PSCR has conducted research on behalf of FirstNet and, using $300  million in funds provided to NIST by the 2012 Act, is also planning for and  implementing other research activities to support FirstNet. For instance, in  January 2016, PSCR launched its Public Safety Innovation Accelerator  Program to support these research activities, and in December 2016,  NIST issued a funding announcement to fund research in several areas.\nAt the time of our report, we found that PSCR\u2019s research process  generally aligned with key phases of sound research programs identified  by leading national organizations, including the American Evaluation  Association and the National Academy of Sciences. For example,  PSCR has established a structured process for developing research  priorities that includes both internal and external stakeholders, and has  identified criteria it uses to help it select the research areas to fund and  procedures to help it guide and monitor its research. Similarly, FirstNet  has determined its research priorities to date based on its network- planning needs and in consultation with internal and external  stakeholders, and worked with the PSCR to define criteria to help it select  research areas.\nFurther, we found that the majority of stakeholders we contacted were  satisfied with the planning efforts to ensure the reliability, security, and  interoperability of the network. However, many stakeholders also said that  there is much remaining uncertainty about how this will be implemented in  practice. Additionally, one public safety official we contacted told us that  FirstNet and its contractor will have to balance the costs associated with  implementing features that make the network reliable and secure with the  need to establish compelling and competitively priced service packages  and fees that will encourage user adoption of the network. Indeed,  numerous stakeholders we contacted cited the cost of subscribing to the  network as a key factor affecting user adoption, noting that the pricing  must be comparable to what they pay for commercial service now, that  budgets are constrained in the public safety community, or that local  governments do not want costs to increase. Further, commercial carriers  could choose to compete with FirstNet. FirstNet has stated that it expects  AT&T to provide services at a competitive price and deliver affordable,  high-quality services that will encourage public safety users to adopt the  network. Ultimately\u2014because the network must be self-funding and  FirstNet has stated that revenue from network users will be critical to this  funding\u2014the success of the network depends on whether FirstNet and  AT&T generate enough revenue to operate it over the long term and  whether public safety users adopt it, no matter how reliable and secure it  is.\n\n\tFirstNet\u2019s Contract Oversight Mechanisms\n\nFirstNet must manage and oversee the implementation of the network  contract to build, operate, and maintain the network. Federal internal- control standards also state that an entity\u2019s management retains  responsibility for the performance of processes assigned to service  organizations (such as contractors) and that management should hold  these organizations accountable for their performance.\nIn our report, we found that FirstNet has taken a number of steps to  establish contract oversight mechanisms, but has not fully assessed the  staffing needs of its oversight workforce. FirstNet\u2019s oversight mechanisms  include developing policies and procedures to guide contract  administration and establishing offices to oversee its network contractor.  In particular, FirstNet established the Network Program Office to oversee  the contractor\u2019s performance and facilitate quality assurance of contract  deliverables, among other things. FirstNet is also receiving assistance  from the Department of the Interior, which has experience with contract  administration, although FirstNet plans to assume full responsibility for  contract administration in the future. We also found that FirstNet\u2019s efforts  to develop contract oversight mechanisms aligned with several key  actions that we identified as contributing to effective contract oversight.  However, although FirstNet\u2019s Network Program Office will perform  essential contract administration functions, FirstNet had not conducted  long-term projections of staffing needs for the office as of April 2017.  Planning for and assigning adequate resources, including people, and  performing an assessment of the resources needed to oversee projects is  one of the key actions we identified for planning and executing effective  contract oversight.\nWe concluded that FirstNet lacks reasonable assurance that it will have  sufficient resources to handle increases in its responsibilities over time  and that, by performing a long-term staffing assessment for the Network  Program Office, FirstNet would be in a better position to fully understand  its staffing needs and respond to staffing changes and risks as it assumes  full responsibility of contract administration in the future. As such, we  recommended in our report that FirstNet assess the long-term staffing  needs in the Network Program Office prior to assuming full responsibility  for administering the network contract. FirstNet agreed with this  recommendation and, in September 2017, described the actions it has  taken to implement it. According to FirstNet, in August 2017 the Network  Program Office adopted a strategic workforce plan for fiscal years 2018 to  2022, which it expects to update annually. According to FirstNet, this plan  provides a comprehensive view of current and future human capital  needs required to support the implementation of the network and  identifies strategies the office will employ to fill gaps between current and  future needs, among other things. If implemented as planned, this action  should address the intent of the recommendation.\nChairman Donovan, Ranking Member Payne, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact Mark L. Goldstein, Director, Physical Infrastructure Issues at  (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Sally Moino and Nalylee Padilla. Other staff who made contributions  to the report cited in this testimony are identified in the source product.\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":"Why GAO Did This Study\n\nFirstNet is charged with establishing a nationwide public-safety broadband network that is reliable, secure, and interoperable. To inform this work, FirstNet is consulting with a variety of stakeholders. In March 2017, FirstNet awarded a 25-year contract to AT&T to build, operate, and maintain the network. FirstNet's oversight of AT&T's performance is important given the scope of the network and the duration of the contract.\nThis testimony provides information on (1) FirstNet's efforts to establish the network; (2) stakeholder views on network reliability, security, and interoperability challenges FirstNet faces and its efforts to address them; and (3) FirstNet's plans to oversee its network contractor. This statement is based on GAO's June 2017 report ( GAO-17-569 ). For this report, GAO reviewed FirstNet documentation, key contract oversight practices identified in federal regulations and other sources, tribal communication practices identified by federal agencies, and assessed FirstNet's efforts and plans against these practices. GAO also interviewed FirstNet officials and a nongeneralizable selection of public safety, tribal, and other stakeholders selected to obtain a variety of viewpoints.\n\nWhat GAO Found\n\nIn June 2017, GAO reported that the First Responder Network Authority (FirstNet) had conducted key efforts to establish the network, namely releasing the request for proposal (RFP) for the network and awarding the network contract to AT&T. As the contractor, AT&T will be responsible for the overall design, development, production, operation, and evolution of the network. Additionally, FirstNet consulted with state and local, federal, and tribal stakeholders. State officials GAO contacted were generally satisfied with FirstNet's efforts to engage them. However, tribal stakeholders GAO contacted expressed concern that FirstNet has not fully engaged in effective communication with tribes. FirstNet engaged tribes through a variety of mechanisms, such as through state points of contact and a working group, but tribes noted that individuals with first-hand knowledge of tribes' experiences are unable to represent tribal views directly among FirstNet's key decision makers. Although FirstNet is required to consult with tribes through state points of contact, a key principle of effective tribal communication is to seek full understanding of tribal concerns and reach consensus where possible. By fully exploring and proposing actions to address tribal stakeholders' concerns, FirstNet could help improve its relations with tribes and better meet stakeholders' needs.\nAccording to stakeholders GAO contacted, FirstNet faces various challenges to ensure the network's reliability, security, and interoperability. For example, stakeholders raised concerns related to:\nproviding coverage to rural areas, in buildings, or underground;\nensuring the network's overall resiliency and cybersecurity; and\nmanaging frameworks for user identity, credentialing of users, access management, and prioritization of users on the network.\nFirstNet has taken action to address these challenges, such as by opening a test lab to test public safety devices and applications before deploying them on the network. The majority of stakeholders GAO contacted were satisfied with FirstNet's efforts but many noted that much uncertainty remains about how the network will be implemented.\nFirstNet established offices to oversee its network contractor, developed policies and procedures to guide contract administration\u2014including management and oversight\u2014and is receiving assistance from another federal agency with contract administration experience, although FirstNet plans to assume full responsibility in the future. For example, FirstNet established the Network Program Office to oversee the contractor's performance and facilitate quality assurance of contract deliverables, among other things. Although this office will perform essential contract-administration functions, FirstNet had not conducted long-term projections of staffing needs for the office as of April 2017. As a result, FirstNet lacks reasonable assurance that it will have sufficient resources to handle increases in its responsibilities over time. Planning for and assigning adequate resources, including people, and assessing resource needs is a key practice for planning and executing effective contract oversight. By performing a long-term staffing assessment for the Network Program Office, FirstNet would be in a better position to fully understand its staffing needs and respond to staffing changes and risks as it assumes full responsibility of contract administration in the future.\n\nWhat GAO Recommends\n\nIn June 2017, GAO recommended that FirstNet fully explore tribal stakeholders' concerns and assess its long-term staffing needs. FirstNet agreed with GAO's recommendations and described actions to address them."}
{"id":"gao_GAO-18-471","pid":"gao_GAO-18-471_0","input":"\tBackground\n\n\t\tIRS Budget\n\nIRS\u2019s budget declined by about $658 million (5.5 percent) between fiscal  years 2013 and 2018 (see fig. 1). Furthermore, full-time equivalents  funded with annual appropriations declined by 10,876 (12.7 percent)  between fiscal years 2013 and 2018. The President\u2019s fiscal year 2019  budget request was $11.135 billion. This amount is less than the fiscal  year 2000 level for IRS, after adjusting for inflation. IRS requested an  additional $397 million to cover implementation expenses for the Tax  Cuts and Jobs Act over the next 2 years and received $320 million for  implementation pending submission of a spend plan, which IRS provided  in June 2018. IRS officials said the majority of the money would be  directed toward technological updates.\n\n\t\tIRS Customer Service\n\nIRS uses multiple channels to provide customer service to taxpayers, as  follows:  Telephone service. Taxpayers can contact IRS assistors via telephone  to obtain information about their accounts throughout the year or to ask  basic tax law questions during the filing season. Taxpayers can also listen  to recorded tax information or use automated services to obtain  information on the status of refund processing as well as account  information such as balances due. During fiscal years 2013 through 2017,  IRS received an average of about 107 million calls from taxpayers each  year, according to IRS data.\nCorrespondence. Taxpayers may also use paper correspondence to  communicate with IRS, which includes responding to IRS requests for  information or data, providing additional information, or disputing a notice.  IRS assistors respond to taxpayer inquiries on a variety of tax law and  procedural questions and handle complex account adjustments, such as  amended returns and duplicate filings. IRS tries to respond to paper  correspondence within 45 days of receipt; otherwise, such  correspondence is considered overage. In fiscal year 2017, about 35  percent of the nearly 17.5 million pieces of correspondence IRS received  was overage, down from approximately 47 percent of 20.8 million pieces  of correspondence in fiscal year 2013. Minimizing overage  correspondence is important because delayed responses may prompt  taxpayers to write again, call, or visit IRS Taxpayer Assistance Centers  (TAC); each of which lead to additional costs. Additionally, IRS is required  to pay interest on refunds owed to taxpayers if it did not process  amended returns within 45 days.\nOnline services. IRS\u2019s website is a low-cost method for providing  taxpayers with basic interactive tools to check their refund status or  balance due, make payments, and apply for plans to pay taxes due in  scheduled payments (installment agreements). Taxpayers can use the  website to print forms, publications, and instructions and can use IRS\u2019s  interactive tools to get answers to tax law questions without calling or  writing to IRS. IRS data show that total visits to IRS\u2019s website in fiscal  year 2017 were about 500 million.\nIn-person services. Face-to-face assistance remains an important part  of IRS\u2019s service efforts, particularly for low-income taxpayers. Taxpayers  can receive face-to-face assistance at one of about 370 IRS TACs or at  thousands of sites staffed by volunteer partners during the filing season.  At TACs, IRS representatives provide services including answering basic  tax law questions, reviewing and adjusting taxpayer accounts, taking  payments, authenticating ITIN applicants, and assisting IDT victims.  Based on IRS data, nearly 3.3 million taxpayers visited an IRS TAC in  fiscal year 2017. At sites staffed by volunteers, taxpayers can receive free  return preparation assistance as well as financial literacy information. In  fiscal year 2017, nearly 3.6 million taxpayers had their returns prepared at  volunteer sites, according to IRS data.\n\n\t\tSystemic Verification\n\nSystemic verification is one element of IRS\u2019s Return Review Program, its  primary system to detect fraud and noncompliance. The Return Review  Program is a platform that runs individual tax returns through a set of  rules and models to detect potential taxpayer fraud and other  noncompliance. During systemic verification, IRS checks information that  taxpayers report on their returns against W-2 data in order to verify wage  and withholding information and identify discrepancies.\nWe previously reported that the wage information that employers report  on the W-2 had not been available to IRS until after it issued most  refunds. In an effort to address issues such as refund fraud and  improper EITC payments, Congress enacted the Protecting Americans  from Tax Hikes Act of 2015, which included provisions that took effect in  2017. The act required employers to submit W-2s to the Social Security  Administration (SSA) by January 31, which is about 1 to 2 months earlier  than in prior years. SSA then provides W-2 data to IRS for verifying  employee wage and withholding data on tax returns. The act also  required IRS to hold refunds for all taxpayers claiming the EITC or ACTC  until February 15. Now that IRS has earlier access to W-2 information,  IRS is using it to conduct additional verification checks before issuing  billions of dollars in potentially fraudulent refunds.\nIRS issues individual taxpayer identification numbers (ITIN) to certain  non-U.S. citizens who have federal tax reporting or filing requirements  and do not qualify for SSNs. The Protecting Americans from Tax Hikes  Act required taxpayers that filed a U.S. federal tax return containing an  ITIN to renew the number if the ITIN was not used on at least one tax  return in the past 3 years or it was issued prior to 2013 and contained  certain middle digits. IRS reported that it deactivated approximately 12.4 million ITINs in 2017 and notified affected taxpayers via mail and public  notices. If affected taxpayers did not renew their ITINs either before filing  or in conjunction with filing, their refunds may have been delayed.\n\n\t\tTax Cuts and Jobs Act\n\nThe Tax Cuts and Jobs Act made a number of significant changes to the  tax law affecting both individuals and corporations. For example, for  individual taxpayers, for tax years 2018 through 2025, tax rates were  lowered for nearly all income levels, some deductions from taxable  income were changed (personal exemptions were eliminated while the  standard deduction was increased), and certain credits, such as the  child tax credit, were expanded. For individuals with business income  reported on their tax return (pass-through entities), effective tax rates can  be reduced with a 20 percent deduction of qualified business income.  For corporate filers, the tax rate was changed from a range between 15  and 35 percent to a flat rate of 21 percent, and the corporate alternative  minimum tax was eliminated. IRS must take action to make the  necessary changes to process tax returns in 2019 and to help taxpayers  understand the new law and its effect on their tax obligations. For  example, IRS has planned and begun conducting outreach to employees,  employers, and industry associations encouraging employees to reassess  their withholdings in light of changes the law made to deductions and  credits that may affect tax liability and withholding for a large number of  taxpayers.\n\n\tIRS Improved Customer Service, Managed Multiple Challenges Processing Returns, and Identified More Potential Fraud and Noncompliance Compared to Last Year\n\n\t\tCustomer Service Generally Improved During the 2018 Filing Season\n\nIRS\u2019s telephone, online, and in-person services generally improved during  the 2018 filing season compared to prior years. However, timeliness in  responding to written correspondence declined from last year. Our prior  recommendations could help IRS better manage its correspondence  performance and develop a comprehensive customer service strategy to  improve its efforts.\n\n\t\t\tTelephone Service\n\nDuring the 2018 filing season, IRS slightly improved its telephone level of  service\u2014the percentage of callers seeking and receiving live  assistance\u2014and reduced wait times (see fig. 2). From January 1 through  April 21, 2018, IRS estimated that it answered 80 percent of calls seeking live assistance, which is a slight  increase from about 79 percent for the same period last year, and  reduced the average caller\u2019s wait time to speak to an assistor from 6.5  to 5.1 minutes.\nThis marks the third year of measured improvements since IRS reached a  low of 37.5 percent level of service in 2015 with a 23.1-minute average  wait time. IRS officials attributed the improvements to decreased telephone call volume and sufficient staff levels to meet the demand for  service. IRS expected its level of service for the entire fiscal year 2018 to  be 75 percent, which is similar to fiscal year 2017 when IRS achieved a  77.1 percent level of service.\nTotal call volume to IRS taxpayer service lines has declined by about 43  percent since 2013 (see fig. 3). IRS officials attributed the decline in call  volume to several factors, including  targeted media campaigns to ensure taxpayers had the information  they needed to prepare and file their tax returns prior to the filing  season,  fewer attempts by callers to re-dial multiple times after receiving busy  signals or disconnects or abandoning the call after long wait times,  and moving calls inquiring about balances due and installment payments  to the compliance division, which, according to IRS data, accounted  for approximately 2 million calls in the 2018 filing season.\nThe percentage of calls that IRS assistors have answered since 2013 has  generally increased, while calls answered by automated services has  generally decreased. IRS officials attributed the decrease in automated  calls answered to discontinuation of the e-file personal identification  number (PIN) automated retrieval service in June 2016, along with a  decrease in callers using the Where\u2019s My Refund automated service.\nIn December 2014, we recommended that IRS systematically and  periodically compare its telephone service to the best in business to  identify gaps between actual and desired telephone performance. In  response, IRS benchmarked its telephone service, measures, and goals  to comparable agencies and companies in an internal 2016 study. IRS  projected that achieving an 83 percent level of service would optimize its  balance between wait-time, disconnects, and assistor availability.  However, officials told us in June 2018 that they are adjusting this  projection based on new services and procedures introduced since the  2016 study.\nThe study also recommended exploring using new technology, including  email, online chat, and telephone call-back features as well as  establishing regularly scheduled follow-up benchmarking. In March 2018,  IRS officials told us they are implementing some of the recommendations  from the study, including requesting funding to implement a customer call- back feature. IRS is also developing new methods of monitoring and  reporting service performance across telephone, online, and in-person  channels to identify changes in taxpayer behavior and better adapt to  their needs.\nIRS telephone performance data for 2018 were unavailable from  November 2017 until March 2018. IRS officials explained that IRS was  upgrading the Enterprise Telephone Data System\u2014IRS\u2019s official source  for all data related to its toll-free telephone performance measures\u2014to a  more current version. Before IRS completed the upgrade, the system  crashed. Due to the system outage, IRS was unable to publish its reports  on telephone performance. IRS officials told us that while the system  remained offline, they could still monitor daily call demand and staff  resources, which they used to develop an estimated level of service to  monitor telephone performance. Once the system was operational, IRS  recovered and validated the data, confirming that the data they used  while the system was offline were sufficiently accurate.\nIn addition, IRS replaced the approximately 15-year-old telephone  equipment it uses for answering taxpayer calls because of ongoing  failures that contributed to poor service. For example, at times the  assistor could hear the customer speaking, but the customer could not  hear the assistor. The new equipment will enable future service  improvements such as a call-back feature so customers will not have to  wait on the line for a response. IRS completed the upgrades as planned  in June 2018.\n\n\t\t\tCorrespondence\n\nBecause the same staff answer telephone calls and respond to  correspondence, IRS has continued to struggle to balance competing  demands for maintaining quality telephone level of service with timely  responses to written correspondence. Between October 1, 2017 and April  21, 2018, IRS received over 9 million pieces of correspondence. IRS staff  focus on answering the telephones during the filing season, so they have  less time to respond to correspondence, resulting in inventory and  processing time increases. As it had in prior years, IRS directed staff to  focus on correspondence early in December 2017 and January 2018 to  reduce the inventory before the filing season. However, through April 21,  2018, the overage rate of correspondence\u2014the percentage of cases  generally not processed within 45 days of receipt by IRS\u2014was 36.8  percent compared to 26.4 percent at the same time last year.\nTo improve the management of taxpayer services, in 2015 we  recommended that the Secretary of the Treasury update the Department  of the Treasury\u2019s (Treasury) performance plan to include overage rates  for handling taxpayer correspondence as a part of Treasury\u2019s  performance goals. To implement this recommendation, we suggested  that Treasury include this performance measure as part of a  comprehensive customer service strategy. Treasury neither agreed nor  disagreed with our recommendation, and as of June 2018, it had not  included correspondence overage rates as a performance goal in its  performance plan. We continue to believe that this recommendation is  valid.\nIRS established its new online account service in November 2016 and  taxpayer use of this service has increased since then. The online account  service was unavailable to new users between mid-October and early  December 2017 because of a security breach at Equifax, the service IRS  used to verify users\u2019 identities. In September 2017, Equifax announced  that criminals had exploited a vulnerability in its systems and obtained  personally identifiable information on 145.5 million individuals, including  names, SSNs, birth dates, addresses, and in some cases, driver\u2019s license  information. IRS suspended its online account service, eventually re- activating it when it replaced Equifax\u2019s identity verification service with  another provider. IRS\u2019s online account allows taxpayers to view their IRS  account balance (including the amount they owe for tax, penalties, and  interest), take advantage of various online payment options, and access  the Get Transcript application where taxpayers can obtain copies of their  prior tax returns.\nDespite these challenges, use of IRS\u2019s online account has increased  since its launch. Between January 1, 2018 and April 30, 2018, total  unique users of the online account reached over 1 million compared to  327,000 for the same period in 2017 when the service was newly  launched. In addition, taxpayers increasingly used the online account to  access payment options, including payment agreements. For example,  taxpayers made four times as many payments using the online account to  access Direct Pay, IRS\u2019s online payment option, between January 1 and  April 30, 2018 compared to the same period last year.\nIRS experienced a separate online service disruption prior to the 2018  filing season. Tax professionals could not access e-services between  September and October 2017 because of an IRS delay in a scheduled  upgrade to the system and improvement to the security of the application.  This service is used by tax professionals to conduct transactions,  including applying for authorization as an e-file provider. As a result of this  delay, tax professionals were unable to use this key service during a  critical planning period prior to the filing season, shortening the amount of  time available to complete the necessary actions before filing season.  Despite this delay, IRS officials told us that more than 60,000 tax  professionals were able to complete their transactions in preparation for  the 2018 filing season.\nFinally, IRS launched a redesigned website in August 2017 to make it  easier to use and find information. Website use during the 2018 filing  season showed the greatest year-to-year increase over the past 5 years  (see fig. 4). From January 1 through April 21, 2018, visits to irs.gov  increased by about 24.2 percent compared to the same period last year  (from 311.4 million to 386.9 million). During that same period, total page  views increased by about 50.4 percent (from 1.27 billion to 1.91 billion).\nIn-person visits to IRS\u2019s Taxpayer Assistance Centers (TAC) have  declined since IRS began requiring appointments for in-person service in  2016. During the 2018 filing season (January 1 through April 21, 2018),  IRS served 1 million taxpayers at the TAC locations compared to about  1.3 million during the same period in 2017. However, IRS officials  reported that, between January 1 and April 30, 2018, over half of the  approximately 1.6 million taxpayers requesting an appointment had their  questions resolved on the telephone and did not need an appointment.\nIRS policy mandates that, under special circumstances, taxpayers who  arrive at a TAC without an appointment receive service if staff members  are available, even when the assistors do not have appointment  openings. Officials acknowledged that not all taxpayers receive service if  they walk in because there are not always assistors available. As of April  30, 2018, IRS served nearly 63,000 taxpayers during the 2018 filing  season under an exception to the required appointment process. IRS  officials noted that the lines at TACs have shortened in recent years,  which they attribute to the appointment system and services available  through the telephone. Nationwide, 5.8 percent of taxpayers waited over  30 minutes for assistance between January 1 and April 21, 2018,  compared to 5.6 percent during the same period in 2017, according to  IRS data. Service improved compared to the same period for 2013 to  2016 when between 27 and 33 percent of taxpayers waited over 30  minutes for assistance.\nTo improve the appointment process, in 2018 IRS developed the Field  Assistance Scheduling Tool, which helps IRS manage appointments at  the TACs and monitor availability and demand. IRS expects to add to this  tool by developing reporting capabilities for managing staff availability and  appointments, including the capability to measure the time lapse between  when a taxpayer calls to schedule an appointment and the actual  appointment. According to IRS officials, by using the tool\u2019s current  capabilities, they identified the need to recruit and train nearly 100  employees from other areas of IRS to support increased demand at 27  TAC locations near the end of the filing season.\nIRS also provided alternative options for in-person taxpayer services. In  January 2017, IRS opened four co-locations with the Social Security  Administration (SSA). During the 2018 filing season, 708 taxpayers  received in-person service at these co-locations as of April 21, 2018. In  May 2018, IRS officials said they were working to open an additional co- location with SSA. In addition, IRS added six virtual assistants\u2014kiosks  that provide video calling to an IRS assistor\u2014to the 31 existing terminals  across the United States.\n\n\t\t\tCustomer Service Strategy\n\nWe have made several recommendations for IRS to improve its customer  service. In December 2012, we recommended IRS develop a strategy to  improve telephone and correspondence service. While IRS has taken  steps toward implementing related recommendations, including the  telephone benchmarking study mentioned earlier, IRS has not completed  the actions we recommended, including (1) outlining a comprehensive  strategy that defines appropriate levels of correspondence service and  wait time and (2) listing specific steps to manage service based on an  assessment of time frames, demand, capabilities, and resources.  However, IRS officials told us in June 2018 that they had begun drafting a  customer service strategy that they expected to complete by September  2018. We will assess this strategy once it is issued.\nAdditionally, in December 2011 and April 2013 we made  recommendations that call for IRS to develop a long-term strategy for  providing and improving web-based services to taxpayers. In June  2018, officials in the Office of Online Services stated that they do not  have a specific strategy that outlines their long-term vision for increasing  online services and web offerings. Rather, they rely on IRS\u2019s fiscal year  2018\u20132022 Strategic Plan to provide that vision. The fiscal year 2018\u2013 2022 Strategic Plan includes objectives related to expanding digital  options for taxpayers and professionals to interact efficiently with IRS,  and developing additional self-assistance and correction tools for  enhanced online account capabilities. However, this plan is at a high level  and does not include business cases for new online services that  describe the potential benefits and costs of the projects, timelines and a  prioritization of proposed projects. In July 2018, IRS officials provided  additional documentation that we are reviewing to assess the steps being  taken to develop a long-term strategy to improve web services for  taxpayers.\n\n\t\tIRS Managed Multiple Processing Challenges During the 2018 Filing Season Including Changes in Tax Law and Issues with Hiring and Redistributing Work Responsibilities\n\nIRS started the filing season on January 29, 2018, approximately 1 week  later than it has in recent years to ensure the security and readiness of  processing systems and to assess the potential impact of recently passed  tax laws on 2017 tax returns. IRS also extended the filing deadline by 1  day after a system outage occurred on tax day, April 17, 2018, that  prevented IRS from processing electronically filed returns. Taxpayers  were able to prepare and submit returns electronically during the day; but  a flaw in the mainframe prevented data from being accepted and released  for processing. IRS officials said the problem was caused by a hardware  issue in a 1.5 year old mainframe subcomponent and was not related to  IRS applications or any of the agency\u2019s legacy computer systems. The  system failure affected a number of electronic applications, including  Direct Pay and the online account service, and delayed return processing  until the end of the day. IRS officials said that the agency recovered the  system without data loss and worked with software companies to  coordinate their transmission of returns that were held earlier in the day.  These officials said the agency was able to process all returns submitted  electronically by the end of the day.\nNeither the system issue nor the later start had a significant effect on  returns processing during the filing season. As of April 20, 2018, IRS had  processed 130.48 million returns, compared to 128.85 million by the  same time last year.\nIRS experienced several additional challenges during the 2018 filing  season, including multiple pieces of legislation affecting individual tax  returns that passed soon before the beginning of the filing season or after  it had begun, as well as issues hiring and redistributing work  responsibilities in some IRS processing facilities.\n\n\t\t\tChanges in Tax Law\n\nDisaster relief. On September 29, 2017, Congress passed a law which  provided tax relief related to retirement plan distributions and casualty  losses for people affected by Hurricanes Harvey, Irma and Maria. The  law allowed storm victims to deduct disaster losses on their 2017 returns  or on amended 2016 returns. On February 9, 2018, Congress extended  these benefits to certain taxpayers affected by wildfires in California.  The President also issued major disaster declarations for many areas  affected by the hurricanes and wildfires, allowing IRS to use its authority  to postpone certain tax-related deadlines under the Robert T. Stafford  Disaster Relief and Emergency Act. The laws also offered other forms  of tax-relief\u2014such as hardship distributions from employer-sponsored  retirement plans. To address issues resulting from disaster-related legal  changes, IRS  issued press releases and public notices informing taxpayers of tax- relief options; postponed various filing and payment deadlines for individuals and  businesses affected by disasters; ensured that sites offering in-person taxpayer assistance in Puerto  Rico, Florida, and Texas were open and developed special products  to support these sites in dealing with affected taxpayers; and adapted procedures to accommodate disaster-relief efforts.\nIRS officials also said they corresponded with taxpayers they thought  were eligible for new disaster relief benefits as a result of legal changes  put in place. The officials told us that as of May 26, 2018, the agency had  assisted 37,000 taxpayers seeking live telephone assistance and worked  or closed 6,196 amended returns and 8,847 correspondences related to  Hurricanes Harvey, Irma, and Maria.\nTax Cuts and Jobs Act. While many of the provisions included in the  Tax Cuts and Jobs Act will not affect filing until the 2019 filing season, a  few changes affected filing in 2018. For example, the threshold to claim  the medical expense deduction was temporarily lowered, allowing  individuals to claim deductions for medical expenses totaling more than  7.5 percent of their adjusted gross income for tax years 2016 and 2017.  Also, provisions similar to those described above were implemented for  certain qualified federally declared disasters that occurred in 2016. The  law passed shortly before the start of the filing season and IRS had to  recall, revise, and re-issue more than 100 products that had already been  published.\nIn addition, several provisions affecting business filers presented  processing challenges during the 2018 filing season. For example, IRS  made changes to its forms to address fiscal year filers whose earnings  will be taxed at different rates for 2017 and 2018 (referred to as blended  rate) and developed forms and instructions for filers whose returns  involve the foreign earnings of foreign subsidiaries of U.S. companies.  Officials told us they processed returns subject to the blended rate  provision manually and held returns affected by the foreign earnings  provision until they completed necessary programming changes for the  systems to process them in accordance with the new law. As of May 18,  2018, the agency was holding 2,265 affected individual and business  returns. IRS officials said they completed the programming required to  process all of these returns automatically by July 2, 2018. However,  depending on when IRS completes processing these returns, it may need  to pay interest on some refunds. IRS officials said they do not expect  many of the held returns affected by the foreign earnings provision to  claim refunds.\nExtension of expired tax provisions. On February 9, 2018, after some  taxpayers had already filed their 2017 taxes, Congress extended to 2017  a number of temporary tax provisions that expired at the end of 2016.  These provisions include deductions for qualified tuition and related  expenses and the ability to deduct premiums for mortgage insurance as  interest. Testifying before Congress, the Acting Commissioner of IRS  described the extensions as a major processing challenge and said this is  the only time the agency has been required to implement retroactive tax  extensions after the beginning of a filing season. To address the  extensions, IRS officials told us they  reprogrammed systems to accept taxpayer claims related to these  retroactively extended provisions;  recalled, revised, and re-released more than 50 already published  products; and held 5,624 individual returns while necessary programming changes  were made to ensure proper processing.\n\n\t\t\tIssues Hiring and Redistributing Work Responsibilities\n\nIRS faced challenges in two of its five paper processing centers related to  hiring and redistributing work responsibilities. The center in Ogden, UT  experienced issues related to changes in work assigned to the site while  the center in Austin, TX experienced ongoing hiring difficulties. Despite  these challenges, IRS officials reported that the agency was able to meet  all of its target dates for processing returns and issuing refunds.\nOgden. To realize cost savings from the decrease in paper filing as a  result of increased electronic filing, IRS began to consolidate its paper  processing centers in 2018. As part of this plan, IRS moved some  individual paper return processing to its facility in Ogden. This facility had  not processed individual returns since 2000 and IRS officials told us that  the lack of recent experience with this kind of work caused processing to  fall behind targets. For example, as of March 2, 2018, Ogden had missed  IRS targets for return processing time by between 14 and 15 days,  depending on the form type.\nOfficials told us the agency had reintroduced Ogden to the work  gradually, by assigning fewer returns to the site in the first year;  nevertheless, the site still experienced delays. For example, as of March  2, Ogden had processed 10.6 percent of the 202,000 returns expected,  while the processing centers in Fresno, CA and Kansas City, MO had  processed 98.5 percent (723,000 out of 734,000) and 98.2 percent  (545,000 out of 555,000) of their expected returns respectively on the  same date.\nIRS minimized the effects of these delays on overall processing by  transferring returns initially sent to Ogden to the Kansas City location,  which enabled IRS to meet its overall processing goals. Later in the filing  season, processing at Ogden had improved, but still had not reached  IRS\u2019s goal for the site. For example, as of May 11, 2018, Ogden was at  approximately 73 percent of schedule, having processed 716,000 out of  977,000 scheduled returns. IRS officials said that responding to changes  in work flows is a normal aspect of processing across all locations, but  noted that the agency continued to monitor the situation in Ogden and  learn from the experience to guide future consolidation efforts.\nAustin. This processing facility, slated for closure in 2024, also  experienced processing delays. As we reported in 2017, and as IRS  officials told us again this year, IRS was unable to hire enough personnel  to process paper tax returns at this site, which may be due to low  unemployment rates in the area. IRS officials told us Austin planned to  hire 567 employees by early March to transfer data from paper returns to  an electronic format, but had only been able to hire 142 people, or 25  percent of that target. IRS officials told us the position was perceived as  undesirable in a low-unemployment environment. The officials said they  had addressed the issue by (1) moving resources as needed within the  service center and (2) transferring returns to the Kansas City facility for  processing.\n\n\t\tIRS Identified More Potential Fraud and Noncompliance by Verifying Wage Information Than It Did at the Same Point in the 2017 Filing Season\n\nIRS identified more potential fraud and noncompliance through February  15, 2018, than it had by the same time last year. In its second year of  receiving earlier W-2 data from SSA to match against returns, IRS  identified a larger number of potentially fraudulent or noncompliant  returns claiming the EITC or ACTC prior to issuing refunds\u2014340,000  compared to 162,000 at the same point in 2017. IRS also reduced the  percentage of returns for which it was unable to verify wage information to  13 percent, compared to 58 percent in 2017. IRS officials told us this was,  in part, a result of receiving 224 million W-2s by February 15 compared to  214 million by the same time in 2017. Having more W-2 data available  earlier also allowed IRS to better target its selection of returns for review,  helping to reduce taxpayer burden and IRS workload. For example, IRS  had excluded 10,000 returns from review as of February 15, 2018,  compared to 3,000 during the same time in 2017.\nIn addition, IRS improved its ability to identify potentially false and  fraudulent returns for returns with EITC or ACTC\u2014including those for  which it did not have W-2 data at the time of identification\u2014by developing  two new filters that automated some aspects of the manual review  process used in 2017. IRS developed the new filters based on cases of  confirmed fraud identified through systemic verification in 2017 and  selected returns with characteristics that are more likely to be fraudulent  or noncompliant. The filters select returns for review among those  reporting information that does not match corresponding W-2 data and  that IRS could not verify because it did not have W-2 data at the time of  selection. Last year, IRS identified 12,000 cases of confirmed fraud from  the 162,000 cases it selected for review. IRS officials told us that they do  not have final data at this time, but that they anticipate they will confirm  more cases of fraud and noncompliance in 2018 as a result of these  filters.\nReturns with refunds not claiming EITC or ACTC benefits are also subject  to systemic verification as well as additional fraud filters. However, for  returns not claiming these benefits, IRS does not hold refunds when it is  unable to verify wages reported by the taxpayer unless the returns are  selected by other fraud filters for review. As we reported in January 2018,  IRS cannot verify information reported for more than half of returns  submitted early in the filing season prior to issuing refunds because it  receives W-2 information throughout the filing season. In 2017 and  2018, IRS received and processed the majority of W-2s by mid- to late- February. In addition, IRS verified most wage information on returns  submitted in mid-February as being accurate. IRS verified that accurate  wage information was reported on 77 percent of returns not claiming the  EITC or ACTC submitted between February 9 and 15, 2018, representing  $10.91 billion in refunds.\nHowever, IRS does not have data available early in the filing season that  would help it better identify which returns are potentially fraudulent or  noncompliant. As a result, IRS issues refunds for a large percentage of  returns without the EITC or ACTC that cannot be verified against W-2  data prior to February 15. For example, among 2017 returns without EITC  or ACTC, IRS was unable to verify\n91 percent of returns submitted before January 25, 2018\u2014 representing $4.27 billion in refunds; and\n60 percent of returns submitted prior to February 15\u2014representing  $29.27 billion in refunds.\nIRS has the authority to hold refunds for these returns (as it does for  returns that do claim the EITC or ACTC) until any date deemed  necessary to make inquiries, determinations, and assessments in  conjunction with those determinations. However, IRS officials told us that  IRS has not held those refunds because of the volume of existing cases,  challenges of processing large numbers of refunds on a single day, and  other costs to the agency, such as inquiries from taxpayers about their  refunds.\nIn January 2018, we recommended that IRS study the benefits and costs  of the refund hold and consider modifying it based on the study results.  For example, IRS could hold refunds for taxpayers not claiming EITC or  ACTC and release the refunds once it has the W-2 data available and has  verified the wage information. IRS officials reiterated that the potential of  verification to detect more fraud and noncompliance is limited by delays  caused by filing extensions and use of paper W-2s\u2014which are  transcribed at SSA before being transmitted to IRS. For example, IRS  had not received any paper W-2 data for tax year 2017 by the February  15 refund hold date. IRS is continuing to study systemic verification\u2019s  potential, and is working to identify additional fraud and noncompliance by  beginning to match non-wage income reported by taxpayers against data  reported on Forms 1099-MISC by companies or individuals that paid the  taxpayer miscellaneous income.\n\n\t\tIRS Continued to Deactivate and Renew ITINs\n\nThe Protecting Americans from Tax Hikes Act also contained a number of  provisions relating to individual taxpayer identification numbers (ITIN).  The provisions required IRS to deactivate (1) all ITINs issued prior to  2013 and (2) all ITINs not used at least once during the 3 most recent  consecutive tax years. As of February 26, 2018, IRS said it had  deactivated 14.7 million ITINs, approximately 12.4 million of those in 2017  and an additional 2.3 million in 2018.\nFollowing this initial round of deactivations, ITIN renewal requests have  been significantly lower than IRS anticipated. IRS expected it would  receive 1.3 million renewal applications by the end of 2018 for ITINs that  expired in 2017. However, by April 21, 2018, IRS had only received 23  percent (297,825 of 1.3 million) of the expected renewals.\nIRS officials said they based their renewal projections on a computation  assuming that all ITINs with middle digits 78 and 79\u2014which were issued  16 or more years prior to their deactivation and were the first set of older  ITINs to be deactivated\u2014would be renewed. However, the actual  renewal rate in 2017 was only 60 percent for these ITINs. IRS officials  said the agency used actual renewal data to revise its renewal estimate  for the remaining ITINs issued prior to 2013 and containing certain middle  digits that will be deactivated. Based on these new estimates, IRS will  accelerate the completion date for deactivation of older ITINs.\n\n\tIRS Developed a Management Structure to Implement the Tax Cuts and Jobs Act and Address Associated Challenges and Took Steps to More Fully Involve Human Capital Decision Makers\n\n\t\tIRS Developed a Management Structure to Implement the Tax Cuts and Jobs Act and Took Steps to More Fully Involve Its Human Capital Decision Makers\n\nTo address the changes included in the Tax Cuts and Jobs Act, in  January 2018 IRS established the Tax Reform Implementation Office  (TRIO), a central office that coordinates implementation efforts. IRS  officials said that the 2017 tax law will affect all IRS divisions and  responsibilities. Each of the 119 provisions in the Tax Cuts and Jobs Act  that fall under IRS responsibility has been assigned to one of IRS\u2019s four  business divisions\u2014Wage and Investment, Large Business and  International, Small Business\/Self-Employed, and Tax-Exempt and  Government Entities\u2014each of which will be responsible for planning and  executing the assigned provisions. In addition to TRIO, IRS also  established the Tax Reform Executive Steering Committee and the Tax  Reform Implementation Council (TRIC), described below:\nTax Reform Implementation Office (TRIO). TRIO principally  consists of executive-level IRS employees and coordinates efforts by  each business operating division to revise and develop forms,  instructions, tools, and guidance and to execute programming  changes, communications, and training initiatives required to  implement the individual provisions of the Tax Cuts and Jobs Act. The  office is intended to monitor the implementation action plans of each  business division and ensure risks associated with implementation  efforts are captured and addressed. TRIO has developed an  integrated project plan to track critical implementation activities  identified by the business divisions and discussed by TRIC (described  below). Personnel can access the project plan and update it with  accomplishments and milestones.\nTax Reform Executive Steering Committee. TRIO reports to the  Executive Steering Committee, which includes IRS\u2019s Acting  Commissioner, Deputy Commissioners, Treasury officials, and heads  of offices. The steering committee serves as a forum to provide  leadership guidance, direction, and advice on implementation  activities for the Tax Cuts and Jobs Act.\nTax Reform Implementation Council (TRIC). TRIC consists of  representatives from business divisions and functional units\u2014such as  Information Technology (IT) and Communication and Liaison\u2014that  are performing implementation activities. The group first met on  February 8, 2018, and meets weekly to discuss activities, concerns,  and needs that might involve other IRS divisions. The meetings are  also a forum to discuss accomplishments and deadlines.\nFigure 5 illustrates TRIO\u2019s role in coordinating the various changes IRS  expects to make.\nTo implement the Tax Cuts and Jobs Act, IRS\u2019s Human Capital Office  (HCO) estimated that the agency will need to hire and train staff to fill  approximately 1,100 positions requiring a variety of competencies and  provide additional training on tax law changes for current employees.  HCO will be responsible for recruiting and hiring these new employees  and ensuring they have the needed skills and HCO will play a key role in  training them. It is HCO\u2019s mission to provide human capital strategies and  tools for recruiting, hiring, developing, retaining, and transitioning a highly  skilled and high-performing workforce to support IRS\u2019s mission. TRIO and  other senior IRS officials acknowledged that HCO\u2019s role in implementing  the new tax law is as valuable as other supporting stakeholders, such as  IT. Nevertheless, HCO did not initially have representation in TRIC, as did  IT and other essential operational support units. TRIC meetings provide a  forum not only for the business operating divisions directly implementing  the provisions of the Tax Cuts and Jobs Act to discuss and coordinate  needs and activities, but for supporting stakeholders to understand the  status of implementation efforts as well as future expectations and needs.\nHCO officials said that when the formation of TRIO was first announced,  they contacted TRIO leadership to request that HCO have representation.  However, they were told that the purpose of the group was to discuss the  tax law itself, not hiring or other human resources matters affected by the  law. In our discussions with IRS officials, they told us that HCO has an  informal liaison to TRIO, participates in the executive steering committee,  and has existing human resource partners in the business operating  divisions, and that additional HCO representation in tax law  implementation\u2014including the weekly TRIC calls\u2014was not necessary.\nHowever, a senior HCO official told us that it would be beneficial for HCO  to participate in the weekly TRIC meetings to stay abreast of current  developments and future plans and share relevant timelines and  processes related to hiring and training. Participation will help HCO to  manage its operations more strategically, for example, by planning for  training required ahead of the 2019 filing season.\nBased on our discussions with IRS officials about HCO\u2019s role in tax law  implementation, in June 2018, HCO began participating in the weekly  TRIC calls. HCO\u2019s participation will likely help IRS make more informed  decisions concerning implementation of major tax law changes. It will also  position HCO to proactively understand human capital needs and  timelines across the agency and to hire and train personnel at the  appropriate times. At the same time, IRS will also be better positioned to  improve its management and strategy for executing implementation plans  while also fulfilling the agency\u2019s mission.\n\n\t\tIRS Identified the Scope, Nature, and Time Frame of the Tax Cuts and Jobs Act as Implementation Challenges\n\nIRS officials identified a number of challenges associated with  implementing the Tax Cuts and Jobs Act:\nScope of changes. To implement 119 provisions of the Tax Cuts and  Jobs Act, IRS will need to (1) interpret the law; (2) create or revise  nearly 500 tax forms, publications, and instructions; (3) publish  guidance and additional materials; (4) reprogram 140 interrelated  return processing systems; (5) hire additional staff and train its  workforce to help taxpayers understand the law and how it applies to  them; and (6) conduct extensive taxpayer outreach. IRS officials  stated that these provisions will require extensive changes relevant to  both individual and business filers and affect all areas of IRS.\nComplex and extensive nature of changes. According to IRS  officials, many of the revisions are complex and interrelated and  require central coordination and oversight. While IRS has to make  changes to its products every year, many of the changes needed to  implement the Tax Cuts and Jobs Act are more extensive than usual  and affect some of the forms with which taxpayers are most familiar.  For example, all Form 1040 products\u2014the forms and instructions for  individual tax return filing\u2014will be changed in accordance with the  law.\nOne-year time frame. IRS officials told us that implementing the Tax  Cuts and Jobs Act in 1 year will be challenging. Officials said the  agency is using implementation of the Patient Protection and  Affordable Care Act as a general guide for its current efforts, but  noted this earlier legislation was less expansive. IRS was responsible  for 47 provisions of the Patient Protection and Affordable Care Act  and had multiple years to implement some of its provisions, including  those officials identified at the time as the most challenging.  Implementing individual provisions of the Tax Cuts and Jobs Act  involves multiple, dependent actions. For example, IRS cannot  determine the changes it will need to make to various tax forms until it  has interpreted the law and cannot reprogram its return processing  systems until those forms are changed.\nTo complete necessary changes in time for the 2019 filing season,  IRS has used overtime and compensatory hours. For example,  according to IRS officials, as of May 26, 2018, IRS had used 1,749  overtime hours to make changes to forms and publications, between  two and three times as many overtime hours as it did in the entirety of  fiscal years 2016 or 2017. In addition, the agency delegated authority  to approve requests for work to a larger group of managerial staff and  temporarily reassigned existing staff to assist with time-sensitive  changes to tax forms and publications. In March 2018, IRS also made  a request for direct hiring authority, which would allow the agency to  hire IT staff more quickly. While this authority could be helpful to fill  specific positions more timely, IRS officials explained that these staff  will require training on tax processing procedures. According to a  senior IRS official, as of June 2018 the Office of Personnel  Management had not yet authorized this request.\nIRS has taken a number of steps to implement time-sensitive provisions  of the new law. IRS officials noted that while some provisions of the Tax  Cuts and Jobs Act are retroactive or relevant to the 2018 filing season,  most will not take effect until the 2019 filing season. As part of the  planning process, IRS determined when various provisions of the law  would become relevant and acted to release information on the provisions  with the earliest relevance first. For example, IRS  released new withholding tables and associated guidance;  revised the form and online withholding calculator that taxpayers use  to provide information to employers about the amount of tax that  employers should withhold from their wages; and provided guidance on the transition tax on untaxed foreign earnings of  foreign subsidiaries of U.S. companies, a new section of the Tax Cuts  and Jobs Act that changes how business income is calculated and tax  is paid for the 2018 filing season.\nIRS is continuing to revise its forms and issue guidance in advance of the  2019 filing season.\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Internal Revenue Service for  review and comment. IRS provided written comments, which are  reproduced in appendix I. In its written comments, IRS generally  concurred with our findings and noted a concern regarding interpretation  of correspondence overage data. IRS said that the overage rate we report  is based upon the open inventory at the end of the fiscal year. We  clarified the basis of the overage rate in our report. However, we believe  the total that IRS cites in its letter could also be misinterpreted in that it  does not represent the total overage inventory; rather it is a total for the  last week of the fiscal year. IRS tracks the overage correspondence rate  on a weekly basis, which can vary somewhat during the year given  fluctuations in correspondence receipts and staff availability to respond,  but is relatively consistent throughout the year. Therefore, the overage  rate at the end of the fiscal year provides a basis for assessing IRS\u2019s  annual performance in responding to written correspondence.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of the Treasury, the Acting Commissioner of  Internal Revenue, and other interested parties. In addition, the report is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-9110 or lucasjudyj@gao.gov. Contact points for our  offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff members who made major  contributions to this report are listed in appendix II.\n\nAppendix I: Comments from the Internal Revenue 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, Tom Gilbert (Assistant Director);  Erin Saunders Rath (Analyst-in-Charge); Shea Bader; Jacqueline Chapin;  Jehan Chase; Kirsten B. Lauber; Regina Morrison; Robert Robinson; and  Sarah Wilson made significant contributions to this report.","output":"Why GAO Did This Study\n\nDuring the tax filing season, generally from January to mid-April, IRS processes over 100 million individual tax returns and provides telephone, correspondence, online, and in-person service to tens of millions of taxpayers. In 2018, IRS had to begin taking steps to implement major tax law changes passed in what is commonly referred to as the Tax Cuts and Jobs Act that affect both individuals and businesses.\nGAO was asked to review IRS's performance during the 2018 filing season and its efforts to implement the Tax Cuts and Jobs Act. GAO assessed IRS's (1) performance providing service to taxpayers and processing individual tax returns and (2) early efforts to implement the Tax Cuts and Jobs Act.\nGAO analyzed IRS documents and data and interviewed IRS officials.\n\nWhat GAO Found\n\nThe Internal Revenue Service (IRS) generally improved its customer service during the 2018 filing season compared to prior years and managed multiple return processing challenges. For the third year in a row, IRS improved its telephone service by answering 80 percent of calls seeking live assistance and reducing wait times to about 5 minutes, as of the end of the 2018 filing season. This compares to 37.5 percent of calls answered with an average wait time of about 23 minutes during the 2015 filing season. Taxpayer use of online services also increased, including irs.gov and its online account tool for taxpayers to view their balances due. However, answering taxpayer correspondence remains a challenge\u2014IRS was late responding to about 37 percent of correspondence as of the end of the 2018 filing season compared to about 26 percent at the same time in 2017. In 2015, GAO recommended that the Department of the Treasury (Treasury) include timeliness in handling taxpayer correspondence as part of its performance goals, but as of June 2018 Treasury had not done so. Overall, despite multiple challenges including mid-filing season changes to tax law and a computer system failure, IRS met its processing targets for individual tax returns.\nIn 2018, IRS began taking steps to implement significant tax law changes from Public Law 115-97\u2014commonly referred to by the President and many administrative documents as the Tax Cuts and Jobs Act. To implement the changes, IRS established a centralized office to coordinate implementation across IRS offices and divisions. IRS officials cited the broad scope and complexity of the changes\u2014which will require extensive changes to tax forms, publications, and computer systems\u2014along with the 1 year time frame as key implementation challenges. Although IRS has taken steps to address these challenges, such as developing a project planning tool, GAO found that the new coordination office did not initially fully include the Human Capital Office (HCO), the division responsible for managing the agency's workforce. Based on GAO's discussions with IRS officials, representatives from HCO now attend weekly coordination meetings discussing and planning the tax law changes. Involving HCO in these discussions will better position IRS to hire new employees and train them and the existing workforce. It will also help HCO better understand training requirements and staffing needs ahead of the 2019 filing season.\n\nWhat GAO Recommends\n\nBecause HCO is now attending the weekly meetings, GAO is not making a related recommendation. In addition, GAO believes that its 2015 recommendation to Treasury to include timeliness in handling correspondence as part of its performance goals, which Treasury neither agreed or disagreed with, is still valid. IRS generally concurred with GAO's findings but noted concerns with interpreting the percentage of correspondence considered \u201coverage\u201d (more than 45 days old). GAO clarified its report but notes that while the open inventory of overage correspondence at the end of the fiscal year is not representative of total overage items for the year, the overage rates are relatively consistent throughout the year."}
{"id":"gao_GAO-19-164","pid":"gao_GAO-19-164_0","input":"\tBackground\n\nFEMA\u2019s mission is to help people before, during, and after disasters. It  provides assistance to those affected by emergencies and disasters by  supplying immediate needs (e.g., ice, water, food, and temporary  housing) and providing financial assistance grants for damage to personal  or public property. FEMA also provides non-disaster assistance grants to  improve the nation\u2019s preparedness, readiness, and resilience to all  hazards.\nFEMA accomplishes a large part of its mission through awarding grants to  state, local, and tribal governments and nongovernmental entities to help  communities prevent, prepare for, protect against, mitigate the effects of,  respond to, and recover from disasters and terrorist attacks. As previously  mentioned, for fiscal years 2005 through 2014, the agency obligated  about $104.5 billion in disaster relief grants. In addition, as of April 2018,  the four major disasters in 2017\u2014hurricanes Harvey, Irma, and Maria;  and the California wildfires\u2014had resulted in over $22 billion in FEMA  grants.\n\n\t\tOverview of FEMA\u2019s Grants Management Programs and Administration\n\nThe current FEMA grants management environment is highly complex  with many stakeholders, IT systems, and users. Specifically, this  environment is comprised of 45 active disaster and non-disaster grant  programs, which are grouped into 12 distinct grant categories.\nFor example, one program in the Preparedness: Fire category is the  Assistance to Firefighters Grants (AFG) program, which provides grants  to fire departments, nonaffiliated emergency medical service  organizations, and state fire training academies to support firefighting and  emergency response needs. As another example, the Housing  Assistance grant program is in the Recovery Assistance for Individuals  category and provides financial assistance to individuals and households  in geographical areas that have been declared an emergency or major  disaster by the President.\nTable 1 lists FEMA\u2019s non-disaster and disaster-based grant categories.\nAccording to FEMA, the processes for managing these different types of  grants vary because the grant programs were developed independently  by at least 18 separate authorizing laws that were enacted over a 62-year  period (from 1947 through 2009). The various laws call for different  administrative and reporting requirements.\nFor example, the Robert T. Stafford Disaster Relief and Emergency  Assistance Act, as amended, established the statutory authority for 11  of the grant programs, such as the administration of Public Assistance  and Individual Assistance grant programs after a presidentially declared  disaster. The act also requires the FEMA Administrator to submit an  annual report to the President and Congress covering FEMA\u2019s  expenditures, contributions, work, and accomplishments, pursuant to the  act. As another example, the National Dam Safety Program Act  established one of the grant programs aimed at providing financial  assistance to improve dam safety.\nKey stakeholders in modernizing the IT grants management environment  include the internal FEMA officials that review, approve, and monitor the  grants awarded, such as grant specialists, program analysts, and  supervisors. FEMA has estimated that it will need to support about 5,000  simultaneous internal users of its grants management systems.\nOther users include the grant recipients that apply for, receive, and  submit reports on their grant awards; these are considered the external  system users. These grant recipients can include individuals, states, local  governments, Indian tribes, institutions of higher education, and nonprofit  organizations. FEMA has estimated that there are hundreds of thousands  of external users of its grants systems.\nThe administration of the many different grant programs is distributed  across four divisions within FEMA\u2019s organizational structure. Figure 1  provides an overview of FEMA\u2019s organizational structure and the divisions  that are responsible for administering grants.\nWithin three of the four divisions\u2014Resilience, United States Fire  Administration, and Office of Response and Recovery\u201416 different grant  program offices are collectively responsible for administering the 45 grant  programs. The fourth division consists of 10 regional offices that help  administer grants within their designated geographical regions. For  example, the Office of Response and Recovery division oversees three  different offices that administer 13 grant programs that are largely related  to providing assistance in response to presidentially declared disasters.\nFigure 2 shows the number of grant programs administered by each of  the four divisions\u2019 grant program and regional offices. In addition,  appendix II lists the names of the 45 grant programs.\nFEMA\u2019s OCIO is responsible for developing, enhancing, and maintaining  the agency\u2019s IT systems, and for increasing efficiencies and cooperation  across the entire organization. However, we and the DHS Office of  Inspector General (OIG) have previously reported that the grant programs  and regional offices develop information systems independent of the  OCIO and that this has contributed to the agency\u2019s disparate IT  environment.\nWe and the DHS OIG have reported that this disparate IT environment  was due, in part, to FEMA\u2019s decentralized IT budget and acquisition  practices. For example, from fiscal years 2010 through 2015, the OCIO\u2019s  budget represented about one-third of the agency\u2019s IT budget, with the  grant program offices accounting for the remaining two-thirds of that  budget.\nIn February 2018, the OIG found that FEMA had shown limited progress  in improving its IT management and that many of the issues reported in  prior audits remained unchanged. As such, the OIG initiated a more  comprehensive audit of the agency\u2019s IT management that is ongoing.\n\n\t\tOverview of FEMA\u2019s Legacy Grants Management Systems\n\nFEMA has identified 10 primary legacy IT systems that support its grants  management activities. According to the agency, most of these systems  were developed to support specific grant programs or grant categories.  Table 2 summarizes the 10 primary legacy systems.\nAccording to FEMA officials, the 10 primary grant systems are all in  operation (several have been for decades) and are not interoperable. As  a result, individual grant programs and regional offices have  independently developed work arounds intended to address existing  capability gaps with the primary systems.\nFEMA officials stated that while these work arounds have helped the  agency partially address capability gaps with its primary systems, they  are often nonstandardized processes, and introduce the potential for  information security risks and errors. This environment has contributed to  labor-intensive manual processes and an increased burden for grant  recipients. The disparate systems have also led to poor information  sharing and reporting capabilities, as well as difficulty reconciling financial  data.\nThe DHS OIG and we have previously highlighted challenges with  FEMA\u2019s past attempts to modernize its grant management systems. For  example,  In December 2006, the DHS OIG reported that EMMIE, an effort to  modernize its grants management systems and provide a single  grants processing solution, was being developed without a clear  understanding and definition of the future solution. The report also  identified the need to ensure crosscutting participation from  headquarters, regions, and states in developing and maintaining a  complete, documented set of FEMA business and system  requirements.\nIn April 2016, we found weaknesses in FEMA\u2019s development of the  EMMIE system. For example, we noted that the system was  implemented without sufficient documentation of system  requirements, an acquisition strategy, up-to-date cost estimate and  schedule, total amount spent to develop the system, or a systems  integration plan. In response to our findings and related  recommendations, FEMA took action to address these issues. For  example, the agency implemented a requirements management  process that, among other things, provided guidance to programs on  analyzing requirements to ensure that they are complete and  verifiable.\nWe reported in November 2017 that EMMIE lacked the ability to  collect information on all pre-award activities and, as a result, agency  officials said that they and applicants used ad hoc reports and  personal tracking documents to manage and monitor the progress of  grant applications. FEMA officials added that applicants often  struggled to access the system and that the system was not user  friendly. Due to EMMIE\u2019s shortfalls, the agency had to develop  another system in 2017 to supplement EMMIE with additional grant  tracking and case management capabilities.\n\n\t\tGMM Is to Address FEMA\u2019s Shortcomings with Grants Management\n\nFEMA initiated GMM in 2015, in part, due to EMMIE\u2019s failed attempt to  modernize the agency\u2019s grants management environment. The program  is intended to modernize and streamline the agency\u2019s grants  management environment.\nTo help streamline the agency\u2019s grants management processes, the  program established a standard framework intended to represent a  common grants management lifecycle. The framework consists of five  sequential phases\u2014pre-award, award, post-award, closeout, and post- closeout\u2014along with a sixth phase dedicated to continuous grant  program management activities, such as analyzing data and producing  reports on grant awards and managing IT systems.\nFEMA also established 43 distinct business functions associated with  these six lifecycle phases. Figure 3 provides the general activities that  may occur in each of the grant lifecycle phases, but specific activities  would depend on the type of grant being administered (i.e., disaster  versus non-disaster).\nGMM is expected to be implemented within the complex IT environment  that currently exists at FEMA. For example, the program is intended to  replace the 10 legacy grants management systems, and potentially many  additional subsystems, with a single IT system. Each of the 10 legacy  systems was developed with its own database(s) and with no  standardization of the grants management data and, according to FEMA  officials, this legacy data has grown significantly over time.\nAccordingly, FEMA will need to migrate, analyze, and standardize the  grants management data before transitioning it to GMM. The agency  awarded a contract in June 2016 to support the data migration efforts for  GMM. The agency also implemented a data staging environment in  October 2017 to migrate the legacy data and identify opportunities to  improve the quality of the data.\nFurther, the GMM system is expected to interface with a total of 38 other  systems. These include 19 systems external to DHS (e.g., those provided  by commercial entities or other federal government agencies) and 19  systems internal to DHS or FEMA. Some of the internal FEMA systems  are undergoing their own modernization efforts and will need to be  coordinated with GMM, such as the agency\u2019s financial management  systems, national flood insurance systems, and enterprise data  warehouses.\nFor example, FEMA\u2019s Financial Systems Modernization Program was  originally expected to deliver a new financial system in time to interface  with GMM. However, the financial modernization has been delayed until  after GMM is to be fully implemented; thus, GMM will instead need to  interface with the legacy financial system. As a result, GMM is in the  process of removing one of its key performance parameters in the  acquisition program baseline related to financial systems interoperability  and timeliness of data exchanged.\nIn May 2017, DHS approved the acquisition program baseline for GMM.  The baseline estimated the total lifecycle costs to be about $251 million,  initial operational capability to be achieved by September 2019, and full  operational capability to be achieved by September 2020.\n\n\t\tGMM\u2019s Agile Software Development and Acquisition Approach\n\nFEMA intends to develop and deploy its own software applications for  GMM using a combination of commercial-off-the-shelf software, open  source software, and custom developed code. The agency plans to rely  on an Agile software development approach. According to FEMA  planning documentation, the agency plans to fully deliver GMM by  September 2020 over eight Agile development increments.\nAgile development is a type of incremental development, which calls for  the rapid delivery of software in small, short increments. Many  organizations, especially in the federal government, are accustomed to  using a waterfall software development model. This type of model  typically consists of long, sequential phases, and differs significantly from  the Agile development approach. We have previously reported that DHS  has sought to establish Agile software development as the preferred  method for acquiring and delivering IT capabilities. However, the  department has not yet completed critical actions necessary to update its  guidance, policies, and practices for Agile programs, in areas such as,  developing lifecycle cost estimates, managing IT requirements, testing  and evaluation, oversight at key decision points, and ensuring  cybersecurity. (See appendix III for more details on the Agile software  development approach.)\nFEMA\u2019s acquisition approach includes using contract support to assist  with the development and deployment efforts. The agency selected a  public cloud environment to host the computing infrastructure. In  addition, from March through July 2017, the agency used a short-term  contract aimed at developing prototypes of GMM functionality for grant tracking and monitoring, case management of disaster survivors, grant  reporting, and grant closeout. The agency planned to award a second  development contract by December 2017 to complete the GMM system  (beyond the prototypes) and to begin this work in September 2018.\nHowever, due to delays in awarding the second contract to develop the  complete GMM system, in January 2018, the program extended the  scope and time frames of the initial short-term prototype contract for an  additional year to develop the first increment of the GMM system\u2014 referred to as the AFG pilot.\nOn August 31, 2018, FEMA awarded the second development contract,  which is intended to deliver the remaining functionality beyond the AFG  pilot (i.e., increments 2 through 8). FEMA officials subsequently issued a  90-day planning task order for the Agile development contractor to define  the work that needs to be done to deliver GMM and the level of effort  needed to accomplish that work. However, the planning task order was  paused after a bid protest was filed with GAO in September 2018.  According to FEMA officials, they resumed work on the planning task  order after the bid protest was withdrawn by the protester on November  20, 2018, and then the work was paused again during the partial  government shutdown from December 22, 2018, through January 25,  2019.\n\n\t\tAssistance to Firefighters Grants Pilot\n\nFEMA began working on the AFG pilot\u2014GMM\u2019s first increment\u2014in  January 2018. This increment was intended to pilot GMM\u2019s use of Agile  development methods to replace core functionality for the AFG system  (i.e., one of the 10 legacy systems).This system supports three  preparedness\/fire-related grant programs\u2014Assistance to Firefighters  Grants Program, Fire Prevention and Safety Grant Program, and Staffing  for Adequate Fire and Emergency Response Grant Program. According  to FEMA officials, the AFG system was selected as the first system to be  replaced because it is costly to maintain and the DHS OIG had identified  cybersecurity concerns with the system.\nAmong the 43 GMM business functions discussed earlier in this report,  FEMA officials specified 19 functions to be delivered in the AFG pilot.  Figure 4 shows the planned time frames for delivering the AFG pilot in  increment 1 (which consisted of four 3-month Agile development sub- increments), as of August 2018.\nAs of August 2018, the program was working on sub-increment 1C of the  pilot. In September 2018, GMM deployed its first set of functionality to a  total of 19 AFG users\u2014which included seven of 169 total internal AFG  users, and 12 of more than 153,000 external AFG users. The functionality  supported four of the 19 business functions that are related to the  closeout of grants (i.e., the process by which all applicable administrative  actions and all required work to award a grant have been completed).  This functionality included tasks such as evaluation of final financial  reports submitted by grant recipients and final reconciliation of finances  (e.g., final disbursement to recipients and return of unobligated federal  funds).\nAccording to FEMA officials, closeout functionality was selected first for  deployment because it was the most costly component of the legacy AFG  system to maintain, as it is an entirely manual and labor-intensive  process. The remaining AFG functionality and remaining AFG users are  to be deployed by the end of the AFG pilot.\n\n\t\tGMM Oversight Structure\n\nThe GMM program is executed by a program management office, which  is overseen by a program manager and program executive. This office is  responsible for directing the day-to-day operations and ensuring  completion of GMM program goals and objectives. The program office  resides within the Office of Response and Recovery, which is headed by  an Associate Administrator who reports to the FEMA Administrator. In  addition, the GMM program executive (who is also the Regional  Administrator for FEMA Region IX) reports directly to the FEMA  Administrator.\nGMM is designated as a level 2 major acquisition, which means that it is  subject to oversight by the DHS acquisition review board. The board is  chaired by the DHS Undersecretary for Management and is made up of  executive-level members, such as the DHS Chief Information Officer.\nThe acquisition review board serves as the departmental executive board  that decides whether to approve GMM through key acquisition milestones  and reviews the program\u2019s progress and its compliance with approved  documentation every 6 months. The board approved the acquisition  program baseline for GMM in May 2017 (i.e., estimated costs to be about  $251 million and full operational capability to be achieved by September  2020).\nIn addition, the program is reviewed on a monthly basis by FEMA\u2019s  Grants Management Executive Steering Group. This group is chaired by  the Deputy Administrator of FEMA. Further, DHS\u2019s Financial Systems  Modernization Executive Steering Committee, chaired by the DHS Chief  Financial Officer, meets monthly and is to provide guidance, oversight,  and support to GMM.\n\n\t\tCybersecurity Risk Management Framework\n\nFor government organizations, including FEMA, cybersecurity is a key  element in maintaining the public trust. Inadequately protected systems  may be vulnerable to insider threats. Such systems are also vulnerable to  the risk of intrusion by individuals or groups with malicious intent who  could unlawfully access the systems to obtain sensitive information,  disrupt operations, or launch attacks against other computer systems and  networks. Moreover, cyber-based threats to federal information systems  are evolving and growing. Accordingly, we designated cybersecurity as a  government-wide high risk area 22 years ago, in 1997, and it has since  remained on our high-risk list.\nFederal law and guidance specify requirements for protecting federal  information and information systems. The Federal Information Security  Modernization Act (FISMA) of 2014 requires executive branch agencies  to develop, document, and implement an agency-wide cybersecurity  program to provide security for the information and information systems  that support operations and assets of the agency.\nThe act also tasks NIST with developing, for systems other than those for  national security, standards and guidelines to be used by all agencies to  establish minimum cybersecurity requirements for information and  information systems based on their level of cybersecurity risk.  Accordingly, NIST developed a risk management framework of standards  and guidelines for agencies to follow in developing cybersecurity  programs.\nThe framework addresses broad cybersecurity and risk management  activities, including categorizing the system\u2019s impact level; selecting,  implementing, and assessing security controls; authorizing the system to  operate (based on progress in remediating control weaknesses and an  assessment of residual risk); and monitoring the efficacy of controls on an  ongoing basis. Figure 5 provides an overview of this framework.\nPrior DHS OIG assessments, such as the annual evaluation of DHS\u2019s  cybersecurity program, have identified issues with FEMA\u2019s cybersecurity  practices. For example, in 2016, the OIG reported that FEMA was  operating 111 systems without an authorization to operate. In addition,  the agency had not created any corrective action plans for 11 of the  systems that were classified as \u201cSecret\u201d or \u201cTop Secret,\u201d thus limiting its  ability to ensure that all identified cybersecurity weaknesses were  mitigated in a timely manner. The OIG further reported that, for several years, FEMA was consistently below DHS\u2019s 90 percent target for  remediating corrective action plans, with scores ranging from 73 to 84  percent. Further, the OIG reported that FEMA had a significant number of  open corrective action plans (18,654) and that most of these plans did not  contain sufficient information to address identified weaknesses.\nIn 2017, the OIG reported that FEMA had made progress in addressing  security weaknesses. For example, it reported that the agency had  reduced the number of systems it was operating without an authorization  to operate from 111 to 15 systems.\n\n\tFEMA Has Implemented Most Leading Practices for Reengineering Grants Management Business Processes and Managing IT Requirements\n\nAccording to GAO\u2019s Business Process Reengineering Assessment Guide  and the Software Engineering Institute\u2019s Capability Maturity Model  Integration\u00ae for Development, successful business process reengineering  can enable agencies to replace their inefficient and outmoded processes  with streamlined processes that can more effectively serve the needs of  the public and significantly reduce costs and improve performance.  Many times, new IT systems are implemented to support these improved  business processes. Thus, effective management of IT requirements is  critical for ensuring the successful design, development, and delivery of  such new systems.\nThese leading practices state that effective business process  reengineering and IT requirements management involve, among other  things, (1) ensuring strong executive leadership support for process  reengineering; (2) assessing the current and target business environment  and business performance goals; (3) establishing plans for implementing  new business processes; (4) establishing clear, prioritized, and traceable  IT requirements; (5) tracking progress in delivering IT requirements; and  (6) incorporating input from end user stakeholders.\nAmong these six selected leading practices for reengineering business  processes and managing IT requirements, FEMA fully implemented four  and partially implemented two of them for its GMM program. For example,  the agency ensured strong senior leadership commitment to changing the  way it manages its grants, took steps to assess and document its  business environment and performance goals, defined initial IT  requirements for GMM, took recent actions to better track progress in  delivering planned IT requirements, and incorporated input from end user  stakeholders.\nIn addition, FEMA had begun planning for business process  reengineering; however, it had not finalized plans for transitioning users to  the new business processes. Further, while GMM took steps to establish  clearly defined and prioritized IT requirements, key requirements were not  always traceable. Table 3 summarizes the extent to which FEMA  implemented the selected leading practices.\n\n\t\tFEMA Executive Leadership Demonstrated Strong Commitment to Reengineering Grants Management Processes\n\nAccording to GAO\u2019s Business Process Reengineering Assessment  Guide, the most critical factor for engaging in a reengineering effort is  having strong executive leadership support to establish credibility  regarding the seriousness of the effort and to maintain the momentum as  the agency faces potentially extensive changes to its organizational  structure and values. Without such leadership, even the best process  design may fail to be accepted and implemented. Agencies should also  ensure that there is ongoing executive support (e.g., executive steering  committee meetings headed by the agency leader) to oversee the  reengineering effort from start to finish.\nFEMA senior leadership consistently demonstrated its commitment and  support for streamlining the agency\u2019s grants management business  processes and provided ongoing executive support. For example, one of  the Administrator\u2019s top priorities highlighted in FEMA\u2019s 2014 through 2022  strategic plans was to strengthen grants management through innovative  systems and business processes to rapidly and effectively deliver the  agency\u2019s mission. In accordance with this strategic priority, FEMA  initiated GMM with the intent to streamline and modernize grants  management across the agency.\nIn addition, FEMA established the Grants Management Executive  Steering Group in September 2015. This group is responsible for  transforming the agency\u2019s grants management capabilities through its  evaluation, prioritization, and oversight of grants management  modernization programs, such as GMM. The group\u2019s membership  consists of FEMA senior leaders from across the agency\u2019s program and  business support areas, such as FEMA regions, Individual Assistance,  Public Assistance, Preparedness, Office of the Chief Financial Officer,  Office of Chief Counsel, OCIO, and the Office of Policy and Program  Analysis. In this group\u2019s ongoing commitment to reengineering grants  management processes, it meets monthly to review GMM\u2019s updates,  risks, and action items, as well as the program\u2019s budget, schedule, and  acquisition activities. For example, the group reviewed the status of key  acquisition activities and program milestones, such as the follow-on  award for the pilot contractor and the program\u2019s initial operational  capability date. The group also reviewed GMM\u2019s program risks, such as  data migration challenges (discussed later in this report) and delays in the  Agile development contract award. With this continuous executive  involvement, FEMA is better positioned to maintain momentum for  reengineering the new grants management business processes that the  GMM system is intended to support.\n\n\t\tFEMA Documented Its Current and Target Grants Management Business Processes and Performance Improvement Goals\n\nGAO\u2019s Business Process Reengineering Assessment Guide states that  agencies undergoing business process reengineering should develop a  common understanding of the current environment by documenting  existing core business processes to show how the processes work and  how they are interconnected. The agencies should then develop a deeper  understanding of the target environment by modeling the workflow of  each target business process in enough detail to provide a common  understanding of exactly what will be changed and who will be affected by  a future solution. Agencies should also assess the performance of their  current major business processes to identify problem areas that need to  be changed or eliminated and to set realistically achievable, customer- oriented, and measurable business performance improvement goals.\nFEMA has taken steps to document the current and target grants  management business processes. Specifically,\nThe agency took steps to develop a common understanding of its  grants management processes by documenting each of the 12 grant  categories. For example, in 2016 and 2017, the agency conducted  several nationwide user outreach sessions with representatives from  FEMA headquarters, the 10 regional offices, and state and local grant  recipients to discuss the grant categories and the current grants  management business environment.\nIn addition, FEMA\u2019s Office of Chief Counsel developed a Grants  Management Manual in January 2018 that outlined the authorizing  laws, regulations, and agency policies for all of its grant programs.  According to the Grants Management Executive Steering Group, the  manual is intended to promote standardized grants management  procedures across the agency. Additionally, the group expects grant  program and regional offices to assess the manual against their own  practices, make updates as needed, and ensure that their staff are  properly informed and trained.\nFEMA also documented target grants management business process  workflows for 18 of the 19 business functions that were notionally  planned to be developed and deployed in the AFG pilot by December  2018. However, the program experienced delays in developing the  AFG pilot (discussed later in this report) and, thus, deferred defining  the remaining business function until the program gets closer to  developing that function, which is now planned for August 2019.\nIn addition, FEMA established measurable business performance goals  for GMM that are aimed at addressing problem areas and improving  grants management processes. Specifically, the agency established 14  business performance goals and associated thresholds in an October  2017 acquisition program baseline addendum, as well as 126  performance metrics for all 43 of the target grants management business  functions in its March 2017 test and evaluation master plan.\nAccording to FEMA, the 14 business performance goals are intended to  represent essential outcomes that will indicate whether GMM has  successfully met critical, business-focused mission needs. GMM  performance goals include areas such as improvements in the  satisfaction level of users with GMM compared to the legacy systems and  improvements in the timeliness of grant award processing. For example,  one of GMM\u2019s goals is to get at least 40 percent of users surveyed to  agree or strongly agree that their grants management business  processes are easier to accomplish with GMM, compared to the legacy  systems.\nProgram officials stated that they plan to work with the Agile development  contractor to refine their performance goals and target thresholds,  develop a plan for collecting the data and calculating the metrics, and  establish a performance baseline with the legacy systems. Program  officials also stated that they plan to complete these steps by September  2019\u2014GMM\u2019s initial operational capability date\u2014which is when they are  required to begin reporting these metrics to the DHS acquisition review  board.\n\n\t\tFEMA Has Begun Planning Its Grants Management Business Process Reengineering, but Has Not Finalized Plans for Transition Activities\n\nAccording to GAO\u2019s Business Process Reengineering Assessment  Guide, agencies undergoing business process reengineering should (1)  establish an overall plan to guide the effort (commonly referred to as an  organizational change management plan) and (2) provide a common  understanding for stakeholders of what to expect and how to plan for  process changes. Agencies should develop the plan at the beginning of  the reengineering effort and provide specific details on upcoming process  changes, such as critical milestones and deliverables for an orderly  transition, roles and responsibilities for change management activities,  reengineering goals, skills and resource needs, key barriers to change,  communication expectations, training, and any staff redeployments or  reductions-in-force. The agency should develop and begin implementing  its change management plan ahead of introducing new processes to  ensure sufficient support among stakeholders for the reengineered  processes.\nWhile FEMA has begun planning its business process reengineering  activities, it has not finalized its plans or established time frames for their  completion. Specifically, as of September 2018, program officials were in  the process of drafting an organizational change management plan that is  intended to establish an approach for preparing grants management  stakeholders for upcoming changes. According to FEMA, this document  is intended to help avoid uncertainty and confusion among stakeholders  as changes are made to the agency\u2019s grant programs, and ensure  successful adoption of new business processes, strategies, and  technologies.\nAs discussed previously in this report, the transition to GMM will involve  changes to FEMA\u2019s disparate grants management processes that are  managed by many different stakeholders across the agency. Program  officials acknowledged that change management is the biggest challenge  they face in implementing GMM and said they had begun taking several  actions intended to support the agency\u2019s change management activities.  For example, program officials reported in October 2018 that they had  recently created an executive-level working group intended to address  FEMA\u2019s policy challenges related to the standardization of grants  management processes. Additionally, program officials reported that they  planned to: (1) hire additional support staff focused on coordinating grants  change management activities; and (2) pursue regional office outreach to  encourage broad support among GMM\u2019s decentralized stakeholders,  such as state, local, and tribal territories.\nHowever, despite these actions, the officials were unable to provide time  frames for completing the organizational change management plan or the  additional actions. Until the plan and actions are complete, the program  lacks assurance that it will have sufficient support among stakeholders for  the reengineered processes.\nIn addition, GMM did not establish plans and time frames for the activities  that needed to take place prior to, during, and after the transition from the  legacy AFG to GMM. Instead, program officials stated that they had  worked collaboratively with the legacy AFG program and planned these  details informally by discussing them in various communications, such as  emails and meetings. However, this informal planning approach is not a  repeatable process, which is essential to this program as FEMA plans to  transition many sets of functionality to many different users during the  lifecycle of this program.\nProgram officials acknowledged that for future transitions they will need  more repeatable transition planning and stated that they intend to  establish such plans, but did not provide a time frame for when such  changes would be made. Until FEMA develops a repeatable process, with  established time frames for communicating the transition details to its  customers prior to each transition, the agency risks that the transition  from the legacy systems to GMM will not occur as intended. It also  increases its risk that stakeholders will not support the implementation of  reengineered grants management processes.\n\n\t\tGMM Took Steps to Establish Clearly Defined and Prioritized IT Requirements, but Key Requirements Were Not Always Traceable\n\nLeading practices for software development efforts state that IT  requirements are to be clearly defined and prioritized. This includes,  among other things, maintaining bidirectional traceability as the  requirements evolve, to ensure there are no inconsistencies among  program plans and requirements. In addition, programs using Agile  software development are to maintain a product vision, or roadmap, to  guide the planning of major program milestones and provide a high-level  view of planned requirements.\nPrograms should also maintain a prioritized list (referred to as a backlog)  of narrowly defined requirements (referred to as lower-level requirements)  that are to be delivered. Programs should maintain this backlog with the  product owner to ensure the program is always working on the highest  priority requirements that will deliver the most value to the users.\nThe GMM program established clearly defined and prioritized  requirements and maintained bidirectional traceability among the various  levels of requirements:\nGrant lifecycle phases: In its Concept of Operations document, the  program established six grants management lifecycle phases that  represent the highest level of GMM\u2019s requirements, through which it  derives lower-level requirements.\nBusiness functions: The Concept of Operations document also  identifies the next level of GMM requirements\u2014the 43 business  functions that describe how FEMA officials, grant recipients, and other  stakeholders are to manage grants. According to program officials,  the 43 business functions are to be refined, prioritized, and delivered  to GMM customers iteratively. Further, for the AFG pilot, the GMM  program office prioritized 19 business functions with the product  owner and planned the development of these functions in a roadmap.\nEpics: GMM\u2019s business functions are decomposed into epics, which  represent smaller portions of functionality that can be developed over  multiple increments. According to program officials, GMM intends to  develop, refine, and prioritize the epics iteratively. As of August 2018,  the program had developed 67 epics in the program backlog. An  example of one of the epics for the AFG pilot is to prepare and submit  grant closeout materials.\nUser stories: The epics are decomposed into user stories, which  convey the customers\u2019 requirements at the smallest and most discrete  unit of work that must be done within a single sprint to create working  software. GMM develops, refines, and prioritizes the user stories  iteratively. As of August 2018, the program had developed 1,118 user  stories in the backlog. An example of a user story is \u201cAs an external  user, I can log in with a username and password.\u201d\nFigure 6 provides an example of how GMM\u2019s different levels of  requirements are decomposed.\nNevertheless, while we found requirements to be traceable at the sprint- level (i.e., epics and user stories), traceability of requirements at the  increment-level (i.e., business functions) were inconsistent among  different requirements planning documents. Specifically, the capabilities  and constraints document shows that five business functions are planned  to be developed within sub-increment 1A, whereas the other key planning  document\u2014the roadmap for the AFG pilot\u2014showed one of those five  functions as being planned for the sub-increment 1B. In addition, the  capabilities and constraints document shows that nine business functions  are planned to be developed within sub-increment 1B, but the roadmap  showed one of those nine functions as being planned for the sub- increment 1C.\nProgram officials stated that they decided to defer these functions to later  sub-increments due to unexpected technical difficulties encountered  when developing functionality and reprioritizing functions with the product  owners. While the officials updated the roadmap to reflect the deferred  functionality, they did not update the capabilities and constraints  document to maintain traceability between these two important  requirements planning documents.\nProgram officials stated that they learned during the AFG pilot that the  use of a capabilities and constraints document for increment-level scope  planning was not ideal and that they intended to change the process for  how they documented planned requirements for future increments.  However, program officials did not provide a time frame for when this  change would be made. Until the program makes this change and then  ensures it maintains traceability of increment-level requirements between  requirements planning documents, it will continue to risk confusion among  stakeholders about what is to be delivered.\nIn addition, until recently, GMM\u2019s planning documents were missing up- to-date information regarding when most of the legacy systems will be  transitioned to GMM. Specifically, while the program\u2019s planning  documents (including the GMM roadmap) provided key milestones for the  entire lifecycle of the program and high-level capabilities to be delivered  in the AFG pilot, these documents lacked up-to-date time frames for when  FEMA planned to transition the nine remaining legacy systems. For  example, in May 2017, GMM drafted notional time frames for transitioning  the legacy systems, including plans for AFG to be the seventh system  replaced by GMM. However, in December 2017, the program decided to  reprioritize the legacy systems so that AFG would be replaced first\u2014yet  this major change was not reflected in the program\u2019s roadmap.\nMoreover, while AFG program officials were informed of the decision to  transition the AFG program first, in June 2018 officials from other grant  programs told us that they had not been informed on when their systems  were to be replaced. As a result, these programs were uncertain about  when they should start planning for their respective transitions. In August  2018, GMM program officials acknowledged that they were delayed in  deciding the sequencing order for the legacy system transitions. Program officials stated that the delay was due to their need to factor the Agile  development contractor\u2019s perspective into these decisions; yet, at that  time, the contract award had been delayed by approximately 8 months.  Subsequently, in October 2018, program officials identified tentative time  frames for transitioning the remaining legacy systems.\nProgram officials stated that they determined the tentative time frames for  transitioning the legacy systems based on key factors, such as mission  need, cost, security vulnerabilities, and technical obsolescence, and that  they had shared these new time frames with grant program officials. The  officials also stated that, once the Agile contractor begins contract  performance, they expect to be able to validate the contractor\u2019s capacity  and finalize these time frames by obtaining approval from the Grants  Management Executive Steering Group. By taking steps to update and  communicate these important time frames, FEMA should be better  positioned to ensure that each of the grant programs are prepared for  transitioning to GMM.\n\n\t\tGMM Recently Began Tracking Progress in Delivering Planned IT Requirements\n\nAccording to leading practices, Agile programs should track their  progress in delivering planned IT requirements within a sprint (i.e., short  iterations that produce working software). Given that sprints are very  short cycles of development (e.g., 2 weeks), the efficiency of completing  planned work within a sprint relies on a disciplined approach that includes  using a fixed pace, referred to as the sprint cadence, that provides a  consistent and predictable development routine. A disciplined approach  also includes identifying by the start of a sprint which user stories will be  developed, developing those stories to completion (e.g., fully tested and  demonstrated to, and accepted by, the product owner), and tracking  completion progress of those stories. Progress should be communicated  to relevant stakeholders and used by the development teams to better  understand their capacity to develop stories, continuously improve on  their processes, and forecast how long it will take to deliver all remaining  capabilities.\nThe GMM program did not effectively track progress in delivering IT  requirements during the first nine sprints, which occurred from January to  June 2018. These gaps in tracking the progress of requirements, in part, had an impact on the program\u2019s progress in delivering the 19 AFG  business functions that were originally planned by December 2018 and  are now deferred to August 2019. However, beginning in July 2018, in  response to our ongoing review, the program took steps to improve in  these areas. Specifically,\nGMM did not communicate the status of its Agile development  progress to program stakeholders, such as the grant programs, the  regional offices, and the development teams, during most of the first  nine sprints. Program officials acknowledged that they should use  metrics to track development progress and, in July 2018, they began  reporting metrics to program stakeholders. For example, they began  collecting and providing data on the number of stories planned and  delivered, estimated capacity for development teams, and the number  of days spent working on the sprint, as part of the program\u2019s weekly  status reports to program stakeholders, such as product owners.\nRather than using a fixed, predictable sprint cadence, GMM allowed a  variable development cadence, meaning that sprint durations varied  from 1 to 4 weeks throughout the first nine sprints. Program officials  noted that they had experimented with the use of a variable cadence  to allow more time to complete complex technical work. Program  officials stated that they realized that varying the sprints was not  effective and, in July 2018 for sprint 10, they reverted back to a fixed,  2 week cadence.\nGMM added a significant amount of scope during its first nine sprints,  after the development work had already begun. For example, the  program committed to 28 user stories at the beginning of sprint eight,  and then nearly doubled the work by adding 25 additional stories in  the middle of the sprint. Program officials cited multiple reasons for  adding more stories, including that an insufficient number of stories  had been defined in the backlog when the sprint began, the realization  that planned stories were too large and needed to be decomposed  into smaller stories, and the realization that other work would be  needed in addition to what was originally planned. Program officials  recognized that, by the start of a sprint, the requirements should be  sufficiently defined, such that they are ready for development without  requiring major changes during the sprint. The program made recent  improvements in sprints 11 and 12, which had only five stories added  after the start of a sprint.\nBy taking these steps to establish consistency among sprints, the  program has better positioned itself to more effectively monitor and  manage the remaining IT development work. In addition, this  improvement in consistency should help the program avoid future  deferments of functionality.\n\n\t\tGMM Is Involving Stakeholders and Incorporating Input\n\nLeading practices state that programs should regularly collaborate with,  and collect input from, relevant stakeholders; monitor the status of  stakeholder involvement; incorporate stakeholder input; and measure  how well stakeholders\u2019 needs are being met. For Agile programs, it is  especially important to track user satisfaction to determine how well the  program has met stakeholders\u2019 needs. Consistent stakeholder  participation ensures that the program meets its stakeholders\u2019 needs.\nFEMA implemented its responsibilities in this area through several  means, such as stakeholder outreach activities; development of a  strategic communications plan; and continuous monitoring, solicitation,  and recording of stakeholder involvement and feedback. For example, the  agency conducted nationwide outreach sessions from January 2016  through August 2017 and began conducting additional outreach sessions  in April 2018. These outreach sessions involved hundreds of  representatives from FEMA headquarters, the 10 regional offices, and  state and local grant recipients to collect information on the current grants  management environment and opportunities for streamlining grants  management processes.\nFEMA also held oversight and stakeholder outreach activities and actively  solicited and recorded feedback from its stakeholders on a regular basis.  For example, GMM regularly verified with users that the new functionality  met their IT requirements, as part of the Agile development cycle.  Additionally, we observed several GMM biweekly requirements validation  sessions where the program\u2019s stakeholders were involved and provided  feedback as part of the requirements development and refinement  process.\nIn addition, FEMA identified GMM stakeholders and tracked its  engagement with these stakeholders using a stakeholder register. The  agency also defined processes for how the GMM program is to  collaborate with its stakeholders in a stakeholder communication plan and  Agile development team agreement. Also, while several officials from the selected grant program and regional offices that we interviewed indicated  that the program could improve in communicating its plans for GMM and  incorporating stakeholder input, most of the representatives from these  offices stated that GMM is doing well at interacting with its stakeholders.\nFinally, in October 2018, program officials reported that they had recently  begun measuring user satisfaction by conducting surveys and interviews  with users that have utilized the new functionality within GMM. The  program\u2019s outreach activities, collection of stakeholder input, and  measurement of user satisfaction demonstrate that the program is taking  the appropriate steps to incorporate stakeholder input.\n\n\tFEMA Lacks a Current Cost Estimate and Reliable Schedule for GMM\n\n\t\tGMM\u2019s Initial Cost Estimate Was Reliable, but Is Now Outdated\n\nReliable cost estimates are critical for successfully delivering IT  programs. Such estimates provide the basis for informed decision  making, realistic budget formulation, meaningful progress measurement,  and accountability for results. GAO\u2019s Cost Estimating and Assessment  Guide defines leading practices related to the following four  characteristics of a high-quality, reliable estimate.\nComprehensive. The estimate accounts for all possible costs  associated with a program, is structured in sufficient detail to ensure  that costs are neither omitted nor double counted, and documents all  cost-influencing assumptions.\nWell-documented. Supporting documentation explains the process,  sources, and methods used to create the estimate; contains the  underlying data used to develop the estimate; and is adequately  reviewed and approved by management.\nAccurate. The estimate is not overly conservative or optimistic, is  based on an assessment of the costs most likely to be incurred, and is  regularly updated so that it always reflects the program\u2019s current  status.\nCredible. Discusses any limitations of the analysis because of  uncertainty or sensitivity surrounding data or assumptions, the  estimate\u2019s results are cross-checked, and an independent cost  estimate is conducted by a group outside the acquiring organization to  determine whether other estimating methods produce similar results.\nIn May 2017, DHS approved GMM\u2019s lifecycle cost estimate of about $251  million for fiscal years 2015 through 2030. We found this initial estimate to  be reliable because it fully or substantially addressed all the  characteristics associated with a reliable cost estimate. For example, the  estimate comprehensively included government and contractor costs, all  elements of the program\u2019s work breakdown structure, and all phases of  the system lifecycle; and was aligned with the program\u2019s technical  documentation at the time the estimate was developed. GMM also fully  documented the key assumptions, data sources, estimating methodology,  and calculations for the estimate. Further, the program conducted a risk  assessment and sensitivity analysis, and DHS conducted an independent  assessment of the cost estimate to validate the accuracy and credibility of  the cost estimate.\nHowever, key assumptions that FEMA made about the program changed  soon after DHS approved the cost estimate in May 2017. Thus, the initial  cost estimate no longer reflects the current approach for the program. For  example, key assumptions about the program that changed include:\nChange in the technical approach: The initial cost estimate assumed  that GMM would implement a software-as-a-service model, meaning  that FEMA would rely on a service provider to deliver software  applications and the underlying infrastructure to run them. However, in  December 2017, the program instead decided to implement an  infrastructure-as-a-service model, meaning that FEMA would develop  and deploy its own software application and rely on a service provider  to deliver and manage the computing infrastructure (e.g., servers,  software, storage, and network equipment). According to program  officials, this decision was made after learning from the Agile  prototypes that the infrastructure-as-a-service model would allow  GMM to develop the system in a more flexible environment.\nIncrease in the number of system development personnel: A key  factor with Agile development is the number of development teams  (each consisting of experts in software development, testing, and  cybersecurity) that are operating concurrently and producing separate  portions of software functionality. Program officials initially assumed  that they would need three to four concurrent Agile development  teams, but subsequently realized that they would instead need to  expend more resources to achieve GMM\u2019s original completion date.  Specifically, program officials now expect they will need to at least  double, and potentially triple, the number of concurrent development  teams to meet GMM\u2019s original target dates.\nSignificant delays and complexities with data migration: In 2016 and  2017, GMM experienced various technical challenges in its effort to  transfer legacy system data to a data staging platform. This data  transfer effort needed to be done to standardize the data before  eventually migrating the data to GMM. These challenges resulted in  significant delays and cost increases. Program officials reported that,  by February 2018\u2014at least 9 months later than planned\u2014all legacy  data had been transferred to a data staging platform so that FEMA  officials could begin analyzing and standardizing the data prior to  migrating it into GMM.\nFEMA officials reported that they anticipated the cost estimate to  increase, and for this increase to be high enough to breach the $251  million threshold set in GMM\u2019s May 2017 acquisition program baseline.  Thus, consistent with DHS\u2019s acquisition guidance, the program informed  the DHS acquisition review board of this anticipated breach. The board  declared that the program was in a cost breach status, as of September  12, 2018.\nAs of October 2018, program officials stated that they were in the process  of revising the cost estimate to reflect the changes in the program and to  incorporate actual costs. In addition, the officials stated that the program  was applying a new cost estimating methodology tailored for Agile  programs that DHS\u2019s Cost Analysis Division had been developing. In  December 2018, program officials stated that they had completed the  revised cost estimate but it was still undergoing departmental approval.  Establishing an updated cost estimate should help FEMA better  understand the expected costs to deliver GMM under the program\u2019s  current approach and time frames.\n\n\t\tGMM\u2019s Schedule Is Unreliable\n\nThe success of an IT program depends, in part, on having an integrated  and reliable master schedule that defines when the program\u2019s set of work  activities and milestone events are to occur, how long they will take, and  how they are related to one another. Among other things, a reliable  schedule provides a roadmap for systematic execution of an IT program  and the means by which to gauge progress, identify and address potential  problems, and promote accountability.\nGAO\u2019s Schedule Assessment Guide defines leading practices related to  the following four characteristics that are vital to having a reliable  integrated master schedule.\nComprehensive. A comprehensive schedule reflects all activities for  both the government and its contractors that are necessary to  accomplish a program\u2019s objectives, as defined in the program\u2019s work  breakdown structure. The schedule also includes the labor, materials,  and overhead needed to do the work and depicts when those  resources are needed and when they will be available. It realistically  reflects how long each activity will take and allows for discrete  progress measurement.\nWell-constructed. A schedule is well-constructed if all of its activities  are logically sequenced with the most straightforward logic possible.  Unusual or complicated logic techniques are used judiciously and  justified in the schedule documentation. The schedule\u2019s critical path  represents a true model of the activities that drive the program\u2019s  earliest completion date and total float accurately depicts schedule  flexibility.\nCredible. A schedule that is credible is horizontally traceable\u2014that is,  it reflects the order of events necessary to achieve aggregated  products or outcomes. It is also vertically traceable\u2014that is, activities  in varying levels of the schedule map to one another and key dates  presented to management in periodic briefings are consistent with the  schedule. Data about risks are used to predict a level of confidence in  meeting the program\u2019s completion date. The level of necessary  schedule contingency and high-priority risks are identified by  conducting a robust schedule risk analysis.\nControlled. A schedule is controlled if it is updated regularly by trained  schedulers using actual progress and logic to realistically forecast  dates for program activities. It is compared to a designated baseline  schedule to measure, monitor, and report the program\u2019s progress.  The baseline schedule is accompanied by a baseline document that  explains the overall approach to the program, defines ground rules  and assumptions, and describes the unique features of the schedule.  The baseline schedule and current schedule are subject to a  configuration management control process.\nGMM\u2019s schedule was unreliable because it minimally addressed three  characteristics\u2014comprehensive, credible, and controlled\u2014and did not  address the fourth characteristic of a reliable estimate\u2014well-constructed.  One of the most significant issues was that the program\u2019s fast  approaching, final delivery date of September 2020 was not informed by a  realistic assessment of GMM development activities, and rather was  determined by imposing an unsubstantiated delivery date. Table 4  summarizes our assessment of GMM\u2019s schedule.\nIn discussing the reasons for the shortfalls in these practices, program  officials stated that they had been uncertain about the level of rigor that  should be applied to the GMM schedule, given their use of Agile  development. However, leading practices state that program schedules  should meet all the scheduling practices, regardless of whether a  program is using Agile development. As discussed earlier in this report,  GMM has already experienced significant schedule delays. For example,  the legacy data migration effort, the AFG pilot, and the Agile development  contract have been delayed.\nProgram officials also stated that the delay in awarding and starting the  Agile contract has delayed other important activities, such as establishing  time frames for transitioning legacy systems. A more robust schedule  could have helped FEMA predict the impact of delays on remaining  activities and identify which activities appeared most critical so that the  program could ensure that any risks in delaying those activities were  properly mitigated.\nIn response to our review and findings, program officials recognized the  need to continually enhance their schedule practices to improve the  management and communication of program activities. As a result, in  August 2018, the officials stated that they planned to add a master  scheduler to the team to improve the program\u2019s schedule practices and  ensure that all of the areas of concern we identified are adequately  addressed. In October 2018, the officials reported that they had recently  added two master schedulers to GMM. According to the statement of  objectives, the Agile contractor is expected to develop an integrated  master schedule soon after it begins performance.\nHowever, program officials stated that GMM is schedule-driven\u2014due to  the Executive Steering Group\u2019s expectation that the solution will be  delivered by September 2020. The officials added that, if GMM  encounters challenges in meeting this time frame, the program plans to  seek additional resources to allow it to meet the 2020 target.\nGMM\u2019s schedule-driven approach has already led to an increase in  estimated costs and resources. For example, as previously mentioned,  the program has determined that, to meet its original target dates, GMM  needs to at least double, and possibly triple, the number of concurrent  Agile development teams. In addition, we have previously reported that  schedule pressure on federal IT programs can lead to omissions and  skipping of key activities, especially system testing.\nIn August 2018, program officials acknowledged that September 2020  may not be feasible and that the overall completion time frames  established in the acquisition program baseline may eventually need to  be rebaselined. Without a robust schedule to forecast whether FEMA\u2019s  aggressive delivery goal for GMM is realistic to achieve, leadership will be  limited in its ability to make informed decisions on what additional  increases in cost or reductions in scope might be needed to fully deliver  the system.\n\n\tFEMA Fully Addressed Three Key Cybersecurity Practices and Partially Addressed Two Others\n\nNIST\u2019s risk management framework establishes standards and guidelines  for agencies to follow in developing cybersecurity programs. Agencies  are expected to use this framework to achieve more secure information  and information systems through the implementation of appropriate risk  mitigation strategies and by performing activities that ensure that  necessary security controls are integrated into agencies\u2019 processes. The  framework addresses broad cybersecurity and risk management  activities, which include the following:\nCategorize the system: Programs are to categorize systems by  identifying the types of information used, selecting a potential impact  level (e.g., low, moderate, or high), and assigning a category based  on the highest level of impact to the system\u2019s confidentiality, integrity,  and availability, if the system was compromised. Programs are also to  document a description of the information system and its boundaries  and should register the system with appropriate program  management offices. System categorization is documented in a  system security plan.\nSelect and implement security controls: Programs are to determine  protective measures, or security controls, to be implemented based  on the system categorization results. These security controls are  documented in a system security plan. For example, control areas  include access controls, incident response, security assessment and  authorization, identification and authentication, and configuration  management. Once controls are identified, programs are to determine  planned implementation actions for each of the designated controls.  These implementation actions are also specified in the system  security plan.\nAssess security controls: Programs are to develop, review, and  approve a security assessment plan. The purpose of the security  assessment plan approval is to establish the appropriate expectations  for the security control assessment. Programs are to also perform a  security control assessment by evaluating the security controls in  accordance with the procedures defined in the security assessment  plan, in order to determine the extent to which the controls were  implemented correctly. The output of this process is intended to  produce a security assessment report to document the issues,  findings, and recommendations. Programs are to conduct initial  remediation actions on security controls and reassess those security  controls, as appropriate.\nObtain an authorization to operate the system: Programs are to obtain  security authorization approval in order to operate a system.  Resolving weaknesses and vulnerabilities identified during testing is  an important step leading up to achieving an authorization to operate.  Programs are to establish corrective action plans to address any  deficiencies in cybersecurity policies, procedures, and practices. DHS  guidance also states that corrective action plans must be developed  for every weakness identified during a security control assessment  and within a security assessment report.\nMonitor security controls on an ongoing basis: Programs are to  monitor their security controls on an ongoing basis after deployment,  including determining the security impact of proposed or actual  changes to the information system and assessing the security controls  in accordance with a monitoring strategy that determines the  frequency of monitoring the controls.\nFor the GMM program\u2019s engineering and test environment, which went  live in February 2018, FEMA fully addressed three of the five key  cybersecurity practices in NIST\u2019s risk management framework and  partially addressed two of the practices. Specifically, FEMA categorized  GMM\u2019s environment based on security risk, implemented select security  controls, and monitored security controls on an ongoing basis. However,  the agency partially addressed the areas of assessing security controls  and obtaining an authorization to operate the system. Table 5 provides a  summary of the extent to which FEMA addressed NIST\u2019s key  cybersecurity practices for GMM\u2019s engineering and test environment.\n\n\t\tGMM Categorized the System Based on Security Risk\n\nConsistent with NIST\u2019s framework, GMM categorized the security risk of  its engineering and test environment and identified it as a moderate- impact environment. A moderate-impact environment is one where the  loss of confidentiality, integrity, or availability could be expected to have a  serious or adverse effect on organizational operations, organizational  assets, or individuals. GMM completed the following steps leading to this  categorization:\nThe program documented in its System Security Plan the various  types of data and information that the environment will collect,  process, and store, such as conducting technology research, building  or enhancing technology, and maintaining IT networks.\nThe program established three information types and assigned  security levels of low, moderate, or high impact in the areas of  confidentiality, availability, and integrity. A low-impact security level  was assigned to two information types: (1) conducting technology  research and (2) building or enhancing technology; and a moderate- impact security level was assigned to the third information type:  maintaining IT networks.\nThe engineering and test environment was categorized as an overall  moderate-impact system, based on the highest security impact level  assignment.\nGMM documented a description of the environment, including a  diagram depicting the system\u2019s boundaries, which illustrates, among  other things, databases and firewalls.\nGMM properly registered its engineering and test environment with  FEMA\u2019s Chief Information Officer, Chief Financial Officer, and acting  Chief Information Security Officer.\nBy conducting the security categorization process, GMM has taken steps  that should ensure that the appropriate security controls are selected for  the program\u2019s engineering and test environment.\n\n\t\tGMM Selected and Planned for the Implementation of Controls in Its System Security Plan\n\nConsistent with NIST\u2019s framework and the system categorization results,  GMM appropriately determined which security controls to implement and  planned actions for implementing those controls in its System Security  Plan for the engineering and test environment. For example, the program  utilized NIST guidance to select standard controls for a system  categorized with a moderate-impact security level. These control areas  include, for example, access controls, risk assessment, incident  response, identification and authentication, and configuration  management.\nFurther, the program documented its planned actions to implement each  control in its System Security Plan. For example, GMM documented that  the program plans to implement its Incident Response Testing control by  participating in an agency-wide exercise and unannounced vulnerability  scans. As another example, GMM documented that the program plans to  implement its Contingency Plan Testing control by testing the contingency  plan annually, reviewing the test results, and preparing after action  reports. By selecting and planning for the implementation of security  controls, GMM has taken steps to mitigate its security risks and protect  the confidentiality, integrity, and availability of the information system.\n\n\t\tGMM Developed a Security Assessment Plan, but It Lacked Essential Details and Approvals\n\nConsistent with NIST\u2019s framework, in January 2018, GMM program  officials developed a security assessment plan for the engineering and  test environment. According to GMM program officials, this plan was  reviewed by the security assessment team.\nHowever, the security assessment plan lacked essential details.  Specifically, while the plan included the general process for evaluating the  environment\u2019s security controls, the planned assessment procedures for  all 964 security controls were not sufficiently defined. Specifically, GMM  program officials copied example assessment procedures from NIST  guidance and inserted them into its security assessment documentation  for all of its 964 controls, without making further adjustments to explain  the steps that should be taken specific to GMM. Table 6 shows an  example of a security assessment procedure copied from the NIST  guidance that should have been further adjusted for GMM.\nIn addition, the actual assessment procedures that the GMM assessors  used to evaluate the security controls were not documented. Instead, the  program only documented whether each control passed or failed each  test.\nGMM program officials stated that the planned assessment procedures  are based on an agency template that was exported from a DHS  compliance tool, and that FEMA security officials have been instructed by  the DHS OCIO not to tailor or make any adjustments to the template  language. However, the assessment procedures outlined in NIST\u2019s  guidance are to serve as a starting point for organizations preparing their  program specific assessments. According to NIST, organizations are  expected to select and tailor their assessment procedures for each  security control from NIST\u2019s list of suggested assessment options (e.g.,  review, analyze, or inspect policies, procedures, and related  documentation options).\nDHS OCIO officials stated that, consistent with NIST\u2019s guidance, they  expect that components will ensure they are in compliance with the  minimum standards and will also add details and additional rigor, as  appropriate, to tailor the planned security assessment procedures to fit  their unique missions or needs. In November 2018, in response to our  audit, DHS OCIO officials stated that they were meeting with FEMA OCIO  officials to understand why they did not document the planned and actual  assessment procedures performed by the assessors for GMM. Until  FEMA ensures that detailed planned evaluation methods and actual  evaluation procedures specific to GMM are defined, the program risks  assessing security controls incorrectly, having controls that do not work  as intended, and producing undesirable outcomes with respect to meeting  the security requirements.\nIn addition, the security assessment plan was not approved by FEMA\u2019s  OCIO before proceeding with the security assessment. Program officials  stated that approval was not required for the security assessment plan  prior to the development of the security assessment report. However,  NIST guidance states that the purpose of the security assessment plan  approval is to establish the appropriate expectations for the security  control assessment. By not getting the security assessment plan  approved by FEMA\u2019s OCIO before security assessment reviews were  conducted, GMM risks inconsistencies with the plan and security  objectives of the organization.\nFinally, consistent with NIST guidance, GMM performed a security  assessment in December 2017 of the engineering and test environment\u2019s  controls, which identified 36 vulnerabilities (23 critical- and high-impact  vulnerabilities and 13 medium- and low-impact vulnerabilities). The  program also documented these vulnerabilities and associated findings  and recommendations in a security assessment report. GMM conducted  initial remediation actions (i.e., remediation of vulnerabilities that should  be corrected immediately) for 12 of the critical- and high-impact  vulnerabilities and a reassessment of those security controls confirmed  that they were resolved by January 2018. Remediation of the remaining  11 critical- and high-impact vulnerabilities and 13 medium- and low- impact vulnerabilities were to be addressed by corrective action plans as  part of the authorization to operate process, which is discussed in the  next section.\n\n\t\tGMM Obtained Authorization to Operate, but Had Not Addressed Known Vulnerabilities or Tested All Controls\n\nThe authorization to operate GMM\u2019s engineering and test environment  was granted on February 5, 2018. Among other things, this decision was  based on the important stipulation that the remaining 11 critical- and high- impact vulnerabilities associated with multifactor authentication would be  addressed within 45 days, or by March 22, 2018. However, the program  did not meet this deadline and, instead, approximately 2 months after this  deadline passed, obtained a waiver to remediate these vulnerabilities by  May 9, 2019.\nThese vulnerabilities are related to a multifactor authentication  capability. Program officials stated that they worked with FEMA OCIO  officials to attempt to address these vulnerabilities by the initial deadline,  but they were unsuccessful in finding a viable solution. Therefore, GMM  program officials developed a waiver at the recommendation of the OCIO  to provide additional time to develop a viable solution. However, a  multifactor authentication capability is essential to ensuring that users are  who they say they are, prior to granting users access to the GMM  engineering and test environment, in order to reduce the risk of harmful  actors accessing the system.\nIn addition, as of September 2018, the program had not established  corrective action plans for the 13 medium- and low-impact vulnerabilities.  Program officials stated that they do not typically address low-impact  vulnerabilities; however, this is in conflict with DHS guidance that  specifies that corrective action plans must be developed for every  weakness identified during a security control assessment and within a  security assessment report. In response to our audit, in October 2018,  GMM program officials developed these remaining corrective action  plans. The plans indicated that these vulnerabilities were to be fully  addressed by January 2019 and April 2019.\nWhile the program eventually took corrective actions in response to our  audit by developing the missing plans, the GMM program initially failed to  follow DHS\u2019s guidance on preparing corrective actions plans for all  security vulnerabilities. Until GMM consistently follows DHS\u2019s guidance, it  will be difficult for FEMA to determine the extent to which GMM\u2019s security  weaknesses identified during its security control assessments are  remediated. Additionally, as we have reported at other agencies,  vulnerabilities can be indicators of more significant underlying issues and,  thus, without appropriate management attention or prompt remediation,  GMM is at risk of unnecessarily exposing the program to potential  exploits.\nMoreover, GMM was required to assess all untested controls by March 7,  2018, or no later than 30 days after the approval of the authorization to  operate; however, it did not meet this deadline. Specifically, we found  that, by October 2018, FEMA had not fully tested 190 security controls in  the GMM engineering and test environment. These controls were related  to areas such as security incident handling and allocation of resources  required to protect an information system. In response to our findings, in  October 2018, GMM program officials reported that they had since fully  tested 27 controls and partially tested the remaining 163 controls.\nProgram officials stated that testing of the 163 controls is a shared  responsibility between GMM and other parties (e.g., the cloud service  provider). They added that GMM had completed its portion of the testing  but was in the process of verifying the completion of testing by other  parties. Program officials stated that the untested controls were not  addressed sooner, in part, because of errors resulting from configuration  changes in the program\u2019s compliance tool during a system upgrade,  which have now been resolved. Until GMM ensures that all security  controls have been tested, it remains at an increased risk of exposing  programs to potential exploits.\n\n\t\tGMM Is Using Processes for Monitoring Controls\n\nConsistent with the NIST framework, GMM established methods for  assessing and monitoring security controls to be conducted after an  authorization to operate has been approved. GMM has tailored its  cybersecurity policies and practices for monitoring its controls to take into  account the frequent and iterative pace with which system functionality is  continuously being introduced into the GMM environment.\nSpecifically, the GMM program established a process for assessing  security impact changes to the system and conducting reauthorizations to  operate within the rapid Agile delivery environment. As part of this  process, GMM embedded cybersecurity experts on each Agile  development team so that they are involved early and can impact security  considerations from the beginning of requirements development through  testing and deployment of system functionality.\nIn addition, the process involves important steps for ensuring that the  system moves from development to completion, while producing a secure  and reliable system. For example, it includes procedures for creating,  reviewing, and testing new system functionality. As the new system  functionality is integrated with existing system functionality, it is to  undergo automated testing and security scans in order to ensure that the  integrity of the security of the system has not been compromised. Further,  an automated process is to deploy the code if it passes all security scans,  code tests, and code quality checks.\nGMM\u2019s process for conducting a reauthorization to operate within the  rapid delivery Agile development environment is to follow FEMA guidance  that states that all high-level changes made to a FEMA IT system must  receive approval from both a change advisory board and the FEMA Chief  Information Officer. The board and FEMA Chief Information Officer are to  focus their review and approval on scheduled releases and epics (i.e.,  collections of user stories). Additionally, the Information System Security  Officer is to review each planned user story and, if it is determined that  the proposed changes may impact the integrity of the authorization, the  Information System Security Officer is to work with the development team  to begin the process of updating the system authorization.\nFinally, GMM uses automated tools to track the frequency in which  security controls are assessed and to ensure that required scanning data  are received by FEMA for reporting purposes. Program officials stated  that, in the absence of department-level and agency-level guidance, they  have coordinated with DHS and FEMA OCIO officials to ensure that these  officials are in agreement with GMM\u2019s approach to continuous monitoring.  By having monitoring control policies and procedures in place, FEMA  management is positioned to more effectively prioritize and plan its risk  response to current threats and vulnerabilities for the GMM program.\n\n\tConclusions\n\nGiven FEMA\u2019s highly complex grants management environment, with its  many stakeholders, IT systems, and internal and external users,  implementing leading practices for business process reengineering and IT  requirements management is critical for success. FEMA has taken many  positive steps, including ensuring executive leadership support for  business process reengineering, documenting the agency\u2019s grants  management processes and performance improvement goals, defining  initial IT requirements for the program, incorporating input from end user  stakeholders into the development and implementation process, and  taking recent actions to improve its delivery of planned IT requirements.  Nevertheless, until the GMM program finalizes plans and time frames for  implementing its organizational change management actions, plans and  communicates system transition activities, and maintains clear traceability  of IT requirements, FEMA will be limited in its ability to provide  streamlined grants management processes and effectively deliver a  modernized IT system to meet the needs of its large range of users.\nWhile GMM\u2019s initial cost estimate was reliable, key assumptions about the  program since the initial estimate had changed and, therefore, it no longer  reflected the current approach for the program. The forthcoming updated  cost schedule is expected to better reflect the current approach. However,  the program\u2019s unreliable schedule to fully deliver GMM by September  2020 is aggressive and unrealistic. The delays the program has  experienced to date further compound GMM\u2019s schedule issues. Without a  robust schedule that has been informed by a realistic assessment of  GMM\u2019s development activities, leadership will be limited in its ability to  make informed decisions on what additional increases in cost or  reductions in scope might be needed to achieve their goals.\nFurther, FEMA\u2019s implementation of cybersecurity practices for GMM in  the areas of system categorization, selection and implementation, and  monitoring will help the program. However, GMM lacked essential details  for evaluating security controls, did not approve the security assessment  plan before proceeding with the security assessment, did not follow  DHS\u2019s guidance to develop corrective action plans for all security  vulnerabilities, and did not fully test all security controls. As a result, the  GMM engineering and test environment remains at an increased risk of  exploitations.\n\n\tRecommendations for Executive Action\n\nWe are making eight recommendations to FEMA:  The FEMA Administrator should ensure that the GMM program  management office finalizes the organizational change management plan  and time frames for implementing change management actions.  (Recommendation 1)\nThe FEMA Administrator should ensure that the GMM program  management office plans and communicates its detailed transition  activities to its affected customers before they transition to GMM and  undergo significant changes to their processes. (Recommendation 2)\nThe FEMA Administrator should ensure that the GMM program  management office implements its planned changes to its processes for  documenting requirements for future increments and ensures it maintains  traceability among key IT requirements documents. (Recommendation 3)\nThe FEMA Administrator should ensure that the GMM program  management office updates the program schedule to address the leading  practices for a reliable schedule identified in this report.  (Recommendation 4)\nThe FEMA Administrator should ensure that the FEMA OCIO defines  sufficiently detailed planned evaluation methods and actual evaluation  methods for assessing security controls. (Recommendation 5)\nThe FEMA Administrator should ensure that the FEMA OCIO approves a  security assessment plan before security assessment reviews are  conducted. (Recommendation 6)\nThe FEMA Administrator should ensure that the GMM program  management office follows DHS guidance on preparing corrective action  plans for all security vulnerabilities. (Recommendation 7)\nThe FEMA Administrator should ensure that the GMM program  management office fully tests all of its security controls for the system.  (Recommendation 8)\n\n\tAgency Comments and Our Evaluation\n\nDHS provided written comments on a draft of this report, which are  reprinted in appendix IV. In its comments, the department concurred with  all eight of our recommendations and provided estimated completion  dates for implementing each of them.\nFor example, with regard to recommendation 4, the department stated  that FEMA plans to update the GMM program schedule to address the  leading practices for a reliable schedule by April 30, 2019. In addition, for  recommendation 7, the department stated that FEMA plans to ensure that  corrective action plans are prepared by July 31, 2019, to address all  identified security vulnerabilities for GMM. If implemented effectively, the  actions that FEMA plans to take in response to the recommendations  should address the weaknesses we identified.\nWe also received technical comments from DHS and FEMA officials,  which we incorporated, as appropriate.\nWe are sending copies of this report to the Secretary of Homeland  Security and interested congressional committees. In addition, the report  will be available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives were to (1) determine the extent to which the Federal  Emergency Management Agency (FEMA) is implementing leading  practices for reengineering its grants management business processes  and incorporating business needs into Grants Management  Modernization (GMM) information technology (IT) requirements; (2)  assess the reliability of the program\u2019s estimated costs and schedule; and  (3) determine the extent to which FEMA is addressing key cybersecurity  practices for GMM.\nTo address the first objective, we reviewed GAO\u2019s Business Process  Reengineering Assessment Guide and Software Engineering Institute\u2019s  Capability Maturity Model for Integration for Development to identify  practices associated with business process reengineering and IT  requirements management. We then selected six areas that, in our  professional judgment, represented foundational practices that were of  particular importance to the successful implementation of an IT  modernization effort that is using Agile development processes. We also  selected the practices that were most relevant based on where GMM was  in the system development lifecycle and we discussed the practice areas  with FEMA officials. The practices are:\nEnsuring executive leadership support for process reengineering\nAssessing the current and target business environment and business\nEstablishing plans for implementing new business processes\nEstablishing clear, prioritized, and traceable IT requirements\nTracking progress in delivering IT requirements  Incorporating input from end user stakeholders  We also reviewed selected chapters of GAO\u2019s draft Agile Assessment  Guide (Version 6A), which is intended to establish a consistent framework  based on best practices that can be used across the federal government  for developing, implementing, managing, and evaluating agencies\u2019 IT  investments that rely on Agile methods. To develop this guide, GAO  worked closely with Agile experts in the public and private sector; some chapters of the guide are considered more mature because they have  been reviewed by the expert panel. We reviewed these chapters to  ensure that our expectations for how FEMA should apply the six practices  for business process reengineering and IT requirements management are  appropriate for an Agile program and are consistent with the draft  guidance that is under development. Additionally, since Agile  development programs may use different terminology to describe their  software development processes, the Agile terms used in this report (e.g.,  increment, sprint, epic, etc.) are specific to the GMM program.\nWe obtained and analyzed FEMA grants management modernization  documentation, such as current and target grants management business  processes, acquisition program baseline, operational requirements  document, concept of operations, requirements analyses workbooks,  Grants Management Executive Steering Group artifacts, stakeholder  outreach artifacts, Agile increment- and sprint-level planning and  development artifacts, and the requirements backlog.\nWe assessed the program documentation against the selected practices  to determine the extent to which the agency had implemented them. We  then assessed each practice area as:  fully implemented\u2014FEMA provided complete evidence that showed it  fully implemented the practice area; partially implemented\u2014FEMA provided evidence that showed it  partially implemented the practice area; not implemented\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.\nAdditionally, we observed Agile increment and sprint development  activities at GMM facilities in Washington, D.C. We also observed a  demonstration of how the program manages its lower level requirements  (i.e., user stories and epics) and maintains traceability of the  requirements using an automated tool at GMM facilities in Washington,  D.C.\nWe also interviewed FEMA officials, including the GMM Program  Executive, GMM Program Manager, GMM Business Transformation  Team Lead, and Product Owner regarding their efforts to streamline  grants management business processes, collect and incorporate  stakeholder input, and manage GMM\u2019s requirements. In addition, we  interviewed FEMA officials from four out of 16 grant program offices and  two out of 10 regional offices to obtain contextual information and  illustrative examples of FEMA\u2019s efforts to reengineer grants management  business processes and collect business requirements for GMM.  Specifically,\nWe selected the four grant program offices based on a range of grant  programs managed, legacy systems used, and the amount of grant  funding awarded. We also sought to select a cross section of different  characteristics, such as selecting larger grant program offices, as well  as smaller offices. In addition, we ensured that our selection included  the Assistance to Firefighters Grants (AFG) program office because  officials in this office represent the first GMM users and, therefore, are  more actively involved with the program\u2019s Agile development  practices. Based on these factors, we selected: Public Assistance  Division, Individual Assistance Division, AFG, and National Fire  Academy. Additionally, the four selected grant program offices are  responsible for 16 of the total 45 grant programs and are users of five  of the nine primary legacy IT systems. The four selected grant  program offices also represent about 68 percent of the total grant  funding awarded by FEMA from fiscal years 2005 through 2016.\nWe selected two regional offices based on (1) the largest amount of  total FEMA grant funding for fiscal years 2005 through 2016\u2014Region  6 located in Denton, Texas; and (2) the highest percentage of AFG  funding compared to the office\u2019s total grant funding awarded from  fiscal years 2005 through 2016\u2014Region 5 located in Chicago, Illinois.\nTo assess the reliability of data from the program\u2019s automated IT  requirements management tool, we interviewed knowledgeable officials  about the quality control procedures used by the program to assure  accuracy and completeness of the data. We also compared the data to  other relevant program documentation on GMM requirements. We  determined that the data used were sufficiently reliable for the purpose of  evaluating GMM\u2019s practices for managing IT requirements.\nFor our second objective, to assess the reliability of GMM\u2019s estimated  costs and schedule, we reviewed documentation on GMM\u2019s May 2017  lifecycle cost estimate and on the program\u2019s schedule, dated May 2018.\nTo assess the reliability of the May 2017 lifecycle cost estimate, we  evaluated documentation supporting the estimate, such as the cost  estimating model, the report on GMM\u2019s Cost Estimating Baseline  Document and Life Cycle Cost Estimate, and briefings provided to the  Department of Homeland Security (DHS) and FEMA management  regarding the cost estimate. We assessed the cost estimating  methodologies, assumptions, and results against leading practices for  developing a comprehensive, accurate, well-documented, and  credible cost estimate, identified in GAO\u2019s Cost Estimating and  Assessment Guide. We also interviewed program officials  responsible for developing and reviewing the cost estimate to  understand their methodology, data, and approach for developing the  estimate. We found that the cost data were sufficiently reliable.\nTo assess the reliability of the May 2018 GMM program schedule, we  evaluated documentation supporting the schedule, such as the  integrated master schedule, acquisition program baseline, and Agile  artifacts. We assessed the schedule documentation against leading  practices for developing a comprehensive, well-constructed, credible,  and controlled schedule, identified in GAO\u2019s Schedule Assessment  Guide. We also interviewed GMM program officials responsible for  developing and managing the program schedule to understand their  practices for creating and maintaining the schedule. We noted in our  report the instances where the quality of the schedule data impacted  the reliability of the program\u2019s schedule.\nFor both the cost estimate and program schedule, we assessed each  leading practice as:  fully addressed\u2014FEMA provided complete evidence that showed it  implemented the entire practice area;  substantially addressed\u2014FEMA provided evidence that showed it  implemented more than half of the practice area; partially addressed\u2014FEMA provided evidence that showed it  implemented about half of the practice area; minimally addressed\u2014FEMA provided evidence that showed it  implemented less than half of the practice area; not addressed\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.\nFinally, we provided FEMA with draft versions of our detailed analyses of  the GMM cost estimate and schedule. This was done to verify that the  information on which we based our findings was complete, accurate, and  up-to-date.\nRegarding our third objective, to determine the extent to which FEMA is  addressing key cybersecurity practices for GMM, we reviewed  documentation regarding DHS and FEMA cybersecurity policies and  guidance, and FEMA\u2019s authorization to operate for the program\u2019s  engineering and test environment. We evaluated the documentation  against all six cybersecurity practices identified in the National Institute of  Standards and Technology\u2019s (NIST) Risk Management Framework.  While NIST\u2019s Risk Management Framework identifies six total practices,  for reporting purposes, we combined two interrelated practices\u2014selection  of security controls and implementation of security controls\u2014into a single  practice. The resulting five practices were: categorizing the system based  on security risk, selecting and implementing security controls, assessing  security controls, obtaining an authorization to operate the system, and  monitoring security controls on an ongoing basis.\nWe obtained and analyzed key artifacts supporting the program\u2019s efforts  to address these risk management practices, including the program\u2019s  System Security Plan, the Security Assessment Plan and Report,  Authorization to Operate documentation, and the program\u2019s continuous  monitoring documentation. We also interviewed officials from the GMM  program office and FEMA\u2019s Office of the Chief Information Officer, such  as the GMM Security Engineering Lead, GMM Information System  Security Officer, and FEMA\u2019s Acting Chief Information Security Officer,  regarding their efforts to assess, document, and review security controls  for GMM. We assessed the evidence against the five practices to  determine the extent to which the agency had addressed them. We then  assessed each practice area as:  fully addressed\u2014FEMA provided complete evidence that showed it  fully implemented the practice area; partially addressed\u2014FEMA provided evidence that showed it partially  implemented the practice area; not addressed\u2014FEMA did not provide evidence that showed it  implemented any of the practice area.\nTo assess the reliability of data from the program\u2019s automated security  controls management tool, we interviewed knowledgeable officials about  the quality control procedures used by the program to assure accuracy  and completeness of the data. We also compared the data to other  relevant program documentation on GMM security controls for the  engineering and test environment. We found that some of the security  controls data we examined were sufficiently reliable for the purpose of  evaluating FEMA\u2019s cybersecurity practices for GMM, and we noted in our  report the instances where the accuracy of the data impacted the  program\u2019s ability to address key cybersecurity practices.\nWe conducted this performance audit from December 2017 to April 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Federal Emergency Management Agency\u2019s Grant Programs\n\nThe Federal Emergency Management Agency (FEMA) awards many  different types of grants to state, local, and tribal governments and  nongovernmental entities. These grants are to help communities prevent,  prepare for, protect against, mitigate the effects of, respond to, and  recover from disasters and terrorist attacks.\n\nAppendix III: Overview of Agile Software Development\n\nAgile software development is a type of incremental development that  calls for the rapid delivery of software in small, short increments. The use  of an incremental approach is consistent with the Office of Management  and Budget\u2019s guidance as specified in its information technology (IT)  Reform Plan, as well as the legislation commonly referred to as the  Federal Information Technology Acquisition Reform Act.\nMany organizations, especially in the federal government, are  accustomed to using a waterfall software development model, which  typically consists of long, sequential phases, and differs significantly from  the Agile development approach. Agile practices integrate planning,  design, development, and testing into an iterative lifecycle to deliver  software early and often. Figure 7 provides a depiction of software  development using the Agile approach, as compared to a waterfall  approach.\nThe frequent iterations of Agile development are intended to effectively  measure progress, reduce technical and programmatic risk, and respond  to feedback from stakeholders in changes to IT requirements more  quickly than traditional methods. Despite these intended benefits,  organizations adopting Agile must overcome challenges in making  significant changes to how they are accustomed to developing software.\nThe significant differences between Agile and waterfall development  impact how IT programs are planned, implemented, and monitored in  terms of cost, schedule, and scope. For example, in waterfall  development, significant effort is devoted upfront to document detailed  plans and all IT requirements for the entire scope of work at the beginning  of the program, and cost and schedule can be varied to complete that  work.\nHowever, for Agile programs the precise details are unknown upfront, so  initial planning of cost, scope, and timing would be conducted at a high  level, and then supplemented with more specific plans for each iteration.  While cost and schedule are set for each iteration, requirements for each  iteration (or increment) can be variable as they are learned over time and  revised to reflect experiences from completed iterations and to  accommodate changing priorities of the end users. The differences in  these two software development approaches are shown in figure 8.\nLooking at figure 8, the benefit provided from using traditional program  management practices such as establishing a cost estimate or a robust  schedule, is not obvious. However, unlike a theoretical environment,  many government programs may not have the autonomy to manage  completely flexible scope, as they must deliver certain minimal  specifications with the cost and schedule provided. In those cases, it is  vital for the team to understand and differentiate the IT requirements that  are \u201cmust haves\u201d from the \u201cnice to haves\u201d early in the planning effort. This  would help facilitate delivery of the \u201cmust-haves\u201d requirements first,  thereby providing users with the greatest benefits as soon as possible.\n\nAppendix IV: Comments from the Department of Homeland Security\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\t\tStaff Acknowledgments\n\nIn addition to the contact named above, the following staff made key  contributions to this report: Shannin G. O\u2019Neill (Assistant Director),  Jeanne Sung (Analyst in Charge), Andrew Beggs, Rebecca Eyler,  Kendrick Johnson, Thomas J. Johnson, Jason Lee, Jennifer Leotta, and  Melissa Melvin.","output":"Why GAO Did This Study\n\nFEMA, a component of DHS, annually awards billions of dollars in grants to help communities prepare for, mitigate the effects of, and recover from major disasters. However, FEMA's complex IT environment supporting grants management consists of many disparate systems. In 2008, the agency attempted to modernize these systems but experienced significant challenges. In 2015, FEMA initiated a new endeavor (the GMM program) aimed at streamlining and modernizing the grants management IT environment.\nGAO was asked to review the GMM program. GAO's objectives were to (1) determine the extent to which FEMA is implementing leading practices for reengineering its grants management processes and incorporating needs into IT requirements; (2) assess the reliability of the program's estimated costs and schedule; and (3) determine the extent to which FEMA is addressing key cybersecurity practices. GAO compared program documentation to leading practices for process reengineering and requirements management, cost and schedule estimation, and cybersecurity risk management, as established by the Software Engineering Institute, National Institute of Standards and Technology, and GAO.\n\nWhat GAO Found\n\nOf six important leading practices for effective business process reengineering and information technology (IT) requirements management, the Federal Emergency Management Agency (FEMA) fully implemented four and partially implemented two for the Grants Management Modernization (GMM) program (see table). Specifically, FEMA ensured senior leadership commitment, took steps to assess its business environment and performance goals, took recent actions to track progress in delivering IT requirements, and incorporated input from end user stakeholders. However, FEMA has not yet fully established plans for implementing new business processes or established complete traceability of IT requirements.\nUntil FEMA fully implements the remaining two practices, it risks delivering an IT solution that does not fully modernize FEMA's grants management systems.\nWhile GMM's initial May 2017 cost estimate of about $251 million was generally consistent with leading practices for a reliable, high-quality estimate, it no longer reflects current assumptions about the program. FEMA officials stated in December 2018 that they had completed a revised cost estimate, but it was undergoing departmental approval. GMM's program schedule was inconsistent with leading practices; of particular concern was that the program's final delivery date of September 2020 was not informed by a realistic assessment of GMM development activities, and rather was determined by imposing an unsubstantiated delivery date. Developing sound cost and schedule estimates is necessary to ensure that FEMA has a clear understanding of program risks.\nOf five key cybersecurity practices, FEMA fully addressed three and partially addressed two for GMM. Specifically, it categorized GMM's system based on security risk, selected and implemented security controls, and monitored security controls on an ongoing basis. However, the program had not initially established corrective action plans for 13 medium- and low-risk vulnerabilities. This conflicts with the Department of Homeland Security's (DHS) guidance that specifies that corrective action plans must be developed for every weakness identified. Until FEMA, among other things, ensures that the program consistently follows the department's guidance on preparing corrective action plans for all security vulnerabilities, GMM's system will remain at increased risk of exploits.\n\nWhat GAO Recommends\n\nGAO is making eight recommendations to FEMA to implement leading practices related to reengineering processes, managing requirements, scheduling, and implementing cybersecurity. DHS concurred with all recommendations and provided estimated dates for implementing each of them."}
{"id":"gao_GAO-18-475","pid":"gao_GAO-18-475_0","input":"\tBackground\n\n\t\tThe Workforce Innovation and Opportunity Act (WIOA)\n\nWIOA was designed, in part, to deliver a broad array of integrated  services to customers of the public workforce system, including  individuals seeking jobs and skills training, and employers seeking skilled  workers. WIOA authorizes six core programs, including youth formula  grants, with four programs administered by DOL and two by Education,  as described in table 1. Program participants, including youth, may co- enroll in multiple WIOA core programs, such as the adult education or  vocational rehabilitation programs, if they meet eligibility requirements for  each. The core programs are generally required to report on common  performance indicators, such as how many workers entered and retained  employment, their median wages, whether they attained credentials, and  their measurable skill gains. The law also includes new requirements for  state workforce development plans to unify workforce strategies across  the six core programs.\nMost provisions of WIOA became effective on July 1, 2015, superseding  the Workforce Investment Act (WIA) of 1998. The Departments of Labor  and Education issued the final regulations in August 2016, just after the  close of the first full WIOA program year. Figure 1 shows the timing of key  actions in implementing WIOA and timeframes governing state and local  spending of initial youth grants. As illustrated, compliance is determined  over the period for which funds are available, rather than on a program  year basis. States have 3 years after the start of the program year to  expend each program year\u2019s youth funds, and local areas have 2 years.\nWIOA also emphasized improving opportunities for populations with  significant barriers to employment, including out-of-school youth. We  have previously reported that disconnected youth (those neither in school  nor employed) may experience challenges successfully transitioning to  adulthood. Disconnected youth are more likely than in-school youth to  have characteristics and\/or circumstances that can pose obstacles to  employment, such as a lack of stable housing or transportation, parenting  responsibilities, disabilities, limited basic skills, criminal convictions, or  lack of adult support. In addition, WIOA emphasizes work experiences for  youth\u2014both in- and out-of-school youth\u2014including paid and unpaid work,  pre-apprenticeships, and internships.\nTo ensure states and local areas emphasized services to out-of-school  youth and youth work experiences, WIOA introduced new expenditure  requirements for each. WIOA also changed the age range of eligible  youth (see table 2). However, DOL has broad authority to issue waivers  to individual states or local areas, exempting them from meeting certain  requirements, including those relating to expenditures.\nIn addition to the new spending requirements and eligible age range,  WIOA changed the services local areas are required to make available to  youth, as appropriate. Specifically, 2 of WIA\u2019s 10 program services were  combined, and 5 new services were added, bringing the total to 14 (see  table 3). In general, WIOA\u2019s youth program elements support career  readiness as a youth transitions from basic educational attainment to  occupational skills training and work opportunities, then to post-secondary  education or unsubsidized employment.\nSince 2011, total youth formula grants to states\u2014under WIA and then  WIOA\u2014have fluctuated but declined overall, with $700,044,855 being  allotted to the 50 states and the District of Columbia for all WIOA youth  activities in PY2017 (see fig. 2). Under WIOA Title I, DOL administers  youth grants to states based on a formula reflecting the distribution of  unemployment and economically disadvantaged youth. In general,  states allocate funds to local areas based on a similar formula. In  addition to changes in federal grant funding, fluctuations in unemployment  and estimates of disadvantaged youth affect annual state and local  grants.\nGovernors establish state Workforce Development Boards that help guide  implementation of WIOA by developing state plans, crafting statewide  WIOA policies, and assisting local boards in the planning and delivery of  WIOA services, among other duties. The state Boards must include a  majority share of leaders in the state business community as well as  representation from the state legislative and executive leadership, and  labor organizations, and may include community-based organizations and  service providers. Local Workforce Development Boards operate under  state Boards and perform several roles, including developing local WIOA  plans, contracting with service providers, providing oversight of youth  activities, and selecting American Job Center operators.\nAs was the case with WIA, WIOA provides significant flexibility to states  and local areas to design and operate their WIOA programs to best suit  local needs. For example, some local Workforce Development Boards  provide direct services to youth while others contract with one or more  organizations to provide the WIOA youth program services. In addition,  services can be provided to youth at the workforce area\u2019s American Job  Center, a separate youth center, service providers\u2019 offices, other locations  in the community, or a combination of these sites. Local service providers  work with each youth participant to develop an individual service strategy,  which is a combination of services connected to a career pathways plan  and tailored to the youth\u2019s needs. Local workforce areas generally must  make available all 14 program services, though youth are not required to  participate in all services.\n\n\tStates and Local Workforce Areas Report Progress in Meeting Spending Requirements\n\n\t\tMost States Appear on Track to Meet Targets for Spending on Out-of- School Youth\n\nComplete data on the spending of youth grants allocated to states for the  first 2 program years of WIOA (PY2015 and PY2016) were unavailable  during our review, but available data states reported to DOL showed a  growing number of states were on target to expend at least 75 percent of  their youth formula grant on out-of-school youth (see fig. 3). Nationally, as  of September 30, 2017, states reported spending over 99 percent of their  WIOA youth grant program funds allotted in PY2015, and 36 states had  spent 75 percent or more of their expended funds on out-of-school youth (with an additional 13 states having spent between 70 and 75 percent).  Twenty-nine states reported having spent all of their PY2015 funds, and  of these states, 21 had spent 75 percent or more on out-of-school youth.  The remaining 8 fell short of the level generally required by statute.  However, for PY2015 specifically, DOL officials told us that the agency  used its transition authority to modify the requirement. For that program  year, DOL allowed states that could not meet the 75 percent requirement  to spend a minimum of 50 percent of funds on out-of-school youth (rather  than 75 percent) if they spent at least 10 percentage points more on  these youth than in the previous program year. Applying this standard to  DOL data on state spending, all but two states were on track to meet the  modified requirement for PY2015 funds.\nAvailable DOL data also suggest most states are making progress in  meeting the out-of-school youth spending requirement for their PY2016  youth funds. The rate at which states are spending their PY2016 funds  varies, but as of September 30, 2017, states had collectively spent  approximately 77 percent of their allotments. As of that date, 48 states  had spent 75 percent or more of their expended funds on out-of-school  youth. Only 4 states reported they had spent all of their PY2016 funds,  and of those 4, all had spent more than 75 percent on out-of-school  youth. States that have not yet spent all of their youth funds nor met the  requirement to spend 75 percent of their PY2015 or PY2016 funds on  out-of-school youth may still do so by the end of the 3-year period, ending  June 30, 2018 for PY2015 funds, and June 30, 2019 for PY2016 funds.  Conversely, states that are currently at or above the 75 percent level, with  substantial funds left to spend, may fall below that level by the end of the  3-year spending period.\nPast federal emphasis on serving out-of-school youth, and many states\u2019  experience in doing so, may partially account for states\u2019 progress in  meeting WIOA\u2019s higher spending targets for this population. As far back  as 2002, DOL guidance had emphasized serving out-of-school youth.  Even before WIOA went into effect, many states were exceeding the  existing WIA requirement to spend 30 percent of their WIA youth grant  funds on out-of-school youth, with nationwide levels exceeding 50 percent  since 2012 (see fig. 4). State workforce board officials in the three states  we visited reported that they did not need to make significant changes to  their youth programs to meet the new spending requirement. For  example, in Texas, officials told us that the state had anticipated the  increased focus on out-of-school youth for a number of years. In  response, in the years before WIOA, it began steering more of its WIA  youth grant funds toward serving out-of-school youth. According to this  state official, in PY2006, Texas increased the percentage of youth grant  funds that local areas must spend on out-of-school youth from 30 (the  requirement under WIA) to 45 percent, and raised the requirement again  in PY2007 to 65 percent.\n\n\t\tLocal Areas Reported Being on Track to Meet WIOA Spending Requirements\n\nSimilar to states, most local workforce areas we surveyed reported that  they were on track to meet the requirement that they spend 75 percent of  their WIOA youth grant funds on out-of-school youth. They also reported  they were making progress on the requirement that they spend 20  percent of their funds providing work experience to all youth served by  WIOA (in- and out-of-school).\nWith respect to the out-of-school youth spending requirement,  approximately 76 percent of survey respondents reported spending at or  above the required level, and 3 percent reported spending below it.  The majority of local workforce areas reported that meeting the spending  requirement on out-of-school youth was not challenging or only slightly  challenging. Likewise, staff in several local workforce development  areas we visited told us that meeting the out-of-school youth spending  requirement was not a significant challenge. An estimated 15 percent of  those surveyed reported that meeting the spending target for out-of- school youth in PY2016 was very or extremely challenging.\nA majority of local workforce areas we surveyed also reported they were  on track to meet the requirement to spend 20 percent of local WIOA youth  grant funds on work experiences for both in- and out-of-school youth.  While work experience was a youth program element under WIA,  spending a specific percentage of WIOA funds on the service is a new  requirement and applies only to local areas and not to states. Based on  our survey, we estimate that approximately two-thirds of local workforce  areas reported spending 20 percent or more of their PY2016 youth funds  on work experiences (see fig. 5), but around 11 percent reported  spending less.\nIn general, many local workforce areas reported that it was not  challenging or only slightly challenging to meet WIOA\u2019s spending  requirements for serving out-of-school youth and the provision of work  experiences. However, an estimated 15 percent reported that meeting the  out-of-school youth requirement was very or extremely challenging, and  around 21 percent reported the same about the work experience  requirement (see fig. 6).\nUnder WIOA, states are responsible for monitoring local areas\u2019 progress  in meeting youth spending requirements. DOL officials we interviewed  told us that states collect local area expenditure data, but those data are  not transmitted to DOL except in the aggregate. The three states we  visited confirmed that they collect local expenditure data from local areas  using their own individual state reporting systems and then aggregate  those data at the state level.\nDOL takes steps to determine whether states are carrying out their  monitoring responsibilities, including conducting on-site visits to state  offices. However, DOL officials said regional offices do not have the  capacity to conduct on-site monitoring in each state every year. To make  up for this, they conduct risk-based monitoring based on quarterly desk  reviews that can alert them to expenditure issues at the state level.  According to the officials, DOL regional offices typically conduct on-site  monitoring of approximately one-third of their states each year. The  officials said that during on-site monitoring, regional office staff may elect  to review a sample of local area expenditures and the monitoring  activities the state has taken to ensure local targets are being met.\nAlso, to supplement their monitoring activities, DOL officials said they rely  on regional offices\u2019 ongoing interactions with states to stay abreast of state and local experiences and challenges. They said staff from regional  offices maintain a dialogue with state officials, including periodic  conference calls. As part of this communication, they said states might  inform DOL regional officials about certain local areas experiencing  challenges. DOL officials also said they hear from some local area staff  directly during national conferences.\nAs of February 2018, DOL\u2019s monitoring had thus far focused on assisting  states in overcoming challenges with WIOA requirements through  technical assistance and guidance, according to DOL officials. At that  time, the officials told us that the agency was moving to more formal  compliance monitoring and would be beginning to address state-level  non-compliance. DOL officials also told us that the agency has developed  a core monitoring guide supplement for the WIOA Youth program and  plans to publish the guide by December 2018. The tool will be used by  DOL officials in their monitoring of states, but will also be shared with  state officials to, among other things, help them organize their state-level  monitoring of localities.\n\n\tLocal Areas Reported Using a Combination of Strategies to Address the Out-of- School Youth Spending Requirement and Related Challenges\n\n\t\tLocal Workforce Areas Restricted Enrollment of In-School Youth to Help Meet the Spending Requirement for Out-of- School Youth\n\nWhile most local areas reported that their efforts to meet the out-of-school  youth spending requirement involved serving greater numbers of that  population, they also reported the need to accommodate that increase by  significantly reducing or eliminating services provided to in-school- youth. In addition to the estimated 71 percent of local areas reporting  that the number of out-of-school youth receiving services had increased  since the enactment of WIOA, an estimated 80 percent reported that the  number of in-school youth receiving services had decreased. An  estimated 51 percent said they had reduced outreach and services to in- school youth to a great or very great extent, with another 22 percent  saying they had moderately reduced outreach or services to these youth.  Notably, an estimated 35 percent of local areas reported that they had  stopped enrolling in-school youth in their WIOA youth program entirely.\nAvailable DOL WIOA program participant data reflects this shift, as the  number of in-school youth served since PY2014\u2014the program year prior  to when WIOA went into effect\u2014through PY2016 has dropped from just  over 97,700 to around 38,900, or approximately 60 percent (see fig. 7).  During the same period, the levels of out-of-school youth served rose  from nearly 97,200 to around 108,800, or approximately 12 percent.  DOL officials and some local workforce area staff reported that it is  generally more expensive to serve out-of-school youth, in part because  they often require more services than other youth. Although DOL does  not have current data on cost per participant, DOL\u2019s Employment and  Training Administration\u2019s fiscal year 2017 Congressional Budget  Justification notes that WIA data indicate that out-of-school youth may  cost approximately $1,000 more per youth served than in-school youth.\nSurvey respondents most frequently reported that the reduction in  services to in-school youth was the most adverse consequence they  observed as a result of the new WIOA youth requirements. Similarly,  WIOA practitioners we interviewed during our local area site visits  expressed concerns about reducing services for in-school youth. Several  told us that local in-school youth were no longer receiving the level of  services they might need and that the shift might lead to more youth  becoming disconnected from school and employment. Staff in one of  the more rural workforce areas we visited noted that there are often  insufficient services available to replace these lost WIOA services.  Without a presence in the schools, staff in one workforce area told us  they were concerned that they were not reaching youth at the right time  and that more youth might become disconnected as a result. Some  survey respondents made similar points, reporting that youth are more  likely to become disconnected without WIOA services available in  schools. In addition, workforce development board staff in one local area  we visited told us that the WIOA definition of out-of-school youth has  limited their ability to provide services to youth who need them if they  have enrolled in community college but are not yet attending classes.\nDOL has provided technical assistance identifying other federal programs  available for assistance to in-school youth, but we did not determine the  extent to which these resources were being used in the local areas we  visited. One major urban area we visited had managed the program\u2019s  transition toward serving a larger proportion of out-of-school youth  through a city-wide committee established by the mayor. According to  workforce development board staff, this committee works with the  workforce development board and other community partners (e.g., civic,  business, and philanthropic groups) and has helped develop an  overarching strategy to assist youth that did not exist prior to WIOA.\n\n\t\tTo Address Challenges, Local Workforce Areas Have Increased Recruiting Efforts, Strengthened Partnerships, and Expanded Services\n\nAs local areas have worked to meet the new out-of-school youth  spending requirement, they report applying other strategies to address  certain challenges associated with serving that population in greater  numbers. While many local areas reported that one of the main benefits  of WIOA was its focus on hard-to-serve youth and those in greatest need  of services, survey respondents and local workforce area staff and  service providers reported that it has forced them to make some  adjustments in how they administer their local youth programs,  particularly in their approach to recruitment, local partnerships, and  service offerings.\nChallenges Associated with WIOA\u2019s Shift toward Out-of-School  Youth  In response to our survey, local area staff cited a number of specific  challenges related to recruiting, retaining, and serving out-of-school youth  under WIOA (see fig. 8).\nTransportation: A lack of transportation can prevent youth from getting  to and from WIOA-funded educational programs, service providers,  training, and work, and it was among the most significant barrier to  employment cited by survey respondents. An estimated 71 percent of  local workforce areas reported that transportation barriers were  moderately or very difficult, and an additional 18 percent said they were  somewhat difficult. Local service providers also told us that the lack of  transportation could be particularly acute in rural areas without public  transportation, such as bus systems.\nLocating and Recruiting: Finding out-of-school youth to enroll in WIOA- funded services was a significant challenge cited by local workforce  areas, with an estimated 59 percent reporting that locating out-of-school  youth was moderately or very difficult and another 21 percent reporting  that it was somewhat difficult. Some local workforce area staff and service  providers told us that many out-of-school youth move frequently, making  it difficult to find and track them. In some locations, workforce area staff or  service providers reported that youth typically do not \u201cwalk-in\u201d to  American Job Centers seeking services or congregate in the same places  as in-school youth. Staff in one rural area told us that service providers  had to recruit constantly. But even in urban areas, locating and recruiting  out-of-school youth can be difficult. In fact, service providers in one urban  workforce development area we visited told us that recruiting out-of- school youth is by far their greatest challenge. \u201cLife barriers crop up once engaged and can  take the young adults off course. The system  must be flexible to allow these young adults  time to leave and come back multiple times.\u201d\nRetaining and Serving: Convincing out-of-school youth to stay in a  WIOA program is also challenging for workforce development areas and  service providers. In our survey, retaining youth was cited as moderately  or very difficult by an estimated 54 percent of workforce development  areas, with another 31 percent reporting it was somewhat difficult. Some  survey respondents and workforce development area staff and service  providers cited current low unemployment rates, which make it easier for  youth to find jobs without completing WIOA work experiences or services,  and frequent moves by out-of-school youth, sometimes far from work or  training locations, as reasons retaining these youth can be difficult. \u201cMany of the out-of-school youth have  significant barriers that they have faced their  entire life. We have to address a series of  barriers with the individual before we can  even begin to think about career, training,  education, or work experience.\u201d\nAddressing Personal Barriers: Addressing the personal barriers often  faced by out-of-school youth was also a key challenge cited by local  workforce areas. According to an estimated 44 percent of local workforce  areas, addressing obstacles faced by this population such as  homelessness or having a criminal history is moderately or very difficult,  with another 30 percent reporting that it is somewhat difficult. Multiple  survey respondents noted that because of their multiple barriers, out-of- school youth require more frequent contact and intensive case  management services. During our interviews in local workforce areas,  staff and service providers told us that out-of-school youth tend to face  more of these types of obstacles than in-school youth. They told us these  youth may have disabilities, such as diagnosed or undiagnosed mental  health needs. In addition, they may have children and lack childcare, be  involved in the child welfare or juvenile justice system, or experience  homelessness. Out-of-school youth also often lack basic academic or job  readiness (\u201csoft\u201d) skills, and sometimes are not proficient in English or  face other barriers to employment. Some survey respondents also noted  that the needs of older out-of-school youth are often different from those  of younger youth. For example, they may have multiple children or  housing needs and thus require more supportive services.\nStrategies Local Areas Have Applied to Address Challenges  To mitigate challenges in shifting spending to out-of-school youth, local  workforce area staff and service providers said that they have increased  their recruiting efforts, developed new partnerships, strengthened existing  partnerships, and in some cases, expanded services.\nIncreased Recruitment Efforts to Locate Out-of-School Youth: An  estimated 51 percent of local workforce areas said they are spending a  larger percentage of their WIOA youth grant funds on recruiting compared  to what they spent under WIA. According to our survey, the top  approaches workforce development areas use to recruit out-of-school  youth involve seeking referrals from community-based organizations,  family and friends, and other agencies. They also include recruiting in  person and in places throughout the community where out-of-school  youth tend to congregate. Advertising WIOA youth programs using fliers  and social media were also cited as being used to a great or very great  extent by about 50 percent of local workforce areas (see fig. 9).\nIn addition to survey respondents, those we spoke to in the local  workforce development areas we visited described how they have  increased their recruitment efforts of out-of-school youth since the  enactment of WIOA. For example, one local workforce development  board used its funds to hire an additional staff person to assist a service  provider with its recruitment efforts. Service provider staff from across the  local areas we visited said they spend time out in the community where  out-of-school youth congregate much more now than under WIA when  they served more in-school youth who were easier to find. They told us  they recruit at malls, barbershops, and other places where out-of-school  youth are likely to gather. One service provider told us they have regular  hours at a popular major-chain coffee shop where they meet with youth  and complete enrollment paperwork rather than relying on youth coming  to an American Job Center or the service provider\u2019s office.\nAccording to our survey, an estimated 70 percent of local workforce areas  receive referrals from parents, siblings, friends, and other community  members to a great or very great extent. These word-of-mouth and peer- to-peer recruiting strategies were also frequently cited as being very  successful by local workforce area staff and service providers we  interviewed. For example, staff in one local workforce area told us that  one of their most successful recruitment efforts has been using or  employing youth who had experienced success in the program to help  enroll others in the local community who could benefit from WIOA  services. They reported these youth recruiters knew where to find out-of- school youth in need of services and can more easily establish  relationships with these youth, both in person and via social media. Other  approaches used by the local areas we visited included seeking referrals  from other community-based organizations and agencies, placing  information fliers in high school graduation packets, attending job fairs  and other community events, using social media or radio ads, going door- to-door in public housing, using mobile recruiting units, and placing fliers  for WIOA services in grocery bags or attaching them to water bills.\nStrengthened Partnerships: Local workforce areas report strengthening  partnerships with other WIOA programs and organizations to enroll and  serve out-of-school youth. Approximately 60 percent of local workforce  areas reported developing new partnerships or strengthening  relationships with other WIOA core programs. Specifically, approximately  two-thirds reported that they are co-enrolling WIOA youth with other  WIOA core programs. Similarly, local workforce areas reported  developing new partnerships or strengthening relationships with state and  local government agencies, as well as community-based organizations.  For example, some local workforce development area staff and local  service providers we interviewed told us they had strengthened  relationships with child welfare, juvenile justice, vocational rehabilitation,  community colleges, and adult education programs.\nSome service providers focus on delivering services to a specific  population of youth, such as youth involved in the foster care or justice  system. For example, staff at one local workforce board told us that one  of its local service providers ran a program in a juvenile justice facility to  provide services to incarcerated youth. Some local workforce areas also  reported co-enrolling youth in non-WIOA programs such as Temporary  Assistance for Needy Families (TANF). In addition, an estimated 80  percent of local workforce areas reported that they had created new  partnerships or strengthened relationships with employers. Other ways  that local workforce areas reported strengthening partnerships included  strengthening coordination across youth serving programs by improving  communication (an estimated 78 percent), co-locating programs (47  percent), and integrating information technology systems (21 percent).  Several survey respondents said that new or strengthened partnerships  were one of the primary benefits of the WIOA program and that referrals  from these partners are an important way to recruit out-of-school youth for  the WIOA youth program.\nExpanding or Intensifying Services: To encourage enrollment or retain  and serve of out-of-school youth, local workforce areas reported that they  had expanded the variety or intensity of the youth services they provide.  For example, workforce areas reported that they had expanded  occupational training (59 percent), adult education (55 percent), and the  development of career pathways (63 percent). In addition, approximately  46 percent of local workforce areas reported they had expanded their  supportive services and approximately one-third of workforce areas  reported that they spent a higher percent of their youth grant funds on  supportive services than they did under WIA. For example, local  workforce area staff or service providers we interviewed in three local  areas (in two different states) told us that they had used WIOA funds to  pay for the care of children of enrolled youth. Staff at another local  workforce development area we visited reported intensified focus on staff  training in trauma-informed care and emphasized the need to assume  trauma among program participants. One WIOA service provider we  interviewed explained that keeping more transient out-of-school youth  motivated and enrolled required more intensive services and more  interaction with staff until they learn to become more self-sufficient. She  also emphasized that linking occupational training to an employer is vital  for success with out of school youth.\nReducing Transportation Barriers: In addition to these overall  strategies, some local workforce area staff and service providers we  spoke to told us they had taken steps to address transportation obstacles,  which were widely cited as especially challenging. For example, local  workforce staff in one local area we visited reported supplying bus passes to help youth participants get to their work experience jobs or training in  areas where bus systems existed. One service provider staff member in a  more rural area told us his organization used two vans to transport youth  and another told us that his organization had provided bicycles to out-of- school youth. In one location we visited, a community college that  partners with the WIOA program provides shuttle bus services between  its various campuses and has expanded this service to include  transportation to various partners, to and from job sites, and to and from  credentialing exams. The representative from this community college told  us that this approach is working well but needs to be further expanded. A  service provider in another local area we visited told us they have  developed some portable training modules that can travel across the local  area, alleviating some of the transportation issues out-of-school youth  face. These modules help train students in more remote areas in fields  such as heating, ventilation, and air conditioning (HVAC), electrical work,  and plumbing.\nTo help states and local areas implement their WIOA programs and  overcome challenges, DOL has developed and provided a significant  amount of guidance and technical assistance in the form of Training and  Employment Guidance Letters, webinars, conferences, and online  resources; all of which state and local officials generally reported as being  helpful. Officials in the three states we visited stated that DOL\u2019s  guidance and technical assistance had been helpful and that DOL\u2019s  Employment and Training Administration regional offices had been  responsive to their needs. While local workforce development board staff  we interviewed in several local areas told us that they relied primarily on  guidance from their state, they also reported using DOL guidance and  technical assistance and agreed that it was generally helpful. About half  of local workforce area survey respondents reported that DOL guidance  and technical assistance are either extremely or very helpful. When  asked what topics or issues related to WIOA youth needed additional or  clearer guidance, 54 out of 106 (approximately 51 percent) survey  respondents did not provide any examples. Of those that did respond, the  most commonly cited areas for additional guidance included performance  measures and work experiences. However, these topic areas were only  mentioned by 14 and 9 of the survey respondents, respectively.\n\n\tLocal Areas Used Various Strategies to Meet the New WIOA Work Experience Requirement, Yet Many Reported Challenges\n\n\t\tLocal Areas Expanded Work Experience Opportunities for Youth and Frequently Paid for Youth Salaries in Order to Meet the New Work Experience Requirement\n\nMany local workforce areas we surveyed have increased their emphasis  on work experiences for youth under WIOA, with paid employment being  the most common type of opportunity provided to participants. While work  experience was a youth program element under WIA, since the  enactment of WIOA, an estimated 82 percent of local workforce areas  reported they had expanded work experience opportunities, and 59  percent of local workforce areas reported they provided work experiences  to a greater percentage of youth participants than in the years prior to  WIOA. Year-round paid employment and summer paid employment were  the most common work experience opportunities that local workforce  areas reported providing to a great or very great extent (an estimated 69  percent and 42 percent, respectively). In contrast, pre-apprenticeship, on- the-job training, job shadowing, and internship opportunities were less  commonly provided (see fig. 10).\nWIOA youth participated in several types of work experiences with  employers in numerous occupational fields, local workforce areas  reported, though some were more common than others. Since the  enactment of WIOA, an estimated 80 percent of local areas developed  new or strengthened existing partnerships with employers. Through  partnerships with employers youth participated in work experiences in a  wide range of fields, the most common being jobs involving retail,  customer service, and hospitality. Healthcare and medical-related jobs  were also common, as were jobs in manufacturing. These occupations  were also associated with the three most common career pathway plans  developed for participants, according to the local workforce areas we  surveyed. Several local staff members and survey respondents said they  try to align youth work experiences with the youth\u2019s interests and career  pathway plan. However, many survey respondents noted that finding a  good match can be difficult.\nSeveral workforce development board staff members and service  providers across the three states we visited told us they had a positive  opinion of work experiences and thought they were beneficial for youth.  They praised work experiences for reasons like helping youth learn  valuable soft skills, helping them realize the value of work, and improving  employment outcomes. An American Job Center staff member in one  local area we visited told us how important work experiences were for  letting youth explore their interests and \u201ctry out\u201d a new field before  investing program funds in a related training program, only for the youth  to decide later they did not like that field. Staff at two other centers  described similar instances where participants placed in teaching,  medical, and veterinarian positions reconsidered their decisions after the  work experience exposed them to some of less appealing aspects of the  occupations.\nPayment of participants\u2019 salary is the dominant strategy local workforce  areas said they are using to meet the new WIOA work experience  spending requirement. Specifically, based on our survey an estimated 81  percent of local areas reported that to a great or very great extent they  relied on paying a youth participant\u2019s salary to meet the requirement (see  fig. 11).\nOur survey also indicates that when local areas paid a participant\u2019s work  experience salary, 88 percent often or very often paid the entire salary  with youth program funds, far outpacing other payment structures (see  fig. 12). Although there is no limit on the length of the paid employment  experience, DOL officials told us the typical length is around 6 to 8 weeks.  In one local area, service provider staff told us that paying a youth\u2019s entire  salary encourages businesses to take a chance on a youth when they  otherwise might not. DOL officials also told us that out-of-school youth, in  particular, are a harder population to serve and many employers are not  willing to take a risk in hiring them without the full salary paid through  WIOA. However, based on our survey, an estimated 42 percent of local  areas have at least sometimes arranged an agreement that part of a  participant\u2019s salary be paid by the employer.\n\n\t\tLocal Areas Have Taken Steps to Address a Variety of Challenges That Inhibit Their Ability to Provide Work Experiences to Youth\n\nWIOA requires local areas spend at least 20 percent of local youth funds  on work experience for in-school and out-of-school youth. Most local  workforce areas we surveyed reported meeting that requirement, with  an estimated 42 percent reporting it was slightly or not at all challenging  to meet it in PY2016. However, another 34 percent found it moderately  challenging, and 21 percent reported that it was very or extremely  challenging. As shown in figure 13, local areas reported experiencing a  variety of challenges as they attempted to meet the new spending  requirement.\nParticipant Challenges: The fact that youth participants may be less  prepared for employment than older participants posed a challenge for  workforce area staff as they worked to address WIOA\u2019s new emphasis on  youth work experiences. Overall, we estimate that 38 percent of local  areas found it moderately or very difficult to meet the spending  requirement because youth were not ready for a work experience. An  estimated 31 percent of local workforce areas reported it was moderately  or very difficult to meet the new requirement as a result of youth not  completing their work experiences because they failed to live up to  employer expectations. Several local WIOA program staff members told  us that youth often have no prior work experience, can lack the soft skills  needed for work, and may face other barriers to employment that can  complicate success in a work experience. Some local staff we interviewed  noted that many youth require substantial preparation before, and support  during, a work experience in order to succeed. Perhaps as a  consequence, about half (48 percent) of local workforce areas provided  job readiness training to youth to a great or very great extent in order to  prepare them for work experiences. In addition, some local service  providers we met with told us they provided orientations to employers in  order to manage expectations and prepare them to employ WIOA youth.\nFurther, local service provider staff members told us they lend ongoing  support to both youth participants and employers throughout the work  experience period. This included check-ins at employment sites,  mediating employee\/employer conflicts, and addressing employer  concerns about a youth\u2019s performance to ensure youth meet employers\u2019  expectations.\nEmployer Reluctance: Employers are crucial to a local workforce area\u2019s  ability to provide work experiences to youth, yet many local areas have  struggled to develop effective employer relationships that foster such  opportunities. Notably, identifying employer partners does not appear to  be the primary challenge, as an estimated 55 percent of local workforce  areas reported little or no difficulty doing so. Yet, the existence of  employers may not readily yield work experiences, as approximately 35  percent of local areas reported it was moderately or very difficult to align  youth interests with available work experiences. Nearly the same  proportion reported similar difficulty generating work experience  opportunities because employers may perceive that providing those  experiences would come with additional burdens. For example, service  provider staff in two local areas told us some employers expressed  concern about whether they would be responsible for workers\u2019  compensation should a youth be injured. Staff in other areas told us that  large companies in particular worry about potential administrative  burdens, such as getting approval from corporate headquarters for a  WIOA-sponsored work experience, or incorporating a participating youth  into their payroll system.\nSome of the additional administrative burden perceived by employers  may be associated with their general concern about the job-readiness of  youth enrolled in WIOA programs. Around 31 percent of local areas  reported it was moderately or very difficult to meet the work experience  spending requirement because employers were reluctant to work with  WIOA youth participants. One local employer we interviewed said out-of- school youth, in particular, may require additional help with  communication, professional presentation, punctuality, and interpersonal  skills, which can require additional personal attention. Many local service  provider staff and survey respondents described the numerous barriers to  employment often faced by out-of-school youth. One service provider  said, as a result of these barriers, employers may be less receptive to  provide work experiences for them. A survey respondent voiced a similar  concern, saying employers may think youth with significant barriers are  \u201ctoo difficult to manage and\/or retain in employment.\u201d\nIn light of employers\u2019 possible reluctance to provide work experiences for  youth, our survey shows many local workforce areas focused more  resources toward developing employer partnerships. Specifically, we  estimate that 51 percent of local areas reported that they increased their  spending on business\/employer relations under WIOA. Service providers  in two local areas we visited, as well as many survey respondents,  reported they had hired new staff, or were utilizing existing staff, to  coordinate with employers. In one local area, workforce board staff told us  that even with an established community presence and decades of  experience, they still had to convince potential employer partners that  their youth program staff would do everything in their ability to make work  experiences easier for the employer.\nOther Challenges: Youth interest in work experiences may also vary  according to current life circumstances, especially the need for immediate  income. About a quarter (23 percent) of local areas reported youths\u2019 lack  of interest in obtaining WIOA-funded work experiences made meeting the  spending requirement moderately or very difficult. As one survey  respondent reported, \u201cMany youth in this program simply want and need  a job.\u201d This sentiment was echoed by service providers in all three states  we visited, who said the need for income can inhibit youths\u2019 interest in a  temporary work experience opportunity.\nAlso, during our interviews with local area service providers we were told  that challenges associated with the WIOA work experience component  may be more acute in rural areas. As with other WIOA components,  such as education and training, the availability of transportation can  determine whether a youth can participate in WIOA-funded work  experiences. For example, service providers we interviewed in Texas  stressed how a lack of transportation, especially in rural areas where  employers may be more distant from a youth\u2019s home, can prevent youth  from getting to and from a work site. In addition, a lack of employers in  rural areas can hinder the creation of work experience opportunities. One  service provider we interviewed said that some rural towns in his local  area \u201chave little more than a gas station and a school,\u201d and the lack of  local employers significantly limits work experience opportunities for  youth. In such cases, arranging an opportunity in an alternate location  would also likely require that the youth have a means of transportation to  travel to the job site.\n\n\tAgency Comments\n\nThis report does not include any recommendations. We provided a draft  of this report to the Secretaries of Labor and Education for review and  comment. Both agencies provided technical comments which we  incorporated as appropriate.\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 send copies to the appropriate  congressional committees, the Secretaries of Labor and Education, and  other interested parties. In addition, the report will be available at no  charge on the GAO Web site at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-7215 or gurkinc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines the implementation of the Workforce Innovation and  Opportunity Act (WIOA) youth program in states and local workforce  areas with respect to the new requirements that 75 percent of youth funds  be expended on out-of-school youth and 20 percent of youth funds be  expended on work experiences. In particular, this report examines: (1)  what is known about states\u2019 and local areas\u2019 progress in meeting the  WIOA spending requirements for serving out-of-school youth and  providing youth with work experiences; (2) how local areas are  addressing WIOA\u2019s emphasis on serving out-of-school youth, and any  challenges they have encountered; and (3) how local areas are  addressing WIOA\u2019s emphasis on youth work experiences and any  challenges they have encountered.\nTo answer all of our research objectives we reviewed relevant federal  laws, regulations, and guidance. We also employed other methods to  answer our audit objectives, as described below.\n\n\tAnalysis of DOL Data and Documents\n\nTo address our first objective, we analyzed Department of Labor (DOL)  state-level WIOA youth program expenditure data from program year  (PY) 2015 and PY2016, the most recent data available, for the 50 states  and the District of Columbia. We also analyzed WIA state level  expenditure data from PY2012 through PY2014. These data include the  funds allotted to each state, minus the governors\u2019 reserve for statewide  activities, which can be up to 15 percent of the total allotment. In addition,  the data include funds spent by the states on out-of-school youth, and for  PY2015 and PY2016, funds spent on work experiences. To determine  whether states appeared to be on track to meet WIOA spending  requirements, we considered the percentage of their overall funds they  had spent, as well as the percentage of their expended funds that were  spent on out-of-school youth and work experiences. Our analysis should  not be used to make conclusions about legal compliance with WIOA  requirements. To assess the reliability of these data, we interviewed DOL  officials with knowledge of the data and reviewed written responses from  the agency officials to data reliability questions. We also reviewed other  documentation related to the data. We found these data to be reliable for  the purposes of addressing our research objective. We also reviewed  DOL guidance and technical assistance materials to identify the  measures the agency is taking to help states and local areas meet  program requirements and deliver WIOA services to youth. To gather  information about the extent to which local areas are making progress in  meeting WIOA spending requirements, we collected data through our  nationally representative survey, described below.\n\n\tInterviews with DOL Headquarters and Regional Office Staff\n\nIn addition, to address this research objective, we conducted semi- structured interviews with DOL headquarters and regional office officials  to gain information on DOL\u2019s role in the implementation and  administration of the WIOA youth program, the steps the agency is taking  to monitor states\u2019 and local areas\u2019 progress in meeting program  requirements, and to assess the availability and reliability of program and  expenditure data. We spoke to three of the Employment and Training  Administration\u2019s six regional offices, selected for their timely availability  and to account for a large portion of state and territorial oversight. Among  them, these regional offices were responsible for overseeing 24 states  and 3 territories. Our review of DOL\u2019s monitoring of state oversight was  limited to aspects necessary to describe DOL\u2019s general review structure  and collection of information, if any, on local spending; we did not  comprehensively assess DOL\u2019s monitoring efforts.\n\n\tSurvey of Local Workforce Development Areas\n\nTo address each of our research objectives, we conducted a nationally  representative web-based survey of local workforce development areas  (local workforce areas) in the 50 states and the District of Columbia. We  surveyed workforce development areas because they are responsible for  overseeing local youth workforce investment activities. Our survey results  can be generalized to the entire population of workforce development  areas. Specifically, we took a stratified random sample of workforce  development areas (130 out of a universe of 543) to create estimates  about the population of all workforce development areas. To ensure that  our survey included workforce development areas located in major  population areas, in Strata 1 we included the 23 local areas serving the  20 largest metropolitan areas in the United States with a workforce  development board within the city, as identified by U.S. Census Bureau  data. In addition, we included all 11 states in which there is only a single  workforce development board that oversees WIOA activities for the entire  state. There were 33 total workforce development areas in this strata.  Strata 2 included 97 other randomly selected workforce development  areas across the country. Each workforce development area was  weighted in the analysis so our survey would be representative of the  entire universe of workforce development areas.\nWe conducted the survey from November 15, 2017 through January 31,  2018. We emailed our survey to the executive director of each workforce  development area and asked questions about changes the area has  made in response to the enactment of WIOA, challenges the workforce  area has faced in meeting WIOA requirements related to serving out-of- school youth, and the adequacy of federal guidance and technical  assistance, among other topics. The survey contained a mix of closed- ended and open-ended items. The survey\u2019s weighted response rate was  82.3 percent (81.5 percent unweighted), with 106 of 130 workforce areas  surveyed responding. A small number of items had higher non-response  rates; we note this in the text when the rate of non-response is material.  All closed-ended questions were weighted; however, open-ended  questions were analyzed without weighting. Open-ended items generally  received fewer responses than closed-ended questions.\nBecause we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample\u2019s results as a 95 percent confidence interval (e.g., plus or minus  10 percentage points). This is the interval that would contain the actual  population value for 95 percent of the samples we could have drawn. As  a result, we are 95 percent confident that each of the confidence intervals  in this report will include the true values in the study population. All  percentage estimates in this report have a margin of error of plus or  minus 10 percentage points or fewer, unless otherwise noted.\n\n\tState Interviews and Local Site Visits\n\nTo collect more detailed information about WIOA implementation at the  state and local levels than our survey allowed, we conducted semi- structured interviews of state and local officials, as well as WIOA service  providers, and partners, in three states. For our state-level interviews we  selected three states primarily based on two criteria:  1) Proportions of disconnected youth at or above the median for  all states.  2) WIOA state youth grant allotment for PY2016 at or above the  median for all states.\nSixteen states met both criteria. From those 16 states, we selected 3 that  ensured diversity across DOL Employment and Training Administration  regions and provided a mix of states with large percentages of  disconnected youth and large state allotments. Based on this process we  selected Arizona, Michigan, and Texas. In aggregate, these 3 states  received approximately 12 percent of total PY2016 WIOA Youth funds.\nIn each of the three states we selected, we visited three separate local  workforce development areas, for a total of nine local areas. For our local  workforce development area site selection we considered a number of  factors, including disconnected youth rate data, input from state officials,  and logistical feasibility. We also selected workforce development areas  that would provide a mix of urban and rural areas. Specifically, we  analyzed data on the percentage of disconnected youth at the county or  metro area level and selected local areas with relatively high percentages  of disconnect youth. To ensure that we selected workforce areas that  would provide both urban and rural perspectives, we relied on county  classifications by the U.S. Census Bureau. As we narrowed the list of site visit candidates, we reviewed the local area strategic plans published  on the state workforce board\u2019s website to gain additional insight into  youth-specific programs in these areas. We also considered state  officials\u2019 input regarding workforce development areas in their states.  Lastly, in making our final selections, we considered the logistical  feasibility of traveling between local areas.\nWe held interviews with state workforce officials in these states by phone  and then conducted site visits to the three selected workforce  development areas in each of the three selected states. In the each local  area we visited, we interviewed local workforce development board staff,  including, for example, executive directors, youth program supervisors,  workforce youth specialists, community and business liaisons or business  service managers, and others. Members of the workforce development  board, in addition to board staff, participated in some of these interviews.  In addition, in these local areas we interviewed staff from American Job  Centers (one-stops), contracted youth service providers, and WIOA youth  partner organizations, such as community colleges and other educational  services providers, Job Corps, vocational rehabilitation agencies, and the  Temporary Assistance for Needy Families (TANF) program. In one of the  three states we visited, we also spoke with a small number of employers  in each local area that had provided work experiences or hired youth  through the WIOA program. These interviews were designed to obtain  information on a variety of topics related to our research objectives, such  as: how local workforce practitioners were serving out-of-school youth  through the WIOA program;  changes made as a result of the transition from WIA to WIOA;  recruitment and service delivery strategies focused on out-of-school  youth;  challenges related to implementing WIOA and meeting new WIOA  spending requirements; and  federal guidance and technical assistance.\nWe conducted this performance audit from December 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Cindy Brown Barnes (Director),  Betty Ward Zukerman (Assistant Director), David Perkins (Analyst-in- Charge), David Barish, and Kelly Turner made significant contributions to  this report. In addition, key support was provided by James Ashley,  Susan Baker, James Bennett, Stephen Betsock, Holly Dye, David  Forgosh, Laura Hoffrey, Benjamin Sinoff, Almeta Spencer, and Walter  Vance.\n\nRelated GAO Products\n\nWorkforce Innovation and Opportunity Act: Federal Agencies\u2019  Collaboration Generally Reflected Leading Practices, but Could Be  Enhanced. GAO-18-171. Washington, D.C.: February 8, 2018.\nWorkforce Innovation and Opportunity Act: Selected States\u2019 Planning  Approaches for Serving Job Seekers and Employers. GAO-17-31.  Washington, D.C.: November 15, 2016.\nWorkforce Innovation and Opportunity Act: Information on Planned  Changes to State Performance Reporting and Related Challenges,  GAO-16-287. Washington, D.C.: March 7, 2016).\nWorkforce Innovation and Opportunity Act: Performance Reporting and  Related Challenges. GAO-15-764R. Washington, D.C.: September 23,  2015.\nTransportation-Disadvantaged Populations: Federal Coordination Efforts  Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June  20, 2012.\nDisconnected Youth: Federal Actions Could Address Some of the  Challenges Faced by Local Programs That Reconnect Youth to  Education and Employment. GAO-08-313. Washington, D.C.: February,  28, 2008.","output":"Why GAO Did This Study\n\nApproximately 4.6 million youth ages 16 to 24 were neither in school nor employed in 2016. WIOA, enacted in July 2014, provides, in part, grants to states and local areas to assist youth\u2014particularly out-of-school youth\u2014in accessing employment, education, and training services. It also emphasizes the provision of work experiences to in- and out-of-school youth.\nGAO was asked to review how states and local areas are using WIOA grants to serve youth. This report examines (1) what is known about states' and local areas' progress in meeting WIOA spending requirements for serving out-of-school youth and for providing youth with work experiences; (2) how local areas are addressing WIOA's emphasis on serving out-of-school youth and any challenges, and (3) how local areas are addressing WIOA's emphasis on youth work experiences and any challenges. GAO reviewed relevant federal laws, regulations, and guidance; interviewed DOL officials; analyzed DOL state level WIOA youth program expenditure data from program years 2015 and 2016, the most recent data available; surveyed a nationally representative sample of local workforce development areas; and visited nine local workforce development areas in three states selected for their relatively large WIOA Youth funding allotments and relatively high rates of out-of-school youth.\nGAO is not making recommendations in this report. DOL and the Department of Education provided technical comments on a draft of this report, which were incorporated as appropriate.\n\nWhat GAO Found\n\nMost states reported they were on target to meet the Workforce Innovation and Opportunity Act's (WIOA) requirement to spend 75 percent of their Program Year 2015 and 2016 youth grant funding to serve out-of-school youth, according to Department of Labor (DOL) data. Because deadlines had not arrived for the spending of state youth grant allotments for these program years, compliance could not be determined. Similarly, most local areas reported they were on track to meet the out-of-school youth spending requirement, as well as the requirement that 20 percent of local youth grant funds be spent on providing work experiences to youth. Through GAO's survey, many local areas reported it was not challenging or only slightly challenging to meet the spending requirements, but some reported experiencing greater challenges (see figure). Under WIOA, DOL does not collect local expenditure information, but states must monitor local areas' compliance while DOL monitors state oversight. DOL has taken some steps to determine whether states are carrying out their monitoring responsibilities, including limited on-site monitoring and ongoing dialogue with states. According to DOL officials, the agency's monitoring of the new requirements has thus far focused on providing technical assistance and guidance, but they reported plans for more formal compliance monitoring.\nNote: All percentage estimates in this figure have a margin of error of plus or minus 10 percentage points or fewer. Percentages do not add to 100 due to rounding and because a small number of survey respondents answered \u201cdon't know\u201d or did not respond.\nLocal areas reported in GAO's survey that they used a combination of strategies to meet the WIOA spending requirement for serving out-of-school youth and to address other related challenges. For example, many local areas reported suspending enrollment of in-school-youth to help meet the requirement to spend 75 percent of youth grant funds on out-of-school youth. In addition, local areas reported having taken steps to address challenges locating, retaining, and serving out-of-school youth in their WIOA-funded programs, including increasing their recruiting efforts and strengthening partnerships with other WIOA programs, state and local government agencies, and community-based organizations.\nTo meet WIOA's 20 percent spending requirement for work experiences, local areas reported expanding work experience opportunities for youth, most commonly with temporary paid employment. An estimated 81 percent of local areas reported they paid youth participants' salaries, with most paying the entire salary. Many local areas also reported challenges, including youths' lack of job-readiness and employers' reluctance to hire WIOA participants. To address these challenges, local areas reported providing job-readiness training for youth and strengthening partnerships with employers."}
{"id":"gao_GAO-19-211","pid":"gao_GAO-19-211_0","input":"\tBackground\n\nThe appropriation and execution of DOD\u2019s base and OCO amounts is  part of the broader federal budget process. In this process, Congress, the  President, and federal agencies take a number of steps to formulate a  budget, enact appropriation acts, and execute the federal budget for each  fiscal year. A summary of the budget process is depicted in figure 1  below.\nIn DOD\u2019s budget process, the military services and defense agencies  submit a budget request\u2014known as the Budget Estimate Submission\u2014 that addresses their estimated annual funding requirements for both base  and OCO activities. In building their OCO budget requests, the military  services and defense agencies use criteria that OMB developed in  collaboration with DOD, for deciding whether items belong in the base  budget or in OCO funding requests. The services also use guidance  issued within their own organizations, as well as utilize OCO-specific  budget guidance included in DOD\u2019s Financial Management Regulation.\nCongress then takes action on the budget request and appropriates  funding for both base and OCO activities into the same appropriation  accounts, such as service-specific O&M accounts. Explanatory  statements or conference committee reports accompanying annual  appropriations acts provide congressional direction on how OCO and  base funding amounts should be obligated. However, the congressional  direction for funding is generally not legally binding. Congress also has  the discretion to make available amounts for base activities or enduring  costs through OCO appropriations, even if DOD considers such costs to  be part of the base budget. The Budget Control Act of 2011, amending  the Balanced Budget and Emergency Deficit Control Act of 1985,  imposes government-wide discretionary spending limits for fiscal years  2012 through 2021 to reduce projected spending by about $1 trillion. All  amounts appropriated to DOD are subject to limitations on discretionary  spending. Appropriated amounts designated by Congress for OCO that  would otherwise exceed the annual limits established for discretionary  spending will instead result in an adjustment to the overall spending limit  established for a particular fiscal year, and will not trigger a sequestration,  which is an automatic cancellation of budgetary resources provided by  discretionary appropriations or direct spending laws.\nUpon enactment of an appropriation, the Secretary of the Treasury issues  a warrant to federal agencies, which is an official document that  establishes the amount of moneys authorized to be withdrawn from the  central accounts that the Department of Treasury maintains. The  Treasury does not employ a process to separate OCO funding from base  funding in its role in warranting funds to federal agencies, including DOD.  After receiving budget authority, agencies make allotments, delegating  budget authority to various agency officials allowing them to incur  obligations. Agencies then disburse amounts by cash or cash equivalents  to liquidate obligations.\n\n\tDOD Components We Reviewed Use Coding and Other Control Activities to Separately Account for OCO and Base Amounts during Budget Execution\n\nThe DOD components in our review use coding and other internal control  activities to separately account for OCO and base amounts in their O&M  accounts during budget execution. To record and track OCO and base  amounts separately, the DOD components use coding in their financial  systems during the allotment, obligation, and disbursement of funds. For  example, during the allotment phase, the Army and the Defense Security  Cooperation Agency use codes in their financial systems to divide,  distribute, and track their appropriated funds into separate categories\u2014 including one for OCO and one for base. Army and Defense Security  Cooperation Agency officials stated that the separate categories are  maintained through the obligation phase. The Air Force, the Marine  Corps, and the Navy use specific codes to track OCO transactions within  multiple systems they use to allot and obligate OCO and base amounts.  For example, the Air Force uses an Emergency and Special Program  code to track and record allotments and obligations of OCO amounts within its budgeting and accounting systems. The Marine Corps uses  three-digit, alphanumeric codes called Special Interest Codes to track and  record costs associated with high-interest activities, such as OCO, during  obligation. Figure 2 describes the steps that DOD takes to separate OCO  and base amounts.\nWe identified some internal control activities that the DOD components in  our review have put into place to ensure separate accounting of OCO and  base amounts, such as controls over information processing. A variety  of control activities can be used in information processing, including  controls incorporated directly into computer applications to ensure  accuracy, as well as policies and procedures that apply to information  systems. For example, Army and Defense Security Cooperation Agency  officials stated that the financial systems they use incorporate system  controls that automatically maintain the categories of funding designated  during allotment through subsequent actions, including obligation, which  ensures an amount in the OCO category maintains its OCO-specific  coding throughout the budget execution process. Also, the Army restricts  the number of personnel who are able to reassign the coding of funding  from one category to another. Navy officials explained that two of three  financial accounting systems used by the Navy receive OCO allotments  automatically from the Navy\u2019s budgeting information system, which  eliminates the need for manual entry of allotment amounts. Also, Marine  Corps guidance requires entry of an identifying OCO code in the Marine  Corps\u2019 financial system when recording an OCO-related transaction,  which can prevent data reporting errors.\nIn addition to controls over information processing, each DOD component  in our review incorporates reviews of their OCO execution as one of their  internal control activities. Internal control activities also include reviews,  such as reviews of data or expected results, by management throughout  an organization. The financial management offices of these components  periodically review the OCO-related allotments they make within their  components to confirm the amounts are properly recorded. For example,  the Air Force, the Army, the Marine Corps, the Navy, the Defense  Security Cooperation Agency, and U.S. Special Operations Command  review OCO-related execution amounts at least monthly to determine if  amounts are within their established spending plans and that OCO coding  is recorded correctly, among other things. In addition, officials from each  service and the Defense Security Cooperation Agency stated that officials  review OCO-related obligations and verify they are legitimate OCO  expenses.\nThe DOD Inspector General and the services\u2019 audit agencies have found  weaknesses in the services\u2019 processes of accounting for OCO costs or in  other related internal control activities. For example, in March 2018, the  US Army Audit Agency found that while the Army had a strategy and  processes to capture and report its financial data for Operation Inherent  Resolve for fiscal year 2016, processes to account for some obligation  data needed improvement. Moreover, an official from the Office of the  Secretary of Defense (Comptroller) stated that, while the DOD  components included in our review have processes to separate OCO and  base amounts, other DOD components may not have similar processes,  and not all components have auditable financial systems.\n\n\tFour Alternatives to the Current Processes That Congress and DOD Use to Separate Funding for OCO and Base Activities Would Entail Tradeoffs\n\nWe identified at least four alternatives to the processes Congress and  DOD use to separate funding for DOD\u2019s OCO and base activities. Each  alternative would require action at different phases of DOD\u2019s budget  process and entail tradeoffs. Appendix II provides additional information  on requirements and costs to implement the alternatives reported by  respondents that we summarize, as well as other alternatives to provide  funding to DOD that respondents independently identified. In addition,  appendix II provides summary information on the positive and negative  aspects of Congress\u2019 current process for providing funding for OCO and  base activities, as described by respondents.\n\n\t\tAlternative #1: DOD Could Request Funding for Enduring Costs through Its Base Budget Rather Than Its OCO Budget\n\nThe first alternative to the current process would be for DOD to request all  funding for enduring costs through its base budget rather than its OCO  budget. DOD is considering a plan to move enduring costs associated  with OCO activities from its OCO budget request into its base budget  request for fiscal year 2020. In its budget justification materials for fiscal  year 2019, DOD estimated that it would shift between $45.8 billion and  $53.0 billion from its OCO request to its base budget request from fiscal  years 2020 through 2023. However, moving DOD\u2019s enduring costs to its  base budget request may require increased base O&M appropriations  provided in annual DOD appropriations acts. Appropriations that are not  designated as OCO, such as base O&M amounts, and that exceed  annual discretionary spending limits established by the Budget Control  Act of 2011, as amended, would trigger a sequestration. Respondents  to our questionnaire identified several positive and negative aspects of  this alternative, which we summarize in table 1.\n\n\t\tAlternative #2: Congress Could Add Specific Purpose Language to Annual DOD Appropriations Acts Concerning OCO Amounts\n\nThe second alternative would be for Congress to specify in annual DOD  appropriations acts the purposes\u2014programs, projects and activities\u2014for  which OCO amounts may be obligated. As we noted above, DOD  currently determines what constitutes OCO activities based on criteria  developed in 2010 in coordination with OMB and DOD 7000.14-R,  Financial Management Regulation. Explanatory statements and  conference committee reports accompanying annual appropriations acts  include direction on how OCO amounts should be allocated for specific  activities; however, explanatory statements and committee reports are not  legally binding unless incorporated by reference into the appropriations  act. Either specific purpose language or language incorporating  explanatory statement or committee report language could be included in  DOD\u2019s annual appropriations. Respondents to our questionnaire identified  several positive and negative aspects of this alternative, which we  summarize in table 2.\n\n\t\tAlternative #3: Congress Could Create Separate Appropriation Accounts for OCO and Base Funding\n\nThe third alternative entails Congress creating separate appropriation  accounts for OCO and base funding. Under the current approach, both  OCO and base amounts are appropriated into and executed out of the  same appropriation accounts. By contrast, under this alternative,  Congress would create separate Treasury-level appropriation accounts  for funding for OCO and base activities. For example, there could be an  O&M appropriation account for the Army\u2019s base activities and an O&M  appropriation account for the Army\u2019s OCO activities. Funding for OCO  and base activities would no longer be comingled, but could be  transferred between accounts with statutory authority. Respondents to  our questionnaire identified several positive and negative aspects of this  alternative, which we summarize in table 3.\n\n\t\tAlternative #4: Congress and DOD Could Use a Transfer Account to Fund Contingency Operations\n\nUnder the fourth alternative, Congress would appropriate funds into a  non-expiring transfer account for contingency operations. These funds  would be available for DOD\u2019s use during multiple fiscal years. DOD would  use its base appropriations to initially fund OCO activities and later use  funds from the transfer account, as needed, to reimburse its base  appropriation accounts. One example is the Overseas Contingency  Operations Transfer Fund, which was originally established by Congress  in fiscal year 1997 to meet small-scale, recurring operational demands of  the department by transferring amounts to the military services and  agencies based on execution needs as the year progresses.  Respondents to our questionnaire identified several positive and negative  aspects of this alternative, which we summarize in table 4.\n\n\t\tEach Alternative Would Require Action at Different Phases in the Budget Process and Entail Tradeoffs\n\nThe four alternatives we identified would require Congress and DOD to  take action at different phases within DOD\u2019s budget process. In the first  alternative, DOD would move enduring costs to the base budget request  during the budget formulation phase. In the second alternative, Congress  would specify the activities to be funded by OCO amounts in the annual  appropriations acts during the congressional appropriation phase.  Similarly, in the third alternative, Congress would create separate  appropriation accounts for OCO and base activities during the  congressional appropriation phase. In the fourth alternative, using transfer  accounts would require actions during two phases\u2014the congressional  appropriations phase and the budget execution phase. Congress would  appropriate funds into a transfer account during the congressional  appropriation phase, and DOD would later use funds from the transfer  account, as needed, to reimburse its base appropriation accounts during  budget execution. In figure 3, we depict the phase of the budget process  in which these alternatives would take place.\nEach alternative includes tradeoffs that Congress and DOD would have to  consider to strike the desired balance between agency flexibility and  congressional control. For example, adding specific purpose language  would better align obligation of OCO amounts with congressional intent;  however, doing so could also reduce DOD\u2019s financial flexibility and  responsiveness to changes in operations. Understanding the implications  of each alternative is important to avoid unintended consequences. Our  summary of the positive and negative aspects of the alternatives reported  by respondents could be a reference for Congress and DOD as they  consider potential changes to processes for separating the funding of  amounts for OCO and base activities.\n\n\tAgency Comments and Our Evaluation\n\nWe requested comments from DOD, the Department of the Treasury, and  provided an informational copy of the draft report to OMB. DOD provided  technical comments on the draft report, which we incorporated as  appropriate.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretary of the Treasury, the  Director of OMB; the Under Secretary of Defense for the Comptroller; the  Secretaries of the Air Force, the Army, and the Navy; the Commandant of  the Marine Corps; the Commanding General of U.S. Special Operations  Command, and the Director of the Defense Security Cooperation Agency.  In addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\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 members who made key contributions to  this report are listed in appendix IV.\n\nAppendix I: Scope and Methodology\n\nTo describe selected Department of Defense (DOD) components\u2019 use of  internal controls to separately account for overseas contingency  operations (OCO) and base amounts, we reviewed documentation of the  internal controls that DOD organizations in our review have designed to  separate these amounts in their operation and maintenance (O&M)  account. We focused on the O&M account because Congress provides  most of the OCO amounts for DOD in O&M. In addition, we focused on  the military services that receive service-specific OCO appropriations,  and the two non-service DOD components (U.S. Special Operations  Command and the Defense Security Cooperation Agency) that are  allotted the most OCO funding appropriated to the O&M Defense-wide  account. We collected information for this objective through interviews  and written requests for information from financial management officials in  the Office of the Secretary of Defense (Comptroller), the offices of the  military services, U.S. Special Operations Command, the Defense  Security Cooperation Agency, and the Defense Finance and Accounting  Service. Our review focused on the design of the internal control systems  and did not assess the effectiveness of these internal controls.\nTo identify alternatives to separate funding for DOD\u2019s OCO and base  activities, we searched for relevant literature from 2001 through July  2018. Specifically, we searched for alternative processes that (1) DOD  could use to separately account for OCO funding or (2) Congress could  use to provide separate OCO funding to DOD because both DOD and  Congress could be involved in implementing alternatives to separate  funding for OCO and base activities. We started with 2001, because this  was the first year that funds were appropriated for the Global War on  Terror (GWOT), now known as OCO. We conducted searches of various  databases and websites, such as ProQuest and the National Academy of  Sciences website. Our literature search identified 235 sources, which  primarily consisted of journal articles, reports, and news articles. Two  analysts independently reviewed the full text of the literature sources to  determine which were relevant. When they disagreed, a third analyst  independently reviewed the full text of a source to make the final  determination. We determined that 22 sources were relevant. We did not  identify any sources that described alternative processes for DOD to  separately account for OCO funding; therefore, we do not address this in  our report. We did identify three alternatives related to how Congress  provides OCO funding to DOD and how DOD requests OCO funding from  Congress. We summarized these alternatives and obtained feedback  from our internal subject matter experts familiar with Congress\u2019 process  for providing funding for OCO and DOD\u2019s process for separating OCO  and base funds. We revised the wording of the alternatives based on their  feedback to ensure that we described them accurately. Our internal  subject matter experts suggested a fourth congressional alternative. We  summarized all four alternatives in our report.\nIn collaboration with a survey specialist, we developed a questionnaire to  solicit opinions from knowledgeable individuals (\u201crespondents\u201d) regarding  Congress\u2019 and DOD\u2019s current processes and the four alternatives. Our  internal subject matter experts also provided feedback on the draft  questionnaire. We included the summaries of all processes and asked  respondents to identify the positive and negative aspects, as well as the  costs and requirements, associated with each. We also asked  respondents to describe any additional alternatives apart from the four we  described in the questionnaire.\nWe identified questionnaire respondents within and outside DOD who  were sufficiently knowledgeable about Congress\u2019 and DOD\u2019s current  processes in several ways. We identified respondents within DOD by  emailing the engagement points of contact, who were budget and  financial management officials in the headquarters for the military  services and other DOD components included in our review. To identify  respondents outside of DOD, we contacted individuals identified by an  internal subject matter expert and contacted additional individuals  identified in our literature review. We provided respondents with a brief  summary of the questionnaire and asked them if they would be able and  willing to respond to questions on these topics. We also asked  respondents to recommend additional knowledgeable individuals at the  end of the questionnaire. Respondents identified were current officials in  DOD financial management offices, former DOD officials, and defense  budget analysts from think tanks. In addition, we contacted officials from  the Congressional Research Service and the Congressional Budget  Office, whom we identified as assigned to analyze defense budget issues  related to OCO. We included questions at the start of the questionnaire to  determine if respondents were sufficiently knowledgeable about either the  current congressional process, the current DOD process\u2014or both\u2014to  offer perspectives on the alternatives presented.\nWe sent the questionnaire as a Microsoft Word form via email to 23  respondents, including 10 within DOD and 13 outside DOD. We began  sending the questionnaires on August 1, 2018, and continued as we  identified more respondents. We sent up to two reminder emails with a  copy of the questionnaire to anyone who had not yet responded. We  received the last questionnaire on September 10, 2018. We received a  total of 19 questionnaires back from respondents. We excluded two  completed questionnaires from our analysis based on our screening  criteria for determining if respondents were sufficiently knowledgeable  about Congress\u2019 and DOD\u2019s current processes. Therefore, we included  17 questionnaires in our analysis\u201410 from DOD officials and 7 from  respondents outside DOD\u2014for a response rate of 81 percent. We  calculated the response rate using a total possible number of 21  questionnaires instead of 23 to account for the two questionnaires we  excluded from the analysis. Fifteen of the 17 respondents to our  questionnaire were current or former DOD officials. Results of this  questionnaire are not generalizable beyond our respondents.\nTo enable us to provide the information to Congress within the time  frames required by the mandate, we did not pretest the questionnaire.  However, we believe that the questionnaire was a sufficiently valid data  collection tool for reporting positive and negative aspects identified by  respondents. We developed the questionnaire with assistance from a  survey specialist, and we revised the questionnaire content based on  feedback from our internal subject matter experts. Most respondents  provided answers that indicated they correctly interpreted the questions  as stated in the questionnaire. In addition, we took steps to provide  clarification to the few respondents who misunderstood questions and  excluded responses we could not reasonably assure were understood.  Four of the 23 original recipients of the questionnaire requested  clarification or misunderstood two questions in our questionnaire. We  provided clarification to those respondents via email and requested that  they update their questionnaire responses based on this new information.  Two did so. The other two respondents did not reply to our clarification  email, and we excluded their responses to the misunderstood questions.  Not all respondents provided answers to all questions in our  questionnaire. We extracted the data from the Word questionnaires and  imported them into Excel for qualitative analyses. We inspected the Excel  files to ensure that data were not missing or were not imported incorrectly  and made iterative corrections to the process to ensure accurate data  were analyzed. Because we did not pretest the questionnaire, we do not  report the number of respondents who provided any answers but rather  we present qualitative positive and negative aspects based on the  responses.\nWe conducted a content analysis in which two analysts independently  categorized each response from each questionnaire to identify  similarities. For our purposes, similarities existed when two or more  respondents gave the same or very similar answers to a particular  question. The summaries of the responses we developed were based on  comments from two to nine respondents. The analysts discussed any  discrepancies in their categorizations until they reached agreement.  Subsequently, an internal subject matter expert provided feedback on the  summary. Using that feedback, the analysts consolidated summaries that  were related and clarified the wording of all the summarized responses.  We identified positive and negative aspects for questions regarding the  current processes and the four alternatives presented in the  questionnaire. We did not summarize positive and negative aspects for  questions regarding the additional alternatives described by respondents.  We did not include this information because although two respondents  described similar alternatives, they did not identify similar positive and  negative aspects about this alternative. In addition, none of the remaining  questionnaires included similar responses. We list any additional  alternatives identified by respondents in appendix II. The verbatim  wording from key sections of the questionnaire we administered is  presented in appendix III.\nIn addition, section 1523 of the National Defense Authorization Act for  Fiscal Year 2018 contained additional provisions for us to review other  processes related to the execution of OCO funds. In particular, section  1523 contained a provision for us to review the processes the Department  of the Treasury employs to separate expenditures of amounts  appropriated for OCO from expenditures of all other amounts  appropriated for DOD. We assessed the steps that the Department of the  Treasury takes in the execution of the federal budget after funds have  been appropriated and determined that the Department of the Treasury  does not employ a process to separate OCO funding from base funding in  its role in making appropriations available to DOD. In addition, section  1523 of the act included another provision for us to compare the  processes DOD and the Department of Treasury use to separate  expenditures of OCO amounts to the generally accepted accounting  principles. The Federal Accounting Standards Advisory Board issues  federal financial accounting standards and provides guidance on federal  generally accepted accounting principles. The Federal Accounting  Standards Advisory Board\u2019s Handbook of Federal Accounting Standards  and Other Pronouncements, as Amended (Current Handbook) is the most  up-to-date, authoritative source of generally accepted accounting  principles developed for federal entities. However, the Current Handbook  does not address the separation of OCO from non-OCO appropriations,  obligations, and disbursements. Therefore, it is not possible to compare  the processes DOD and the Department of the Treasury use to the  generally accepted accounting principles based on existing standards and  guidance.\nWe conducted this performance audit from March 2018 to January 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Additional Information on the Current Process and Alternatives to Provide OCO Funding\n\nAdditional information from our questionnaire is provided below, including  information about (1) the positive and negative aspects of Congress\u2019  current process for providing funding for the Department of Defense\u2019s  (DOD) overseas contingency operation (OCO) and base activities, (2) the  requirements and costs to implement the four alternatives we discussed  earlier, and (3) other alternatives for providing funding to DOD.\n\n\tPositive and Negative Aspects of Congress\u2019 Current Process to Provide Funding for OCO and Base Activities\n\nWe asked respondents to report on the positive and negative aspects of  Congress\u2019 current process for providing funding for DOD\u2019s OCO and base  activities. We summarize those aspects in table 5.\n\n\tRequirements and Costs to Implement the Four Alternatives\n\nRespondents reported on the requirements and costs to implement the  four alternatives in our questionnaire. The requirements respondents  identified to implement the four alternatives are summarized in table 6.\nRegarding the costs, respondents reported that two alternatives would  require minimal or no additional costs, while the other two alternatives  would involve higher costs to DOD. The costs respondents identified to  implement the four alternatives are summarized in table 7.\n\n\tAlternatives for Providing Funding to DOD that Respondents Independently Identified\n\nWe also asked respondents to describe any other alternatives for  separating funding for DOD\u2019s OCO and base activities, apart from the  four alternatives described above. Respondents identified several  alternatives for providing funding to DOD, including alternatives that  would not provide separation of OCO and base funding. The other  alternatives that respondents described are shown in table 8.\n\nAppendix III: Key Questions from GAO\u2019s Questionnaire on Separation of OCO and Base Amounts\n\nBelow we show the verbatim wording of the descriptions of the  alternatives to separate amounts for DOD\u2019s OCO and base activities as  summarized in the questionnaire. Each description was presented  separately in the questionnaire followed by a standard set of questions  that are all presented below these descriptions. We also show the  verbatim wording of any clarification text sent via email to respondents  who misunderstood the description of the alternative.\nDOD could move requests for funding of enduring activities from its  OCO budget to its base budget request. Enduring activities are those  that began in response to contingency operations but have continued  after these operations ended. An example of an enduring cost would be  maintaining residual headquarters staff at U.S. Central Command in  Qatar to train, advise, and assist as missions have evolved from  contingency to ongoing activities. We understand that in the in FY 2020,  the Department plans to move funding for enduring activities from its  OCO budget to its base budget request. DOD\u2019s OCO funding request  would then reflect only the incremental costs of existing contingency  operations.\nThe Congress could specify activities for which DOD should use  OCO amounts within the annual appropriations acts. Currently, DOD  determines what activities constitute OCO activities based on criteria  developed in 2010 in coordination with OMB. Under this alternative,  explicit purpose language designating specific funds for specific activities  would be added directly into the appropriations acts or the explanatory  statement, then incorporated into the appropriations act by reference. \u201cUnder the current approach, funds are designated for specific sub-activities in the  explanatory statement. However, these designations are generally not legally binding  unless incorporated by reference into the appropriations act itself. Under this alternative  approach , specific purpose language or language of incorporation would  be included in the appropriations act. The distinction between the current approach and  the alternative presented here is that legally binding language concerning specific  amounts for specific OCO activities would appear in the appropriation act.\u201d\nThe Congress could create separate appropriation accounts for  amounts designated for OCO and amounts designated for base  activities. \u201cIn the current approach, amounts are designated for OCO and base activities within a  single appropriation account. In the alternative proposed in Question 5, the Congress  would create two separate appropriation accounts for OCO and base activities amounts.  For example, there would be one appropriation account for OCO amounts for O&M, and  another appropriation account for base activity amounts for O&M.\u201d\nDOD could use a transfer account (such as the Overseas  Contingency Operations Transfer Fund, or OCOTF) through which  the Department could meet operational demands by transferring  funds to the military services and agencies based on execution  needs as the year progresses. The Congress would appropriate funds  into a transfer account. These funds would not expire and be available for  DOD\u2019s use during multiple fiscal years. DOD would use its base activities  appropriations to fund OCO activities and later draw from the transfer  account as needed to reimburse its base appropriation accounts.\nBelow we show the verbatim wording from key sections of the  questionnaire we administered. We used Questions 2 and 3 as screening  questions to help determine if respondents were sufficiently  knowledgeable about the current congressional or DOD processes.  Question 4 and its sub-questions below were repeated for each  alternative presented above (i.e., as Questions 4 through 7 in the  questionnaire). We also asked sub-questions \u201cb\u201d through \u201ce\u201d in Question  4 for the current approaches Congress and DOD use (presented in  Questions 2 and 3). Finally, we asked respondents to identify up to five  additional alternatives in Questions 8 through 12.  2.  Are you familiar with any of the current approaches that the  military services or DOD organizations use to separate operation  and maintenance (O&M) amounts designated for Overseas  Contingency Operations (OCO) from amounts designated for  base activities during the allotment, obligation, and\/or  disbursement phases? Please check one box.  \uf0e8 Please continue to \u201ca\u201d through \u201ce\u201d  \uf0e8 Please skip to Question 3  \uf0e8 Please skip to Question 3  3.  Are you familiar with the current approach that Congress uses to  designate amounts for OCO in the appropriations process for  DOD? Please check one box.  \uf0e8 Please continue to \u201ca\u201d through \u201ce\u201d  \uf0e8 Please skip to Question 4  \uf0e8 Please skip to Question 4  4.  GAO has identified the following as a possible alternative to the  current approach for separating amounts designated for OCO  from amounts designated for base activities in the  appropriations process:  a.   Were you aware of this alternative before completing this   questionnaire? Please check one box.\nPlease continue to \u201cb\u201d through \u201ce\u201d  b.  What are the positive aspects associated with this alternative,  if any? Please consider factors impacting both taxpayers and  the DOD. The box will expand as you type.   c.  What are the negative aspects associated with this  alternative, if  any? Please consider factors impacting both  taxpayers and the DOD. The box will expand as you type.   d.  What are the costs associated with this alternative, if any? Please  consider costs impacting both taxpayers and the DOD. The box  will expand as you type.   e.  What are the requirements associated with implementing this  alternative? Consider factors such as: changes to existing  systems, policies, or processes; new systems, policies, or  processes; new budget estimations; required training; etc.  These could be requirements for DOD or the Congress. The  box will expand as you type.   8.  Are you aware of any alternative approaches for separating  amounts designated for OCO from amounts designated for base  activities other than the ones listed above? Please consider both  approaches DOD could implement on its own (such as  approaches to separating OCO from base in the O&M account or  changes that make that unnecessary) and legislative approaches  the Congress could take. We are aware of the Enterprise Resource  Planning (ERP) systems listed above. For this question, we are  interested in the implementation of new potential alternatives other  than the ERP system. Please check one box.  \uf0e8  Please continue to \u201ca\u201d through \u201ce\u201d to tell us about  one alternative. If you are aware of more than one,  you will be able to tell us about others in Questions   9-12.  \uf0e8   Please skip to Question 13   Please skip to Question 13  a.   If yes, please briefly describe the first alternative approach.\nThe box will expand as you type.\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nElizabeth Field, (202) 512-2775 or fielde1@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Richard K. Geiger, Assistant  Director; Arkelga Braxton, Assistant Director; Rebekah Boone; Amie  Lesser; Felicia Lopez; James P. Klein (Analyst-in-Charge); Shylene Mata;  Sheila Miller; Richard Powelson; and Michael Silver made key  contributions to this report.","output":"Why GAO Did This Study\n\nSince 2001, DOD has received more than $1.8 trillion in OCO funds. DOD defines \u201ccontingency operations\u201d as small, medium, or large-scale military operations, while \u201cbase\u201d activities include operating support for installations, civilian pay, and other costs that would be incurred, regardless of contingency operations. Congress separately appropriates amounts for base and OCO activities into the same appropriation accounts and directs how funds are to be spent by designating amounts in conference reports or explanatory statements accompanying the annual appropriations acts.\nThe National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to report on the feasibility of separating OCO expenditures from other DOD expenditures. This report (1) describes internal controls that selected DOD components use to separately account for OCO and base amounts during budget execution and (2) identifies and examines alternatives that Congress or DOD could use to separate funding for OCO and base activities.\nGAO reviewed documentation of DOD internal controls for separating OCO and base amounts in the O&M account, interviewed financial management officials, and, among other things, conducted a literature review to identify alternatives that Congress or DOD could use to separate funding for OCO and base activities. Also, GAO administered a questionnaire to DOD and non-DOD officials to identify positive and negative aspects of these alternatives.\n\nWhat GAO Found\n\nSelected Department of Defense (DOD) components use coding and other internal control activities to separately account for overseas contingency operations (OCO) and base amounts in their operation and maintenance (O&M) accounts during budget execution. To record and track OCO and base amounts separately, the military services, U.S. Special Operations Command, and the Defense Security Cooperation Agency use coding in their financial systems. These DOD components also have instituted some internal control activities to help ensure separation of OCO amounts. For example, Army and Defense Security Cooperation Agency officials stated that the financial systems they use incorporate system controls that automatically maintain the categories of funding, such as OCO, designated during allotment through subsequent actions to ensure the OCO coding remains throughout budget execution.\nGAO identified at least four alternatives to the processes used to separate funding for DOD's OCO and base activities:\nMove enduring costs to the base budget . DOD could request funding for enduring costs\u2014costs that would continue in the absence of contingency operations\u2014through its base budget rather than its OCO budget.\nUse specific purpose language . Congress could use legally binding language in the annual DOD appropriations acts to specify the purposes\u2014programs, projects and activities\u2014for which OCO amounts may be obligated.\nCreate separate appropriation accounts . Congress could create separate appropriation accounts for OCO and base funding.\nUse a transfer account . Congress could appropriate funds for OCO into a non-expiring transfer account. DOD would fund OCO with its base budget and later reimburse its base accounts using funds from a transfer account.\nImplementing these alternatives would require Congress and DOD to take action in different phases of the budget process (see figure).\nEach alternative includes tradeoffs that Congress and DOD would have to consider to strike the desired balance between agency flexibility and congressional control. The alternatives, and GAO's summary of their positive and negative aspects identified by questionnaire respondents, could be a reference for Congress and DOD as they consider potential changes to processes for separating the funding of amounts for OCO and base activities."}
{"id":"gao_GAO-19-84","pid":"gao_GAO-19-84_0","input":"\tBackground\n\nThis section describes (1) NNSA\u2019s weapons design and production sites;  (2) the framework for managing LEPs, known as the Phase 6.X process,  and NNSA\u2019s program execution instruction; and (3) NNSA\u2019s technology  development and assessment process.\n\n\t\tNNSA Weapons Design and Production Sites\n\nNNSA oversees three national security laboratories\u2014Lawrence  Livermore in California, Los Alamos in New Mexico, and Sandia in New  Mexico and California. Lawrence Livermore and Los Alamos are the  design laboratories for the nuclear components of a weapon, while  Sandia works with both to design nonnuclear components and as the  system integrator. Los Alamos led the original design of the W78, but  Lawrence Livermore is leading current efforts to design the replacement  warhead.\nNNSA also oversees four nuclear weapons production plants\u2014the  Pantex Plant in Texas, the Y-12 National Security Complex in Tennessee,  the Kansas City National Security Campus in Missouri, and the Savannah  River Site in South Carolina. In general, the Pantex Plant assembles,  maintains, and dismantles nuclear weapons; the Y-12 National Security  Complex produces the secondary and the radiation case; the Kansas City  National Security Campus produces nonnuclear components; and the  Savannah River Site replenishes a component known as a gas transfer  system that transfers boost gas to the primary during detonation.\n\n\t\tPhase 6.X Process for Managing LEPs and NNSA\u2019s Program Management Directive\n\nDOD and NNSA have established a process, known as the Phase 6.X  process, to manage life extension programs. According to a Nuclear  Weapons Council document, NNSA\u2019s Office of Defense Programs will  follow this process to manage a W78 replacement program. As shown in  figure 1, this process includes key phases or milestones that a nuclear  weapon LEP must undertake before proceeding to subsequent steps.\nIn January 2017, while the program was still suspended, NNSA issued a  supplemental directive that defines additional activities that NNSA offices  should conduct in support of the Phase 6.X process. For example, as  discussed below, NNSA\u2019s supplemental directive established a new  requirement during Phase 6.1 (Concept Assessment) that NNSA conduct  a technology readiness assessment of technologies proposed for  potential use in the warhead. In addition, NNSA\u2019s Office of Defense  Programs issued a program execution instruction that defines enhanced  program management functions for an LEP and other programs. This  instruction also describes the level of program management rigor that the  LEP must achieve as it advances through the Phase 6.X process.\n\n\t\tNNSA\u2019s Technology Development and Assessment Process\n\nAccording to NNSA\u2019s Fiscal Year 2018 Stockpile Stewardship  Management Plan, NNSA extends the life of existing U.S. nuclear  warheads by replacing aged nuclear and non-nuclear components with  modern technologies. In replacing these components, NNSA seeks  approaches that will increase safety, improve security, and address  defects in the warhead. Several technologies are frequently developed  concurrently before one approach is selected. According to NNSA\u2019s  Fiscal Year 2018 Stockpile Stewardship Management Plan, this approach  allows selection of the option which best meets warhead requirements  and reduces the risks and costs associated with an LEP. NNSA conducts  technology readiness assessments to provide a snapshot in time of the  maturity of technologies and their readiness for insertion into a program\u2019s  design and schedule, according to NNSA\u2019s guidance. NNSA\u2019s  assessments also look at the ability to manufacture the technology.  NNSA measures technological maturity using technology readiness levels  (TRLs) on a scale from TRL 1 (basic principles developed) through TRL 9  (actual system operation). Similarly, NNSA measures manufacturing  readiness using manufacturing readiness levels (MRL) on a scale from  MRL 1 (basic manufacturing implications identified) through MRL 9  (capability in place to begin full rate production). According to NNSA\u2019s  guidance, NNSA recommends but does not require that an LEP\u2019s critical  technologies reach TRL 5 (technology components are integrated with  realistic supporting elements) at the beginning of Phase 6.3  (Development Engineering). At the end of Phase 6.3, it recommends  that a technology be judged to have achieved MRL 5 (capability to  produce prototype components in a production relevant environment).  However, according to NNSA officials, lower TRLs and MRLs may be  accepted in circumstances where a technology is close to achieving the  desired levels or the program team judges that the benefit of the  technology is high and worth the increased risk that it may not be  sufficiently mature when the program needs it.\n\n\tNNSA Has Taken Steps to Prepare to Restart a Program to Replace the W78 Nuclear Warhead Capability\n\nNNSA has taken steps to prepare to restart a program to replace the W78  nuclear warhead capability. According to NNSA officials, these steps are  typically needed to conduct any LEP. Therefore, they can be undertaken  despite the uncertainty about whether the final program will develop the  warhead for the Air Force only or for both the Air Force and the Navy.  Specifically, NNSA has (1) taken initial steps to establish the program  management functions needed to execute the program and assemble  personnel for a program management team; (2) assessed technologies  that have been under development while the program was suspended  that could potentially be used to support a W78 replacement; and (3)  initiated plans for the facilities and capabilities needed to provide the  nuclear and nonnuclear components for the warhead.\nAt the time of our review, NNSA and DOD officials stated that, in  response to the 2018 NPR, they planned to restart a program that would  focus on replacing the capabilities of the W78 for the Air Force; however,  the extent to which the program would focus on providing a nuclear  explosive package for the Navy was uncertain. DOD officials said that  the Navy plans to complete a study examining the feasibility of using the  nuclear explosive package developed for the W78 replacement warhead  in its SLBM system by the end of fiscal year 2019. According to DOD  officials, the Nuclear Weapons Council will make a decision about  developing an interoperable warhead for the Air Force and the Navy  based on the results of the study but, as of August 2018, had not  established time frames for making that decision. According to Air Force  and NNSA officials, if the Nuclear Weapons Council decided that the  Navy should participate in the program, then NNSA would not need to  redo the work planned for fiscal year 2019.\n\n\t\tProgram Management and Personnel\n\nNNSA has taken initial steps to establish the program management  functions needed to execute the program and assemble personnel for a  program management team, as follows:\nProgram management. In fiscal year 2018, NNSA started to  establish the program management functions needed to execute a  W78 replacement program, as required in the Office of Defense  Programs\u2019 program execution instruction. In preparation for the  program restart, NNSA assigned a manager for a W78 replacement  program who is taking or plans to take steps to implement these  functions. For example, among other steps, the W78 replacement  program manager told us that he had started developing the risk  management plan to define the process for identifying and mitigating  risks that may impact the program. The program manager also said  NNSA had started to adapt a standardized work breakdown structure  for life extension programs to define and organize the W78  replacement program\u2019s work scope for restart. An initial version of  this work breakdown structure would be completed before the  program restarts in fiscal year 2019, according to the program  manager. Further, as NNSA refines the scope of work, the agency will  refine and tailor the work breakdown structure. At the time of our  review, this work was under development and therefore we were not  able to review these plans and tools.\nIn addition, as of July 2018, NNSA had created a preliminary schedule  for a W78 replacement program under the Phase 6.X process (see  fig. 2).\nAccording to NNSA\u2019s preliminary schedule, the program will:\nRestart in Phase 6.2 (Feasibility and Design Options) in the third  quarter of fiscal year 2019. NNSA previously completed Phase 6.1  and was authorized by the Nuclear Weapons Council to start  Phase 6.2 in June 2012. During Phase 6.2, NNSA plans to,  among other things, select design options and develop cost  estimates of the selected design options.\nConduct Phase 6.2A (Design Definition and Cost Study) for one  year beginning in the fourth quarter of fiscal year 2021. During this  phase, for example, NNSA plans to develop a preliminary cost  estimate for the program, called a weapons design and cost  report, and also produce an independent cost estimate.\nStart Phase 6.3 (Development Engineering) in the fourth quarter  of fiscal year 2022 and transition to Phase 6.4 (Production  Engineering) in the mid-2020s. During these phases, NNSA will  develop the final design as well as begin producing selected  acquisition reports, which detail the total program cost, schedule,  and performance, among other things. According to the W78  program manager, the military characteristics will be finalized in  Phase 6.4 and before that point DOD will continue to update the  requirements.\nAchieve production of the first warhead\u2014Phase 6.5\u2014by the  second quarter of fiscal year 2030 so that it can be fielded on the  Air Force\u2019s planned Ground Based Strategic Deterrent that same  year.\nStart Phase 6.6 (Full Scale Production) by the second quarter of  fiscal year 2031.\nWhen the program restarts in fiscal year 2019, NNSA intends to  develop or finalize initial versions of other plans and tools such as a  requirements management plan, according to the program manager.  (See appendix I for a detailed description of the steps NNSA is taking  or plans to take to establish the program management functions  needed to execute a W78 replacement program, according to the  manager for the W78 replacement program.)\nThe program manager also told us that as the program progresses  through Phases 6.2 (Feasibility and Design Options), 6.2A (Design  Definition and Cost Study), and 6.3 (Development Engineering),  NNSA will increase the maturity of the program management  processes and tools, consistent with the Office of Defense Programs\u2019  program execution instruction. For example, in Phases 6.2 and 6.2A,  NNSA intends to establish an earned value management system  (EVM)\u2014used to measure the performance of large, complex  programs. In Phase 6.3, NNSA will further develop the system to be  consistent with DOE and industry standards, as specified in the  program execution instruction. NNSA officials said they will need to  achieve sufficient program management rigor in Phase 6.3 to  effectively report to Congress on the status and performance of the  program as NNSA develops cost and schedule baselines.\nPersonnel. At the time of our review, NNSA was reconstituting a  program management team. Specifically, as mentioned above, NNSA  assigned a new program manager in March 2017. In the spring of  2018, NNSA began assigning additional federal staff and contractor  support to help ramp up the program in advance of the fiscal year  2019 restart date. According to the program manager, he expected to  complete a plan in the late summer or early fall of 2018 that NNSA  could use to hire additional federal staff needed to manage the  program in fiscal year 2019. The advanced development and  implementation of staffing plans prior to each phase of an LEP was a  key lesson learned from an NNSA review of another LEP\u2014the W76- 1.\n\n\t\tTechnology Development and Assessment\n\nWhile the program was suspended, NNSA supported other programs that  developed weapons technologies\u2014including materials and manufacturing  processes\u2014that could potentially be used by the W78 replacement  program and potentially by other future life extension programs.  Specifically, according to NNSA officials, NNSA supported the  development of technologies through ongoing LEPs (such as the W80-4  LEP) and other technology maturation projects (such as the Joint Technology Demonstrator) that could support future LEPs. For example,  the W80-4 program has supported development at Lawrence Livermore  of certain new materials as a risk mitigation strategy in case certain  legacy materials used in the secondary are not available. According to  NNSA officials, NNSA will likely continue to develop these new materials  for use in future weapons, including the W78 replacement. In addition,  contractors at Lawrence Livermore told us that test demonstrations  conducted under the Joint Technology Demonstrator have helped to  mature potential technologies for a W78 replacement. Examples they  cited included additively manufactured mounts and cushions for securing  and stabilizing the nuclear explosive package inside the Air Force\u2019s  aeroshell.\nIn May 2018, in anticipation of the restart of a W78 replacement program  and to retroactively address NNSA\u2019s new supplemental requirement to  conduct a technology readiness assessment in Phase 6.1, NNSA\u2019s Office  of Systems Engineering and Integration completed a technology  readiness assessment that evaluated the maturity of technologies  potentially available for the W78 replacement program. According to  NNSA officials, the assessment identified and evaluated technologies that  NNSA would have available for the next LEP, irrespective of whether the  final program will replace the W78 warhead in ICBMs only or will also be  used in the Navy\u2019s SLBMs.\nThe assessment evaluated 126 technologies based on proposals from  the laboratories and production sites. As shown in table 1 below, the proposals related to key functional areas of the warhead, including the  nuclear explosive package and the arming, fuzing, and firing  mechanism\u2014which provides signaling that initiates the nuclear explosive  chain. For the W78 warhead replacement, DOD divided the military  characteristics into two categories: threshold or minimum requirements  (or \u201cneeds\u201d) and objective or optional requirements (or \u201cwants\u201d). NNSA\u2019s  assessment grouped the technologies into one of three categories, as  follows.\nMust do. A technology deemed \u201cmust do\u201d means that it is the only  technology available that can meet a minimum requirement (or  \u201cneed\u201d) for the warhead to function. The technology that previously  fulfilled this requirement is generally obsolete or no longer produced,  and there are no alternatives.\nMust do (trade space). \u201cMust do (trade space)\u201d technologies fulfill a  minimum requirement (or \u201cneed\u201d) for the warhead, but there are two  or more technologies that could meet this need. NNSA must evaluate  and select which technology it will use to fulfill the need.\nTrade space. \u201cTrade space\u201d technologies are those that can meet an  optional requirement (or \u201cwant\u201d) for the warhead.\nAmong the nine \u201cmust do\u201d technologies that NNSA evaluated, for  example, was a new manufacturing process being developed at Sandia to  produce a type of magnesium oxide\u2014needed for use in the thermal  batteries that power the warhead\u2019s firing mechanism\u2014that is no longer  available from a vendor and for which NNSA\u2019s existing supplies are  limited. For this new process, the assessment team estimated that it had  completed TRL 1 (basic principles developed) but had not yet reached  MRL 1 (basic manufacturing implications identified). The technology  readiness assessment noted that for technologies with a TRL of 3 or less,  an MRL of 1 or less is expected. In addition, according to the report,  Sandia estimated that it may cost about $7.1 million to develop the  material and manufacturing process to TRL 5 and MRL 4 during fiscal  years 2018 through 2023\u2014when the program is slated to reach Phase  6.3\u2014to achieve a level of readiness where it could potentially be included  in the design of the W78 replacement warhead.\nAmong the 59 \u201cmust do (trade space)\u201d technologies that NNSA evaluated  were, for example, two new gas transfer system technologies developed  by Sandia that may offer advantages compared with the existing  technology. A gas transfer system is a required capability (or \u201cmust do\u201d)  but, according to the technology readiness assessment report, NNSA  needs to compare the costs, benefits, and risks of these new  technologies with the traditional technology (i.e., evaluate the \u201ctrade  space\u201d) and make a selection among them. The first new technology was  a gas transfer system bottle made out of aluminum that could be cheaper,  weigh less, and last longer than the gas transfer system used in the W78.  According to the technology readiness assessment report, the  assessment team estimated the aluminum-based bottle had completed  TRL 2 but did not have enough information to estimate an MRL. Sandia  estimated that it would cost about $6.5 million to achieve TRL 5 and MRL  4 during fiscal years 2018 through 2023. The second Sandia technology  involved an advanced gas transfer system technology. The assessment  team estimated that this technology had completed TRL 3 but did not  have enough information to estimate an MRL. Sandia estimated that it  would cost about $5.4 million to achieve TRL 5 and MRL 4 during fiscal  years 2018 through 2023. According to the technology readiness  assessment report, NNSA will need to further evaluate these approaches  as well as the traditional technology to make a selection for a W78  replacement program.\nThe 75 \u201ctrade space\u201d technologies that the assessment team evaluated  included, for example, several proposed by Lawrence Livermore, Los  Alamos, and Sandia for providing an advanced safety feature to prevent  unauthorized detonation of the warhead. As mentioned above, when  NNSA extends the life of existing U.S. nuclear warheads it also seeks  approaches that will increase the safety and improve security of the  warhead. According to the report, the laboratories proposed similar  concepts that varied in maturity levels and estimated costs for further  development. Specifically, the assessment team estimated the Lawrence  Livermore and Los Alamos technologies to have completed TRL 4 and  Sandia\u2019s proposal to have completed TRL 3. Regarding MRLs, the  assessment team also estimated Lawrence Livermore\u2019s technology to  have completed MRL 1, Los Alamos\u2019s technology to be at MRL 1, and did  not have enough information to estimate the MRL for Sandia\u2019s  technology. In addition, according to the report, Lawrence Livermore  estimated costs of about $31.2 million to $45.6 million to further mature its  technology during fiscal years 2018 through 2023. Los Alamos estimated  costs of about $72.1 million to $154.5 million to further mature its  technology during the same period. Sandia estimated costs of about $8.2  million to further mature its technology during the same period. Because  the feature is not a minimum requirement, NNSA officials told us that they  are continuing to evaluate the costs, benefits, and risks of including the  feature.\nAccording to NNSA\u2019s manager for the W78 replacement program and key  staff involved in preparing to restart the program, when the program  restarts in fiscal year 2019 they will use the assessment to identify  specific technologies or groups of technologies (i.e., trade spaces) to  further evaluate for potential use in the warhead. These officials said they  will continue evaluating technologies and make selections of preferred  options at the same time that the warhead\u2019s program requirements and  priorities are refined during Phases 6.2 and 6.2A. According to the  program manager, NNSA will produce a technology development plan for  technologies selected for a W78 replacement during Phase 6.2 and 6.2A  and that will identify the current readiness levels of the technologies, key  risks, and estimated costs to bring them to TRL 5 in Phase 6.3.\nIn addition, the technology readiness assessment team made several  recommendations to the NNSA Deputy Administrator for Defense  Programs regarding the development of technologies that could provide  benefits to the nuclear security enterprise overall. For example, the  assessment team observed that 21 of the proposed technologies for a  W78 replacement involved the use of additive manufacturing. The  assessment noted that, if successful, these technologies could reduce  component production costs and schedule risks for future LEPs  compared to current methods. The team recommended that the Office of  Defense Programs conduct an analysis to validate these capabilities and  develop a nuclear enterprise-wide effort to address additive  manufacturing for a W78 replacement, future LEPs, and other  applications. According to the NNSA official who led the assessment, at  the time of our review, the assessment team was preparing to present its  enterprise-wide recommendations to the Office of Defense Program\u2019s  senior leadership; therefore, specific follow-on actions had not yet been  decided.\n\n\t\tCoordination with Facilities and Capabilities\n\nThe manager of the W78 replacement program said that he has begun to  identify the facilities and capabilities at the laboratories and production  sites that will be needed to provide the nuclear and nonnuclear  components for a W78 replacement, and plans to draft formal  agreements to help ensure coordination with them. According to the  program manager, collecting the information that identifies facilities and  capabilities\u2014including a rough idea of key milestone dates for when the  program will need to use them\u2014is the first step in producing a major  impact report, which is required upon completion of Phase 6.2 and  accompanies the final Phase 6.2 study report delivered to the Nuclear  Weapons Council. Among other things, a major impact report identifies  aspects of the program\u2014including facilities and capabilities to support it\u2014 that could affect the program\u2019s schedule and technical risk, according to  the Phase 6.X guidelines.\nAccording to an NNSA official and contractor representatives, many of the  existing nuclear and nonnuclear components of the W78 are outdated or  unusable and a W78 replacement will need all newly manufactured  components. As a result, NNSA will need to exercise numerous  manufacturing capabilities in support of this effort, and the facilities and  capabilities must be ready to support the work. However, many of the  facilities that may be needed to provide components for a W78  replacement program are outdated and are undergoing modernization to  either build new facilities or repair existing facilities and capabilities, which  represents a critical external risk to the program. According to NNSA\u2019s  Fiscal Year 2018 Stockpile Stewardship and Management Plan, these  planned modernization activities will require sustained and predictable  funding over many years to ensure they are available to support the  weapons programs. Some examples of NNSA activities to build or repair  facilities and capabilities that will provide nuclear or nonnuclear  components for a W78 replacement warhead\u2014and which may have  schedule, cost, or capacity issues that could impact the program\u2014 include:\nPlutonium pit production facilities. NNSA does not currently have  the capability to manufacture sufficient quantities of plutonium pits for  a W78 replacement program. NNSA\u2019s Fiscal Year 2018 Stockpile  Stewardship and Management Plan stated that the agency will  increase its capability to produce new pits over time, from 10 pits per  year in fiscal year 2024 to 30 pits per year in fiscal year 2026, and as  many as 50 to 80 pits per year by 2030. NNSA is refurbishing its pit  production capabilities at Los Alamos to produce at least 30 pits per  year. In addition, in May 2018, NNSA announced its intention to  repurpose the Mixed Oxide Fuel Fabrication Facility at the Savannah  River Site in South Carolina to produce at least an additional 50 pits  per year by 2030. NNSA officials told us that they will need both the  Los Alamos and Savannah River pit production capabilities to meet  anticipated pit requirements for the W78 replacement program and for  future warhead programs.\nUranium processing facilities. NNSA\u2019s construction of the Uranium  Processing Facility at the Y-12 National Security Complex will help  ensure NNSA\u2019s continued ability to produce uranium components for  the W78 replacement program. NNSA plans to complete the facility  for no more than $6.5 billion by the end of 2025\u2014approximately 4  years before the scheduled delivery of the first production unit of a  W78 replacement program warhead. This effort is part of a larger  NNSA plan to relocate and modernize other enriched uranium  capabilities performed in a legacy building at the Y-12 National  Security Complex to other existing buildings or in newly constructed  buildings.\nLithium production facility. NNSA will require lithium for a W78  replacement warhead. The United States no longer maintains full  lithium production capabilities and relies on recycling as the only  source of lithium for nuclear weapon systems. According to the Fiscal  Year 2018 Stockpile Stewardship and Management Plan, NNSA has  analyzed options to construct a new lithium production facility, and a  conceptual design effort is next, with an estimated completion date of  fiscal year 2027 for the new facility. Until the facility is available,  NNSA has developed a bridging strategy to fill the interim supply  gaps.\nRadiation-hardened microelectronics facility. Nuclear warheads,  such as a W78 replacement warhead, include electronics that must  function reliably in a range of operational environments. NNSA has a  facility at Sandia that produces custom, strategic radiation-hardened  microelectronics for nuclear weapons. In August 2018, NNSA officials  told us that this facility, known as Microsystems and Engineering  Sciences Applications, can remain viable until 2040\u2014but would need  additional investment.\nThe W78 replacement program manager told us that the need for newly  manufactured components coupled with the scale of NNSA\u2019s  modernization activities means that a comprehensive coordination effort  will be necessary to ensure that the facilities and capabilities are ready to  provide components for the warhead by the end of the 2020s. Because  these activities are separately managed and supported outside the W78  replacement program, NNSA considers progress on them to represent a  critical external risk to the program.\nNNSA is taking or plans to take some action to mitigate this external risk  at the program and agency level. One step that the program plans to take  to address this risk is to draft formal agreements\u2014called interface  requirements agreements\u2014with other NNSA program offices that  oversee the deliverables and schedules for the design, production, and  test facilities that are needed for the program. These agreements  describe the work to be provided by these external programs, including  milestone dates for completing the work; funding; and any risks to cost,  schedule, or performance. The W78 program manager stated that they  are generally drafted toward the end of Phase 6.2 through Phase 6.2A  and largely finalized in Phase 6.3\u2014though small adjustments may be  made into Phase 6.4 (Production Engineering).\nAt the agency level, in response to a direction in the 2018 NPR, NNSA  officials told us that the agency is also developing an agency-wide  integrated master schedule that is intended to align NNSA\u2019s enterprise- wide modernization schedule with milestone delivery dates for nuclear  weapons components. The W78 program manager and other NNSA  officials told us that the information they provide on the facilities and  capabilities needed, as well as milestone dates, will be integrated into this  schedule and used to help ensure that the facilities and capabilities are  ready to support the program.\n\n\tAgency Comments\n\nWe provided a draft of this report to NNSA and DOD for comment. NNSA  and DOD provided technical comments, which we incorporated as  appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense and Energy, the Administrator of  NNSA, and other interested parties. In addition, this report is available at  no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or bawdena@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made significant  contributions to the report are listed in appendix II.\n\nAppendix I: NNSA\u2019s Program Management Functions to Execute a W78 Replacement Program\n\nThe table below identifies the steps NNSA is taking or plans to take to  establish the program management functions needed to execute a W78  replacement program. NNSA was directed by the Nuclear Weapons  Council to suspend the program in fiscal year 2014 and the 2018 Nuclear  Posture Review directed NNSA to restart the program in fiscal year 2019.  The NNSA Office of Defense Program\u2019s program execution instruction  defines enhanced program management functions for a warhead life  extension program (LEP) such as the W78 replacement program and  other programs. The instruction also describes the level of program  management rigor that the LEP must achieve as it advances through the  Department of Defense and NNSA process for managing life extension  programs called the Phase 6.X process. This process includes key  phases or milestones that a nuclear weapon life extension program must  undertake before proceeding to subsequent steps. NNSA completed  Phase 6.1 (Concept Assessment) and started Phase 6.2 (Feasibility and  Design Options) activities before the program was suspended in fiscal  year 2014. NNSA, therefore, plans to restart the program in Phase 6.2.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nAllison B. Bawden, (202) 512-3841 or bawdena@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, William Hoehn (Assistant  Director), Brian M. Friedman (Analyst in Charge), and Julia T. Coulter  made significant contributions to this report. Also contributing to this  report were Antoinette Capaccio, Pamela Davidson, Penney Harwell  Caramia, Greg Marchand, Diana Moldafsky, Cynthia Norris, Katrina  Pekar-Carpenter, and Sara Sullivan.","output":"Why GAO Did This Study\n\nThe Department of Defense and NNSA have sought for nearly a decade to replace the capabilities of the aging W78 nuclear warhead used by the U.S. Air Force. NNSA undertakes LEPs to refurbish or replace the capabilities of nuclear weapons components. In fiscal year 2014, NNSA was directed to suspend a program that was evaluating a capability that could replace the W78 and also be used by the U.S. Navy. NNSA's most recent estimate\u2014reported in October 2018\u2014was that the combined program would cost about $10 billion to $15 billion. NNSA has been directed by the 2018 Nuclear Posture Review to restart a program to replace the W78 for the Air Force in fiscal year 2019. The 2018 Nuclear Posture Review also directed NNSA and the Navy to further evaluate whether the Navy could also use the warhead.\nSenate report 115-125 included a provision for GAO to review NNSA's progress on the program to replace the W78.\nGAO's report describes NNSA's steps in key early planning areas\u2014including program management, technology assessment, and coordination with facilities and capabilities\u2014to prepare to restart a program to replace the W78. GAO reviewed documentation on areas such as program management, technologies, and facilities needed for the program, and interviewed NNSA and DOD officials.\n\nWhat GAO Found\n\nThe Department of Energy's National Nuclear Security Administration (NNSA) has taken steps to prepare to restart a life extension program (LEP) to replace the capabilities of the Air Force's W78 nuclear warhead\u2014a program which was previously suspended. According to NNSA officials, these steps are typically needed to conduct any LEP. Therefore, they can be undertaken despite the current uncertainty about whether the final program will develop the warhead for the Air Force only or for both the Air Force and the Navy. Specifically, NNSA has taken the steps described below:\nProgram management. NNSA has begun to establish the program management functions needed to execute a W78 replacement program, as required by NNSA's program execution instruction. For example, NNSA has started to develop a risk management plan to define the process for identifying and mitigating risks. In addition, NNSA has created a preliminary schedule to restart the program in fiscal year 2019 in the feasibility and design options phase with the goal of producing the first unit in fiscal year 2030. (See figure)\nTechnology assessment. In May 2018, NNSA completed an assessment of 126 technologies for potential use in a W78 replacement. These included nine technologies that are needed to replace obsolete or no longer available technologies or materials. These are considered \u201cmust-do\u201d because they are the only technologies or materials available to meet minimum warhead requirements established by the Department of Defense and NNSA. NNSA officials said that in fiscal year 2019 they will use the assessment to further evaluate technologies for potential use in the warhead.\nCoordination with facilities and capabilities. NNSA's program manager is identifying the facilities and capabilities needed to provide components for the warhead. This information will be used to produce a report that identifies aspects of the program\u2014including facilities and capabilities to support it\u2014that could affect the program's schedule and technical risk. However, several of the needed facilities must be built or repaired, and these activities are separately managed and supported outside the W78 replacement program\u2014representing a critical external risk to the program. As mitigation, the program intends to coordinate with the offices that oversee these facilities to draft agreements that describe the work to be performed and timeframes, among other things.\n\nWhat GAO Recommends\n\nGAO is not making recommendations. NNSA and DOD provided technical comments, which GAO incorporated as appropriate."}
{"id":"crs_R45525","pid":"crs_R45525_0","input":"\tIntroduction\n\nCongress has been active in establishing federal policy for the agricultural sector on an ongoing basis since the 1930s. Over the years, as economic conditions and technology have evolved, Congress has regularly revisited agricultural policy through periodic farm legislation. Across these decades, the breadth of policy areas addressed through such farm bills has expanded beyond providing support for a limited number of agricultural commodities to include establishing programs and policies that address a broad spectrum of related areas. These include agricultural conservation, credit, rural development, domestic nutrition assistance, trade and international food aid, organic agriculture, forestry, and support for beginning and veteran farmers and ranchers, among others.\nThe Agriculture Improvement Act of 2018 ( P.L. 115-334 ), known as the \"2018 farm bill,\" was enacted on December 20, 2018, approximately eight months after the bill was introduced ( Table 1 ). In the House, the Agriculture Committee reported the bill on April 18, 2018, by a vote of 26-20. An initial floor vote on May 18, 2018, failed in the House by a vote of 198-213, but floor procedures allowed that vote to be reconsidered ( H.Res. 905 ). The House passed H.R. 2 in a second vote of 213-211 on June 21, 2018. In the Senate, the Agriculture Committee reported its bill ( S. 3042 ) on June 13, 2018, by a vote of 20-1. The Senate passed its bill as an amendment to H.R. 2 by a vote of 86-11 on June 28, 2018. Conference proceedings to resolve the differences between the House- and Senate-passed versions of H.R. 2 officially began on September 5, 2018, and concluded in December 2018 with Senate passage of H.R. 2 on a vote of 87-13 and House passage by a vote of 369-47 ( H.Rept. 115-1072 ).\nThe enacted 2018 farm bill continues a tradition of multi-year farm bills that would establish policy for a broad array of agriculture and nutrition assistance programs. To this end, P.L. 115-334 addresses agriculture and food policy across 12 titles. These titles cover commodity support programs, agricultural conservation, trade and international food aid, domestic nutrition assistance, credit, rural development, research and extension, forestry, horticulture, crop insurance, and a variety of other policies and initiatives. \nThe Congressional Budget Office (CBO) projected at enactment that outlays of the 2018 farm bill will amount to $428 billion over the five-year life of the law (FY2019-FY2023). Most of this projected spending\u2014$326 million, or 76%\u2014is in the nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 24%\u2014$102 billion of projected outlays\u2014stems primarily from agricultural programs, including crop insurance, farm commodity programs, and conservation. CBO estimated that the conference agreement for the 2018 farm bill will be budget neutral over a 10-year period (FY2019-FY2028). CBO estimated that in its first five years, the enacted 2018 farm bill will increase spending by $1.8 billion, compared with a simple extension of the 2014 farm bill, but that this initial increase will be entirely offset in the second five years of the budget window. The \" Budgetary Impact \" section of this report provides additional detail at the level of individual titles and major programs.\nThe policymaking environment for the 2018 farm bill differed materially from that of the 2014 farm bill, reflecting lower farm income levels in recent years and disruptions to agricultural exports beginning in 2018. The U.S. Department of Agriculture (USDA) forecasts that for 2018, net cash farm income\u2014a measure of the profitability of farming\u2014will be about one-third below the levels of 2012 and 2013, which were the highest in the last 40 years adjusted for inflation. The decline in net cash farm income over this period reflects lower farm prices for many commodities. U.S. farm exports, which provide critical support to U.S. agricultural commodity prices and farm profitability, have been disrupted since early 2018 by a series of trade disputes involving major U.S. agricultural export markets\u2014including China, Canada, Mexico, and the European Union\u2014that has led to the imposition of tariffs by these trading partners on a range of U.S. farm product exports. The decline in farm income, coupled with uncertainty about prospects for agricultural exports, may well have played a role in shaping a set of policies in the enacted farm bill that provide farmers and ranchers with a degree of continuity for the next five years. \nThis report provides an analysis of the budgetary implications of both bills, followed by summaries identifying some of the changes contained in the enacted 2018 farm bill compared with prior law. These summaries are followed by tables containing a title-by-title analysis of all of the policies and provisions in the enacted 2018 farm bill compared to the House- and Senate-passed versions of H.R. 2 and with the expired 2014 farm bill .\n\n\tBudgetary Impact5\n\nThe allocation of federal spending is one way to measure the activities covered by a farm bill, both by how much is spent in total and by how a new law changes policy. CBO estimates are the official measures when bills are considered and are based on long-standing budget laws and rules.\nA farm bill authorizes funding in two ways: It authorizes and pays for mandatory outlays with multi-year budget estimates when the law is enacted. It also sets the parameters for discretionary programs and authorizes them to receive future appropriations but does not provide funding. Mandatory programs often dominate farm bill policy and the debate over the farm bill budget.\n Figure 1 illustrates the $428 billion, five-year total of projected mandatory outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the farm commodity and conservation titles. The nutrition title is the largest component of the farm bill budget, followed by crop insurance, farm commodity programs, and conservation.\n\n\t\tBaseline\n\nThe budgetary impact of mandatory spending proposals is measured relative to an assumption that certain programs continue beyond the end of the farm bill. The benchmark is the CBO baseline \u2014a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline provides funding for reauthorization, reallocation to other programs, or offsets for deficit reduction. Generally, many programs (such as the farm commodity programs or supplemental nutrition assistance) are assumed to continue in the baseline as if there were no change in policy and the program did not expire. However, some programs are not assumed to continue beyond the end of a farm bill.\nThe CBO baseline used to develop the 2018 farm bill was released in April 2018. It projected that if the 2014 farm bill, as amended as of April 2018, were extended, farm bill programs would cost $867 billion over the next 10 years, FY2019-FY2028. Most of that amount, 77%, was in the nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 23%, $203 billion baseline (the first and fourth data columns in Table 3 ), was for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contributed about 1% of the baseline, some of which are funded primarily with discretionary spending.\n\n\t\tScore\n\nWhen a new bill is proposed that would affect mandatory spending, CBO estimates the score (cost impact) in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Budget enforcement rules use these baselines and scores to follow \"PayGo\" and other budget rules (that in part may require no increase to the federal deficit). The score (change) of the enacted 2018 farm bill is shown by title in the second and fifth columns in Table 3 .\n Figure 3 shows the title-level scores that are made by the enacted 2018 farm bill and the House and Senate bills that preceded the conference agreement. Table 4 contains the more detailed section-by-section CBO score of the enacted 2018 farm bill.\nRelative to the baseline, the overall score of the 2018 farm bill is budget neutral over a 10-year period. The farm bill increases spending in the first five years by $1.8 billion ( Table 3 ). The House-passed bill would have decreased 10-year outlays by $1.8 billion; the Senate-passed bill was budget neutral ( Figure 3 ). Scores of separate titles show both increases and decreases. Generally, the enacted farm bill follows the score of the Senate bill more closely than the House bill ( Figure 3 ). In the enacted law, most of the reductions are from changes in the Rural Development title. Six titles have increased outlays over the 10-year period, including farm Commodities, Trade, Research, Energy, Horticulture, and Miscellaneous. The Conservation and Nutrition titles have increases over the first five years but are budget neutral over the 10-year period ( Table 3 ). Within some titles, the net score may be a combination of increases and decreases across provisions. This is particularly notable in the Conservation title, which reallocates spending across programs more than in other titles ( Table 4 ).\nFor several of the \"programs without baseline\" from the 2014 farm bill, the 2018 farm bill provides continuing funding and, in some cases, permanent baseline. Twenty-three of the 39 such programs received continued mandatory funding in the 2018 farm bill (see footnotes in Table 4 ).\nFourteen of the programs without baseline received mandatory funding during FY2019-FY2023 but no baseline beyond the end of the farm bill. Nine of the programs without baseline received mandatory funding and permanent baseline beyond the end of the farm bill. Three of these programs were combined with six others into six provisions in the 2018 farm bill. In addition, five provisions in the 2018 farm bill created new programs without baseline for the next farm bill. \n\n\t\tProjected Outlays at Enactment\n\nWhen a new law is passed, the projected cost at enactment equals the baseline plus the score (the third and sixth columns of Table 3 ). This sum becomes the foundation of the new law and may be compared to future CBO baselines as an indicator of how actual costs transpire as the law is implemented and market conditions change.\nAs presented above, Figure 1 illustrates the projected outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the Farm Commodity and Conservation titles. Most of $428 billion five-year total amount (76%) is in the Nutrition title for SNAP. The remaining 24%, $102 billion of projected outlays, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%).\n\n\tTitle-by-Title Summaries\n\n\t\tCommodities14\n\nTitle I of the 2018 farm bill authorize support programs for dairy, sugar, and covered commodities\u2014including major grain, oilseed, and pulse crops\u2014as well as agricultural disaster assistance. Major field-crop programs include the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs and the Marketing Assistance Loan (MAL) program (see Table 5 ). The dairy program involves protecting a portion of the margin between milk and feed prices. The sugar program provides a combination of price support, limits on imports, and processor\/refiner marketing allotments. Four disaster assistance programs that focus primarily on livestock and tree crops were permanently authorized in the 2014 farm bill. These disaster assistance programs provide federal assistance to help farmers recover financially from natural disasters, including drought and floods. Title I also includes several administrative provisions that suspend permanent farm law from 1938 and 1949 that would otherwise impose antiquated and potentially disruptive price support programs; assign payment limits for individuals, joint ventures or partnerships, and corporations; specify the adjusted gross income (AGI) threshold for program payment eligibility; and identify other details regarding payment attribution and eligibility.\nThe 2018 farm bill extends authority for most current commodity programs but with some modifications to the ARC, PLC, and MAL programs; dairy; sugar; and agricultural disaster assistance. \nUnder the 2014 farm bill, producers were allowed a one-time choice between ARC and PLC on a commodity-by-commodity basis, with payments made on 85% of each commodity's base acres (i.e., historical program acres that are eligible for ARC and PLC payments). To increase producer flexibility, the 2018 farm bill provides producers the option in 2019 of switching between ARC and PLC coverage, on a commodity-by-commodity basis, effective for both 2019 and 2020. Beginning in 2021, producers again have the option to switch between ARC and PLC but on an annual basis for each of 2021, 2022, and 2023. Producers may remotely and electronically sign annual contracts for ARC and PLC. Producers also have the option to sign a multi-year contract for the ARC and PLC programs. If no initial choice is made, then the program defaults to whichever program was in effect under the 2014 farm bill. Base acres that have not been planted to a commodity eligible to participate in these programs during the 2009-2017 period are not eligible to receive ARC and PLC payments under the 2018 farm bill. However, as a concession to the affected farms, these base acres may be enrolled in the Conservation Stewardship Program for five years at an annual program payment rate of $18 per acre.\nTwo changes to the PLC program include the option for producers to update their program yields (used in the PLC payment formula) based on 90% of the average yield for 2013-2017, using a yield plug of 75% of the county average for each year where the farm program yield is less, excluding any years with zero yields, and adjusting downward for any national trend yield growth. In addition, an escalator provision was added that could potentially raise a covered commodity's effective reference price (used to determine the PLC per-unit payment rate) by as much as 115% of the statutory PLC reference price based on 85% of the five-year Olympic average of farm prices. \nThe 2018 farm bill also specifies several changes to the ARC program. Under the 2014 farm bill, USDA's National Agricultural Statistics Service (NASS) data for county average yields was used for calculating both ARC benchmark and actual revenues. Under the 2018 farm bill, data from USDA's Risk Management Agency (RMA) will be the primary source for county average yield data. Where RMA data is not available, USDA will determine the data source considering data from NASS or the yield history of representative farms in the state, region, or crop-reporting district. This data reprioritization is intended to improve the integrity of the ARC program and avoid the disparity in ARC payments that some neighboring counties experienced in recent years. Also, up to 25 counties nationwide that meet certain criteria\u2014larger than 1,400 square miles and with more than 190,000 base acres\u2014may subdivide for purposes of calculating the ARC benchmark and actual revenue. This change is expected to allow ARC calculations to better reflect significant yield deviations within a county. Also, ARC will use a trend-adjusted yield, as is done by RMA for the federal crop insurance program. This has the potential to raise ARC revenue guarantees for producers. Finally, the five-year Olympic average county yield calculations will increase the yield floor (substituted into the formula for each year where the actual county yield is lower) to 80%, up from 70%, of the transitional county yield. This yield calculation is used to calculate the ARC benchmark county revenue guarantee. \nMarketing assistance loan rates are increased for several program crops, including barley, corn, grain sorghum, oats, extra-long-staple cotton, rice, soybeans, dry peas, lentils, and small and large chickpeas. Commodities excluded from the loan rate increase are upland cotton, peanuts, minor oilseeds, nongraded wool, mohair, and honey. Marketing assistance loan rates are used to establish the maximum payment under PLC. Thus, raising the loan rate for a commodity lowers its potential PLC program payment rate. \nNo changes were made to the \"actively engaged in farming\" criteria used to determine whether an individual is eligible for farm program payments. With respect to payment limits and the AGI limit, the 2018 farm bill leaves both the payment limit of $125,000 per individual ($250,000 per married couple) and the AGI limit of $900,000 unchanged, but it modifies the eligibility criteria for commodity program payment eligibility. However, MAL program benefits are exempted from inclusion under payment limits. Thus, payment limits apply only to combined ARC and PLC payments. Also, the definition of family farm is expanded to include first cousins, nieces, and nephews, thus increasing the potential pool of individuals eligible for individual payment limits on family farming operations. \nThe enacted bill also amends the permanent agricultural disaster assistance programs. The law expands payments for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. The law also expands the definition of eligible producer to include Indian tribes or tribal organizations and increases replanting and rehabilitation payment rates for beginning and veteran orchardists. The law amends the limits on payments received under select disaster assistance programs\u2014of the four disaster assistance programs, only the livestock Forage Program (LFP) is not subject to the $125,000\/person payment limit. The AGI requirements are left unchanged.\nThe Noninsured Crop Disaster Assistance Program (NAP) is also amended. The enacted bill amends crop eligibility to include crops that may be covered by select forms of crop insurance but only under whole farm plans or weather index policies. It also amends the payment calculation to consider the producer's share of the crop, raises the service fees and creates separate payment limits for catastrophic ($125,000\/person) and buy-up ($300,000\/person) coverage. The law makes buy-up coverage permanent, and adds data collection and program coordination requirements.\nThe 2018 farm bill significantly revises the Margin Protection Program (MPP) for milk producers that was established in the 2014 farm bill. The new dairy program\u2014Dairy Margin Coverage (DMC)\u2014provides lower producer-paid premium rates for milk coverage of 5 million pounds or less (Tier I), adds margin coverage at higher levels of coverage, and allows producers to cover a larger quantity of milk production. DMC is authorized through December 31, 2023. \nThe DMC program will pay participating dairy producers the difference (when positive) between a producer-selected margin and the national milk margin (calculated as the all-milk price minus an average feed cost ration). The feed ration formula is unchanged from MPP. For a $100 administrative fee, participating dairy producers are automatically covered at the $4.00 per hundredweight (cwt) margin level. Producers may buy additional margin coverage from $4.50\/cwt to $9.50\/cwt on the first 5 million pounds of production, compared with $5.50\/cwt to $8.00\/cwt under MPP. Also, producers may now cover from 5% to 95% of their production history, compared with 25% to 90% under MPP.\nUnder DMC, premiums for Tier I coverage above $4.00\/cwt are significantly reduced from MPP to incentivize dairy producers to buy higher levels of margin coverage. For example, under MPP, an $8.00 margin cost $0.142\/cwt, but under DMC, the cost is $0.10\/cwt. The premiums for the newly available coverage for margins of $8.50, $9.00, and $9.50 are established at $0.105\/cwt, $0.11\/cwt, and $0.15\/cwt, respectively. For production of over 5 million pounds (Tier II coverage), the premium rates for $4.50 and $5.00 margins are also reduced compared with MPP, but margin coverage is only available up to $8.00, and the premium rates are generally higher than under MPP.\nAnother change under the 2018 farm bill is that dairy producers will receive a 25% discount on premiums if they select and lock in their margin and production coverage levels for the entire five years of the DMC program. Otherwise, producers may continue to select coverage levels annually. Also under DMC, dairy producers may apply for repayment of the premiums, less any payments received, that were paid under MPP during 2014-2017. If dairy producers opt to apply repayments to future DMC premiums, they are to receive credit for 75% of the eligible repayment. Otherwise, they may opt for a direct cash payment of 50% of the eligible repayment. \nUnlike MPP, the DMC program allows dairy producers to participate in both margin coverage and the Livestock Gross Margin-Dairy (LGM-D) insurance program that insures the margin between feed costs and a designated milk price. In addition, producers who were excluded from participating in MPP in 2018 because their milk production was enrolled in LGM-D may retroactively participate in MPP.\nThe 2018 farm bill reauthorizes the Dairy Forward Pricing Program, the Dairy Indemnity Program, and the Dairy Promotion and Research Program through FY2023. The act repeals the Dairy Product Donation Program enacted in the 2014 farm bill. It also establishes a milk donation program designed to simplify donations of fluid milk that producers, processors, and cooperatives make to food banks and feeding organizations. The donation program is funded at $9 million for FY2019 and $5 million in each following fiscal years. Also, the act amends the formula for the Class I skim milk price used for calculating the Class I price under Federal Milk Marketing Orders. \nThe farm bill requires USDA to conduct studies on whether the national feed cost ration is representative of actual feed costs used in the margin calculation and on the cost of corn silage versus the feed cost of corn, and it directs USDA to report alfalfa hay prices in the top five milk-producing states.\n\n\t\tConservation17\n\nUSDA administers a number of agricultural conservation programs that assist private landowners with natural resource concerns. These can be broadly grouped into working lands programs, land retirement and easement programs, watershed programs, emergency programs, technical assistance, and other programs. The enacted bill amends portions of programs in all of these categories (see Table 6 ). However, the general focus of the enacted 2018 farm bill is on the larger working lands, land retirement, and easement programs. All major conservation programs were reauthorized with varying degrees of amendments. \nFarm bill conservation programs are authorized to receive mandatory funding through the Commodity Credit Corporations (CCC). Generally, the law reallocates mandatory funding within the title among the larger programs and pays for increases in the short term with reductions in the long term. CBO projects that the enacted bill would increase funding for conservation by $555 million in the short term (FY2019-FY2023) and reduce funding by $6 million in the long term (FY2019-FY2028). \n\n\t\t\tWorking Lands Programs\n\nIn general, working lands programs provide technical and financial assistance to help farmers improve land management practices. The two largest working lands programs\u2014Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP)\u2014account for more than half of all conservation program funding. Total funding for both programs is reduced under the enacted bill, compared with prior law, but in different ways and to different degrees. \nCSP provides financial and technical assistance to producers to maintain and improve existing conservation systems and to adopt additional conservation activities in a comprehensive manner on a producer's entire operation. The House bill would have repealed CSP and created a stewardship contract within EQIP, whereas the Senate bill would have reauthorized CSP and reduce program enrollment. The enacted bill creates a mix of both the House and Senate proposals with amendments. The law reauthorizes CSP but amends how the program limits future enrollment. The program is shifted away from an acreage limitation under prior law (10 million acres annually) to limits based on funding ($700 million in FY2019 increasing to $1 billion in FY2023), a reduction from prior law. The savings from limiting CSP in this manner are redistributed to EQIP and other farm bill conservation programs within the title. The enacted bill also amends CSP's ranking criteria; contract renewal requirements; payments for cover crops, grazing management, and comprehensive conservation plan development; and organic certification allocations. A new grassland conservation initiative is also added to CSP.\nEQIP is reauthorized and expanded in the enacted bill. EQIP provides financial and technical assistance to producers and land owners to plan and install structural, vegetative, and land management practices on eligible lands to alleviate natural resource problems. The enacted bill increases EQIP funding in annual increments from $1.75 billion in FY2019 to $2.025 billion in FY2023. A number of amendments to EQIP focus on water quality and quantity-related practices, soil health improvement, and wildlife habitat improvement. The bill reduces the allocation for livestock-related practices from 60% to 50% and increases the allocation for wildlife-related practices from 5% to 10%. Water conservation system payments are expanded to irrigation and drainage entities with limitations. Conservation Innovation Grants, a subprogram under EQIP, is expanded to include community colleges, on-farm innovation, and soil health trials.\n\n\t\t\tLand Retirement and Easement Programs\n\nLand retirement and easement programs provide federal payments to private agricultural landowners for accepting permanent or long-term land-use restrictions. The largest land retirement program\u2014the Conservation Reserve Program\u2014is reauthorized and expanded under the enacted 2018 farm bill. CRP provides annual rental payments to producers to replace crops on highly erodible and environmentally sensitive land with long-term resource-conserving plantings. Under the new law, annual CRP enrollment is increased incrementally from 24 million acres in FY2019 to 27 million by FY2023. Within this limit, CRP is required to enroll up to 2 million acres in grasslands contracts and up to 8.6 million acres in continuous contracts. To offset this increased enrollment level, the enacted bill reduces payments to participants, including cost-share payments, annual rental payments, and incentive payments. Annual rental payments are limited to 85% of the county average for general enrollment and 90% for continuous enrollment. The enacted bill also makes a number of other changes that would further expand grazing and commercial uses on CRP acres as well as transition options for new and limited resource producers. Under CRP, new pilot programs are created, such as CLEAR 30 (Clean Lakes, Estuaries, and Rivers and Soil Health and Income Protection Pilot), while existing subprograms are reauthorized and codified (e.g., Conservation Reserve Enhancement Program and Farmable Wetlands Program).\nThe Agricultural Conservation Easement Program (ACEP) is reauthorized and amended in the 2018 farm bill. ACEP provides financial and technical assistance through two types of easements: (1) agricultural land easements that limit nonagricultural uses on productive farm or grasslands and (2) wetland reserve easements that protect and restore wetlands. Most of the changes to ACEP focus on the agricultural land easements in which USDA enters into partnership agreements with eligible entities to purchase agricultural land easements from willing landowners. Additional flexibilities are provided to ACEP-eligible entities, including amendments to nonfederal cost share requirements, consideration of geographical differences, terms and conditions of easements, and certification criteria of eligible entities. Several amendments reduce the roll of USDA in the administration of ACEP agricultural land easements, including amendments to the certification of eligible entities, the right of easement enforcement, and planning requirements. Changes to wetland reserve easements center on compatible use and vegetative cover requirements. The enacted bill increases overall funding from $250 million in FY2018 to $450 million annually for FY2019-FY2023.\n\n\t\t\tOther Conservation Programs\n\nThe new farm bill reauthorizes and amends the Regional Conservation Partnership Program (RCPP) by shifting the program away from enrolling land through existing conservation programs to a standalone program with separate contracts and agreements. The program is to continue to enter into agreements with eligible partners, and these partners are to continue to define the scope and location of the project, provide a portion of the project cost, and work with eligible landowners to enroll in RCPP contracts. The scope of eligible activities under RCCP is expanded to include activities that may be carried out under additional covered programs. RCPP funding is increased to $300 million annually for FY2019-FY2023 from $100 million annually under prior law. The enacted bill provides additional flexibilities to partners, including the makeup of a partner's project contribution, guidance and reporting requirements, agreement renewals, and the application process.\nThe enacted bill also includes amendments to conservation programs and provisions with originating authorities outside of farm bill legislation, primarily various watershed and emergency conservation programs. The law also requires reports be provided to Congress on natural resources and on various pilot programs and trials.\n\n\t\tTrade18\n\nThe trade title\u2014Title III of the enacted 2018 farm bill\u2014addresses statutes concerning U.S. international food aid and agricultural export programs (see Table 7 ). Under the farm bill authority, U.S. international food assistance is distributed through three main programs: (1) Food for Peace (emergency and nonemergency food aid), (2) Food for Progress (agricultural development programs), and (3) the McGovern-Dole International Food for Education and Child Nutrition program (school lunch and feeding programs). The largest of these, the Food for Peace (FFP) program, receives about $1.5 billion in annual appropriations. Traditionally, these three programs have relied on donated U.S. agricultural commodities as the basis for their activities. However, recent farm bills have increasingly added flexibility to purchase food in local markets or to directly transfer cash or vouchers to needy recipients. The U.S. Agency for International Development administers FFP, while the Foreign Agricultural Service of USDA administers the other two programs. \nThe bill reauthorizes all international food aid programs as well as certain operational details such as prepositioning of agricultural commodities and micronutrient fortification programs. P.L. 115-334 also adds a provision requiring that food vouchers, cash transfers, and local and regional procurement of non-U.S. foods avoid market disruption in the recipient country. Under prior law, this requirement applied only to U.S. commodities. The enacted law amends FFP by eliminating the requirement to monetize \u2014sell on local markets to fund development projects\u2014at least 15% of FFP commodities. It also increases the minimum level of FFP funds allocated for nonemergency assistance from $350 million to $365 million each year while maintaining the maximum annual allocation of 30% of FFP funds. \nP.L. 115-334 amends the McGovern-Dole program by authorizing up to 10% of annual appropriated funds to be used to purchase food in the country or region where it will be distributed. Prior law required all commodities provided under the program be produced in the United States. The bill also extends authority for several related international programs, including the Farmer-to-Farmer program, Bill Emerson Humanitarian Trust, and Global Crop Diversity Trust, as well as two associated fellowship programs: Cochran Fellowships and Borlaug Fellowships.\nP.L. 115-334 consolidates the existing U.S. export promotion programs\u2014the Market Access Program (MAP), the Foreign Market Development Program (FMDP), the Emerging Markets Program (EMP), and Technical Assistance for Specialty Crops (TASC)\u2014into one section, establishing permanent mandatory funding for those programs. It also establishes a Priority Trade Fund, from which the Secretary can provide additional funding to the export promotion programs. The programs are authorized to receive $255 million in annual mandatory CCC funds for FY2019-FY2023. Of that money, not less than $200 million is to be spent on MAP, not less than $34.5 million on FMDP, not more than $8 million on EMP, not more than $9 million on TASC, and $3.5 million on the Priority Trade Fund. While the MAP and FMDP funding reflects 2014 farm bill funding levels for those programs, EMP and TASC are each authorized at $1 million less than in the 2014 farm bill. Another change is that MAP and FMDP funds can now also be spent on authorized programs in Cuba.\nThe law also reauthorizes direct credits or export credit guarantees for the promotion of agricultural exports to emerging markets of not less than $1 billion in each fiscal year through 2023. Further, the new law authorizes the appropriation of up to $2 million annually through 2023 to assist with the removal of nontariff and other trade barriers to U.S. agricultural products produced with biotechnology and other agricultural technologies. And the law adds a requirement that USDA facilitate the inclusion of more tribal food and agricultural products in federal trade-related activities and international trade missions. \n\n\t\tNutrition19\n\nThe enacted farm bill's Nutrition title amends a variety of aspects of SNAP and related nutrition assistance programs (see Table 8 ). While the enacted provisions incorporate some of the SNAP policies included in the House- and\/or Senate-passed bills, the Nutrition title does not include the House-passed bill's expansion of work requirements and SNAP employment and training (E&T) programs. The law reauthorizes SNAP and related programs for five years through the end of FY2023. CBO estimates the Nutrition title's impact on direct spending (in outlays) is cost-neutral over the 10-year period (FY2019-FY2028). While certain policies are estimated to increase spending by approximately $1.1 billion, all others total to an estimated decrease in spending by approximately $1.1 billion.\nSNAP Eligibility and Benefit Calculation. The enacted 2018 farm bill's Nutrition title largely maintains current SNAP eligibility and benefit calculation rules. After debate over work requirements for SNAP, the enacted conference report maintains both the existing general work requirements and the time limit for nondisabled adults without dependents to receive SNAP, with a few amendments\nWhile prior law allowed states to exempt up to 15% of those subject to the time limit from the time limit, the 2018 farm bill reduces such exemptions to 12%. The conference report expands the SNAP E&T activities that a state may provide and emphasizes supervised job search over unsupervised job search programs. The new law increases one stream of mandatory E&T funding by approximately $14 million and prioritizes specified E&T activities for receiving any reallocated funding.\nOn benefit calculation, the new law requires states to conduct a simplified calculation for homeless households and also requires certain updates or studies of certain aspects of benefit calculation. Among other eligibility-related provisions that were not adopted, the House-passed bill would have limited categorical eligibility while amending asset limits, limited how utilities may have been calculated in benefit calculation, expanded work requirements to include individuals 50-59 years old and individuals with children over the age of six, made it more difficult for states to qualify for waivers from work requirements, and increased the earned income deduction. ( Table 8 expands upon the eligibility and benefit calculation differences between the bills.)\nSNAP fraud, errors, and related state administration . The enacted 2018 farm bill includes policies intended to reduce errors and fraud in SNAP. The enacted farm bill establishes a nationwide National Accuracy Clearinghouse to identify concurrent enrollment in multiple states and requires state action on information that could change benefit amounts. It increases USDA's oversight of state systems and the quality control system. The enacted bill also repeals funding for state performance awards. \nElectronic Benefit Transfer (EBT) and retailers . The enacted Nutrition title contains policy changes for SNAP's EBT system and benefit redemption. It places limits on the fees EBT processors may charge, shortens the time frame for storing and expunging unused benefits, changes the authorization requirements for farmers' market operators with multiple locations, and requires USDA to conduct other specified retailer and EBT system oversight. The new law requires the nationwide implementation of the online acceptance of SNAP benefits and authorizes a pilot project to test SNAP recipients' use of mobile technology to redeem their SNAP benefits.\nOther SNAP- related grants . The enacted 2018 farm bill makes changes to other SNAP-related funding (E&T, a type of SNAP-related grants, is discussed above). The enacted Nutrition title reauthorizes the Food Insecurity Nutrition Incentive (FINI) grant program, renaming it the Gus Schumacher FINI, and provides for evaluation, training, and technical assistance. As added by the 2014 farm bill, this program funds projects that incentivize participants to purchase fruits and vegetables. The 2018 farm bill expands these SNAP incentive programs, increasing mandatory funding, and, within FINI's funding, establishes grants for produce prescription projects to serve individuals eligible for SNAP or Medicaid in households with or at risk of developing a diet-related health condition. The new law increases FINI funding by $417 million over 10 years. \nIn addition to FINI's fruit and vegetable incentives or prescriptions, the Nutrition title also includes policies\u2014but not federal funding\u2014for retailer incentive programs and authorizes, with discretionary funding, pilot projects to focus on milk consumption. On nutrition education (SNAP-Ed), the new law makes some policy changes, such as requiring an electronic reporting system, but it does not change the program's funding. \nFood distribution programs . The Nutrition title reauthorizes and makes some policy changes to the nutrition assistance programs that distribute USDA foods to low-income households. The law includes changes to the Food Distribution Program on Indian Reservations, including requiring the federal government to pay at least 80% of administrative costs and creating a demonstration project for tribes to purchase their own commodities. The Nutrition title reauthorizes the Commodity Supplemental Food Program and increases the length of certification periods. \nThe enacted bill also increases funding for The Emergency Food Assistance Program. CBO estimates that the increases will amount to an additional $206 million over 10 years. Included in this cost estimate is $4 million for each of FY2019-FY2023 for newly authorized projects to facilitate the donation of raw\/unprocessed commodities by agricultural producers, processors, and distributors to emergency feeding organizations.\nOther nutrition programs and policies . The enacted 2018 farm bill also continues the Senior Farmers' Market Nutrition Program and its mandatory funding. The enacted bill reduces funding for the Community Food Projects competitive grant program, providing $5 million per year instead of $9 million. Though generally the school meals programs are reauthorized outside of the farm bill, the 2018 farm bill continues the $50 million set-aside for USDA's fresh fruit and vegetable purchases for schools and requires USDA to take certain actions to enforce school meals' Buy American requirements. The enacted bill also authorizes new programs and discretionary funding for Public-Private Partnerships and Micro-Grants for Food Security.\n\n\t\tCredit20\n\nThe Credit title (Title V) of the 2018 farm bill reauthorizes and makes several changes to provisions in the Consolidated Farm and Rural Development Act that governs the USDA farm loan programs (7 U.S.C. 1921 et seq. ). It also modifies the Farm Credit Act that governs the Farm Credit System (12 U.S.C. 2001 et seq. ) and reauthorizes the State Agricultural Loan Mediation Program (7 U.S.C. 5101; see Table 9 ).\nFor the USDA farm loan programs, the 2018 farm bill adds specific criteria (e.g., coursework, military service, mentoring) that the Secretary may use to reduce the requirement for three years of farming experience in order for beginning farmers to qualify for loans. It also raises the maximum loan size for guaranteed loans (both farm ownership and farm operating) to $1.75 million per borrower in 2019, adjusted for inflation thereafter, from a lower statutory base of $700,000 established in 1996 ($1.4 million in 2018 after adjusting for inflation). For direct loans, the new farm bill increases the farm ownership loan limit to $600,000 and the farm operating loan limit to $400,000, both from $300,000 under prior law. For beginning and socially disadvantaged farmers, it increases the percentage of loans that may be guaranteed to 95%, generally from 80%-90%. \nThe State Agricultural Loan Mediation Program is reauthorized through FY2023, and the range of issues covered by the program is expanded.\nFor the government-chartered cooperative Farm Credit System (FCS), the 2018 farm bill eliminates obsolete references to outdated names and transition periods from the 1980s and 1990s. It clarifies that FCS entities may share privileged information with the Farm Credit Administration (FCA) for regulatory purposes without altering the privileged status elsewhere, and it expands FCA's jurisdiction to hold accountable \"institution-affiliated parties\" (including agents and independent contractors). It also repeals a compensation limit for FCS bank boards of directors.\nFor the Federal Agricultural Mortgage Corporation (FarmerMac), the new farm bill increases the acreage exception\u2014subject to a study by FCA\u2014from 1,000 acres to 2,000 acres for the dollar limit to remain a qualified loan. \nFor the Farm Credit System Insurance Corporation (FCSIC), which insures repayment of certain FCS debt obligations, the 2018 farm bill provides greater statutory guidance regarding the powers and duties of the FCSIC when acting as a conservator or receiver of a troubled FCS institution and the rights and duties of parties affected by an FCS institution being placed into a conservatorship or receivership. These are largely modeled after provisions that apply to depository institutions that are insured by the Federal Deposit Insurance Corporation.\nThe enacted 2018 farm bill also directs four studies about agricultural credit: (1) an annual FSA report about its farm loan program that includes various performance characteristics, demographics, and participation by beginning and socially disadvantaged farmers; (2) an FCA study about the risks and capitalization of loans in the portfolios of FCS and FarmerMac and the feasibility of increasing the acreage for FarmerMac qualified loans; (3) a Government Accountability Office (GAO) study about credit availability for socially disadvantaged farmers; and (4) a GAO study about the credit needs of Indian tribes and members of Indian tribes.\n\n\t\tRural Development21\n\nThe Rural Development title of the enacted 2018 farm bill ( P.L. 115-334 ) addresses rural development policies including broadband deployment, opioid abuse and rural health, and business and infrastructure development (see Table 10 ). \nThe law adds a new section to the Rural Development Act of 1972 authorizing the Secretary to temporarily prioritize assistance under certain USDA Rural Development loan and grant programs to respond to a public health emergency. P.L. 115-334 also directs the Secretary to prioritize assistance under certain programs between FY2019 and FY2025 to combat substance use disorder. It directs the Secretary to make available 20% of Distance Learning and Telemedicine Program funds for telemedicine projects that provide substance use disorder treatment services. It also gives priority for assistance under the Community Facilities Program and Rural Health and Safety Education Program to entities providing substance use prevention, treatment, and recovery services. The new law also allows loans or loan guarantees provided to a community facility or rural entity to be used to refinance a rural hospital's debt obligation.\nP.L. 115-334 includes provisions that address access to broadband in rural communities. The law amends the Rural Broadband Access Loan and Loan Guarantee Program to allow USDA to provide grants, in addition to loans and loan guarantees, to fund broadband deployment projects. It increases authorized appropriations for broadband projects from $25 million to $350 million annually for FY2019-FY2023. Prior law established minimum acceptable levels of broadband service for a rural area for the purposes of this program as 4 megabits per second (Mbps) download and 1 Mbps upload. P.L. 115-334 increases these minimum acceptable levels to 25 Mbps download and 3 Mbps upload. The new law also reauthorizes the Rural Gigabit Network Pilot Program established in the 2014 farm bill ( P.L. 113-79 ) and renames the program Broadband Innovative Advancement. It also codifies the Community Connect Grant Program and authorizes discretionary funding for the program of $50 million annually for FY2019-FY2023. The new law also establishes a Rural Broadband Integration Working Group to identify barriers and opportunities for broadband deployment in rural areas.\nThe enacted 2018 farm bill directs the Northern Border Regional Commission to establish a new State Capacity Building Grant Program to provide grants to support economic and infrastructure development in commission states. P.L. 115-334 also establishes a Council on Rural Community Innovation and Economic Development to enhance federal efforts to address the needs of rural areas by creating working groups within the council to focus on job acceleration and integration of smart technologies in rural communities and making recommendations to the Secretary of Agriculture. \nP.L. 115-334 reauthorizes the Rural Energy Savings Program and amends the program to allow financing of off-grid and renewable energy and energy storage systems. It increases authorized discretionary funding for the Emergency and Imminent Community Assistance Water Program from $35 million per year to $50 million per year for FY2019-FY2023. It also decreases authorized discretionary funding to capitalize revolving water and wastewater loan funds from $30 million per year to $15 million per year for FY2019-FY2023.\nP.L. 115-334 amends the definition of rural in the ConAct (P.L. 92-419) to exclude from population-based criteria individuals incarcerated on a \"long-term or regional basis\" and to exclude the first 1,500 individuals who reside in housing located on military bases. It also amends the Housing Act of 1949 to allow any area defined as a rural area between 1990 and 2020 to remain classified as such until receipt of the 2030 decennial census.\nAmong its other changes, the enacted 2018 farm bill establishes a new technical assistance and training program to assist communities in accessing programs offered through the Rural Business-Cooperative Service. In addition, it amends the Cushion of Credit Payments Program to cease new deposits and modify the interest rate structure that borrowers receive. It also allows borrowers to withdraw deposits from cushion of credit accounts to prepay loans under USDA's Rural Utilities Service without a prepayment penalty through FY2020. The new law amends the Rural Economic Development Loan and Grant Program to authorize $10 million per year in discretionary funding for FY2019-FY2023 and $5 million per year in mandatory funding for FY2022-FY2023. The law also repeals several unfunded programs, including the Rural Telephone Bank, the Rural Collaborative Investment Program, and the Delta Region Agricultural Development Grants Program.\n\n\t\tResearch22\n\nUSDA is authorized under four major laws to conduct agricultural research at the federal level and to provide support for cooperative research, extension, and postsecondary agricultural education programs in the states through formula funds and competitive grants to land-grant universities (see Table 11 ). The enacted Agriculture Improvement Act of 2018 ( P.L. 115-334 , Title VII) reauthorizes funding for these activities through FY2023 with either mandatory funding or discretionary funding that is subject to annual appropriations.\nSeveral new research areas in the High Priority Research and Extension program are designated as high priorities: macadamia tree health, national turfgrass research, fertilizer management, cattle fever ticks, and laying hen and turkey research. The law also reauthorizes the Organic Agriculture Research and Extension Initiative (OREI) and increases mandatory funding levels to $30 million annually for FY2019-FY2023. The Specialty Crop Research Initiative (SCRI) is reauthorized through FY2023 and will continue to include carve-out funding for the Emergency Citrus Disease Research and Extension Program. SCRI also expands program eligibility to include \"size-controlling rootstock systems for perennial crops\" and \"emerging and invasive species,\" among other production practices and technologies.\nThe enacted law provides new programs for the 1890 land-grant institutions and 1994 tribal colleges of agriculture, authorizes new support for urban and indoor agricultural production, authorizes new funding for industrial hemp research and development, and authorizes an initiative supporting advanced agricultural research. Other provisions reauthorize and extend national genetic resources programs, OREI, and SCRI. The research title also makes changes to the Foundation for Food and Agriculture Research and reauthorizes several programs relating to agricultural biosecurity.\nThe law creates a new scholarship program for students attending 1890 land-grant universities (Historically Black Colleges and Universities). Authorized grants are for young African American students who commit to pursuing a career in the food and agricultural sciences. Another provision of the law also establishes at least three Centers of Excellence, each to be led by an 1890 institution. The centers are to concentrate research and extension activities in one or more defined areas, including nutrition, wellness and health, farming systems and rural prosperity, global food security and defense, natural resources, energy and the environment, and emerging technologies. A similar program, New Beginnings for Tribal Students, is to offer competitive grants to 1994 tribal agriculture colleges to support recruiting, tuition, experiential learning, student services, counseling, and academic advising to increase the retention and graduation rates of tribal students at 1994 land-grant colleges. Another provision will make 1994 tribal colleges that offer an associate's degree or a baccalaureate eligible to participate in McIntire-Stennis forestry research support. \nSeveral provisions authorize research and development funding for industrial hemp production. Under the Critical Agricultural Materials Act, hemp will now be included as an industrial product eligible for support. In amending and expanding a provision in the 2014 farm bill (Section 7606, P.L. 113-79 ), the Secretary is directed to conduct a study of hemp production pilot programs to determine the economic viability of domestic production and sale of hemp. A new provision creates a \"Hemp Production\" subtitle under the Agricultural Marketing Act of 1946, expanding the existing statutory definition of hemp and expanding eligibility to other producers and groups, including tribes and territories. States or Indian tribes wanting primary regulatory authority over hemp production will be required to implement a plan with specific requirements to further monitor and regulate their production of hemp. \nA provision of the research title creates new programs supporting advanced agricultural research and urban, indoor, and emerging agricultural production systems. A new Agriculture Advanced Research and Development Authority (AGARDA) is established as a component of the Office of the Chief Scientist to examine the applicability for advanced research and development in food and agriculture through a pilot program that targets long-term and high-risk research. Focal areas include acceleration of novel, early-stage innovative agricultural research; prototype testing; and licensing and product approval under the Plant Protection Act and the Animal Health Protection Act, among other innovative research tools that might be used in the discovery, development, or manufacture of a food or agricultural product. \nThe Secretary is to develop and make publicly available a strategic plan setting forth the agenda that AGARDA will follow and provide for consultation with other federal research agencies; the National Academies of Sciences, Engineering, and Medicine; and others. There are provisions in the AGARDA program to expedite contract and grant awards and the appointments of highly qualified scientists and research program managers without regard to certain statutes governing appointments in the competitive federal service. The fund will have an authorized appropriation of $50 million each year for FY2019-FY2023. The program terminates at the end of FY2023.\nThe enacted bill also authorizes a new Urban, Indoor, and Emerging Agricultural Production, Research, Education, and Extension Initiative. The provision authorizes the Secretary to make competitive grants to facilitate development of urban and indoor agricultural production systems and emerging harvesting, packaging, and distribution systems and new markets. The grants could also support methods of remediating contaminated urban sites (e.g., brownfields); determining best practices in pest management; exploring new technologies to minimize energy, lighting systems, water, and other inputs for increased food production; and studying new crop varieties and agricultural products to connect to new markets. The provision provides mandatory and discretionary spending of $4 million and $10 million, respectively, for each year for FY2019-FY2023. In addition, there is authorization of $14 million for a study of urban and indoor agriculture production under the 2017 Census of Agriculture, including data on community gardens, rooftop gardens, urban farms, and hydroponic and aquaponic farm facilities.\n\n\t\tForestry23\n\nSimilar to previous farm bills, the forestry title in the enacted 2018 farm bill ( P.L. 115-334 , Title VIII) includes provisions related to forestry research and establishes, modifies, or repeals several programs to provide financial and technical assistance to nonfederal forest landowners (see Table 12 ). The forestry title also includes several provisions addressing management of the National Forest System (NFS) lands managed by the USDA Forest Service and the public lands managed by the Bureau of Land Management (BLM) in the Department of the Interior. \nForestry assistance and research programs are primarily authorized under three main laws: the Cooperative Forestry Assistance Act, the Forest and Rangeland Renewable Resources Research Act, and the Healthy Forests Restoration Act. Many forestry programs are permanently authorized to receive such sums as necessary in annual discretionary appropriations and thus do not require reauthorization in the farm bill. Some programs, however, are not permanently authorized and expired at the end of FY2018. The 2018 farm bill reauthorizes, through FY2023, four such programs: the Healthy Forests Reserve Program, Rural Revitalization Technology, National Forest Foundation, and funding for implementing statewide forest resource assessments. The 2018 farm bill also provides explicit statutory authorization and congressional direction for current programs that were operating under existing, but broad, authorizations. For example, the farm bill authorizes the Landscape Scale Restoration program to provide financial assistance for large restoration projects that cross landownership boundaries, providing statutory direction for an assistance program that has been operating since FY2015 based on authorities provided in the 2014 farm bill. The 2018 farm bill also modifies or repeals some existing assistance programs. For example, the bill amends the permanent authorization for the Semiarid Agroforestry Research Center and establishes an FY2023 expiration. \nThe forestry title also addresses issues related to the accumulation of biomass in many forests and the associated increased risk for uncharacteristic wildfires on both federal and nonfederal land. In Part III of Subtitle F, the Timber Innovation Act incorporates provisions from both the House- and Senate-passed bills to establish, reauthorize, and modify assistance programs to promote wood innovation for energy use and building construction and to facilitate the removal of forest biomass. The law also authorizes up to $20 million in annual appropriations to provide financial assistance to states for hazardous fuel reduction projects that cross landownership boundaries. The law also reduces the annual authorization for the Forest Service's hazardous fuels management program from $760 million annually to $660 million annually and adds a sunset date of FY2023 to the authorization. In addition, the law repeals other biomass-related programs, such as the Biomass Commercial Utilization Program, a biomass energy demonstration project, and a wood fiber recycling research program.\nThe 2018 farm bill contains a provision that changes how the Forest Service and BLM comply with the requirements under the National Environmental Policy Act for management activities involving sage grouse and\/or mule deer habitat. The law establishes a categorical exclusion for specified activities under which projects up to 4,500 acres would not be subject to the requirements to prepare an environmental assessment or environmental impact statement. This provision was in the Senate-passed version of the bill. The House-passed version would have established 10 other categorical exclusions for various activities and would have also changed some of the consultation requirements under the Endangered Species Act. The enacted farm bill also includes provisions from the House bill related to the Forest Service's authority to designate insect and disease treatment areas on NFS lands and procedures intended to expedite the environmental analysis for specified priority projects within those areas. Specifically, the enacted farm bill adds hazardous fuels reduction as a priority project category and authorizes larger projects. \nThe enacted farm bill also addresses miscellaneous federal and tribal forest management issues. For example, the law expands the availability of Good Neighbor Agreements to include federally recognized Indian tribes and county governments and authorizes tribes to enter into contracts to perform specified forest management activities on tribal land. The enacted bill also reauthorizes the Collaborative Forest Landscape Restoration Program to receive appropriations through FY2023, raises the authorized level to $80 million, and authorizes the Secretary to issue waivers to extend projects beyond the initial 10 years. In addition, the enacted farm bill also authorizes the conveyance of NFS land through lease, sale, or exchange. The enacted bill expands the Small Tracts Act, reauthorizes the Facility Realignment and Enhancement program, authorizes the Forest Service to lease administrative sites, and includes provisions for specific parcels. The law also establishes two watershed protection programs on NFS lands and authorizes the Secretary to accept cash or in-kind donations from specified nonfederal partners to implement projects associated with one of those programs.\n\n\t\tEnergy32\n\nThe Energy title (Title IX) supports agriculture-based renewable energy. In the 2018 farm bill, the energy title extends eight programs and one initiative through FY2023 (see Table 13 ). It repeals one program and one initiative\u2014the Repowering Assistance Program and the Rural Energy Self-Sufficiency Initiative. It establishes one new grant program, the Carbon Utilization and Biogas Education Program, which is focused on the education and utilization of carbon sequestration as well as biogas systems. The title also amends the eligible material definition for the Biomass Crop Assistance Program to include algae. Further, the law modifies the definitions of biobased product (to include renewable chemicals), biorefinery (to include the conversion of an intermediate ingredient or feedstock), and renewable energy systems (to include ancillary infrastructure such as a storage system). \nMandatory program funding is less than what was provided in earlier farm bills. The 2018 farm bill authorizes a total of $375 million in mandatory funding for FY2019-FY2023. The 2014 farm bill authorized a total of $694 million in mandatory funding over its five-year life. Mandatory funding is provided for the Biobased Markets Program ($15 million over five years), the Biorefinery Assistance Program ($75 million over five years), the Bioenergy Program for Advanced Biofuels ($35 million over five years), the Rural Energy for America Program ($250 million over five years), and the Feedstock Flexibility Program for Bioenergy Producers, which is authorized for such sums as necessary for five years but with outlays projected to amount to $0 according to CBO. Mandatory funding is not provided for the Biodiesel Fuel Education Program, the Biomass Research and Development Initiative, the Biomass Crop Assistance Program, or the new Carbon Utilization and Biogas Education Program. The farm bill also authorizes discretionary appropriations, subject to annual appropriations action. \n\n\t\tHorticulture33\n\nThe 2018 farm bill reauthorizes many of the existing farm bill provisions supporting farming operations in the specialty crop, certified organic agriculture, and local foods sectors. These provisions cover several programs and policies benefitting these sectors, including block grants to states, support for farmers markets, data and information collection, education on food safety and biotechnology, and organic certification, among other market development and promotion initiatives (see Table 14 ). \nProvisions affecting the specialty crop and certified organic sectors are not limited to the Horticulture title (Title X) but are contained within several other titles. Among these are programs in the Research, Nutrition, and Trade titles, among others. Related programs outside the Horticulture title include SCRI and OREI in the research title, as well as the Fresh Fruit and Vegetable Program and Section 32 purchases for fruits and vegetables under the Nutrition title, among other farm bill programs.\nThe new law makes changes both to farmers markets and local foods promotion programs, combining and expanding the Farmers Market Promotion Program and Local Food Promotion Program, along with the Value-Added Agricultural Product Market Development Grants program, to create a new \"Local Agriculture Market Program\" with an expanded mission and mandatory funding of $50 million for FY2019 and each year thereafter, plus authorized appropriations. The law also includes several provisions from S. 3005 (Urban Agriculture Act of 2018) supporting urban agriculture development (including new programs and authorization for both mandatory and discretionary funding in the Miscellaneous, Research, Conservation, and Crop Insurance titles).\nThe new law also makes changes to USDA's National Organic Program (NOP) and related programs, addressing concerns about organic import integrity by including provisions that strengthen the tracking, data collection, and investigation of organic product imports, including certain provisions in H.R. 3871 (Organic Farmer and Consumer Protection Act of 2017). It also amends the eligibility and consultation requirements of the National Organic Standards Board, among other changes. The law reauthorizes NOP appropriations above current levels while reauthorizing current funding for the Organic Production and Market Data Initiatives and for technology upgrades to improve tracking and verification of organic imports. It also expands mandatory funding for the National Organic Certification Cost Share Program.\nThe new law also includes a number of provisions that further facilitate the commercial cultivation, processing, and marketing of industrial hemp in the United States. These provisions were in the Senate-passed bill and contained within the Horticulture title as well as the Research, Crop Insurance, and Miscellaneous titles of the enacted farm bill. Many of these provisions originated from introduced versions of the Hemp Farming Act of 2018 ( S. 2667 ; H.R. 5485 ). Chief among these provisions is an amendment to the Controlled Substances Act (21 U.S.C. 802(16)) to exclude hemp from the statutory definition of marijuana as redefined in the 2018 farm bill, provided it contains not more than a 0.3% concentration of delta-9 tetrahydrocannabinol\u2014marijuana's primary psychoactive chemical. The law also creates a new hemp program under the Agricultural Marketing Act of 1946 (7 U.S.C. Section 1621 et seq. ) establishing a regulatory framework for hemp production (under USDA's oversight), expands the statutory definition of hemp , and expands eligibility to produce hemp to a broader set of producers and groups, including tribes and territories. States or Indian tribes that seek primary regulatory authority over hemp production would be required to implement a \"plan\" to further monitor and regulate hemp production. States and tribal governments without USDA-approved plans would be subject to plans established by USDA to monitor and regulate hemp production. Without a license issued by USDA, it is unlawful to produce hemp in a state or tribal domain. Other provisions in the law's crop insurance title make hemp producers eligible to participate in federal crop insurance programs, while provisions in the Research title of the law make hemp production eligible for certain USDA research and development programs.\n\n\t\tCrop Insurance34\n\nThe federal crop insurance program offers subsidized crop insurance policies to farmers. Farmers can purchase policies that pay indemnities when their yields or revenues fall below guaranteed levels. While the majority of federal crop insurance policies cover yield or revenue losses, the program also offers policies with other types of guarantees, such as index policies that trigger an indemnity payment based on weather conditions. \nThe Federal Crop Insurance Corporation (FCIC), a government corporation within USDA, pays part of the premium (about 63% on average in crop year 2017) while policy holders\u2014farmers and ranchers\u2014pay the balance. Private insurance companies, known as Approved Insurance Providers, deliver the policies in return for administrative and operating subsidies from FCIC. Approved Insurance Providers also share underwriting risk with FCIC through a mutually negotiated Standard Reinsurance Agreement. The USDA Risk Management Agency administers the federal crop insurance program. \nThe Crop Insurance title (Title XI) of the enacted 2018 farm bill ( P.L. 115-334 ) makes several modifications to the existing federal crop insurance program ( Table 15 ). CBO projects that the 2018 farm bill will decrease outlays for crop insurance relative to baseline levels by $104 million during the FY2019-FY2028 period. This projected reduction represents around 0.1% of projected crop insurance outlays over the same time period, during which outlays are projected to total about $78 billion.\nWithin the 2018 farm bill's Crop Insurance title, the section with the highest projected increase in outlays ($90 million increase over FY2019-FY2028, Section 11109) expands coverage for forage and grazing by authorizing catastrophic level coverage for insurance plans covering grazing crops and grasses It also allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season and to receive independent indemnities for each intended use. \nTwo other sections of the 2018 farm bill have projected outlay increases compared with prior law. One modifies the FCIC board's research and development authority in several ways, including redefining beginning farmer or rancher as an individual having actively operated and managed a farm or ranch for less than 10 years, thus making these individuals eligible for federal subsidy benefits available for the purposes of research, development, and implementation of whole-farm insurance plans ($13 million increase over FY2019-FY2028, Section 11122). The other section that is projected to result in higher outlays authorizes FCIC to waive certain viability and marketability requirements in considering proposals from private submitters to develop a policy or pilot program relating to the production of hemp ($8 million increase over FY2019-FY2028, Section 11113).\nThe 2018 farm bill adds hemp to the definition of eligible crops for federal crop insurance subsidies (Sections 11101 and 11119) and also adds hemp to the list of crops whose policies may cover post-harvest losses (Section 11106). Most federal crop insurance policies do not cover post-harvest losses. Prior to the 2018 farm bill, coverage of post-harvest losses was limited to potatoes, sweet potatoes, and tobacco. \nThe section in the 2018 farm bill with the highest projected reduction in outlays ($125 million over FY2019-FY2028, Section 11110) raises the administrative fee for catastrophic level coverage from $300 to $655 per crop per county. Four other sections also scored projected reductions in outlays, according to CBO. These sections relate to consolidation and reduction of funding for certain research and development contracts and partnerships ($40 million over FY2019-FY2028, Section 11123); the expansion of enterprise units across county lines ($27 million over FY2019-FY2028, Section 11111); the reduction of funds available for review, compliance, and program integrity ($18 million over FY2019-FY2028, Section 11118); and modifications to how producer benefits are reduced when producing crops on native sod ($4 million over FY2019-FY2028, Section 11114).\n\n\t\tMiscellaneous35\n\nThe Miscellaneous title (Title XII) of the Agriculture Improvement Act of 2018 covers a wide array of issues across six subtitles, including livestock, agriculture and food defense, historically underserved producers, Department of Agriculture Reorganization Act of 1994 Amendments, other miscellaneous provisions, and general provisions. The enacted provisions are organized by subtitle in Table 16 . Those provisions that were located in the Miscellaneous titles of the House- and Senate-passed bills but were moved to other titles in the enacted bill, along with those provisions that were not enacted, are listed at the end of Table 16 .\nThe livestock subtitle of the enacted 2018 farm bill establishes the National Animal Disease Preparedness Response Program (NADPRP) and the National Animal Vaccine and Veterinary Countermeasures Bank (NAVVCB), both under the National Animal Health Laboratory Network (NAHLN) in the Animal Health Protection Act (7 U.S.C. Section 8308a). The NADPRP is to address risks to U.S. livestock associated with the introduction of animal diseases and pests. The new law directs the NAVVCB to maintain significant quantities of vaccine and diagnostic products to respond to animal disease outbreaks. It also directs the NAVVCB is to prioritize foot-and-mouth disease. The act authorizes mandatory funding of $120 million for FY2019-FY2022 and $30 million for FY2023 and for each fiscal year thereafter. In addition, $30 million is authorized to be appropriated annually for FY2019-FY2023 for NAHLN, with as such sums as necessary appropriated for the NADPRP and NAVVCB.\nAmong other livestock provisions, the act authorizes appropriations for the Sheep Production and Marketing Grant Program; provides for a study on a livestock dealer statutory trust; adds llamas, alpacas, live fish, and crawfish to the list of covered animals under the Emergency Livestock Feed Assistance Act; calls for a report on the guidance and outreach USDA's Food Safety and Inspection Service provides to small meat processors; and establishes regional cattle and carcass grading centers.\nWithin the Agriculture and Food Defense subtitle of the enacted bill, the USDA Office of Homeland Security, as authorized in the 2008 farm bill ( P.L. 110-246 ), is repealed and reestablished under the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. Section 6901 et seq. ). Under the new authorities, USDA is required to conduct Disease and Pest of Concern Response Planning, establish a National Plant Diagnostic Network to monitor threats to plant health, and establish a National Plant Disease Recovery System for long-term planning. The section also amends the criteria for considering the impact on research performance when biological agents or toxins are added to the Biological Agents and Toxins List.\nThe Historically Underserved Producers subtitle expands USDA activities for beginning, socially disadvantaged, and veteran farmers and ranchers. It prioritizes youth agricultural employment and volunteer programs and promotes the role of youth-serving organizations and school-based agricultural education programs. It also establishes a Tribal Advisory Committee to advise USDA on tribal and Indian affairs. The new law authorizes $50 million in discretionary funding for FY2019-FY2023 for the Farming Opportunities Training and Outreach program and provides mandatory funding for the program that increases from $30 million in FY2019 to $50 million in FY2023. The act also establishes within USDA an Office of Urban Agriculture and Innovative Production to promote urban, indoor, and emerging agricultural practices. \nThe 2018 farm bill includes conforming amendments that address USDA reorganizational changes that created the Under Secretary for Trade and Foreign Agricultural Affairs, the Under Secretary for Farm Production and Conservation, and the Assistant to the Secretary for Rural Development. For one, the act requires USDA to re-establish the position of Under Secretary of Agriculture for Rural Development that USDA abolished and replaced with an Assistant to the Secretary for Rural Development in its May 2017 reorganization. The new law amends the duties and provisions of the USDA Military Veterans Agricultural Liaison and the Office of Chief Scientist and creates a Rural Health Liaison. It further requires USDA to conduct a civil rights analysis on actions, policies, or decisions that may impact employees, contractors, or beneficiaries of USDA programs based on membership in a federally protected group. \nThe Other Miscellaneous Provisions and General Provisions subtitles contain 40 provisions that address a wide variety of issues. For example, the Protecting Animals with Shelter provision authorizes USDA\u2014in consultation with the Departments of Justice, Housing and Urban Development, and Health and Human Services\u2014to provide grants for emergency and transitional shelter for victims of domestic and dating violence, sexual assault, and stalking and their pets. Other animal-related provisions ban the slaughter of dogs and cats, impose a ban on animal fighting in U.S. territories, and require a report on the importation of dogs. \nThe enacted 2018 farm bill reauthorizes the Pima Cotton; the Wool Apparel Manufacturers; and the Wool Research, Development, and Promotion trust funds. It also establishes the Emergency Citrus Disease Research and Development Trust Fund to address invasive citrus diseases and pests. The act extends for 10 years the National Oilheat Research Alliance. It further establishes a Commission on Farm Transition to study issues affecting transitioning farms to the next generation and establishes a Century Farms program to recognize farms that have been owned by the same family and in operation for at least 100 years.\nIn addition, the enacted bill requires USDA to conduct and issue various studies and reports on a variety of topics, among which are food waste; the business centers of the Natural Resources Conservation Service, the Farm Service Agency, and the Risk Management Agency; the number of personnel in USDA agencies each year; the effect of absentee landlords; the level of funding that would allow the National Institute of Food and Agriculture to address evolving research and extension needs in rural and farming communities; an FDA food labeling regulation (81 Fed. Reg. 33742); and the impact of rice ratooning and post-disaster flooding on migratory birds.\nThe enacted 2018 farm bill directs USDA to restore exemptions for weighing and inspection services that were included in the United States Grain Standards Act (USGSA) in 2003 that were revoked when the USGSA was reauthorized in 2015. The act requires the U.S. Fish and Wildlife Service to clarify that the green sea urchin is exempt from the export permission requirements of the Endangered Species Act (16 U.S.C. Section 1538(d)(1) and its licensing regulations. The act also amends the Controlled Substance Act (21 U.S.C. Section 802(16)) to exclude industrial hemp from the statutory definition of marijuana .\n\n\tProvisions of the 2018 Farm Bill by Title Compared with the House- and Senate-Passed Bills (H.R. 2) and with Prior Law","output":"Congress sets national food and agriculture policy through periodic omnibus farm bills that address a broad range of farm and food programs and policies. The 115th Congress established the direction of farm and food policy for five years through 2023 by enacting the Agricultural Improvement Act of 2018, which the President signed into law on December 20, 2018, as P.L. 115-334.\nThe Congressional Budget Office (CBO) has scored the cost of programs with mandatory spending\u2014such as nutrition programs, commodity support programs, major conservation programs, and crop insurance\u2014in the enacted 2018 farm bill at $867 billion over a 10-year budget window of FY2019-FY2028. This amount is budget neutral compared with CBO's baseline scenario of an extension of 2014 farm bill (P.L. 113-79) programs with no changes. CBO estimates that over the five-year life of the law (FY2019-FY2023), outlays will amount to $428 billion, or $1.8 billion above the baseline scenario. In general, the new law largely extends many major programs through FY2023, thereby providing an overlay of continuity with the existing framework of agriculture and nutrition programs even as it modifies numerous programs, alters the amount and type of program funding that certain programs receive, and exercises discretion not to reauthorize some others.\nThe enacted 2018 farm bill extends agricultural commodity support programs largely along existing lines while modifying them in various ways. For instance, producers acquire greater flexibility, compared with prior law, to switch between the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) revenue support programs. Producers may update program yields that factor into payments under PLC, while a newly added escalator could raise a commodity's reference price under the program. The law also makes several modifications to ARC, including introducing a trend-adjusted yield that has the potential to raise ARC revenue guarantees for producers. Other changes include an increase in marketing assistance loan rates for a number of crops and revising the definition of family farm to include nephews, nieces, and cousins, making these individuals eligible for farm program payments. The law modifies dairy programs, including renaming the Margin Protection Program as Dairy Margin Coverage (DMC) and revising it to expand the margin protection between milk prices and feed costs that milk producers may purchase, as well as lowering the cost of this coverage for the first 5 million pounds of milk produced. Loan rates under the sugar program are increased.\nThe Supplemental Nutrition Assistance Program (SNAP), the largest domestic nutrition assistance program, is reauthorized through FY2023. The law amends SNAP in a number of ways, including making changes to policies intended to reduced errors and fraud in SNAP, limiting fees that electronic benefit transfer processors may charge, and requiring nationwide online acceptance of SNAP benefits. Not included in the enacted bill are provisions in the House-passed bill that would have expanded work requirements and SNAP employment and training programs. The enacted bill does make certain modifications to these elements of the program, such as expanding the employment and training activities that a state may provide. Beyond SNAP, the law amends programs that distribute U.S. Department of Agriculture foods to low-income households, and it increases funding for The Emergency Food Assistance Program (TEFAP).\nThe enacted farm bill addresses agricultural conservation on several fronts. For one, it reauthorizes the two largest working lands programs\u2014the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP)\u2014while reducing the overall funding allocated for these two programs. It also reauthorizes the primary land retirement program, the Conservation Reserve Program (CRP), allowing it to expand from a maximum of 24 million acres in FY2019 to 27 million acres in FY2023 while offsetting the added cost of any enrollment increase through lower payments to participants. The law also expands grazing and commercial uses on CRP acres and provides options for new and limited resource producers for transitioning CRP land.\nThe enacted 2018 farm bill addresses a range of issues of importance to rural America, including combatting substance abuse by prioritizing assistance under certain programs, by expanding broadband access and providing additional authorized appropriations to that end and by amending the definition of rural by excluding certain groups of individuals from population-based criteria. The credit title increases the maximum loan amount for guaranteed loans, and these amounts are adjusted for inflation thereafter. The ceiling for direct loans is also raised, among other changes.\nAmong the broad and diverse array of other provisions in the law are provisions intended to facilitate the commercial cultivation, processing, and marketing of hemp. Among these, hemp with low levels of the psychoactive ingredient in marijuana is excluded from the statutory definition of marijuana. The law creates a new hemp program under USDA oversight and makes hemp an eligible crop under the federal crop insurance program. The enacted 2018 farm bill also strengthens the National Organic Program and increases funding for organic agricultural research.\nWithin the Miscellaneous title, the livestock industry is the object of several initiatives to guard against disease outbreaks and strengthen the response to such events. These include the establishment of the National Animal Disease Preparedness Response Program and the National Animal Vaccine and Veterinary Countermeasures Bank. The law also addresses USDA organizational changes in recent years, requiring USDA to reestablish the position of Under Secretary for Rural Development and creating a Rural Health Liaison, among other changes. Among its provisions, the Forestry title addresses the accumulation of biomass in many forests and the consequent risk of wildfires by establishing, reauthorizing, and modifying various assistance programs to promote wood use and biomass removal.\nWith these programs, policies, and initiatives codified into law, the job that remains is for USDA, other federal agencies, and entities designated by the enacted farm law to implement the will of Congress through regulatory actions and other administrative measures. As implementation of the farm law proceeds, Congress may find it prudent to monitor this process and to provide direction and feedback through the exercise of its oversight responsibilities."}
{"id":"gao_GAO-18-351","pid":"gao_GAO-18-351_0","input":"\tBackground\n\nBlack lung benefits include both cash assistance and medical benefits.  Maximum cash assistance payments generally ranged from about $650  to $1,300 per month in fiscal year 2017, depending on the number of  dependents the miner has. Miners receiving cash assistance are also  eligible for medical benefits that cover the treatment of their black-lung- related conditions, which may include hospital and nursing care,  rehabilitation services, and drug and equipment charges, according to  DOL documentation. DOL estimates that the average annual cost for  medical treatment in fiscal year 2017 was approximately $6,980 per  miner.\nThere were about 25,700 total beneficiaries (primary and dependents)  receiving black lung benefits during fiscal year 2017 (see fig. 1). The  decrease in the number of beneficiaries over time has resulted from a  combination of declining coal mining employment and an aging  beneficiary population, according to DOL officials. Further, black lung  beneficiaries could increase in the near term due to the increased  occurrence of black lung disease and its most severe form, progressive  massive fibrosis, particularly among Appalachian coal miners, according  to HHS officials.\nBlack lung claims are processed by DOL\u2019s Office of Workers\u2019  Compensation Programs. Contested claims are adjudicated by DOL\u2019s  Office of Administrative Law Judges, which issues decisions that can be  appealed to the Benefits Review Board. Claimants and mine operators  may further appeal these agency decisions to the federal courts. If an  award is contested, claimants can receive interim benefits, which are  generally paid from the Trust Fund according to DOL officials, while their  claims are in the appeals process. Final awards are either funded by mine  operators\u2014who are identified as the responsible employers of  claimants\u2014or the Trust Fund, when responsible employers cannot be  identified or do not pay. In fiscal year 2017, black lung claims had an  approval rate of about 29 percent, according to DOL data. Of the 19,430  primary black lung beneficiaries receiving benefits during fiscal year 2017,  64 percent (12,464) were paid from the Trust Fund, 25 percent (4,798)  were paid by liable mine operators, and 11 percent (2,168) were receiving  interim benefits, according to DOL officials.\nBlack Lung Disability Trust Fund revenue is primarily obtained from mine  operators through the coal tax. The coal tax is imposed at two rates,  depending on whether the coal is extracted from underground or surface  mines. The current tax rates are $1.10 per ton of underground-mined coal  and $0.55 per ton of surface-mined coal, up to 4.4 percent of the sales  price. Therefore, if a ton of underground-mined coal is sold for less than  $25, than the tax paid would be less than $1.10. For instance, if a ton of  underground-mined coal sold for $20, than it would be taxed at 4.4  percent of the sales price, or $0.88. To a lesser extent, the Trust Fund  also receives other miscellaneous revenue from interest payments, and  various fines and penalties paid by mine operators, among other sources,  according to DOL documentation. Coal tax revenue is collected from mine  operators by Treasury\u2019s Internal Revenue Service and then transferred to  the Trust Fund where it is then used by DOL officials to pay black lung  benefits and the costs of administering the program.\nTrust Fund expenditures include, among other things, black lung benefit  payments, certain administrative costs incurred by DOL and Treasury to  administer the black lung benefits program, and debt repayments. When  necessary for the Trust Fund to make relevant expenditures under federal  law, the Trust Fund borrows from the Treasury\u2019s general fund. When this  occurs, the federal government is essentially borrowing from itself\u2014and  hence from the general taxpayer\u2014to fund its benefit payments and other  expenditures.\n\n\tMultiple Factors Have Challenged Trust Fund Finances Resulting in Growing Debt\n\nMultiple factors have challenged Trust Fund finances since it was  established about 40 years ago. Its expenditures have consistently  exceeded its revenue, interest payments have grown, and legislative  actions taken that were expected to improve Trust Fund finances did not  completely address its debt. Combined black lung benefit payments and  program administrative costs exceeded Trust Fund revenue every year  for the program\u2019s first decade (fiscal years 1979 through 1989), resulting  in the accrual of debt. During the Trust Fund\u2019s first three fiscal years in  particular, revenue covered less than 40 percent of the Trust Fund\u2019s  combined benefit payments and administrative costs. For instance, in  fiscal year 1980, the Trust Fund received about $251 million in revenue  and paid about $726 million in black lung benefits and administrative  costs.\nBeginning in 1982, revenue increased as a result of the Black Lung  Benefits Revenue Act of 1981 that doubled the coal tax rates from $0.50  to $1 per ton of underground-mined coal and from $0.25 to $0.50 per ton  of surface-mined coal, up to 4 percent of the sales price. Even with the  tax rate increase, combined benefit payments and administrative costs  continued to exceed revenue throughout the 1980s (see fig. 2). As a  result, the Trust Fund borrowed from Treasury\u2019s general fund to cover the  annual differences between its expenditures and revenues, and by fiscal  year 1989 the Trust Fund\u2019s outstanding debt to Treasury\u2019s general fund  exceeded $3 billion.\nBeginning in fiscal year 1990, Trust Fund revenue generally began to  exceed combined benefit payments and administrative costs, and, in fact,  total Trust Fund cumulative revenue collected from fiscal years 1979 through 2017 exceeded total cumulative benefit payments and  administrative costs incurred during these years. However, interest owed  from earlier years of borrowing led to more borrowing and debt. From  fiscal years 1979 through 1989, the Trust Fund borrowed\u2014primarily  through 30-year term loans according to Treasury officials\u2014from  Treasury\u2019s general fund at interest rates that varied from about 6.5  percent to about 13.9 percent. In fiscal year 1985, for instance, the Trust  Fund paid about $275 million in interest, which was equal to about half of  the total revenue collected that year. Since fiscal year 1990, revenue  has generally exceeded combined benefit payments and administrative  costs, although interest payments on the Trust Fund\u2019s outstanding debt  kept the fund in a position whereby its total expenditures continued to  exceed its total revenues. As a result, the principal amount of the Trust  Fund\u2019s total outstanding debt to Treasury\u2019s general fund increased and  exceeded $10 billion by fiscal year 2008.\nLegislation has been enacted over the years that was expected to  improve Trust Fund finances:  In 1981, the Black Lung Benefits Revenue Act of 1981 doubled the  coal tax rates from $0.50 cents to $1 per ton of underground-mined  coal, and from $0.25 cents to $0.50 cents per ton of surface-mined  coal, up to 4 percent of the sales price (as mentioned previously).\nIn 1986, the Consolidated Omnibus Budget Reconciliation Act of 1985  established a 5 year moratorium on interest accrual with respect to  repayable advances to the Trust Fund (which we refer to as annual  borrowing from Treasury\u2019s general fund), and increased the coal tax  rates to $1.10 per ton of underground-mined coal, and $0.55 per ton  of surface-mined coal (up to 4.4 percent of the sales price), where  they have remained since.\nIn 2008, the EIEA included provisions that were expected to eliminate  the Trust Fund\u2019s debt. Specifically, EIEA (1) generally extended the  coal tax rates at their current rates until December 31, 2018 (after  which they are scheduled to decrease to their original levels of $0.50  per ton of underground-mined coal, and $0.25 per ton of surface- mined coal, up to 2 percent of the sales price); (2) provided for a one- time federal appropriation toward Trust Fund debt forgiveness (about  $6.5 billion, according to DOL data); and (3) provided for the  refinancing of the Trust Fund\u2019s debt that was not forgiven as a result  of EIEA (which we refer to as the Trust Fund\u2019s legacy debt).  Specifically, the Trust Fund\u2019s legacy debt was refinanced with more  favorable interest rates, according to DOL data. Interest rates on the  refinanced legacy debt range from about 1.4 percent to about 4.5  percent.\nThe forgiveness and refinancing of Trust Fund debt along with extending  the current coal tax rates through 2018 were expected to result in annual  tax revenue that could be used to pay down interest and principal on the  Trust Fund\u2019s legacy debt, according to DOL and Treasury officials. These  officials said that models showed that debt would be eliminated by fiscal  year 2040; however, they noted that coal tax revenue has been less than  originally projected due, in part, to the 2008 recession and increased  market competition from other energy sources. As a result, the Trust  Fund\u2019s total expenditures continued to exceed revenue and the Trust  Fund borrowed from Treasury\u2019s general fund each year from fiscal years  2010 through 2017 to cover debt repayments expenditures. In fiscal year  2017, the Trust Fund\u2019s total principal amount of outstanding debt, which  includes its legacy debt and the amount borrowed from Treasury\u2019s  general fund that year, was about $4.3 billion (see fig. 3).\n\n\tTrust Fund Borrowing Will Likely Continue to Increase through 2050, and Multiple Options Could Reduce Future Debt\n\n\t\tTrust Fund Borrowing Will Likely Continue to Increase through 2050\n\nTrust Fund borrowing will likely continue to increase from fiscal years  2019 through 2050 due, in part, to the scheduled coal tax rate decrease  of about 55 percent that will take effect in 2019 and declining coal  production, according to our moderate simulation. We simulated the  effects of the scheduled 2019 tax rate decrease on Trust Fund finances  through 2050, and in this report, we generally present the results of a  moderate case set of assumptions (see table 1). These simulations are  not predictions of what will happen, but rather models of what could  happen given certain assumptions. For more information on our  simulation methodology see appendix I. In addition to the moderate case  assumptions, we also simulated how Trust Fund debt could change  through 2050 given various other assumptions, and the full range of  results for all of our simulations are presented in appendix II.\nOur moderate case simulation suggests that Trust Fund revenue may  decrease, from about $485 million in fiscal year 2018 to about $298  million in fiscal year 2019, due, in part, to the scheduled approximate 55  percent decrease in the coal tax. Our simulation, which incorporates EIA  data on future expected coal production, also shows that annual Trust  Fund revenue will likely continue to decrease beyond fiscal year 2019  due, in part, to declining coal production. Domestic coal production has  declined from about 1.2 billion tons in 2008 to about 728 million tons in  2016, according to EIA. Based on these projections, our moderate  simulation shows that Trust Fund annual revenue may continue to  decrease from about $298 million in fiscal year 2019 to about $197 million  in fiscal year 2050 (see fig. 4).\nWith the scheduled 2019 tax rate decrease, our moderate case simulation  suggests that expected revenue will likely be insufficient to cover  combined black lung benefit payments and administrative costs, as well  as debt repayment expenditures. Specifically, our moderate case  simulation suggests that revenue may not be sufficient to cover  beneficiary payments and administrative costs from fiscal years 2020  through 2050 (see fig. 5). For instance, in fiscal year 2029, simulated  benefit payments and administrative costs will likely exceed simulated  revenue by about $99 million. These annual deficits will likely decrease  over time to about $4 million by fiscal year 2050 due, in part, to the  assumed continued net decline in total black lung beneficiaries. Our  simulation also therefore suggests that Trust Fund revenue may not be  enough to also cover the debt repayment expenditures it must continue to  make through fiscal year 2040, per the payment schedule established  following the 2008 EIEA.\nOur moderate simulation suggests that the amount borrowed by the Trust  Fund will likely increase from about $1.6 billion in fiscal year 2019 to  about $15.4 billion in fiscal year 2050 (see fig. 6). Although the Trust  Fund\u2019s legacy debt decreases through fiscal year 2040, total Trust Fund  expenditures\u2014including combined benefit payments and administrative  costs as well as debt repayments\u2014will likely continue to exceed revenue  which will require continued annual borrowing from Treasury\u2019s general  fund. However, the amount borrowed by the Trust Fund could vary  depending, in part, on future coal production and the number of new  beneficiaries and could range between about $6 billion and about $27  billion in 2050, according to our simulations (see appendix II).\n\n\t\tAdjusting Coal Tax Rates, Forgiving Interest, and Forgiving Debt Are Options That Could Improve the Trust Fund\u2019s Future Financial Position\n\nWe simulated three options that can affect Trust Fund finances through  fiscal year 2050. Specifically, we simulated the effects of (1) adjusting the  coal tax, (2) forgiving interest, and (3) forgiving debt. In each of the  simulations, we compared the results of the option to a baseline in which  the coal tax rates will decrease by about 55 percent, which we refer to as  the scheduled 2019 tax rate decrease. We compare interest and debt  forgiveness options to a baseline which assumes the scheduled 2019 tax  rate decrease has taken effect, and that there is no interest or debt  forgiveness. The simulated options are not intended to be exhaustive and  we are not endorsing any particular option or combination of options.\n\n\t\t\tAdjust Coal Tax Rates\n\nUsing the moderate case, we simulated four options: (1) implementing the  2019 coal tax rate reduction to $0.50 per ton of underground-mined coal  and $0.25 per ton of surface-mined coal; (2) maintaining the current coal  tax rates of $1.10 per ton for underground-mined coal and $0.55 per ton  of surface-mined coal; (3) reducing the tax rates by 25 percent (from  $1.10 and $0.55); and (4) increasing these tax rates by 25 percent (see  fig. 7). Increasing the tax rates by 25 percent was the only option that  eliminated simulated Trust Fund debt by fiscal year 2050, according to  our moderate case simulation.\nWe simulated three interest forgiveness options including forgiving  interest on (1) legacy debt, (2) annual borrowing, and (3) all debt. Our  moderate case simulation suggests that forgiving interest will not  eliminate simulated debt by fiscal year 2050 (see fig. 8).\nWe simulated two debt forgiveness options by forgiving principal and  interest on (1) legacy debt and (2) all debt. Our moderate case simulation  suggests that both debt forgiveness options would reduce simulated Trust  Fund borrowing by fiscal year 2050, but these options would not eliminate  debt altogether as simulated revenue will likely not be enough to cover  simulated expenditures (see fig. 9). In these cases, the Trust Fund will  need to continue borrowing from Treasury\u2019s general fund to cover annual  deficits, and thus accumulate debt.\nWhile adjusting coal tax rates and forgiving interest or debt could reduce  the Trust Fund\u2019s simulated borrowing by 2050, implementing them could  affect the coal industry or general taxpayers, according to stakeholders  we interviewed. For instance, a coal industry representative noted that  maintaining the coal tax at its current rate would continue to burden the  coal industry and increasing the tax would exacerbate the burden at a  time when coal production has been declining. Treasury officials noted  that the costs associated with forgiving Trust Fund interest or debt would  be borne by the general taxpayer since Treasury borrows from taxpayers  to lend to the Trust Fund as needed. These officials also said that  making a one-time federal appropriation to forgive interest or debt would  be the most transparent way to satisfy the Trust Fund\u2019s outstanding debt  to Treasury\u2019s general fund.\nIn addition to the simulations, other options could affect the financial  position of the Trust Fund including reducing black lung benefits,  eliminating or adjusting the coal tax cap, or creating a variable coal tax.  Our moderate case simulation suggests that completely eliminating black  lung benefits as of fiscal year 2019 could reduce the Trust Fund\u2019s  borrowing from Treasury\u2019s general fund in fiscal year 2050 from about  $15.4 billion to about $6.4 billion. However, doing so would generally  mean that coal tax revenue would be collected solely to fund the  repayment of Trust Fund debt. Another option could be to eliminate or  adjust the coal tax cap, which currently prevents mine operators from  paying a coal tax of more than 4.4 percent of the price per ton of coal  sold. If the coal tax cap were eliminated, for instance, mine operators  would pay $1.10 per ton of underground-mined coal and $0. 55 per ton of  surface-mined coal regardless of price sold, which could increase  revenue. As an additional option, changing the structure of the coal tax  to flexible rates that change based on an annual actuarial assessment of  the Trust Fund could help to ensure that coal mine operators pay the  necessary amount of tax to cover Trust Fund expenditures, without  resulting in a Trust Fund balance or deficit.\n\n\t\tMultiple Options Could Reduce Future Trust Fund Debt and Would Distribute the Financial Burden Differently Among General Taxpayers and Industry\n\nMultiple options could reduce the Trust Fund\u2019s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated whether various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. These  options were selected, in part, based on interviews with Trust Fund  stakeholders and the availability of DOL and other data. We approached  these simulations from two perspectives. First, we simulated how much  Trust Fund debt would need to be forgiven based on various coal tax  rates. Second, we simulated the average tax collected per ton needed to  balance the Trust Fund by 2050, based on certain debt forgiveness  options. The simulated options are not intended to be exhaustive and we  are not endorsing any particular combination of options.\nOur first set of options using the moderate case simulations are based on  the current coal tax rates of $1.10 per ton of underground-mined coal and  $0.55 per ton of surface-mined coal, and show the amount of debt  forgiveness in fiscal year 2019 needed to balance the Trust Fund by fiscal  year 2050 based on certain tax rates (see fig. 10). Specifically, our  moderate case simulations show the following:  Increasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 and would likely require no debt forgiveness. For  this option, the simulated coal tax revenue would likely be sufficient to  cover simulated Trust Fund expenditures, including combined benefit  payments and administrative costs, as well as debt repayments.  However, this option would place the burden solely on the coal  industry that would be paying higher taxes at a time when coal  production has been declining.\nMaintaining current coal tax rates could balance the Trust Fund by  2050 if coupled with about $2.4 billion of debt forgiveness. This option  would distribute the burden among the coal industry and general  taxpayers.\nDecreasing current coal tax rates by 25 percent could balance the  Trust Fund by 2050 if coupled with about $4.8 billion in debt  forgiveness. This option would burden the coal industry less than  maintaining the current tax rates, but would increase the burden on  general taxpayers.\nDecreasing current tax rates by 55 percent, which we refer to as the  scheduled 2019 tax rate decrease, would balance the Trust Fund by  2050 if coupled with about $7.8 billion in debt forgiveness. This figure  comprises the Trust Fund\u2019s total simulated outstanding debt in fiscal  year 2019 ($6.6 billion), and an additional about $1.2 billion that would  be required because the Trust Fund will accrue additional debt from  fiscal years 2020 through 2050, according to our moderate case  simulations. The coal industry would bear some of the financial  burden of this option, while also placing a financial burden on general  taxpayers.\nOur second set of options using moderate case simulations show the  change in average coal tax revenue collected per ton to balance the Trust  Fund by fiscal year 2050 based on certain debt forgiveness options (see  fig. 11). Specifically, our moderate simulations show the following:\nForgiving the Trust Fund\u2019s legacy debt would allow for an average tax  collected of about $0.59 per ton to balance the Trust Fund by 2050.  Based on certain assumptions, this could be accomplished with a tax  of $0.88 per ton on underground-mined coal and $0.44 per ton on  surface-mined coal.\nForgiving all Trust Fund debt would allow for an average tax collected  per ton of coal sold of $0.47 per ton to balance the Trust Fund by  2050. Based on certain assumptions, this could be accomplished with  a tax of $0.70 per ton on underground-mined coal and a tax of $0.35  per ton of surface-mined coal.\n\n\tAgency Comments\n\nWe provided a draft of this report to the Departments of Labor (DOL),  Treasury, and Health and Human Services (HHS) for review and  comment. DOL, Treasury, and HHS provided technical comments, which  we incorporated as appropriate.\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 of this report to the  appropriate congressional committees, the Secretaries of Labor,  Treasury, and Health and Human Services, and other interested parties.  In addition, the report will be available at no charge on GAO\u2019s web site at  http:\/\/www.gao.gov.\nIf you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or brownbarnesc@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix III.\n\nAppendix I: Black Lung Disability Trust Fund Simulation Methodology\n\nWe examined the extent to which (1) Black Lung Disability Trust Fund  (Trust Fund) debt may change through 2050 and (2) selected options to  improve its future financial position. We interviewed officials from the  Departments of Labor (DOL), Treasury, and Health and Human Services  (HHS), as well as representatives from the National Mining Association  and the United Mine Workers of America. We then selected options to  simulate based, in part, on these interviews and the availability of DOL  and other data. These options included adjusting the coal tax, forgiving  interest on some or all Trust Fund debt, forgiving some or all Trust Fund  debt, or various combinations of these options. The options we simulated  are not intended to be exhaustive and we are not endorsing any particular  option or combination of options. Our simulations are based on various  assumptions and simulate Trust Fund revenues and expenditures from  fiscal years 2016 through 2050. To develop these simulations, we used  actual and projection data from (1) DOL for fiscal years 2015 through  2040; (2) Treasury\u2019s Office of Tax Analysis for fiscal years 2011 through  2015; (3) the Department of Energy\u2019s Energy Information Administration  (EIA) for calendar years 2015 through 2050; and (4) the Office of  Management and Budget for fiscal year 2017.\n\n\tBlack Lung Benefit Expenditures\n\nTo simulate future Trust Fund benefit expenditures, we simulated the  number of beneficiaries each fiscal year, and the annual average amount  of benefits received (cash assistance and medical benefits). To simulate  the numbers of beneficiaries, we used DOL data on the (1) age  distributions of miner and widow beneficiaries for fiscal year 2015; (2)  mortality rates by age for miner and widow beneficiaries as of fiscal year  2015; and (3) numbers of beneficiaries\u2014including married miners, single  miners, widows, and miners receiving medical benefits only\u2014in fiscal  year 2015. We assumed\u2014as DOL does in its Black Lung Budget and  Liability Model\u2014that all miners are men, all widows are women, and all  spouses are 3 years younger than the miner. We also assumed that the  age distribution of single miners is the same as for married miners, and  that the age distribution of new miner and widow beneficiaries is the same  as for miner and widow beneficiaries during fiscal year 2015. We used  DOL\u2019s mortality rates to simulate the number of beneficiaries of each age  and type in each year, and used those numbers to then simulate the total  number of beneficiaries of each type each year (see table 2).\nWe also assumed that there will be no new medical-benefit-only recipients.\nFormula  The number of married miner beneficiaries age a in fiscal year y is equal to the number of new  married miner beneficiaries age a in fiscal year y plus the number of married miner  beneficiaries age a-1 in fiscal year y-1 who survived and whose spouse survived. The total  number of married miner beneficiaries in fiscal year y is then the sum of the number of married  miner beneficiaries of all ages in fiscal year y. Finally, we averaged the number of married  miner beneficiaries by averaging the prior fiscal year\u2019s total and the current fiscal year\u2019s total.\nThe number of single miner beneficiaries age a in fiscal year y is equal to the number of new  single miner beneficiaries age a in fiscal year y plus the number of single miner beneficiaries  age a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a-1  in fiscal year y-1 who survived but whose spouse did not survive. The total number of single  miner beneficiaries in fiscal year y is then the sum of the number of single miner beneficiaries  of all ages in fiscal year y. Finally, we averaged the number of single miner beneficiaries by  averaging the prior fiscal year\u2019s total and the current fiscal year\u2019s total.\nThe number of widow beneficiaries age a in fiscal year y is equal to the number of new  beneficiaries who are widows age a in fiscal year y plus the number of widow beneficiaries age  a-1 in fiscal year y-1 who survived plus the number of married miner beneficiaries age a+2 in  fiscal year y-1 who did not survive but whose spouse did survive. The total number of widow  beneficiaries in fiscal year y is then the sum of the number of widow beneficiaries of all ages in  fiscal year y. Finally, we averaged the number of widow beneficiaries by averaging the prior  fiscal year\u2019s total and the current fiscal year\u2019s total.\nThe number of MBO beneficiaries of age a in fiscal year y is equal to the number of MBO  beneficiaries of age a-1 in fiscal year y-1 who survived. The total number of MBO beneficiaries  only in fiscal year y is then the sum of the number of MBO beneficiaries of all ages in fiscal  year y. Finally, we averaged the number of MBO beneficiaries by averaging the prior fiscal  year\u2019s total and the current fiscal year\u2019s total.\n\n\tCoal Tax Revenues\n\nTo simulate future coal tax revenue, we used Treasury and EIA data to  calculate (1) the amounts of underground and surface-mined coal taxed  at fixed dollar amounts of $1.10 and $0.55 per ton, respectively, in 2015;  (2) the amounts of underground and surface-mined coal taxed at variable  dollar amounts per ton equal to 4.4 percent of the price in 2015; and (3)  average prices of underground and surface-mined coal taxed at 4.4  percent of the price in 2015. We then used EIA data on projected  amounts of total coal production, underground-mined coal production,  lignite coal production, and coal exports, as well as projected average  coal prices, for the period from 2015 through 2050 to simulate future coal  tax revenues (see table 3).\nWe simulated other Trust Fund expenditures and revenues, including  administrative costs and debt repayments (see table 4). For our  simulations, total Trust Fund expenditures are the sum of black lung  benefits (cash assistance and medical benefits), total administrative  costs, repayment of interest and principal on outstanding debt to  Treasury\u2019s general fund, and other expenditures. Total Trust Fund  revenues are the sum of coal tax revenue and other miscellaneous  revenue, and exclude annual borrowing from Treasury\u2019s general fund.  Annual borrowing from Treasury\u2019s general fund is the difference between  total Trust Fund expenditures and revenues and is assumed to be repaid  with interest the following year. If total revenues are greater than total  expenditures, then the Trust Fund has a balance and would not have to  borrow that year. In this case, we assumed that the Trust Fund will earn  interest on that balance at the same rate on which interest would accrue  on annual borrowing.\nWe simulated how the scheduled 2019 tax rate decrease and various  options including adjusting the coal tax, forgiving debt interest, and  forgiving debt principal and interest may affect Trust Fund finances  through fiscal year 2050 (see table 5). The options listed are not intended  to be exhaustive and we are not endorsing any particular option or  combination of options.\nWe simulated option combinations for coal tax rates, interest forgiveness,  and debt forgiveness to demonstrate how potential financial adjustments  could affect future Trust Fund borrowing from Treasury\u2019s general fund  through fiscal year 2050. For options that involve adjusting coal tax rates,  we estimated the amount of debt that would need to be forgiven in fiscal  year 2019 for the Trust Fund\u2019s revenues to be sufficient to cover its  expenditures through fiscal year 2050, assuming the Trust Fund does not  borrow from Treasury\u2019s general fund after fiscal year 2018. To do so, we  first calculated the real discounted present value of Trust Fund  expenditures for fiscal years 2019 through 2050, including benefit  payments, administrative costs, legacy debt repayments, and repayment  of annual borrowing from Treasury\u2019s general fund. Second, we calculated  the real discounted present value of Trust Fund revenue for the same  period, including coal tax revenue and other miscellaneous revenue.  Third, we calculated debt forgiveness as the difference between the real  discounted present value of Trust Fund expenditures from the first  calculation and the real discounted present value of Trust Fund revenues  from the second calculation. When the amount of debt forgiveness is  greater than the amount of debt outstanding, the Trust Fund would need  an additional cash inflow in addition to forgiveness of all outstanding debt.  Amounts of debt forgiveness less than zero suggest that no debt  forgiveness is required.\nFor options involving forgiving debt (interest or principal), we estimated  the average tax per ton of coal that, if implemented in fiscal year 2019,  would provide the Trust Fund sufficient revenue to cover its expenditures  through fiscal year 2050, assuming the Trust Fund does not receive any  advances from Treasury\u2019s general fund after fiscal year 2018. To do so,  we first calculated the real discounted present value of Trust Fund  expenditures for the period from fiscal year 2019 through fiscal year 2050,  again including benefit payments, administrative costs, legacy debt  repayments, and repayment of annual borrowing from Treasury\u2019s general  fund, minus the real discounted present value of miscellaneous revenues  for the same period. Second, we calculated the real discounted present  value of coal production for the same period. Third, we calculated the  average tax per ton of coal as the first amount divided by the second  amount.\nTo assess the sensitivity of each option, we ran each simulation 36 times  using four different sets of assumptions about the numbers of future  beneficiaries and nine different sets of assumptions about future coal production and prices (see table 6). Doing so provided a range of  estimates about the Trust Fund\u2019s future borrowing needs and provided  insight on the sensitivity of its overall financial position relative to its  various expenditures and revenues. The analysis also provided a range  of estimates of the amount of debt forgiveness needed to bring the Trust  Fund into balance by fiscal year 2050, assuming various coal tax rates,  and the average tax collection per ton needed to do the same, and  assuming various amounts of debt forgiveness.\nFrom the range of estimates that resulted from our sensitivity analysis, we  selected cases with moderate expectations related to future Trust Fund  expenditures and revenue. Specifically, for future expenditures, we  assumed an average growth rate of new black lung beneficiaries for fiscal  years 2003 through 2015 as a moderate case that reflects historical  experience. For future revenue, we used a moderate coal production  outlook based on EIA\u2019s reference case, which reflects moderate  expectations about future coal production based on various assumptions  about economic growth, oil prices, technological innovation, and energy  policy.\n\nAppendix II: Results of GAO\u2019s Black Lung Disability Trust Fund Simulations\n\nWe summarized the results of our simulations by showing the extent to  which the Black Lung Disability Trust Fund\u2019s (Trust Fund) balance\u2014the  sum of tax revenue and miscellaneous revenue less expenditures\u2014may  change in fiscal year 2050 for each option simulated. For example, with  the scheduled 2019 tax rate decrease, our moderate case simulations  suggest that the Trust Fund would likely have a deficit in fiscal year 2050  of about $15.4 billion.\nMultiple options could reduce the Trust Fund\u2019s future debt and distribute  the financial burden among the coal industry and general taxpayers. We  simulated how various coal tax and debt forgiveness options could  balance the Trust Fund by fiscal year 2050, whereby its simulated  revenue would be sufficient to cover its simulated expenditures. We  approached these simulations from two perspectives. First, we simulated  how much Trust Fund debt would need to be forgiven based on various  coal tax rates. Second, we simulated the average tax collected per ton  needed to balance the Trust Fund by 2050, based on certain debt  forgiveness options.\nFor our first set of simulations, we calculated the amount of debt  outstanding in fiscal year 2019 and the amount that would likely need to  be forgiven in fiscal year 2019 for the Trust Fund to have sufficient  revenues to cover its expenditures by fiscal year 2050, assuming that it  does not borrow from Treasury\u2019s general fund after fiscal year 2018. For  example, before any options are implemented, our moderate case  simulations suggest that the Trust Fund\u2019s outstanding debt in fiscal year  2019\u2014including both legacy debt and annual borrowing from Treasury\u2019s  general fund\u2014would likely be about $6.6 billion (after discounting and  adjusting for inflation). Therefore, with implementation of the coal tax rate  decrease of about 55 percent as scheduled in calendar year 2019, about  117.7 percent of that debt would need to be forgiven to balance the Trust  Fund. In other words, balancing the Trust Fund would require forgiveness  of $6.6 billion and an additional cash inflow of about $1.2 billion because  the Trust Fund will accrue additional debt from fiscal years 2020 through  2050, according to our moderate case simulations (see table 8).\nFor our second set of simulations, we estimated the average tax per ton  of coal that, if implemented in fiscal year 2019, would likely provide the  Trust Fund sufficient revenues to cover its expenditures in fiscal year  2050, assuming that it does not borrow from Treasury\u2019s general fund after  fiscal year 2018. For example, if all principal and interest on Trust Fund  legacy debt is forgiven, as of 2019, the estimated average tax that  balances the Trust Fund is about $0.59 per ton (see table 9). Based on  certain assumptions, this could be accomplished with a tax of $0.88 per  ton on underground-mined coal and $0.44 per ton on surface-mined  coal.\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Blake Ainsworth (Assistant  Director), Justin Dunleavy (analyst-in-charge), Angeline Bickner,  Courtney LaFountain, and Rosemary Torres Lerma made key  contributions to this report. Also contributing to this report were James  Bennett, Melinda Bowman, Lilia Chaidez, Caitlin Cusati, Holly Dye, Alex  Galuten, Carol Henn, John Lack, Emei Li, Almeta Spencer, Kate van  Gelder, and Shana Wallace.","output":"Why GAO Did This Study\n\nWith revenue of about $450 million in fiscal year 2017, the Trust Fund paid about $184 million in benefits to more than 25,000 coal miners and eligible dependents. However, the Trust Fund also borrowed about $1.3 billion from the Treasury's general fund in fiscal year 2017 to cover its debt repayment expenditures. Adding to this financial challenge, the coal tax that supports the Trust Fund is scheduled to decrease by about 55 percent beginning in 2019. GAO was asked to review the financial positon of the Trust Fund and identify options to improve it.\nThis report examines (1) factors that have challenged the financial position of the Trust Fund since its inception and (2) the extent to which Trust Fund debt may change through 2050, and selected options that could improve its future financial position. GAO reviewed Trust Fund financial data from fiscal years 1979 through 2017. GAO also interviewed officials from the Departments of Labor, Treasury, Health and Human Services (HHS) and representatives of coal industry and union groups. Using assumptions, such as the about 55 percent coal tax decrease and moderately declining coal production, GAO simulated the extent to which Trust Fund debt may change through 2050. GAO also simulated how selected options, such as forgiveness of debt, could improve finances. The options simulated are not intended to be exhaustive. Further, GAO is not endorsing any particular option or combination of options.\nGAO provided a draft of this report to DOL, Treasury, and HHS. The agencies provided technical comments, which were incorporated as appropriate.\n\nWhat GAO Found\n\nMultiple factors have challenged Black Lung Disability Trust Fund (Trust Fund) finances since it was established about 40 years ago. Its expenditures have consistently exceeded its revenues, interest payments have grown, and actions taken that were expected to improve Trust Fund finances did not completely address its debt. When necessary to make expenditures, the Trust Fund borrows with interest from the Department of the Treasury's (Treasury) general fund. Because Trust Fund expenditures have consistently exceeded revenue, it has borrowed almost every year since 1979, its first complete fiscal year, and as a result debt and interest payments increased. Legislative actions were taken over the years including (1) raising the rate of the coal tax that provides Trust Fund revenues and (2) forgiving debt. For example, the Energy Improvement and Extension Act of 2008 provided an appropriation toward Trust Fund debt forgiveness; about $6.5 billion was forgiven, according to Department of Labor (DOL) data (see figure). However, coal tax revenues were less than expected due, in part, to the 2008 recession and increased competition from other energy sources, according to DOL and Treasury officials. As a result, the Trust Fund continued to borrow from Treasury's general fund from fiscal years 2010 through 2017 to cover debt repayment expenditures.\nGAO's simulation suggests that Trust Fund borrowing will likely increase from fiscal years 2019 through 2050 due, in part, to the coal tax rate decrease of about 55 percent that will take effect in 2019 and declining coal production. The simulation estimates that Trust Fund borrowing may exceed $15 billion by 2050 (see figure). However, various options, such as adjusting the coal tax and forgiving interest or debt, could reduce future borrowing and improve the Trust Fund's financial position. For example, maintaining the current coal tax rates and forgiving debt of $2.4 billion could, under certain circumstances, balance the Trust Fund by 2050, whereby revenue would be sufficient to cover expenditures. However, a coal industry representative said that maintaining or increasing the coal tax would burden the coal industry, particularly at a time when coal production has been declining. Further, Treasury officials noted that the costs associated with forgiving Trust Fund interest or debt would be paid by taxpayers."}
{"id":"gao_GAO-18-260T","pid":"gao_GAO-18-260T_0","input":"\tSelected VA Medical Centers\u2019 Reviews of Providers\u2019 Clinical Care Were Not Always Documented or Timely\n\nWe found that from October 2013 through March 2017, the five selected  VA medical centers required reviews of a total of 148 providers\u2019 clinical  care after concerns were raised about their care, but officials at these  medical centers could not provide documentation to show that almost half  of these reviews were conducted. We found that all five VA medical  centers lacked at least some documentation of the reviews they told us  they conducted, and in some cases, we found that the required reviews  were not conducted at all. Specifically, across the five VA medical  centers, we found the following:\nThe medical centers lacked documentation showing that one type of  review\u2014focused professional practice evaluations (FPPE) for  cause\u2014had been conducted for 26 providers after concerns had been  raised about their care. FPPEs for cause are reviews of providers\u2019  care over a specified period of time, during which the provider  continues to see patients and has the opportunity to demonstrate  improvement. Documentation of these reviews is explicitly required  under VHA policy. Additionally, VA medical center officials confirmed  that FPPEs for cause that were required for another 21 providers  were never conducted.\nThe medical centers lacked documentation showing that retrospective  reviews\u2014which assess the care previously delivered by a provider  during a specific period of time\u2014 had been conducted for 8 providers  after concerns had been raised about their clinical care.\nOne medical center lacked documentation showing that reviews had  been conducted for another 12 providers after concerns had been  raised about their care. In the absence of any documentation, we  were unable to identify the types of reviews, if any, that were  conducted for these 12 providers.\nWe also found that the five selected VA medical centers did not always  conduct reviews of providers\u2019 clinical care in a timely manner. Specifically,  of the 148 providers, the VA medical centers did not initiate reviews of 16  providers for 3 months, and in some cases, for multiple years, after  concerns had been raised about the providers\u2019 care. In a few of these  cases, additional concerns about the providers\u2019 clinical care were raised  before the reviews began.\nWe found that two factors were largely responsible for the inadequate  documentation and untimely reviews of providers\u2019 clinical care we  identified at the selected VA medical centers.\nFirst, VHA policy does not require VA medical centers to document all types of reviews of providers\u2019 clinical care, including retrospective reviews, and VHA has not established a timeliness requirement for initiating reviews of providers\u2019 clinical care.\nSecond, VHA\u2019s oversight of the reviews of providers\u2019 clinical care is  inadequate. Under VHA policy, networks are responsible for  overseeing the credentialing and privileging processes at their  respective VA medical centers. While reviews of providers\u2019 clinical  care after concerns are raised are a component of credentialing and  privileging, we found that none of the network officials we spoke with  described any routine oversight of such reviews. This may be in part  because the standardized tool that VHA requires the networks to use  during their routine audits does not direct network officials to ensure  that all reviews of providers\u2019 clinical care have been conducted and  documented. Further, some of the VISN officials we interviewed told  us they were not using the standardized audit tool as required.\nWithout adequate documentation and timely completion of reviews of  providers\u2019 clinical care, VA medical center officials lack the information  they need to make decisions about providers\u2019 privileges, including  whether or not to take adverse privileging actions against providers.  Furthermore, because of its inadequate oversight, VHA lacks reasonable  assurance that VA medical center officials are reviewing all providers  about whom clinical care concerns have been raised and are taking  adverse privileging actions against the providers when appropriate. To  address these shortcomings, we recommended that VHA 1) require  documentation of all reviews of providers\u2019 clinical care after concerns  have been raised, 2) establish a timeliness requirement for initiating such  reviews, and 3) strengthen its oversight by requiring networks to oversee  VA medical centers to ensure that such reviews are documented and  initiated in a timely manner. VA concurred with these recommendations  and described plans for VHA to revise existing policy and update the  standardized audit tool used by the networks to include more  comprehensive oversight of VA medical centers\u2019 reviews of providers\u2019  clinical care after concerns have been raised.\n\n\tSelected VA Medical Centers Did Not Report All Providers to the NPDB or to State Licensing Boards as Required\n\nWe found that from October 2013 through March 2017, the five VA  medical centers we reviewed had only reported one of nine providers  required to be reported to the NPDB under VHA policy. These nine  providers either had adverse privileging actions taken against them or  resigned or retired while under investigation before an adverse privileging  action could be taken. None of these nine providers were reported to  state licensing boards as required by VHA policy.\nThe VA medical centers documented that these nine providers had  significant clinical deficiencies that sometimes resulted in adverse  outcomes for veterans. For example, the documentation shows that one  provider\u2019s surgical incompetence resulted in numerous repeat surgeries  for veterans. Another provider\u2019s opportunity to improve through an FPPE  for cause had to be halted and the provider was removed from providing  care after only a week due to concerns that continuing the review would  potentially harm patients.\nIn addition to these nine providers, one VA medical center terminated the  services of four contract providers based on deficiencies in the providers\u2019  clinical performance, but the facility did not follow any of the required  steps for reporting providers to the NPDB or relevant state licensing  boards. This is concerning, given that the VA medical center documented  that one of these providers was terminated for cause related to patient  abuse after only 2 weeks of work at the facility.\nTwo of the five VA medical centers we reviewed each reported one  provider to the state licensing boards for failing to meet generally  accepted standards of clinical practice to the point that it raised concerns  for the safety of veterans. However, we found that the medical centers\u2019  reporting to the state licensing board took over 500 days to complete in  both cases, which was significantly longer than the 100 days suggested in  VHA policy.\nAcross the five VA medical centers, we found that providers were not  reported to the NPDB and state licensing boards as required for two  reasons.\nFirst, VA medical center officials were generally not familiar with or  misinterpreted VHA policies related to NPDB and state licensing board  reporting. For example, at one VA medical center, we found that  officials failed to report six providers to the NPDB because they were  unaware that they had been delegated responsibility for NPDB  reporting. Officials at two other VA medical centers incorrectly told us  that VHA cannot report contract providers to the NDPB. At another VA  medical facility, officials did not report a provider to the NPDB or to any  of the state licensing boards where the provider held a medical license  because medical center officials learned that one state licensing board  had already found out about the issue independently. Therefore, VA  officials did not believe that they needed to report the provider. This  misinterpretation of VHA policy meant that the NPDB and the state  licensing boards in other states where the provider held licenses were  not alerted to concerns about the provider\u2019s clinical practice.\nSecond, VHA policy does not require the networks to oversee whether VA medical centers are reporting providers to the NPDB or state licensing boards when warranted. We found, for example, that network officials were unaware of situations in which VA medical center officials failed to report providers to the NPDB. We concluded that VHA lacks reasonable assurance that all providers who should be reported to these entities are reported.\nVHA\u2019s failure to report providers to the NPDB and state licensing boards  as required facilitates providers who provide substandard care at one  facility obtaining privileges at another VA medical center or at hospitals  outside of VA\u2019s health care system. We found several cases of this  occurring among the providers who were not reported to the NPDB or  state licensing boards by the five VA medical centers we reviewed. For  example, we found that two of the four contract providers whose contracts  were terminated for clinical deficiencies remained eligible to provide care  to veterans outside of that VA medical center. At the time of our review,  one of these providers held privileges at another VA medical center, and  another participated in the network of providers that can provide care for  veterans in the community. We also found that a provider who was not  reported as required to the NPDB during the period we reviewed had their  privileges revoked 2 years later by a non-VA hospital in the same city for  the same reason the provider was under investigation at the VA medical  center. Officials at this VA medical center did not report this provider  following a settlement agreement under which the provider agreed to  resign. A committee within the VA medical center had recommended that  the provider\u2019s privileges be revoked prior to the agreement. There was no  documentation of the reasons why this provider was not reported to the  NPDB under VHA policy.\nTo improve VA medical centers\u2019 reporting of providers to the NPDB and  state licensing boards and VHA oversight of these processes, we  recommended that VHA require its networks to establish a process for   overseeing VA medical centers to ensure they are reporting to the NPDB  and to state licensing boards and to ensure that this reporting is timely.  VA concurred with this recommendation and told us that it plans to  include oversight of timely reporting to the NPDB and state licensing  boards as part of the standard audit tool used by the networks.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff members have any questions concerning this  testimony, please contact me at (202) 512-7114 (williamsonr@gao.gov).  Contact points for our Office of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other individuals  who made key contributions to this testimony include Marcia A. Mann  (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), Summar  C. Corley, Krister Friday, and Jacquelyn Hamilton.\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":"Why GAO Did This Study\n\nThis testimony summarizes the information contained in GAO's November 2017 report, entitled VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns ( GAO-18-63 ).\n\nWhat GAO Found\n\nDepartment of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers\u2014physicians and dentists who are approved to independently perform specific services\u2014after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges.\nGAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that\nselected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and\nnone of these nine providers had been reported to SLBs.\nGAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later."}
{"id":"gao_GAO-18-483","pid":"gao_GAO-18-483_0","input":"\tBackground\n\n\t\tPuerto Rico\u2019s Territorial Status and Residents\u2019 Status\n\nPuerto Rico is the most populous U.S. territory with approximately 3.3  million residents. Puerto Rico and its residents are generally subject to  the same federal laws as the states and their residents, except in cases  where specific exemptions have been made, such as with certain federal  programs. Individuals born in Puerto Rico are U.S. citizens and can  migrate freely to the states.\n\n\t\tHurricane Maria\n\nOn September 20, 2017, Hurricane Maria, a category 4 storm, devastated  Puerto Rico and left nearly all its residents without potable running water  and electricity. In addition, the existing infrastructure for cellular and  wireless service was rendered virtually useless, hampering  communication. Four months after Hurricane Maria, more than a third of  Puerto Rico\u2019s energy customers remained without power. The lack of  power and communication impeded residents\u2019 ability to return to work.  According to the Federal Emergency Management Agency (FEMA),  rebuilding will take years.\n\n\t\tPuerto Rico Oversight, Management, and Economic Stability Act (PROMESA)\n\nPROMESA established a Financial Oversight and Management Board for  Puerto Rico (Oversight Board), and granted it broad powers of fiscal and  budgetary control over Puerto Rico. The Oversight Board is comprised of  seven members appointed by the President of the United States from a  list of recommendations from House and Senate Leadership and one ex- officio member designated by the Governor of Puerto Rico. PROMESA  also established a mechanism through which the Oversight Board could  petition U.S. courts on Puerto Rico\u2019s behalf to restructure debt.\n\n\t\tGovernment Assessment of Puerto Rico\u2019s Economic Condition\n\nUnder Puerto Rico law, the Puerto Rico Planning Board (Planning Board)  has the legal responsibility of developing an economic outlook and a  detailed analysis of the economy, including gross domestic product  (GDP), and producing an annual Economic Report to the governor and to  the legislature. The Planning Board Chairperson releases GDP  measures only after approval from the governor\u2019s office, according to  Planning Board officials.\nThe Department of Commerce\u2019s Bureau of Economic Analysis (BEA)  produces economic accounts statistics that enable government and  business decision-makers, researchers, and the American public to follow  and understand the performance of the nation\u2019s economy. To do this,  BEA collects source data, conducts research and analysis, develops and  implements estimation methodologies, and disseminates statistics to the  public. BEA calculates GDP for the United States, including for the  territories of American Samoa, Guam, the U.S. Virgin Islands and the  Commonwealth of the Northern Mariana Islands. Since 2009 the  Department of the Interior\u2019s Office of Insular Affairs has reimbursed BEA  for estimating and publishing GDP for these territories. This office carries  out the administrative responsibilities of the Secretary of the Interior and  the Assistant Secretary for Insular Areas by coordinating federal policy for  these territories, but does not for Puerto Rico.\nCensus in cooperation with the Department of Labor\u2019s Bureau of Labor  Statistics (BLS) produces the Current Population Survey (CPS), which  provides statistics on work, earnings, and education. CPS is one of the  oldest, largest, and most well-recognized surveys in the United States,  according to Census. In addition to being the primary source of monthly  labor force statistics, the CPS is used to collect data for a variety of other  studies that provide information on economic and social well-being  factors. The CPS does not collect or report data for Puerto Rico or any of  the other U.S. territories.\nCensus also produces the American Community Survey (ACS). It is an  ongoing survey that provides national information on a yearly basis that  includes information for the States, as well as for Puerto Rico. The ACS  includes data on jobs and occupations, educational attainment, veterans,  whether people own or rent their homes, and other topics. Information  from the survey generates data that help determine how more than $675  billion in federal and state funds are distributed each year.\n\n\t\tFederal Labor Laws\n\nDOL\u2019s Wage and Hour Division (WHD) administers the wage, hour, and  child labor provisions of the Fair Labor Standards Act of 1938 (as  amended) that sets the minimum wage and overtime pay standards  applicable to most U.S. workers. The Fair Labor Standards Act (FLSA)  requires employers to compensate employees who are covered by the  act and not specifically exempt from its provisions, at least federal  minimum wage (currently $7.25 per hour) and with premium pay (at one- and-one-half the regular rate) for overtime hours worked in excess of 40  hours in a workweek. There are a number of exemptions from the  requirements of the FLSA. For example, employees working in a \u201cbona  fide executive, administrative, or professional capacity\u201d (EAP) are not  entitled to premium pay for overtime.\nThe FLSA was enacted to address problems associated with substandard  working conditions by, in part, establishing a floor on wages and a ceiling  on hours, beyond which the employer is required to pay extra wages.  With a requirement for overtime pay, employers would either have to hire  more workers or assume extra wage costs in order to achieve the same  amount of work. Employees would be assured additional pay to  compensate them for the burden of a workweek in excess of 40 hours.  The Minimum Wage Study Commission of 1981 justified the EAP  exemption in part because these employees are associated with higher  base pay, higher promotion potential, and greater job security than most  of the U.S. labor force.\nFor employers and employees, the practical effects of the exempt  employee classification can be important. An exempt employee may be  required to work as many hours as it takes to complete a task. Although  this may be more than 40 hours per week, the employee will not be  entitled to overtime pay. Thus, an exempt financial manager may be  required to work 60 hours a week and be paid a set weekly salary. On the  other hand, a nonexempt bookkeeper may be required to work 60 hours  per week, but must be paid for 20 hours of overtime, in addition to a set  weekly salary.\nThe FLSA authorizes DOL to define EAP exemptions. Balancing the  competing interests of expanding exemptions and restricting them, DOL  regulations establish specific tests that must be met before an employee  may be classified as an EAP and exempt from overtime. In general, there  are three tests:\nSalary Basis Test. The employee must be paid on a salary basis,  rather than an hourly basis. This means that the employee must be  paid at least the guaranteed amount, regardless of the number of  hours actually worked and the quality or quantity of worked  performed.\nSalary Level Test. The employee must meet a minimum salary level  that indicates managerial or professional status.\nDuties Test. The employee must have duties and responsibilities  associated with an exempt EAP position.\nIn 2003, DOL reviewed the regulations for EAP exemptions in response  to a GAO recommendation. Based on its review, in 2004 DOL increased  the minimum \u201csalary level\u201d threshold for an employee to be exempt from  receiving overtime pay to $23,660. In May 2016, DOL again updated  minimum the salary level threshold for EAP employees to be exempt from  receiving overtime pay to $47,476 in the 2016 Overtime Rule (see fig. 1).\n\n\t\tStatus of the 2016 Overtime Rule\n\nIn July 2015, DOL proposed updating the overtime regulations relating to  the EAP exemption, and published a notice of proposed rulemaking.  After receiving approximately 294,000 comments, the Secretary of Labor  published the final rule on May 23, 2016 (2016 Overtime Rule). The major  changes included increasing the salary level threshold from $455 per  week ($23,660 annually) to $913 per week ($47,476 annually) and  providing an automatic update to the salary level every 3 years. DOL  estimated that about 4.2 million EAP employees in the states would  become newly entitled to overtime pay under the revised salary level  threshold. At the time of publication, the 2016 Overtime Rule would have  applied to Puerto Rico; however, on June 30, 2016, prior to the rule\u2019s  effective date of December 1, 2016, PROMESA was enacted which, in  part, delayed the applicability of this rule to Puerto Rico.\nPrior to the 2016 Overtime Rule going into effect, several states and  various business groups challenged the rule in the Federal District Court  of the Eastern District of Texas. On November 22, 2016, this court issued  a nationwide preliminary injunction preventing DOL from implementing  and enforcing the 2016 Overtime Rule for the duration of the case. In  the interim, the 2004 Overtime Rule salary level threshold for EAP  employees of $23,660 remained in effect. In July 2017, DOL published a  Request for Information to gather additional information to begin the  rulemaking process to replace and update the overtime regulations. In  August 2017, the district court determined that the 2016 Overtime Rule  was unlawful and ordered it invalidated. In October 2017, DOL filed a motion to appeal that ruling with the Fifth Circuit Court of Appeals. In  November 2017, DOL filed a motion to stay the appeal pending the  outcome of its rulemaking, and the Fifth Circuit granted this motion.  DOL\u2019s comment period for the Request for Information ended on  September 25, 2017, and the agency currently is reviewing submissions.  DOL plans to publish a Notice of Proposed Rulemaking on the salary  level threshold for EAP employees in October 2018. Meanwhile, the  2004 Overtime Rule continues to remain in effect as of today, while the  appeal and rulemaking are pending.\n\n\t\tPuerto Rico\u2019s Labor Laws\n\nIn addition to FLSA, workers and employers in Puerto Rico may be  subject to various other federal, Puerto Rican, and local labor laws or  regulations depending on eligibility, exemptions, and other limitations. In  some cases, including sick leave, vacation leave, mandatory meal period,  weekly day of rest, and maternity leave, these laws may be more  generous to workers than federal law, according to Puerto Rico  Department of Labor officials.\nSick leave. Non-exempt employees in Puerto Rico are entitled to  accrue at least 1 day of paid sick leave after working at least 130  hours per month.\nVacation leave. Non-exempt employees in Puerto Rico are entitled to  accrue paid vacation after working at least 130 hours per month. Non- exempt employees hired before January 26, 2017, are entitled to a  minimum monthly vacation leave accrual rate of one-and-a-quarter  days. Non-exempt employees hired on or after January 26, 2017, are  entitled to a minimum monthly vacation leave accrual rate of a half- day during the first year of service; three-quarters of a day after the  first year of service up to the fifth year of service; 1 day after the fifth  year of service up to the fifteenth year of service; and one-and-a- quarter days after the fifteenth year of service. However, in the case  of Puerto Rico resident employers who have less than 12 employees,  the minimum monthly vacation leave accrual rate is a half-day.\nMandatory meal period. Non-exempt employees in Puerto Rico are  entitled to a mandatory meal period between the third and sixth  consecutive hour of work. In general, any employer that employs or  allows an employee to work during the meal period is required to pay  said period or fraction thereof at a pay rate equal to twice or one and  one-half times the regular pay rate, as applicable.\nWeekly day of rest. Non-exempt employees in Puerto Rico are  entitled to a mandatory weekly day of rest for every six consecutive  days of work. Work performed during the day of rest is considered  overtime and requires extraordinary compensation, regardless of the  total number of hours that the non-exempt employee worked in the  preceding 6 days.\nMaternity leave. Pregnant women in Puerto Rico are entitled to paid  maternity leave 4 weeks before and 4 weeks after childbirth. Working  mothers may opt to take only 1 week of pre-natal leave and extend  post-natal leave up to 7 weeks. Women who adopt a child 5 years old  or younger are entitled to 8 weeks of maternity leave.\n\n\t\tPossessions Tax Credit\n\nThe Tax Reform Act of 1976 created the possessions tax credit to assist  Puerto Rico and other insular areas in obtaining employment-producing  investments. The credit effectively reduced federal taxes on income  earned by qualifying U.S. corporations from operations in U.S. insular  areas. However, the credit was repealed in 1996, but existing claimants  were allowed to continue to use the credit during a 10-year phaseout  period ending in 2006. In 2006, we reported that U.S. corporations  claiming the credit dominated Puerto Rico\u2019s manufacturing sector in the  late 1990s and that after the tax credit began to phase out in 1996, the  activities of these corporations decreased significantly.\n\n\tUnreliable Economic Data Make Conditions in Puerto Rico Difficult to Evaluate\n\n\t\tPrior to Hurricane Maria, Puerto Rico Had Already Experienced Prolonged Economic Decline\n\n\t\t\tOverall Economic Decline\n\nPuerto Rico Planning Board (Planning Board) data show that Puerto Rico  has been in an economic decline for more than a decade. From 2005 to  2016, Puerto Rico\u2019s GDP decreased by over 9 percent, after adjusting for  inflation. Beginning in 2006, Puerto Rico\u2019s economy experienced declines  in real output in 9 of the next 11 years, as measured by real GDP (see fig.  2). While we have concerns about the precision of the Planning Board\u2019s real GDP measure from year to year, as discussed later, we are confident  in the downward direction of growth.\nPuerto Rico officials described the economic contraction as a downward  spiral, where negative economic growth spurred outmigration by skilled  workers, leading to decreased tax revenue and thereby increasing public  debt per capita. This, in turn, they said decreases new investment and the  cycle repeats.\nFive Main Factors that Contributed to  Puerto Rico\u2019s Economic Condition  In May 2018, GAO reported on five main  factors it identified through discussions with  officials and experts and a review of literature.  The factors were:  Outmigration and diminished labor force.  Some experts tied Puerto Rico\u2019s negative  economic growth to a steady decline in its  population and labor force since 2005.  According to Census data, Puerto Rico\u2019s  aging population means there are  proportionally fewer individuals of working  age.   Regulatory challenges of doing business  in Puerto Rico. Some experts cited the high  cost to businesses of complying with Puerto  Rico\u2019s regulations, such as the permitting  process for new businesses, and federal laws,  such as the minimum wage law.  High cost of importing goods and energy.  Many of the goods used by businesses in  Puerto Rico must be imported, significantly  increasing their costs and in turn the cost of  doing business. Petroleum, the main source  of electronical energy generation, is a good  whose high cost was particularly  consequential to Puerto Rico\u2019s economic  struggles, according to Puerto Rico  government officials, experts, and a literature  reviews.  Phaseout of the possessions tax credit.  The loss of the tax credit was been cited by  some as a potential cause of Puerto Rico\u2019s  economic decline since 2006; however, there  was no consensus as to the magnitude.  Banking and housing struggles. Puerto  Rico\u2019s banks have struggled and several have  closed. Puerto Rico\u2019s housing prices peaked  in 2009, but fell 25 percent by January 2017,  according to Federal Housing Finance Agency  data.\nIn our May 2018 report examining the Puerto Rico debt crises, we spoke  with officials and experts, and conducted a literature review, and identified  five main factors contributing to Puerto Rico\u2019s current economic condition:  outmigration and a diminished labor force; regulatory challenges of doing  business in Puerto Rico; the high cost of importing goods and energy; the  phaseout of the possessions tax credit; and banking and housing  struggles (see sidebar).\n\n\t\t\tHurricane Maria\u2019s Economic Impact\n\nPuerto Rico was already experiencing a long economic contraction when  Hurricane Maria made landfall in September 2017. Previous U.S. natural  disasters, such as Hurricane Katrina in the Gulf Coast, have had  significant adverse impacts on the economies of the affected regions,  including significant outmigration. Immediately following Hurricane  Katrina, the Gulf Coast experienced a number of challenges to its  economy including a rise in unemployment; an increase in outmigration  and decrease in housing units; a decline in state tax revenue; and a  decline in imports and exports. Puerto Rico may experience similar  challenges. For example, a February 2018 Federal Reserve Bank of New  York press briefing on the impact of Hurricanes Maria and Irma  characterized the 4 percent local job losses in Puerto Rico as  substantial. Further, the briefing indicated that the true economic cost  may be understated because some workers who are still employed likely  suffered a drop in income, there may be unmeasured effects on the  informal economy, and the value people place on quality of life issues are  not measured.\nThe substantial damage to the territory also accelerated outmigration and  will likely worsen its economic condition. A January 2018 report from the  Puerto Rico government identified the 2017 hurricanes as having a  significant impact on the economy and projected that the population will  decline by 10 percent over the next 2 years and could decline by nearly  20 percent over the next 5 years as people leave the island due to poor  economic conditions. Initial data from the U.S. Bureau of Transportation  Statistics show that 92,284 more people flew out of Puerto Rico with one- way tickets than flew into Puerto Rico in October 2017, the first full month  after Hurricane Maria. That number represents a 255 percent increase  over similar statistics in August 2017 and a 1,195 percent increase over  October 2016 (see fig. 3). By December 2017, 17,281 more people flew  out of Puerto Rico with one-way tickets than flew into Puerto Rico. This is  149 percent increase over similar statistics for December 2016. While the  extent to which citizens of Puerto Rico may return to the territory is  unclear, the initial outmigration could prolong negative economic growth.\n\n\t\tMethods Currently Used To Measure Puerto Rico\u2019s Economy Are Outdated and Lead to Unreliable Measures\n\n\t\t\tMeasuring GDP in Puerto Rico\n\nOutdated methods for measuring GDP make it difficult for the Puerto Rico  government to fully analyze specific economic needs and develop long- range plans. There is no federal statistical measure of Puerto Rico\u2019s  GDP. The U.S. Census\u2019 Economic Census of Island Areas provides  some limited insights into Puerto Rico\u2019s economic performance by  industry, including revenue, payroll, employee count, and inventories.  The Economic Census of Island Areas is updated every 5 years, but does  not include total GDP. Instead, each year, BEA calculates GDP for four  other territories and is reimbursed by the Department of the Interior\u2019s  Office of Insular Affairs for the estimation and publication of this  information.\nIn contrast, Puerto Rico\u2019s Planning Board calculates GDP, but its  methods are outdated and therefore unreliable, as they do not provide a  precise measure of economic activity. Specifically, a 2011 White House  Task Force Report examining Puerto Rico\u2019s economic challenges found  the Planning Board\u2019s methods were outdated because they did not follow  the same standards used for the rest of the United States. The Task  Force also found that the methodology was not in line with modern  statistical techniques, resulting in a less precise measure of Puerto Rico\u2019s  economic activity. Accurately calculating GDP is necessary to  adequately measure total output of goods and services in Puerto Rico.  GDP is also useful in measuring productivity and conducting monetary  policy, and may be used to develop and apply appropriate policies for  promoting economic growth. For example, a reliable and timely measure  of GDP helps government officials calculate more accurate projections of  tax revenue.\nThe Planning Board\u2019s method for calculating GDP does not effectively  adjust for inflation because, the methodology uses a fixed-weighted index  method that assumes the structure of the economy\u2014what is being  produced and prices of what is being produced relative to each other\u2014is  roughly constant over time. Further, the Planning Board is using this  method to report inflation adjusted GDP based on the prices in a 1978  \u201cmarket basket\u201d\u2014a fixed set of goods and services that people buy for  day-to-day living. The Planning Board then uses 1954 as the reference  year in its inflation adjustment to report GDP based on the price of goods  and services. Consequently, the Planning Board\u2019s real GDP measure  may not be accurately adjusted to reflect current purchasing patterns and  inflation in the prices of purchased products.\nBEA provides Puerto Rico\u2019s Planning Board with some support in its  calculation of GDP, but does not verify the accuracy of the calculation. In  response to the 2011 White House Task Force findings, BEA began  providing technical assistance and support to the Planning Board in  updating its methods to adjust GDP for inflation and developed a report  with recommendations for updating economic accounts. BEA found that  the Planning Board\u2019s methods did not comply with the internationally  agreed upon standards for compiling measures of economic activity.  Officials said that BEA was helping the Planning Board update its  methods; however, a change in the level of communication slowed the  update from 2013 through 2014. As a result, the Planning Board  continued to use the same outdated methods.\nIn January 2017, the Planning Board and BEA signed an agreement to  modernize Puerto Rico\u2019s economic accounts and align them with  international guidelines. The agreement also tasked the Planning Board  with providing deliverables in regular intervals beginning in spring 2017,  including publication of alternative estimates of GDP that implement steps  towards modernization. BEA officials told us that they are providing  support to the Planning Board, and Planning Board officials told us they  are working on updating the methodology. However, as of March 2018,  the Planning Board had not yet produced all of the agreement  deliverables, including publication of alternative GDP estimates.\nGiven the impact of Hurricane Maria, it may be challenging for Puerto  Rico to modernize its GDP measures. Planning Board officials told us in  August 2017 that they were working to update their GDP methodology, so  that it is similar to the one used by BEA, and that they would be updating  to a 2007 \u201cmarket basket.\u201d Board officials said the new GDP figures  were expected to be completed in December 2017. Their release was  delayed in the aftermath of Hurricane Maria, but officials said they now  expect to release GDP measures using the new methodology in summer  2018. Officials added that they plan to continue publishing GDP  measures using the old methodology along with the new one for trend  comparisons. The Planning Board and BEA estimated the cost to the  Puerto Rico government to modernize its GDP measure is $2 million \u2014 including staff time and computing infrastructure.\nA 2016 bi-partisan Congressional Task Force on Economic Growth in  Puerto Rico (2016 Congressional Task Force) recommended BEA  calculate GDP for Puerto Rico as it does for the states and other  territories, and BEA\u2019s long-term goals include this objective. Further, in  February 2018, the Financial Oversight and Management Board for  Puerto Rico recommended that the Governor of Puerto Rico support  efforts to implement the Congressional Task Force recommendation. BEA  officials told us one of the agency\u2019s long-term goals is calculating GDP for  Puerto Rico and they have discussed including Puerto Rico in its  reporting of GDP. Officials noted that including Puerto Rico in GDP  reporting would require additional funds similar to reimbursements it  received for the other four territories\u2019 calculations.\nBEA\u2019s mission is to promote a better understanding of the entire U.S.  economy by providing the most timely, relevant, and accurate economic  accounts data in an objective and cost-effective manner. BEA has  provided technical assistance and support for 6 years; however the  Planning Board has not yet modernized its methods to report a reliable  GDP measure, and BEA has not included Puerto Rico in its reporting  efforts. Federal standards for internal control state that management  should use quality information to achieve the entity\u2019s objectives. The  lack of a federal GDP measure for Puerto Rico makes it difficult to make  reasoned policy recommendations, adds uncertainty around issues  affecting Puerto Rico\u2019s economy, and makes it more difficult to identify  fiscal and economic recovery plan priorities. Without modernized GDP  methods, it remains difficult to compare Puerto Rico\u2019s GDP with the rest  of the United States and the other four territories for which BEA calculates  GDP. Finally, without such a measure of GDP, federal policy makers and  private investors must rely on various and sometimes unreliable data  sources to try to establish common facts about Puerto Rico\u2019s economic  condition\u2014an impediment in reaching consensus, engaging in meaningful  policy discourse, and investment.\n\n\t\t\tU.S. Government Labor Statistics for Puerto Rico\n\nFederal labor statistics for Puerto Rico are incomplete because the  Current Population Survey (CPS) does not include Puerto Rico and four  other U.S. territories, and the American Community Survey (ACS)  primarily provides data on population and housing, rather than labor.  PROMESA recognized this and recommended that Census consider the  feasibility of including Puerto Rico, and the other territories in the CPS.  Specifically, PROMESA suggested that Census conduct a study to  determine the feasibility of expanding data collection to include Puerto  Rico and the other four U.S. territories in the CPS and if necessary,  request the funding required to conduct this feasibility study as part of its  budget submission to Congress for fiscal year 2018. Census officials  told us they estimate a feasibility study including all of the U.S. territories  will cost $1.1 million in fiscal year 2018, but did not request funding. The  2016 Congressional Task Force also recommended that BLS and Census  take reasonable steps to include the territories.\nFederal standards for internal control state that management should use  quality information to achieve the entity\u2019s objectives. CPS data are  intended to provide a comprehensive body of labor data that can be used  to keep the nation informed about the economic and social well-being of  its people, but Census and BLS are unable to report on the economic and  social well-being of a segment of the nation and its people. Census  officials told us they are concerned about unduly burdening Puerto Rico  citizens with data collection efforts that would provide state level  estimates. However, Census has not studied the feasibility of including  Puerto Rico in the CPS, which would inform officials\u2019 decision on whether  to include Puerto Rico and the other territories in the CPS. By conducting  such a study, Census would better understand the tradeoffs of including  or continuing to omit Puerto Rico from CPS, including the extent to which  it can be considered in public policy decisions, such as the 2016 Overtime  Rule.\n\n\tIncreasing the Overtime Threshold Would Affect a Small Percentage of Workers in Puerto Rico and Could Affect Employment Conditions\n\n\t\tThe 2016 Overtime Threshold Increase Would Likely Affect Less Than 5 Percent of the Workforce in Puerto Rico\n\nOur estimates suggest that a larger percentage (about 4.5 percent) of  Puerto Rico\u2019s total workforce would have been affected by the Overtime  Rule than the states (about 2.6 percent), based on our analysis of ACS  data and DOL\u2019s analysis of CPS data. Specifically, DOL\u2019s analysis  estimated that of 159.9 million wage and salary workers in the states,  about 4.2 million (or about 2.6 percent) might be directly affected by the  2016 Overtime Rule. In our analysis of the Overtime Rule for Puerto  Rico, we estimated that about 47,250 (about 4.5 percent) of 1.06 million  wage and salary workers in Puerto Rico would have been directly  affected (see fig. 4).\nThe lack of data from CPS on Puerto Rico and the effects of Hurricane  Maria hinder our ability to fully assess the potential effect of the 2016  Overtime Rule on Puerto Rico. Instead, we used data from the 2015 5- year ACS to estimate the impact of the Overtime Rule on Puerto Rico.  The ACS employment data lack multiple variables available in the CPS;  hence, we were limited in what we could estimate. For example, DOL\u2019s  estimate for the states included the wealth transfer from employers to  employees, which is important for understanding the economic effects of  the 2016 Overtime Rule. We do not provide similar insights because of the difference in variables in the ACS and CPS. (See table 2 in appendix I  for the differences between our analysis and that of DOL.) Additionally,  DOL estimated the effect the Overtime Rule would have on the probability  that a worker had multiple jobs, but the limitations of the data we used  kept us from performing this analysis.\nOur analysis estimates that the impact of the 2016 Overtime Rule in  Puerto Rico would have been largely concentrated in four industries:  education and health services, wholesale and retail trade, public  administration, and financial activities. We estimated that in these four  industries about 76 percent (about 36,000) of our approximate 47,250  total workers would have been directly affected (see table 1). The largest  directly affected industry, education and health services, makes up about  43 percent (about 20,000) of this total.\n\n\t\tRaising the Overtime Threshold Could Increase Wages for Some, but Reduce Overall Hours and Employment in Certain Industries\n\nDepending on how employers respond to an increase in the overtime  threshold, the effect of amending the overtime regulations could vary  across employees. Similar to employers in the states, employers in  Puerto Rico could respond to changes in the overtime regulations based  on the current employee\u2019s salary and work schedule by: 1) making no  changes, 2) paying overtime, 3) raising salaries, or 4) adjusting hours  worked (see fig. 5). In its analysis of the impact of the 2016 Overtime  Rule in the states, DOL estimated the largest impact would be an  aggregate transfer of income from employers to employees, which would  be seen as a positive for some employees (e.g., increased pay, fewer  hours for same pay, or new hires) and a negative for others (e.g.,  employers in our facilitated discussion groups said they would have  layoffs, move employees from salaried to hourly, or lower benefit  amounts).\nWhile we were unable to conduct a full impact analysis identical to DOL\u2019s  because of data limitations, we held facilitated discussion groups, to gain  insight into how employers would have responded if the 2016 Overtime  Rule was implemented in Puerto Rico. Views reported by participants in  these groups may not be representative of all Puerto Rico employers, but  they provide illustrative examples of the types of steps employers might  have taken if the 2016 Overtime Rule were implemented. Employers in 2  of our 10 discussion groups said they would make staff adjustments by  increasing the salary of some employees while, in some cases,  minimizing the role of others. However, employers in 9 of our 10 of our  discussion groups said they might also need to convert the remaining  employees to part-time or hourly work, reduce their hours, or lay them off. \u201cWe have 125 exempt employees. The rule  change would impact our labor costs a lot. We  would need to minimize employees\/hours to  reduce the labor costs. We may adjust our  contribution to medical plans to make up for  the increased labor costs.\u201d  \u201cWith the new rule, half  would  need to be paid overtime or increase salary.  This would leave us not enough flexibility to  cover the hours or operation.\u201d  \u201cWe have a total of 850 employees. About 8  would be affected by the change. Of those 8,  3 we would boost their salary; the others will  be switched to hourly. This may affect their  benefits.\u201d\nThrough these facilitated discussion groups, we also learned that  employer responses to the 2016 Overtime Rule may differ by industry.  Employers in 3 of 10 industry discussion groups said they would be able  to absorb some of the higher costs associated with an increase in the  Overtime Rule threshold. For example, some manufacturers told us it  would not be difficult for their businesses to absorb these additional costs,  particularly if the salary threshold was at a somewhat lower level.  Similarly, some hotel employers told us they would be able to absorb  costs associated with the change across their many hotel locations, but  others said they may not be able to assimilate the threshold increase.  Hospital employers who participated in our facilitated discussion groups  told us they have lower margins and face threats of closure even without  the threshold increase. Some restaurant and hotel employers who  participated in our facilitated discussion groups said they may be unable  to pass associated increased labor costs to consumers; some would have  to require exempt workers to work longer hours and reduce the number of  full time employees or hours (see sidebar).\nEmployers could respond by adjusting staff if the 2016 Overtime Rule  goes into effect, but the impacts to employers may be limited and the  workforce could benefit from the 2016 Overtime Rule change according to  our interviews with 1 economist and 1 labor group official. One   economist suggested that instead of having two employees who work 60  hours each, an employer might hire a third employee so that each works  40 hours. Additionally, this economist said an increase to the threshold  would not be as burdensome to business, because employee wages  have risen above the current overtime salary threshold. One labor group  representative suggested that the 2016 Overtime Rule would have a  minimal impact because very few workers in Puerto Rico earn enough to  meet the 2004 salary threshold. Further, one economist said that under  the current threshold, workers work excessive hours and do not have the  same bargaining power. An increased overtime threshold would improve  these dire working conditions. Specifically, this economist said that  implementing the 2016 Overtime Rule would encourage firms to hire  more workers, provide employees with more bargaining power, and help  prevent worker exploitation.\nOne economist said implementing the 2016 Overtime Rule only in the  states could increase the wage differential between Puerto Rico and in  turn increase outmigration from Puerto Rico. One member of the Puerto  Rico Economic Administration said that if Puerto Rico were to have a  lower threshold than the U.S. mainland the effects might be worse than  those caused by the increased labor costs of implementing the higher  threshold. Another economist said that while hours may be adjusted or  layoffs may occur immediately following implementation of the Overtime  Rule, these impacts would not be a major concern within 3 to 4 years.\n\n\tConclusions\n\nPuerto Rico has long been experiencing severe economic challenges and  its default on over a billion dollars of debt payments since 2015 has  focused the need for attention to this territory. As Puerto Rico officials  were in the process of taking action to update their methodology for  reporting inflation-adjusted GDP, Hurricane Maria exacerbated the  territory\u2019s economic challenges. FEMA estimates that it may take years  for Puerto Rico to recover. The lack of accurate economic and  comprehensive labor data hinders policymaking, including a  determination of the potential impact of changes to the overtime  regulations. To help address Puerto Rico\u2019s economic challenges now and  in the future, the federal government and investors need updated and  reliable data. Going forward, having BEA include Puerto Rico in its  calculation of GDP would provide federal and local authorities, as well as  businesses and investors, with reliable data on Puerto Rico\u2019s economic  condition that can be directly compared with the United States and other  territories. BEA\u2019s long-term goals include measuring Puerto Rico\u2019s GDP,  but having reliable data now would help address significant economic  challenges in the short term. Likewise, studying whether including Puerto  Rico in the Current Population Survey is feasible would allow DOL and  other policymakers to be better positioned to fully consider the cost of  including the territory against the implications of exclusion.\n\n\tRecommendations for Executive Action\n\nWe are making a total of three recommendations, including two to  Commerce and one to DOL. Specifically:  The Secretary of Commerce should ensure that the Bureau of Economic  Analysis includes Puerto Rico in its reporting on gross domestic product,  as it does for four other U.S. territories. (Recommendation 1)\nThe Secretary of Commerce, in cooperation with DOL\u2019s Bureau of Labor  Statistics, should conduct a study on the feasibility of including Puerto  Rico in its reporting of the Current Population Survey. (Recommendation  2)\nThe Secretary of Labor, in cooperation with the Commerce\u2019s Census  Bureau, should conduct a study on the feasibility of including Puerto Rico  in its reporting of the Current Population Survey. (Recommendation 3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of the report to the Government of Puerto Rico, the  Department of Commerce (Commerce), and the Department of Labor  (DOL) for review and comment. In written comments that are reproduced  in appendix IV, Commerce agreed with the recommendations made to it.  In an email, DOL\u2019s Deputy Assistant Secretary for Policy stated that the  agency did not have any comments on the report. In addition, Commerce  and the Government of Puerto Rico provided technical comments, which  we incorporated into the report as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Government of Puerto Rico, the Secretary of the  Department of Commerce, the Secretary of the Department of Labor, and  other interested parties. In addition, this report is available at no charge  on the GAO website at http:\/\/gao.gov.\nIf you or your staff have any questions about this report, please contact  Cindy Brown Barnes at (202) 512-7215 or Oliver Richard at (202) 512-  8424.You may also reach us by e-mail at brownbarnesc@gao.gov or  richardo@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur review addressed: (1) the economic conditions in Puerto Rico as of  the end of 2016; and (2) the potential effects of implementing the 2016  Overtime Rule on Puerto Rico\u2019s economy.\nTo evaluate the current economic conditions in Puerto Rico quantitatively,  we analyzed (1) data from the Puerto Rico Planning Board\u2019s (Planning  Board) Statistical Appendix for the Governor that includes data on Puerto  Rico\u2019s gross domestic product (GDP) from 1990 through 2016 and (2)  passenger data for Puerto Rican airports for years 2016 and 2017 from  the Bureau of Transportation Statistics (BTS).\nTo analyze the real GDP of Puerto Rico from 1990 through 2016 and  Puerto Rico GDP by industry for 2016, we relied on data from the  Planning Board\u2019s Statistical Appendix for the Governor. We interviewed  Planning Board officials responsible for producing the annual GDP  estimates to understand how the data were prepared and any limitations  to the data, and concluded that the while we have concerns over the  precision of real GDP data, they were sufficiently reliable for our purposes  of determining the direction of growth.\nTo analyze the flow of passengers through Puerto Rican airports before  and after Hurricane Maria, we relied on the BTS\u2019 monthly passenger data  for 2016 and 2017 as accessed through Diio Mi: Market Intelligence for  the Aviation Industry. Diio Mi is a private contractor that provides online  access to U.S. airline financial, operation, and passenger data. We  reviewed the relevant documentation of the dataset and previous GAO  reports and found the dataset sufficiently reliable for our purposes.\nTo assess the potential effects of the 2016 Overtime Rule on Puerto Rico  quantitatively, we analyzed and reported data from the American  Community Survey (ACS) for calendar year 2015, because DOL used  2015 data in its impact analysis of the Overtime Rule on the states. The  ACS is a national survey designed and administered by the Census  Bureau (Census), and it contains data on individual earnings. Since 2005,  the ACS has also included the Puerto Rico Community Survey (PRCS)  which extends the survey through Puerto Rico. Our data set selection  process included interviews with current and former agency officials as  well as review of dataset documentation such as data handbooks, data  dictionaries, and guidance on the different versions of data available. The  ACS is conducted annually with estimates based on 1-year and 5-year  data with benefits and drawbacks for each version. The 1-year ACS is  updated the earliest and gives the most current data; however, according  to Census\u2019 guidance on the different ACS samples, it also contains the  smallest sample size and is more appropriate for analyzing large  populations than small ones. The 5-year ACS is the most reliable data,  according to Census\u2019 ACS guidance, as it includes the largest population  size, which can be used to analyze small populations; however, the 5- year ACS is the least current version of the data. Additionally, while the  2015 5-year ACS data were not the most recent available, we used them  because the Department of Labor (DOL) used 2015 data in its impact  analysis of the 2016 Overtime Rule for the states. Based on these  benefits and limitations, we chose to use the 2015 ACS 5-year  estimates. Estimates produced from ACS data are subject to sampling  error. For all of our estimates we weighted observations based on the  individual weight. We compared our estimates of values derived from our  weighting procedures to those published by the DOL and found them to  be consistent. In addition to estimates, we generated standard errors or  the margin of error for the 95 percent confidence interval, and report them  with estimates in figures and tables. Based on our data checks, reviews  of documentation and interviews with agency officials, we found the ACS  data to be sufficiently reliable for our purposes.\nIn addition to the quantitative data collected, we reviewed relevant federal  laws, regulations, court documents, agency guidance, and internal  controls related to the 2016 Overtime Rule, labor in Puerto Rico, and  federal statistical measures for Puerto Rico. Additionally, we reviewed  previous GAO reports on Puerto Rico and its economy. We interviewed  DOL and Commerce officials at the national level. We interviewed Puerto  Rican government officials to better understand current economic  conditions and the statistical measure used to reflect the economic  conditions. We interviewed representatives of national and Puerto Rican  employer and labor organizations to gain their perspectives on the impact  of the 2016 Overtime Rule and the condition of the economy. We  conducted 10 facilitated group discussions with Puerto Rican employers  in the manufacturing, restaurant, hotel, hospital, and professional services  industries.  These are some of the industries that employ the largest  number of people in Puerto Rico and are among the most likely to be  impacted by the 2016 Overtime Rule. Employers were selected to  represent both large and small business perspectives in each industry.  Views reported by participants in these groups are not representative of  those of all Puerto Rico employers and for that reason are not  generalizable. We also interviewed four economists, identified from prior  work and interviews with agency officials, industry groups, and labor  groups as having expertise relating to the 2016 Overtime Rule or the  Puerto Rico economy, regarding the economic conditions of Puerto Rico  and the potential economic impacts of the 2016 Overtime Rule.\n\n\tAnalysis of American Community Survey Data\n\nFor our analysis of the effects of the 2016 Overtime Rule on Puerto Rico,  we mirrored the analysis conducted by DOL for the impacts of the rule on  the United States. While the methodologies are similar, the DOL analysis  used the Current Population Survey (CPS) data that do not include  Puerto Rico. The ACS data we use serves a similar role; however, we  made a few adjustments to the analysis in light of available data.  Specifically, in the ACS, there is no variable identifying whether the  individual works an hourly job. In order to simulate the removal of hourly  workers from the sample, we randomly assign hourly worker designation  to the same proportion of the population that are classified as hourly  workers in DOL\u2019s analysis (41.01 percent). A few assumptions are  associated with this manipulation: 1) We are assuming that the proportion  of the population that works an hourly job in Puerto Rico is similar to that  of the 50 states, and 2) when we perform industry and region analyses,  we assume the same hourly worker proportion across all industries and  regions. Additionally, in its final rule, DOL analyzes the impact of the 2016  Overtime Rule on individual worker\u2019s propensity to work multiple jobs; the  ACS does not identify workers employed in multiple jobs and we could  not perform this analysis. Also, the CPS data contain several variables on  the number of hours worked that allowed DOL to analyze who likely  works overtime on a regular basis. While the ACS includes a variable  indicating the usual number of hours worked per week over the past year,  we found it does not capture the schedule fluctuations as accurately as  the CPS variables. As such, we do not calculate the dollar amount  transfers from employers to employees and dead weight losses, or the  loss in economic efficiency from the rule that DOL shows in its analyses.  To the extent possible, we used DOL\u2019s methodology to determine the  potential effect of the 2016 Overtime Rule in Puerto Rico. However, due  to data limitations there were some ways in which our approach differed  from the approach used by DOL.\nIn DOL\u2019s analysis, the sample includes only the workers covered by its  regulation. We adapt the sample to match the DOL\u2019s analysis as follows:  1) remove military personnel, unpaid volunteers, self-employed  individuals, clergy and other religious workers, and federal employees, 2)  remove blue-collar workers and workers paid hourly; and 3) remove  workers who are categorized under occupation and industry codes that  are generally exempt under other exemptions.\nFor consistency, our analysis makes the same adjustments to our sample  that DOL makes in its analysis. Since we use the 2015, 5-year ACS data,  we first put all wages into 2015 levels using ACS defined variables. Next,  we inflate from 2015 to 2017 levels using the calendar year consumer  price index (CPI-U). Just as in DOL\u2019s analysis, we do not know whether  any specific worker satisfies the duties test of the 2016 Overtime Rule, so  we follow the same steps DOL took in its final rule. These steps include  using DOL\u2019s probabilities that specific job codes meet the duties test and  assigning the probability to individual workers using the gamma  distribution with the shape parameter alpha was set to the squared  quotient of the sample mean divided by the sample standard deviation,  and the scale parameter beta was set to the sample variance divided by  the sample mean. Additionally, DOL explicitly removes certain industries  and occupations from the sample and we follow its methodology exactly  to remove these. Finally, to estimate the population that would have been  affected by the 2016 Overtime Rule, we limit the sample to only those  above the 2004 overtime salary threshold ($23,660) and below the 2016  salary threshold ($47,476) just as DOL did in its analysis.\nDOL\u2019s estimates for industries and regions use different groupings than  those provided in the ACS; however, since the ACS variables use the  same coding but, a finer level, we can recreate the variables used in  DOL\u2019s analysis. For example, we used Census guidance on converting  2012 industry codes to create a major industry variable from the ACS  industry codes. Similarly, to compare our estimates to DOL estimates by  region, we take the ACS data, which is reported state-by-state, and put it  into larger regions, such as \u201cNortheast.\u201d\nWe conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Effects of Implementing Alternative Overtime Rule Thresholds on Puerto Rico\n\nTable 3 shows how different populations of workers would be affected by  applying alternative overtime thresholds in Puerto Rico. For our analysis,  in order to more closely replicate Department of Labor\u2019s (DOL) design, we  use the same alternative salary thresholds DOL analyzed in its final rule,  which are defined as follows:\nAlternative 1: Inflate the 2004 Level - takes the 2004 overtime  threshold and inflates it to fiscal year 2015 dollars using the consumer  price index. This method leads to an overtime threshold of $570 per  week or $29,640 per year.\nAlternative 2: 2004 Methodology - uses the 2004 final rule and  updates it with data from the third quarter of 2015. This method leads  to an overtime threshold of $596 per week or $31,015 per year.\nAlternative 3: Kantor Long Test - is based on a 1958 Report and  Recommendations on Proposed Revision of Regulations, Part 541, by  Harry S. Kantor. This methodology uses data collected on actual  salaries paid to executive, administrative, or professional (EAP)  employees grouped by geographic region, industry group, number of  employees, and city size. DOL then used the long-duties test such  that no more than about 10 percent of exempt EAP employees in the  lowest-wage region, lowest-wage industry, smallest establishment  group, or smallest city group will fail to meet the test. This method  leads to a threshold of $684 per week or $35,568 per year.\nAlternative 4: 40th Percentile of Full-time Salaried Workers  (Nationally) - takes all full-time salaried workers in the United States  and calculates the 40th percentile of their wages. This method leads  to a threshold of $972 per week or $50,544 per year.\nAlternative 5: Kantor Short Test - is also based on the Kantor method  described in the third alternative, but uses the methodology  associated with the short-duties test instead of the long-duties test. To  do this, DOL took the $684 per week of the Kantor Long Test and  inflated it by the average percent wage difference between the long  and short test from 1949 through 1975 (149 percent). Multiplying $684 per week by 149 percent yields a Kantor Short Test threshold of  $1,019 per week or $52,984 per year.\nAlternative 6: Inflate 1975 Short Test Level - takes the 1975 short- duties test salary level and inflates it to fiscal year 2015 dollars. This  leads to a threshold level of $1,100 per week or $57,205 per year.\n\nAppendix III: Data Checks for American Community Survey\n\nThe following tables show how the Department of Labor\u2019s (DOL) analysis  of the 2016 Overtime Rule in the United States using the analysis of  Current Population Survey (CPS) data compares to our analysis using the  American Community Survey (ACS) data. This analysis was conducted  to support using ACS data as an alternative to CPS data. The  methodologies used in our analysis and the DOL analysis are similar, but  some adjustments were made to our analysis to attempt to replicate the  DOL\u2019s analysis of CPS data because variables were missing from the  ACS data. Between the slightly different methodologies and different data  sets, we expect the estimates to be of similar magnitudes, but not  necessarily identical. The results indicate that our adjustments to the  methodology and use of a different data yield similar results and add  validity to our estimates for Puerto Rico.\n\nAppendix IV: Comments from the Department of Commerce\n\nAppendix V: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tGAO Acknowledgments\n\nIn addition to those named above, Kimberley Granger and Seyda  Wentworth, Assistant Directors; Amber Yancey-Carroll, Analyst-in- Charge; Pedro Almoguera and Michael Naretta made key contributions to  this report. Also contributing to this report were Jeffrey Arkin, David  Blanding, David Chrisinger, Sarah Gilliland, Robin Marion, Jonathan S.  McMurray, Sheila R. McCoy, Thomas Moscovitch, Dominic Nadarski,  Mimi Nguyen, Karissa Robie, Benjamin Sinoff, Almeta Spencer, Amy  Sweet, Anjali Tekchandani, Rosemary Torres Lerma, and Kathleen van  Gelder.","output":"Why GAO Did This Study\n\nPuerto Rico, the largest and most populous territory of the United States, is subject to congressional authority, although it has broad authority over matters of internal governance. After it defaulted on over $1.5 billion in public debt since 2015, Congress passed PROMESA to establish federal oversight of fiscal affairs. This debt crisis coincided with DOL finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. PROMESA included a provision for GAO to assess the rule's impact on Puerto Rico and examine its economic condition.\nThis report (1) examines the economic conditions in Puerto Rico as of the end of 2016, and (2) assesses the potential effects of applying the 2016 Overtime Rule to Puerto Rico. GAO analyzed 1990-2016 economic data and replicated DOL's impact analysis of the 2016 Overtime Rule using 2015 ACS data, the same year used by DOL in its analysis. GAO also reviewed federal laws, regulations, court documents, agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups.\n\nWhat GAO Found\n\nUnreliable economic and limited labor data make conditions in Puerto Rico difficult to evaluate.\nPuerto Rico Planning Board data show that from 2005 to 2016 Puerto Rico's gross domestic product (GDP), a principal economic indicator, decreased by over 9 percent, after adjusting for inflation, and the devastation brought by Hurricane Maria in 2017 has worsened economic conditions. While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories. For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico's GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so.\nFurther, Puert Rico has limited labor statistics because it is not included in the Current Population Survey (CPS), which is produced by Commerce's Census Bureau (Census) and Department of Labor's (DOL) Bureau of Labor Statistics (BLS). CPS provides detailed information about employment, such as hours of work and earnings. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL's 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS.\nGAO used a different dataset\u2014American Community Survey (ACS)\u2014to assess the potential effects of applying the 2016 Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay. GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected\u2014that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers' salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal.\n\nWhat GAO Recommends\n\nGAO recommends that BEA include Puerto Rico in its reporting on GDP and that Census and BLS study the feasibility of including Puerto Rico in the CPS. Commerce agreed with our recommendations and DOL did not have any comments on the report."}
{"id":"gao_GAO-18-609SP","pid":"gao_GAO-18-609SP_0","input":"\tBackground\n\n\t\tUse of Performance Information in the Federal Government\n\nConcerned that the federal government was more focused on program  activities and processes than the results to be achieved, Congress  passed the Government Performance and Results Act of 1993 (GPRA).  GPRA sought to focus federal agencies on performance by requiring  agencies to develop long-term and annual goals, and measure and report  on progress towards those goals annually. Based on our analyses of the  act\u2019s implementation, we concluded in March 2004 that GPRA\u2019s  requirements had laid a solid foundation for results-oriented  management. At that time, we found that performance planning and  measurement had slowly yet increasingly become a part of agencies\u2019  cultures. For example, managers reported having significantly more  performance measures in 2003 than in 1997, when GPRA took effect  government-wide.\nHowever, the benefit of collecting performance information is fully realized  only when that information is actually used by managers to make  decisions aimed at improving results. Although our 2003 survey found  greater reported availability of performance information than in 1997, it  also showed managers\u2019 use of that information for various management  activities generally had remained unchanged. Based on those results,  and in response to a request from Congress, in September 2005, we  developed a framework intended to help agencies better incorporate  performance information into their decision making. As shown in figure  1, we identified  five leading practices that can promote the use of performance  information for policy and program decisions; and  four ways agency managers can use performance information to  make program decisions aimed at improving results.\nOur September 2005 report also highlighted examples of how agencies  had used performance information to improve results. For example, we  described how the Department of Transportation\u2019s National Highway  Traffic Safety Administration used performance information to identify,  develop, and share effective strategies that increased national safety belt  usage\u2014which can decrease injuries and fatalities from traffic accidents\u2014 from 11 percent in 1985 to 80 percent in 2004.\nSubsequently, the GPRA Modernization Act of 2010 (GPRAMA) was  enacted, which significantly expanded and enhanced the statutory  framework for federal performance management. The Senate  Committee on Homeland Security and Governmental Affairs report  accompanying the bill that would become GPRAMA stated that agencies  were not consistently using performance information to improve their  management and results. The report cited the results of our 2007  survey of federal managers. That survey continued to show little change  in managers\u2019 use of performance information. The report further stated  that provisions in GPRAMA are intended to address those findings and  increase the use of performance information to improve performance and  results. For example, GPRAMA requires certain agencies to designate a  subset of their respective goals as their highest priorities\u2014known as  agency priority goals\u2014and to measure and assess progress toward those  goals at least quarterly through data-driven reviews.\nOur recent work and surveys suggest that data-driven reviews are having  their intended effect. For example, in July 2015, we found that agencies  reported that their reviews had positive effects on progress toward  agency goals and efforts to improve the efficiency of operations, among  other things. In addition, for those managers who were familiar with their  agencies\u2019 data-driven reviews, our 2013 and 2017 surveys showed that  the more managers viewed their programs as being subject to a review,  the more likely they were to report their agencies\u2019 reviews were driving  results and conducted in line with our leading practices. Recognizing the  important role these reviews were playing in improving data-driven  decision making, our management agenda for the presidential and  congressional transition in 2017 included a key action to expand the use  of data-driven reviews beyond agency priority goals to other agency  goals.\nMore broadly, our recent surveys of federal managers have continued to  show that reported government-wide uses of performance information  generally have not changed or in some cases have declined. As we  found in September 2017, and as illustrated in figure 2, the 2017 update  to our index suggests that government-wide use of performance  information did not improve between 2013 and 2017. In addition, it is  statistically significantly lower relative to our 2007 survey, when we  created the index.\nMoreover, in looking at the government-wide results on the 11 individual  survey questions that comprise the index, we found few statistically  significant changes in 2017 when compared to (1) our 2013 survey or (2)  the year each question was first introduced. For example, in comparing  2013 and 2017 results, two questions had results that were statistically  significantly different:\nThe percentage of managers who reported that employees who report  to them pay attention to their agency\u2019s use of performance information  was statistically significantly higher (from 40 to 46 percent).\nThe percentage of managers who reported using performance  information to adopt new program approaches or change work  processes was statistically significantly lower (from 54 to 47 percent).\nAs we stated in our September 2017 report, the decline on the latter  question was of particular concern as agencies were developing plans to  improve their efficiency, effectiveness, and accountability, as called for by  an April 2017 memorandum from OMB.\n\n\t\tThe Administration\u2019s Plans for Federal Performance Management\n\nIn early 2017, the administration announced several efforts intended to  improve government performance. OMB issued several memorandums  detailing the administration\u2019s plans to improve government performance  by reorganizing the government, reducing the federal workforce, and  reducing federal agency burden. As part of the reorganization efforts,  OMB and agencies were to develop government-wide and agency reform  plans, respectively, designed to leverage various GPRAMA provisions.  For instance, the April 2017 memorandum mentioned above stated that  OMB intends to monitor implementation of the reforms using, among  other things, agency priority goals. While many agency-specific  organizational improvements were included in the President\u2019s fiscal year  2019 budget, released in February 2018, OMB published additional  government-wide and agency reform proposals in June 2018.\nThe President\u2019s Management Agenda (PMA), released in March 2018,  outlines a long-term vision for modernizing federal operations and  improving the ability of agencies to achieve outcomes. To address the  issues outlined in the PMA, the administration established a number of  cross-agency priority (CAP) goals. CAP goals, required by GPRAMA, are  to address issues in a limited number of policy areas requiring action  across multiple agencies, or management improvements that are needed  across the government.\nThe PMA highlights several root causes for the challenges the federal  government faces. Among them is that agencies do not consistently apply  data-driven decision-making practices. The PMA states that smarter use  of data and evidence is needed to orient decisions and accountability  around service and results. To that end, in March 2018, the administration  established the Leveraging Data as a Strategic Asset CAP goal to  improve the use of data in decision making to increase the federal  government\u2019s effectiveness.\n\n\t\tFederal Performance Management Leadership Roles and Responsibilities\n\nOver the past 25 years, various organizations, roles, and responsibilities  have been created by executive action or in law to provide leadership in  federal performance management. At individual agencies and across the  federal government, these organizations and officials have key  responsibilities for improving performance, as outlined below.\nOMB: At least every four years, OMB is to coordinate with other  agencies to develop CAP goals\u2014such as the one described earlier on  leveraging data as an asset\u2014to improve the performance and  management of the federal government. OMB is also required to  coordinate with agencies to develop annual federal government  performance plans to define, among other things, the level of  performance to be achieved toward the CAP goals. Following  GPRAMA\u2019s enactment, OMB issued guidance for initial  implementation, as required by the act, and continues to provide  updated guidance in its annual Circular No. A-11, additional  memorandums, and other means.\nChief Operating Officer (COO): The deputy agency head, or  equivalent, is designated as the COO, with overall responsibility for  improving agency management and performance through, among  other things, the use of performance information.\nPresident\u2019s Management Council (PMC): The PMC is comprised of  OMB\u2019s Deputy Director for Management and the COOs of major  departments and agencies, among other individuals. Its  responsibilities include improving overall executive branch  management and implementing the PMA.\nPerformance Improvement Officer (PIO): Agency heads designate  a senior executive as the PIO, who reports directly to the COO. The  PIO is responsible for assisting the head of the agency and COO to  ensure that agency goals are achieved through, among other things,  the use of performance information.\nPerformance Improvement Council (PIC): The PIC is charged with  assisting OMB to improve the performance of the federal  government. It is chaired by the Deputy Director for Management at  OMB and includes PIOs from each of the 24 Chief Financial Officers  Act agencies, as well as other PIOs and individuals designated by the  chair. Among its responsibilities, the PIC is to work to resolve  government-wide or cross-cutting performance issues, and facilitate  the exchange among agencies of practices that have led to  performance improvements.\nPreviously, the General Service Administration\u2019s (GSA) Office of  Executive Councils provided analytical, management, and administrative  support for the PIC, the PMC, and other government-wide management  councils. In January 2018, the office was abolished and its functions,  staff, and authorities, along with those of the Unified Shared Services  Management Office, were reallocated to GSA\u2019s newly created Shared  Solutions and Performance Improvement Office.\n\n\tAgencies\u2019 Use of Performance Information in Decision Making and Related Leading Practices Generally Has Not Improved\n\n\t\tReported Use of Performance Information in Decision Making Generally Has Not Improved at Individual Agencies Since 2013\n\nAs at the government-wide level\u2014where, as described earlier, the use of  performance information did not change from 2013 to 2017\u2014managers\u2019  reported use of performance information at most agencies also did not  improve since 2013 (illustrated in figure 3).\nAt the agency level, 3 of the 24 agencies had statistically significant  changes in their index scores\u20141 increase (National Science Foundation)  and 2 decreases (Social Security Administration and the Office of  Personnel Management). Also, in 2017, 6 agencies had results that  were statistically significantly different\u20144 higher and 2 lower\u2014than the  government-wide average (see sidebar).\nThroughout the report, we highlight two different types of statistically  significant results\u2014changes from our last survey in 2013 and differences  from the 2017 government-wide average. The former indicates when an  agency\u2019s reported use of performance information or leading practices  has measurably improved or declined. The latter indicates when it is  statistically significantly higher or lower than the rest of government.  These results suggest agencies have taken actions that led to  improvements in their use of performance information. For example,  when a result is a statistically significant increase since 2013, as with the  National Science Foundation index score in 2017, this suggests that the  agency has adopted practices that led to a measurable increase in the  use of performance information by managers.\nWhen a result is statistically significantly higher than the government-wide  average, like GSA\u2019s 2017 index score, this suggests that the agency\u2019s  use of performance information is among the highest results when  compared to the rest of government. These agencies could also have  insights into practices that led to relatively high levels of performance  information use. Finally, when a result is a statistically significant  decrease since 2013, as with the Social Security Administration\u2019s index  score in 2017, or statistically significantly lower than the government-wide  average, like the Department of Homeland Security\u2019s 2017 index score,  this suggests the agencies face challenges that are hampering their  ability to use performance information. Appendix III provides each  agency\u2019s index scores from 2007, 2013, and 2017 to show changes  between survey years.\nWhen we disaggregated the index and analyzed responses from the 11  questions that comprise the index\u2014which could help pinpoint particular  actions that improved the use of performance information\u2014we similarly  found relatively few changes in agencies\u2019 recent results. Specifically, we  identified 16 instances where agency responses on individual questions  were statistically significantly different from 2013 to 2017\u201410 increases  and 6 decreases. This represents about 6 percent of the total possible  responses to the 11 survey questions from each of the agencies.\nIn addition, we found 12 instances where an agency\u2019s result on a  question was statistically significantly higher (11) or lower (1) than the  government-wide average in 2017. For example, the percentage of Social  Security Administration (SSA) managers reporting that their peers use  performance information to share effective approaches was statistically  significantly higher than the government-wide average. Although SSA\u2019s  index score had a statistically significant decline in 2017 compared to  2013, the agency\u2019s index score remains relatively high, as it has in prior  years. The scope of our work has not allowed us to determine definitively  what factors caused the decline in SSA\u2019s index score and whether the  decline is likely to continue, although its result on this particular question  may indicate a continued strength. Each agency\u2019s results on the 11  questions that comprise the index are presented in appendix I. The  agencies\u2019 respective statistically significant results are identified in figure  4.\nWhile some agencies had statistically significant improvements on  individual questions, and could point to actions that led to improvements  in their use of performance information, these improvements should be  considered in relation to the range of agency results and the government- wide average. In figure 4, there are five agencies with statistically  significant increases on responses to individual questions, where those  results were not statistically significantly higher than the government-wide  average (see arrows without plus signs for the Departments of  Agriculture, Defense, and Justice; the Environmental Protection Agency;  and the National Science Foundation). While these represent  improvements, they should be considered in relation to the range of  agency results and the government-wide average (provided in detail in  the agency summaries in appendix I). For example, in 2017, the  percentage of managers at the Department of Agriculture who reported  that upper management use performance information to inform decisions  about program changes was statistically significantly higher than in 2013.  However, the department\u2019s 2017 result (37 percent) was relatively lower  when compared to the maximum agency result on that question (60  percent). Appendix I presents the results on the index and the 11  questions that comprise it for each of the 24 agencies.\n\n\t\tIndividual Agencies\u2019 Reported Use of Leading Practices Generally Remains Unchanged\n\nWhen we compared government-wide and agency-level results on  selected survey questions that reflect practices that promote the use of  performance information, we found that results between 2013 and 2017  generally remained unchanged. As described earlier, there are 10 survey  questions that both reflect the five leading practices identified in our past  work and had statistically significant associations with higher index  scores. As shown in figure 5, government-wide results on 2 of the 10  questions were statistically significantly different, both increases, from  2013 to 2017. Despite these two increases, the overall results suggest  these practices are not widely followed government-wide. On most of the  10 questions, only about half (or fewer) of the managers reported their  agencies were following them to a \u201cgreat\u201d or \u201cvery great\u201d extent.\nWhen we analyzed agency-level responses to these 10 questions, we  also found relatively few changes in recent results. Specifically, our  analysis found 20 instances\u201416 increases and 4 decreases\u2014where  agencies\u2019 responses on individual questions were statistically significantly  different from 2013 to 2017. This represents about 8 percent of the total  possible responses to the 10 survey questions from each of the  agencies.\nIn addition, we found 10 instances where an agency\u2019s result on a  question was statistically significantly higher (8) or lower (2) than the  government-wide average in 2017. Each agency\u2019s results on these 10  questions are presented in appendix I, and the statistically significant  results are identified in figure 6.\nThose agencies with results on individual questions that are either  statistically significantly higher than 2013, higher than the 2017  government-wide average, or both may have taken actions in line with our  leading practices for promoting the use of performance information. For  example, the National Science Foundation had both types of statistically  significant results on a question about having sufficient information on the  validity of their performance data. Here, the agency\u2019s result increased 27  percentage points from 2013 to 2017. While the scope of our review does  not allow us to definitively determine the reasons for the National Science  Foundation\u2019s higher results, they suggest the agency has taken recent  actions that greatly improved the availability and accessibility of  information on the validity of performance data. In both 2013 and 2017,  our analyses found this particular question to be the strongest predictor of  higher performance information use when we tested for associations  between the questions that reflect leading practices and our index.\n\n\tManagers Whose Programs Were Subject to Data- Driven Reviews Reported Greater Use of Performance Information and Leading Practices\n\nOur 2017 survey results show that managers who reported their  programs were subject to data-driven reviews also were more likely to  report using performance information in decision making to a greater  extent (see figure 7). For the 35 percent of managers who reported being  familiar with data-driven reviews, those who reported their programs had  been subject to data-driven reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent had  index scores that were statistically significantly higher than those whose  programs were subject to these reviews to a lesser extent.\nSimilarly, we found that being subject to data-driven reviews to a greater  extent was also related to greater reporting of agencies following  practices that can promote the use of performance information. As figure  8 shows, managers who reported their programs were subject to these  reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent more frequently reported that  their agencies followed the five leading practices that promote the use of  performance information, as measured by the 10 related survey questions  associated with higher scores on the index. For example, of the estimated  48 percent of managers who reported their programs were subject to  data-driven reviews to a \u201cgreat\u201d or \u201cvery great\u201d extent, 72 percent also  reported that managers at their level (peers) effectively communicate  performance information on a routine basis to a \u201cgreat\u201d or \u201cvery great\u201d  extent. Conversely, for the 24 percent of managers who reported their  programs were subject to data-driven reviews to a \u201csmall\u201d or \u201cno\u201d extent,  only 30 percent reported that managers at their level do this to a \u201cgreat\u201d  or \u201cvery great\u201d extent.\n\n\tOpportunities Exist for the Executive Branch to Increase the Use of Performance Information within Agencies\n\n\t\tDisparities Exist in the Use of Performance Information by Senior Agency Leaders and Managers at Lower Levels\n\nOur past work has found that the Executive Branch has taken steps to  improve the use of performance information in decision making by senior  leaders at federal agencies. However, our survey results indicate those  steps have not led to similar improvements in use by managers at lower  levels. Through its guidance to implement GPRAMA, OMB developed a  framework for performance management in the federal government that  involves agencies setting goals and priorities, measuring performance,  and regularly reviewing and reporting on progress. This includes  expectations for how agency senior leaders should use performance  information to assess progress towards achieving agency priority goals  through data-driven reviews, and strategic objectives through strategic  reviews. For example, GPRAMA requires, and OMB\u2019s guidance  reinforces, that data-driven reviews should involve the agency head,  Chief Operating Officer, Performance Improvement Officer, and other  senior officials responsible for leading efforts to achieve each goal.\nOMB\u2019s guidance also identifies ways in which agency leaders should use  the results of those reviews to inform various decision-making activities,  such as revising strategies, formulating budgets, and managing risks. Our  past work also found that agencies made progress in implementing these  reviews and using performance information. In July 2015, we found that  agencies generally were conducting their data-driven reviews in line with  GPRAMA requirements and our related leading practices, including that  agency leaders used the reviews to drive performance improvement. In  addition, in September 2017, we reported on selected agencies\u2019  experiences in implementing strategic reviews and found that the reviews  helped direct leadership attention to progress on strategic objectives.\nDespite those findings, our survey results continue to show that the  reported use of performance information by federal managers has  generally not improved, and actually declined at some agencies. This  could be because of the two different groups of agency officials covered  by our work. GPRAMA\u2019s requirements, and the federal performance  management framework established by OMB\u2019s guidance, apply at the  agency-wide level and generally involve senior leaders. Our past work  reviewing implementation of the act therefore focused on improvements  in the use of performance information by senior leaders at the agency- wide level. In contrast, our surveys covered random samples of mid- and  upper-level managers within those agencies, including at lower  organizational levels such as component agencies. Their responses  indicate that the use of performance information more broadly within  agencies\u2014at lower organizational levels\u2014generally has not improved  over time. The exception to this was managers whose programs were  subject to the data-driven reviews required by GPRAMA. As described  above, those managers were more likely to report greater use of  performance information in their agencies. This reinforces the value of the  processes and practices put in place by GPRAMA. Our survey results  suggest that limited actions have been taken to diffuse processes and  practices related to the use of performance information to lower levels  within federal agencies, where mid-level and senior managers make  decisions about managing programs and operations.\nAlthough OMB staff agreed that diffusing processes and practices to  lower levels could lead to improved use of performance information, they  told us they have not directed agencies to do so for a few reasons. First,  OMB staff expressed concerns about potentially imposing a \u201cone-size-fits- all\u201d approach on agencies. They stated that agencies are best positioned  to improve their managers\u2019 use of performance information, given their  individual and unique missions and cultures, and the environments in  which they operate. We agree that it makes sense for agencies to be able  to tailor their approaches for those reasons. OMB\u2019s existing guidance  provides an overarching framework that recognizes the need for flexibility  and for agencies to tailor their approaches. Moreover, given the long- standing and cross-cutting nature of this challenge, a government-wide  approach also would provide a consistent focus on improving the use of  performance information more extensively within agencies.\nOMB staff also told us that they believed it would go beyond their  mandate to direct agencies to extend GPRAMA requirements to lower  levels. GPRAMA requires OMB to provide guidance to agencies to  implement its requirements, which only apply at the agency-wide level. As  noted earlier, however, GPRAMA also requires OMB to develop cross- agency priority (CAP) goals to improve the performance and  management of the federal government. The President\u2019s Management  Agenda established a CAP goal to leverage data as a strategic asset, in  part, to improve the use of data for decision making and accountability  throughout the federal government. This new CAP goal presents an  opportunity for OMB and agencies to identify actions to expand the use of  performance information in decision making throughout agencies.\n\n\t\tPlan for New CAP Goal Does Not Yet Contain Required Elements for Successful Implementation\n\nAs of June 2018, the action plan for implementing the Leveraging Data as  a Strategic Asset CAP goal is limited. According to the President\u2019s  Management Agenda and initial CAP goal action plan, the goal primarily  focuses on developing and implementing a long-term, enterprise-wide  federal data strategy to better govern and leverage the federal  government\u2019s data. It is through this strategy that, among other things, the  administration intends to improve the use of data for decision making and  accountability. However, the strategy is under development and not  expected to be released until January 2019, with a related plan to  implement it expected in April 2019.\nThe existing action plan, released in March 2018 and updated in June  2018, does not yet include specific steps needed to improve the use of  data\u2014including performance information\u2014more extensively within  agencies. According to the action plan for the goal, potential actions  currently under consideration focus on establishing agency \u201clearning agendas\u201d that prioritize the development  and use of data and other evidence for decision-making; building agency capacity to use data and other evidence; and  improving the timeliness of performance information and other data,  and making that information available to decision makers and the  public.\nAlthough developing learning agendas and building capacity could help  improve the use of performance information in agencies, improving  availability of data may be less effective. For example, as our past survey  results have shown, increasing the availability of performance information  has not resulted in corresponding increases in its use in decision  making.\nWe recognize that the CAP goal was created in March 2018.  Nonetheless, it is important that OMB and its fellow goal leaders develop  the action plan and related federal data strategy consistent with all key  requirements to better ensure successful implementation. The action plan  does not yet include complete information related to the following  GPRAMA requirements: performance goals that define the level of performance to be achieved  each year for the CAP goal;  the various federal agencies, organizations, programs, and other  activities that contribute to the CAP goal; performance measures to assess overall progress towards the goal  as well as the progress of each agency, program, and other activity  contributing to the goal; and  clearly defined quarterly targets.\nConsistent with GPRAMA, Standards for Internal Control in the Federal  Government identifies information that agencies are required to include in  their plans to help ensure they achieve their goals. The standards state  that objectives\u2014such as improving the use of data in decision making\u2014 should be clearly defined to enable the identification of risks. Objectives  are to be defined in specific terms so they can be understood at all levels  of the entity\u2014in this case, government-wide as well as within individual  agencies. This involves defining what is to be achieved, who is to achieve  it, how it will be achieved, and the time frames for achievement.\nEnsuring that future updates to the new CAP goal\u2019s action plan includes  all required elements is particularly important, as our previous work has  found that some past CAP goal teams did not meet all planning and  reporting requirements. For example, in May 2016 we found that most  of the CAP goal teams we reviewed had not established targets for all  performance measures they were tracking. This limited the transparency  of their efforts and the ability to track progress toward established goals.  We recommended that OMB, working with the Performance Information  Council (PIC), report on actions that CAP goal teams are taking, or plan  to take, to develop such targets and performance measures. OMB staff  generally agreed and, in July 2017, told us they were working, where  possible, to assist the development of measures for CAP goals. However,  the recommendation has not been addressed and OMB staff said the  next opportunity to address it would be when the administration  established new CAP goals (which took place in March 2018). Following  the initial release of the new CAP goals, CAP goal teams are to more fully  develop the related action plans through quarterly updates. Given the  ongoing importance of meeting these planning and reporting  requirements, we will continue to monitor the status of actions to address  this recommendation as implementation of the new CAP goals proceeds.\n\n\t\tOur Survey Results Identify Additional Opportunities for the PIC to Improve Federal Use of Performance Information\n\nWhile the PIC, which is chaired by OMB, has contributed to efforts to  enhance the use of performance information, our survey results identify  additional opportunities to further those efforts. The PIC\u2019s past efforts  have included hosting various working groups and learning events for  agency officials to provide performance management guidance, and  developing resources with relevant practices. For example, the PIC  created a working group focused on agency performance reviews, which  was used to share recommendations for how agencies can implement  reviews, along with a guide with practices for effectively implementing  strategic reviews. In January 2018, staff supporting the PIC joined with  staff from another GSA office to create a new group called Fed2Fed  Solutions. This group consults with agencies and provides tailored  support, such as data analysis and performance management training for  agency officials, to help them address specific challenges related to  organizational transformation, data-driven decision making, and other  management improvement efforts.\nOur survey results identify useful information related to potential  promising practices and challenges that OMB and the PIC could use to  inform efforts to enhance the use of performance information more  extensively within agencies (e.g., at lower levels). As was previously  described, the PIC has responsibilities to (1) facilitate the exchange  among agencies of proven practices, and (2) work to resolve government- wide or cross-cutting performance issues, such as challenges. Our  analyses of 2017 survey results identified instances where agencies may  have found effective ways to enhance the use of performance information  by agency leaders and managers in decision making, as well as  instances where agencies (and their managers) face challenges in doing  so.\nSpecifically, based on analyses of our survey responses, we identified 14  agencies that may have insights into specific practices that led to recent  improvements in managers\u2019 use of performance information, or ways that  they maintain relatively high levels of use by their managers when  compared to the rest of the government. Figure 9 summarizes the  agencies identified earlier in the report that had statistically significant  increases, or results higher than the government-wide average, on our  index or individual survey questions. As the figure shows, several  agencies had statistically significant results across all three sets of  analyses and therefore may have greater insights to offer: the General  Services Administration, National Aeronautics and Space Administration,  and the National Science Foundation.\nIn addition, our analyses identified nine agencies where results suggest  managers face challenges that have hampered their ability to use  performance information. Figure 10 summarizes the agencies identified  earlier in the report that had statistically significant decreases, or results  lower than the government-wide average, on our index or individual  survey questions. As the figure shows, the Office of Personnel  Management had statistically significant decreases in all three sets of  analyses.\nFour agencies\u2014the Departments of the Treasury and Veterans Affairs,  the Nuclear Regulatory Commission, and the Social Security  Administration\u2014were common to both of the figures above. That is, they  had results that indicate they may have insights on some aspects of using  performance information and face challenges in other aspects. As was  mentioned earlier, to provide proper context, these results should be  considered in relation to the range of agency results and the government- wide average (provided in detail in the agency summaries in appendix I).\nGiven the prioritization of other activities, such as the recent creation of  the Fed2Fed Solutions program, the PIC has not yet undertaken a  systematic approach that could improve the use of performance  information by managers at lower levels within agencies. Such an  approach would involve identifying and sharing practices that have led to  improved use, as well as identifying common or cross-cutting challenges  that have hampered such use. The results of our analyses could help the  PIC do so, and in a more targeted manner. By identifying and sharing  proven practices, the PIC could further ensure that agency leaders and  managers are aware of effective or proven ways they can use  performance information to inform their decisions across the spectrum of  activities they manage within their agencies. Those proven practices also  may help agency leaders and managers resolve any identified  challenges.\nFurthermore, in September 2017, we found that, for the estimated 35  percent of managers who reported familiarity with data-driven reviews,  the more they viewed their programs being subject to a review, the more  likely they were to report the reviews were driving results and were  conducted in line with our leading practices for using performance  information. Despite the reported benefits of and results achieved through  data-driven reviews, they were not necessarily widespread. As noted  above, GPRAMA requires agencies to conduct such reviews for agency  priority goals, which represent a small subset of goals, and they are  required at the departmental level. These reasons may explain why most  managers reported they were not familiar with the reviews.\nAs a result, we recommended that OMB should work with the PIC to  identify and share among agencies practices for expanding the use of  data-driven reviews. OMB staff agreed with our recommendation but have  yet to address it. In June 2018, OMB updated its annual guidance to  agencies to explicitly encourage them to expand data-driven reviews to  include other goals, priorities, and management areas as applicable to  improve organizational performance. However, as of June 2018, OMB  and the PIC have yet to take any steps to identify and share practices for  expanding the use of these reviews in line with our recommendation.  Given the additional analyses we conducted for this report\u2014which show  that being subject to data-driven reviews is related to greater reported use  of performance information and leading practices that promote such  use\u2014we continue to believe these further actions would help agencies  implement these reviews more extensively. We reiterate the importance  of the September 2017 recommendation and will continue to monitor  OMB\u2019s progress to address it.\n\n\tConclusions\n\nFor more than 20 years, our work has highlighted weaknesses in the use  of performance information in federal decision making. While the  Executive Branch has taken some actions in recent years, such as  establishing a framework for performance management across the  federal government, our survey results underscore that more needs to be  done to improve the use of performance information more extensively  within agencies and government-wide. The President\u2019s Management  Agenda and its related CAP goal to leverage data as a strategic asset  present an opportunity to do so, as it aims to improve data-driven  decision making. As OMB and its fellow goal leaders more fully develop  the action plan for achieving this goal, providing additional details for its  plans to improve data-driven decision making would help provide  assurance that it can be achieved.\nAs part of those initiatives, our survey results could provide a useful guide  for targeting efforts. Officials at each agency could use these results to  identify areas for additional analysis and potential actions that could help  improve the use of performance information across the agency and at  lower levels. Similarly, OMB and the PIC could use the results to identify  broader issues in need of government-wide attention. It will also be  important, however, for OMB and the PIC to go beyond this analysis and  work with agencies to identify and share proven practices for increasing  the use of performance information at lower levels within agencies, as  well as challenges that may be hampering agencies\u2019 ability to do so.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to OMB:  The Director of OMB should direct the leaders of the Leveraging Data as  a Strategic Asset CAP Goal to ensure future updates to the action plan,  and the resulting federal data strategy, provide additional details on  improving the use of data, including performance information, more  extensively within federal agencies. The action plan should identify  performance goals; contributing agencies, organizations, programs, and  other activities; those responsible for leading implementation within these  contributors; planned actions; time frames; and means to assess  progress. (Recommendation 1)\nThe Director of OMB, in coordination with the PIC, should prioritize efforts  to identify and share among agencies proven practices for increasing,  and challenges that hamper, the use of performance information in  decision making more extensively within agencies. At a minimum, this  effort should involve the agencies that our survey suggests may offer  such insights. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this report to the Director of the Office of  Management and Budget for review and comment. We also provided a  draft of the report to the heads of each of the 24 federal agencies covered  by our survey.\nOMB had no comments, and informed us that it would assess our  recommendations and consider how best to respond.\nWe are sending copies of this report to congressional requesters, the  Director of the Office of Management and Budget, the heads of each of  the 24 agencies, and other interested parties. This report will also be  available at no charge on the GAO website at http:\/\/www.gao.gov.\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 our report. Key contributors to this report are listed in appendix  IV.\n\nAppendix I: Summaries of Agency Survey Results\n\n\tU.S. Department of Agriculture\n\n(USDA) (Goverment-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Commerce\n\n(Commerce) (Goverment-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to 5 Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Defense\n\n(Goverment-wide) (DOD)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Education\n\n(Education) (Goverment-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Energy\n\n(Government-wide) (Energy)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Health & Human Services\n\n(HHS) (Goverment-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Partices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\tDepartment of Homeland Security\n\n(DHS) (Goverment-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tHousing and Urban Development\n\n(Government-wide) (HUD)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\tDepartment of the Interior\n\n(Interior) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Justice\n\n(DOJ) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Labor\n\n(DOL) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\tDepartment of State\n\n(State) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Transportation\n\n(DOT) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of the Treasury\n\n(Treasury) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tDepartment of Veterans Affairs\n\n(Government-wide) (VA)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tU.S. Agency for International Development\n\n(Goverment-wide) (USAID)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\tEnvironmental Protection Agency\n\n(Government-wide) (EPA)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tGeneral Services Administration\n\n(Government-wide) (GSA)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tNational Aeronautics and Space Administration\n\n(Government-wide) (NASA)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tNational Science Foundation\n\n(Government-wide) (NSF)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tNuclear Regulatory Commission\n\n(NRC) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tOffice of Personnel Management\n\n(Government-wide) (OPM)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Partices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tSmall Business Administration\n\n(SBA) (Government-wide)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\n\tSocial Security Administration\n\n(Government-wide) (SSA)\n\n\t\t11 Questions that Comprise the Index\n\n\t\tPerformance information is used to:\n\n10. The individual I report to 11. Employees that report to me 0 Percent of managers reporting \u201cGreat\u201d or \u201cVery Great\u201d\n\n\t\t10 Questions Related to Leading Practices That Promote the Use of Performance Information\n\n\t\tLeading Practices:\n\n\t\tAligning agencywide goals, objectives, and measures\n\n\t\tImproving the usefulness of performance information\n\n\t\tCommunicate performance information frequently and effectively\n\nAppendix II: Objectives, Scope, and Methodology\n\nThis report responds to a request that we analyze agency-level results  from our 2017 survey of federal managers at the 24 agencies covered by  the Chief Financial Officers (CFO) Act of 1990, as amended, to determine  the extent agencies are using performance information. This report  assesses the extent to which:  1.  the reported use of performance information and related leading  practices at 24 agencies has changed compared to our prior survey in  2013;  2.  being subject to data-driven reviews related to managers\u2019 reported  use of performance information and leading practices; and  3.  the Executive Branch has taken actions to enhance agencies\u2019 use of  performance information in various decision-making activities.\nFrom November 2016 through March 2017, we administered our online  survey to a stratified random sample of 4,395 individuals from a  population of 153,779 mid- and upper-level civilian managers and  supervisors at the 24 CFO Act agencies. The management levels  covered general schedule (GS) or equivalent schedules at levels  comparable to GS-13 through GS-15, and career Senior Executive  Service (SES) or equivalent. We obtained the sample from the Office of  Personnel Management\u2019s Enterprise Human Resources Integration  database as of September 30, 2015\u2014the most recent fiscal year data  available at the time. The sample was stratified by agency and whether  the manager or supervisor was a member of the SES. To help determine  the reliability and accuracy of the database elements used to draw our  sample of federal managers for the 2017 survey, we checked the data for  reasonableness and the presence of any obvious or potential errors in  accuracy and completeness and reviewed our past analyses of the  reliability of this database. We concluded in our September 2017 report  that the data used to draw our sample were sufficiently reliable for the  purpose of the survey. For the 2017 survey, we received usable  questionnaires from about 67 percent of the eligible sample. The  weighted response rate at each agency generally ranged from 57 percent  to 82 percent, except the Department of Justice, which had a weighted  response rate of 36 percent. The overall survey results are generalizable  to the population of managers government-wide and at each individual  agency.\nTo assess the potential bias from agencies with lower response rates, we  conducted a nonresponse bias analysis using information from the survey  and sampling frame as available. The analysis confirmed discrepancies in  the tendency to respond to the survey related to agency and SES status.  The analysis also revealed some differences in response propensity by  age and GS level; however, the direction and magnitude of the  differences on these factors were not consistent across agencies or  strata. Our data may be subject to bias from unmeasured sources for  which we cannot control. Results, and in particular estimates from  agencies with low response rates such as the Department of Justice,  should be interpreted with caution. However, the survey\u2019s results are  comparable to five previous surveys we conducted in 1997, 2000, 2003,  2007, and 2013.\nTo address the first objective, we used data from our 2017 survey to  update agency scores on our use of performance information index.   This index, which was last updated using data from our 2013 survey,  averages managers\u2019 responses on 11 questions related to the use of  performance information for various management activities and decision  making. Using 2017 survey data, we conducted statistical analyses to  ensure these 11 questions were still positively correlated. That analysis  confirmed that no negative correlations existed and therefore no changes  to the index were needed. Figure 11 shows the questions that comprise  the index.\nAfter calculating agency index scores for 2017, we compared them to  previous results from 2007 and 2013, and to the government-wide  average for 2017, to identify any statistically significant differences. We  focus on statistically significant results because these indicate that  observed relationships between variables and differences between  groups are likely to be valid, after accounting for the effects of sampling  and other sources of survey error. For each of the 11 questions that  comprise the index, we identified individual agency results, excluding  missing and no basis to judge responses, and determined when they  were statistically significantly different from (1) the agency\u2019s results on the  same question in 2013, or (2) the government-wide average results on  the question in 2017. In this report, we analyzed and summarized the  results of our 2017 survey of federal managers. Due to the limited scope  of the engagement, we did not conduct additional audit work to determine  what may have caused statistically significant changes between our 2017  and past survey results.\nTo further address this objective we completed several statistical  analyses that allowed us to assess the association between the index and  22 survey questions that we determined relate to leading practices we  previously found promote the use of performance information. See figure  12 for the 22 specific questions related to these five practices that we  included in the analysis.\nWhen we individually tested these 22 survey questions (bivariate  regression), we found that each was statistically significantly and  positively related to the index in 2017. This means that each question,  when tested in isolation from other factors, was associated with higher  scores on the index. However, when all 22 questions were tested  together (multivariate regression), we found that 5 questions continued to  be positively and significantly associated with the index in 2017, after  controlling for other factors.\nTo conduct this multivariate analysis, we began with a base model that  treated differences in managers\u2019 views of agency performance  management use as a function of the agency where they worked. We  found, however, that a model based on agency alone had little predictive  power (R-squared of 0.04). We next examined whether managers\u2019  responses to these questions reflecting practices that promote the use of  performance information related to their perceptions of agency use of  performance information, independent of agency. The results of this  analysis are presented in table 1 below. Each coefficient reflects the  increase in our index associated with a one-unit increase in the value of a  particular survey question.\nOur final multivariate regression model had an R-squared of 0.67,  suggesting that the variables in this model explain approximately 67  percent of the variation in the use index. We also tested this model  controlling for whether a respondent was a member of the SES and found  similar results.\nAs shown above in table 1, five questions related to three of the leading  practices that promote agencies\u2019 use of performance information were  statistically significant in 2017. These results suggest that, when  controlling for other factors, certain specific efforts to increase agency use  of performance information\u2014such as providing information on the validity  of performance data\u2014may have a higher return and lead to higher index  scores.\nWith respect to aligning agency-wide goals, objectives, and  measures, we found that each increase in terms of the extent to which  individuals felt that managers aligned performance measures with  agencywide goals and objectives was associated with a 0.08 increase  in their score on the use index.\nIn terms of improving the usefulness of performance information, we  found that having information on the validity of performance data for  decision making was the strongest predictor in our model (0.18). As  measured here, taking steps to ensure the performance information is  useful and appropriate was associated with almost as large a change  in a managers\u2019 index score (0.16).\nIn terms of developing agency capacity to use performance  information, we found that having sufficient analytical tools to collect,  analyze, and use performance information (0.07), and providing or  paying for training that would help link their programs to achievement  of agency strategic goals (0.10), were also statistically significantly  related to a manager\u2019s reported use of performance information.\nWhen we combined these results with what we previously found through  a similar analysis of 2013 survey results in September 2014, we identified  10 questions that have had a statistically significant association with  higher index scores. This reinforces the importance of the five leading  practices to promote the use of performance information. For each of  these questions, which are outlined in figure 13 below, we determined  when agency results were statistically significantly different from 2013  results or the 2017 government-wide average.\nFor the second objective, we examined, based on the extent they  responded their programs had been subject to agency data-driven  reviews, differences in managers\u2019 use index scores and responses on  questions related to practices that promote the use of performance  information. We grouped managers based on the extent they reported  their programs had been subject to these reviews, from \u201cno extent\u201d  through \u201cvery great extent.\u201d We then calculated the average index scores  for the managers in each of those five categories.\nWe also examined differences in how managers responded to the 10  questions reflecting practices that can promote the use of performance  information based on the extent they reported their programs had been  subject to data-driven reviews. We grouped managers into three  categories based on the extent they reported their programs had been  subject to these reviews (no-small extent, moderate extent, great-very  great extent). We then compared how these groups responded to the ten  questions.\nFor the third objective, we reviewed our past work that assessed Executive Branch activities to enhance  the use of performance information;  various resources (i.e., guidance, guides, and playbooks) developed  by the Office of Management and Budget (OMB) and the Performance  Improvement Council (PIC) that could support agencies\u2019 use of  performance information; and  the President\u2019s Management Agenda, and related materials with  information on cross-agency efforts to improve the use of data in  federal decision making.\nLastly, for the third objective we also interviewed OMB and PIC staff  about any actions they have taken, or planned to take, to further support  the use of performance information across the federal government.\nWe conducted this performance audit from October 2017 to September  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix III: Comparison of 2007, 2013, and 2017 Agency Use of Performance Information Index Scores\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the above contact, Benjamin T. Licht (Assistant Director)  and Adam Miles (Analyst-in-Charge) supervised this review and the  development of the resulting report. Arpita Chattopadhyay, Caitlin Cusati,  Meredith Moles, Dae Park, Amanda Prichard, Steven Putansu, Alan  Rozzi, Shane Spencer, and Khristi Wilkins also made key contributions.  Robert Robinson developed the graphics for this report. Alexandra  Edwards, Jeff DeMarco, Mark Kehoe, Ulyana Panchishin, and Daniel  Webb verified the information presented in this report.\n\nRelated GAO Products\n\nResults of the Periodic Surveys on Organizational Performance and  Management Issues  Managing for Results: Further Progress Made in Implementing the GPRA  Modernization Act, but Additional Actions Needed to Address Pressing  Governance Challenges. GAO-17-775. Washington, D.C.: September 29,  2017.\nSupplemental Material for GAO-17-775: 2017 Survey of Federal  Managers on Organizational Performance and Management Issues.  GAO-17-776SP. Washington, D.C.: September 29, 2017.\nProgram Evaluation: Annual Agency-wide Plans Could Enhance  Leadership Support for Program Evaluations. GAO-17-743. Washington,  D.C.: September 29, 2017.\nManaging for Results: Agencies\u2019 Trends in the Use of Performance  Information to Make Decisions. GAO-14-747. Washington, D.C.:  September 26, 2014.\nManaging for Results: Executive Branch Should More Fully Implement  the GPRA Modernization Act to Address Pressing Governance  Challenges. GAO-13-518. Washington, D.C.: June 26, 2013.\nManaging for Results: 2013 Federal Managers Survey on Organizational  Performance and Management Issues, an E-supplement to GAO-13-518.  GAO-13-519SP. Washington, D.C.: June 26, 2013.\nProgram Evaluation: Strategies to Facilitate Agencies\u2019 Use of Evaluation  in Program Management and Policy Making. GAO-13-570. Washington,  D.C.: June 26, 2013.\nGovernment Performance: Lessons Learned for the Next Administration  on Using Performance Information to Improve Results. GAO-08-1026T.  Washington, D.C.: July 24, 2008.\nGovernment Performance: 2007 Federal Managers Survey on  Performance and Management Issues, an E-supplement to  GAO-08-1026T. GAO-08-1036SP. Washington, D.C.: July 24, 2008.\nResults-Oriented Government: GPRA Has Established a Solid  Foundation for Achieving Greater Results. GAO-04-38. Washington, D.C.:  March 10, 2004.\nManaging for Results: Federal Managers\u2019 Views on Key Management  Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.:  May 25, 2001.\nManaging for Results: Federal Managers\u2019 Views Show Need for Ensuring  Top Leadership Skills.GAO-01-127. Washington, D.C.: October 20, 2000.\nThe Government Performance and Results Act: 1997 Governmentwide  Implementation Will Be Uneven. GAO\/GGD-97-109. Washington, D.C.:  June 2, 1997.","output":"Why GAO Did This Study\n\nTo reform the federal government and make it more efficient and effective, agencies need to use data about program performance. The benefit of collecting performance information is only fully realized when it is used by managers to make decisions aimed at improving results.\nGAO was asked to review agencies' use of performance information. This report assesses, among other things, the extent to which: (1) 24 agencies' reported use of performance information and related leading practices has changed since 2013 and (2) the Executive Branch has taken actions to enhance the use of performance information.\nTo address the first objective, GAO analyzed results from its 2017 survey of federal managers, and compared them to 2013 results. The survey covered a stratified random sample of 4,395 managers from the 24 Chief Financial Officers Act agencies. The survey had a 67 percent response rate and results can be generalized to the population of managers government-wide and at each agency. For the second objective, GAO reviewed agency documents and interviewed staff from OMB and the PIC.\n\nWhat GAO Found\n\nAgencies' reported use of performance information to make decisions, and leading practices that can promote such use, generally has not improved since GAO's last survey of federal managers in 2013. However, GAO's survey results continue to point to certain practices that could help agencies improve managers' use of performance information. For example, as shown in the table below, GAO's survey found that managers whose programs were subject to data-driven reviews (regular reviews used to assess progress on select agency goals) to a greater extent reported statistically significantly greater use of performance information to make decisions.\nThe Executive Branch has begun taking steps to improve the use of performance information within agencies and across the government. For example,\nIn the President's Management Agenda and government-wide reform plan, released in March and June 2018 respectively, the administration acknowledged the need to do more, and announced a goal, among other actions, to improve the use of data in federal decision making. However, the Office of Management and Budget (OMB) and others responsible for this goal have yet to fully develop action plans to hold agencies accountable for achieving it.\nThe Performance Improvement Council (PIC), which is chaired by OMB, has undertaken efforts to improve the use of performance information by, for example, creating a working group on agency performance reviews. But it has not yet taken a systematic approach to identify and share proven practices that led to, or challenges that may be hampering, increased use of performance information by managers. GAO's survey results identified agencies that may have insights into such practices and challenges.\nMore fully developing action plans for the new goal, and identifying and sharing proven practices and challenges, could help ensure the Executive Branch takes further steps to improve the use of performance information by managers within agencies and across the federal government.\n\nWhat GAO Recommends\n\nTo improve the use of performance information within agencies and across the federal government, GAO recommends that OMB work with (1) fellow goal leaders to more fully develop action plans for the new goal to improve the use of data and (2) the PIC to prioritize efforts to identify and share proven practices and challenges. OMB had no comments on this report."}
{"id":"crs_R43997","pid":"crs_R43997_0","input":"\tIntroduction\n\nEach of the four major federal land management agencies has maintenance responsibility for tens of thousands of diverse assets in dispersed locations. These agencies are the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS), all within the Department of the Interior (DOI), and the Forest Service (FS) within the Department of Agriculture. These agencies maintain assets to preserve their functioning and to repair and replace components as needed. \nThe infrastructure needs of the federal land management agencies have been a subject of significant federal and public attention for many years. Congressional and administrative attention has focused on deferred maintenance and repairs , defined as \"maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period.\" \"Maintenance and repair\" include a variety of activities intended to preserve assets in an acceptable condition, including activities such as preventive maintenance and replacement of parts, systems, and components. These terms do not include activities intended to expand the capacity of assets to allow them to serve different purposes or significantly increased needs.\nDeferred maintenance and repairs often are called the maintenance backlog . The agencies assert that continuing to defer the maintenance and repair of facilities accelerates the rate of these facilities' deterioration, increases their repair costs, and decreases their value. Debate has focused on varied issues, including the level of funds needed to reduce deferred maintenance, whether agencies are using existing funding efficiently, the priority of deferred maintenance relative to regular maintenance, and whether additional sources of funds should be directed to maintenance. Other issues include how to balance the maintenance of existing infrastructure with the acquisition of new assets, whether disposal of assets is desirable given limited funding, and how much to prioritize maintaining infrastructure relative to other government functions.\nAnother issue relates to the dollar amount of deferred maintenance and the reasons for fluctuations over time. This report focuses on these issues. It first provides agency deferred maintenance estimates for FY2018, the most recent fiscal year for which this information is available. It also discusses changes in deferred maintenance over the past decade (FY2009-FY2018) and then identifies some of the factors that likely contributed to these changes.\n\n\tEstimates\n\nThe agencies typically identify deferred maintenance through periodic condition assessments of facilities. FS currently reports an annual deferred maintenance dollar total composed of estimates for 10 classes of assets. These classes include roads, buildings, trails, bridges, and water systems, among others. DOI currently reports annual deferred maintenance composed of estimates for four broad categories of assets: (1) roads, bridges, and trails; (2) irrigation, dams, and other water structures; (3) buildings; and (4) other structures. The \"other structures\" category includes a variety of assets (e.g., recreation sites and hatcheries). \nFor each of the 10 years covered by this report, FS has reported the amount of deferred maintenance as a single figure. DOI agencies began reporting deferred maintenance as a single figure in FY2015. In prior years, DOI agencies reported estimates as a range. For FY2014, for instance, the range had an \"accuracy level of minus 15 percent to plus 25 percent of initial estimate.\" According to DOI, a range had been used because \"due to the scope, nature, and variety of the assets entrusted to DOI, as well as the nature of deferred maintenance itself, exact estimates are very difficult to determine.\" \nFS estimates of deferred maintenance included in this report generally are taken from the agency's annual budget justifications to Congress. The DOI Budget Office provided the Congressional Research Service (CRS) with a deferred maintenance range for each DOI agency for each fiscal year from FY2009 to FY2014. From these ranges, CRS calculated mid-range figures. For instance, DOI estimated NPS deferred maintenance for FY2014 at between $9.31 billion and $13.70 billion. The CRS-calculated mid-range figure is $11.50 billion. This report reflects CRS's mid-range calculations for FY2009-FY2014 to facilitate comparison with FS estimates. Since FY2015, the DOI Budget Office has provided CRS with a single estimate for each DOI agency, and those figures are used in this report. They represent deferred maintenance as of the end of the fiscal year (i.e., September 30). For both FS and DOI agencies, the deferred maintenance estimates generally reflect project costs. Finally, totals shown in the body and in tables of this report may not add to 100% due to rounding. \n\n\t\tFY2018\n\nThe four agencies had combined FY2018 deferred maintenance estimated at $19.38 billion. The agencies had widely varying shares of the total. NPS had the largest portion, 62%, based on an estimate of $11.92 billion. The FS share was 27% of the total, with an estimated deferred maintenance of $5.20 billion. The FWS portion was 7%, reflecting the agency's deferred maintenance of $1.30 billion. BLM had the smallest share, 5%, based on a backlog estimate of $0.96 billion. \nEach agency's deferred maintenance estimate for FY2018 consisted of various components. For FS, the single largest asset class was roads, which comprised 61% of the FY2018 total of $5.20 billion. The next largest asset class was buildings, which represented 24% of the FS FY2018 total. The next two largest asset classes were trails and bridges, each with 5%. Six other asset classes made up the remaining 6%. \nFor NPS, the largest asset category was roads, bridges, and trails, which comprised 57% of the FY2018 deferred maintenance total of $11.92 billion. The buildings category comprised 19% of the total, followed by 18% for other structures and 6% for irrigation, dams, and other water structures. \nRoads, bridges, and trails also reflected the largest share of BLM's FY2018 deferred maintenance, with 69% of the $0.96 billion total. Two other categories of assets had relatively comparable portions, specifically 14% for buildings and 12% for other structures. The remaining 6% was for irrigation, dams, and other water structures. \nRoads, bridges, and trails made up the smallest portion of FWS's FY2018 deferred maintenance ($1.30 billion), unlike for the other agencies. Moreover, the four asset categories had roughly comparable portions, as follows: 27% for buildings; 27% for other structures; 24% for irrigation, dams, and other water structures; and 22% for roads, bridges, and trails.\n\n\t\tOverview of Decade (FY2009-FY2018)\n\n\t\t\tChanges in Estimates in Current and Constant Dollars\n\nAs shown in Table 1 and Figure 1 , in current dollars, the total deferred maintenance estimate for the four agencies showed considerable variation over the 10-year period from FY2009-FY2018, with a peak in FY2012. It ended the decade relatively flat, with an increase of $0.36 billion overall, from $19.02 billion to $19.38 billion, or 2%. Both the BLM and NPS estimates increased, by $0.42 billion (80%) and $1.75 billion (17%), respectively. By contrast, both the FWS and FS estimates decreased, by $1.71 billion (57%) and $0.11 billion (2%), respectively. \nWithin these overall changes, there was considerable variation among agency trends. The NPS estimate increased fairly steadily for several years, fell in FY2016, then rose again. The FS estimate was similar at the beginning and end of the decade, although it fluctuated between $5.10 billion and $6.03 billion throughout the 10-year period. The BLM estimate also fluctuated, falling in the first few years of the decade, then rising, leveling off, and rising again to a new high at the end of the decade. The FWS estimate had a generally steady decline during the first several years, leveled off somewhat after FY2015, and reached a decade low in FY2018. Figure 1 depicts the annual changes in current dollars for each agency and for the four agencies combined. Factors that might have contributed to the changes are discussed in the \" Issues in Analyzing Deferred Maintenance \" section, below. \nBy contrast, as shown in Table 2 and Figure 2 , in constant dollars, the total deferred maintenance estimate for the four agencies decreased over the course of the ten-year period by $3.61 billion, from $22.99 billion to $19.38 billion, or 16%. Three agencies had overall decreases: $0.37 billion (3%) for NPS, $1.22 billion (19%) for FS, and $2.34 billion (64%) for FWS. However, the BLM estimate increased by $0.32 billion (50%) over the 10-year period. \nAs was the case for current-dollar estimates, the overall changes in constant dollars reflected various fluctuations. The BLM estimate fell and rose during the period, with the lowest estimate in FY2011 and the highest at the end (FY2018). The FWS estimate exceeded $3 billion for each of the first four years before dropping steeply over the next six years to roughly one-third of the FY2009 level. The NPS estimate peaked in FY2010, then mainly declined, until increasing in FY2018. The FS estimate exceeded $6 billion for the first half of the 10-year period. It ranged roughly between $5 billion and $6 billion during the second half of the period, reaching a low of $5.20 billion in both FY2017 and FY2018. Figure 2 depicts the annual changes in constant dollars for each agency and for the four agencies combined. \n\n\t\t\tAgency Shares of Deferred Maintenance in Current and Constant Dollars\n\nThroughout the decade, agency shares of the deferred maintenance totals differed, as shown in Figure 3 and Figure 4 . In both current and constant dollars, in each fiscal year NPS had the largest portion of total deferred maintenance and considerably more than any other agency. FS consistently had the second-largest share, followed by FWS and then BLM. Moreover, in both current and constant dollars, each agency's portion of the total annual deferred maintenance changed over the decade. Specifically, the NPS portion of the annual total grew overall throughout the period, from 53% in FY2009 to 62% in FY2018. By contrast, the FS share of the total decreased over the 10-year period from 28% to 27%. The FWS component also declined, from 16% to 7%, whereas the BLM portion rose from 3% to 5%. \nThe asset class or category that included roads typically comprised the largest portion of each agency's deferred maintenance. Roads represented the largest portion of FS deferred maintenance from FY2009 to FY2018. Over the 10-year period, the NPS roads, bridges, and trails category had the highest share of the agency's deferred maintenance, and irrigation, dams, and other water structures had the smallest. In some years, the portion of NPS deferred maintenance for the \"other structures\" category exceeded the buildings portion, but in some years the reverse was the case. Roads, bridges, and trails also was the biggest category of BLM's deferred maintenance from FY2009 to FY2018. Although this category typically represented a majority of the FWS total deferred maintenance in the earlier part of the period, this has not been the case since FY2013. A decline in the dollar estimate for roads, bridges, and trails resulted in a sizeable drop in overall FWS deferred maintenance beginning in FY2013, as discussed below.\n\n\tIssues in Analyzing Deferred Maintenance\n\nFluctuations in deferred maintenance estimates are likely the result of many factors, among them estimation methods, levels of funding, and asset portfolios, as discussed below. The extent to which these and other factors affected year-to-year changes in any one agency's maintenance backlog is unclear, in part because comprehensive information is not readily available in all cases or has not been examined. Therefore, the data in this report may not fully explain the changes in deferred maintenance estimates over time.\n\n\t\tMethodology\n\nMethods for assessing the condition of assets and estimating deferred maintenance have changed over the years. As a result, it is unclear what portion of the change in deferred maintenance estimates is due to the addition of maintenance work that was not done on time and what portion may be due to changes in methods of assessing and estimating deferred maintenance. With regard to facility assessment, agencies have enhanced efforts to define and quantify the maintenance needs of their assets. Efforts have included collecting comprehensive information on the condition of facilities and maintenance and improvement needs. For instance, the first cycle of comprehensive condition assessments of NPS industry-standard facilities was completed at the end of FY2006. However, through at least FY2018, NPS continued to develop business practices to estimate the maintenance needs of nonindustry-standard assets. This category presents particular challenges because it includes unique asset types. \nAlterations in methodology have contributed to changes in deferred maintenance estimates, as shown in the following examples for roads. The FY2015 FWS budget justification states that \n[i]n 2012, Service leadership concluded that condition assessment practices and policies in place at that time were unintentionally producing higher than appropriate [deferred maintenance (DM)] cost estimates for some types of constructed real property. DM estimates for our extensive inventory of gravel and native surface roads are a major contributor to this challenge. In response, the FWS is refining its practices and procedures to improve consistency of DM cost estimates and their use in budget planning. Significant reductions in the DM backlog are resulting from this effort. \nSubsequent FWS budget justifications have elaborated on changes to methods of estimating deferred maintenance for roads. For instance, the FY2017 document states that \"deferred maintenance estimates for our extensive inventory of roads were further classified to emphasize public use and traffic volume. As a result, minimally used administrative roads are now generally excluded from contributing to deferred maintenance backlog calculations.\" Of note is that the roads, bridges, and trails category of FWS deferred maintenance declined substantially (by $1.18 billion, 81%) in the past several years in current dollars, from $1.46 billion in FY2012 to $0.28 billion in FY2018. This decline is reflected in the smaller FWS deferred maintenance total for FY2018 ($1.30 billion). The FWS change in the method of estimating deferred maintenance for roads, bridges, and trails appears to be a primary reason for the decreased estimate for this category and total FWS deferred maintenance over the 10-year period. \nSimilarly, FS attributes variations in deferred maintenance partly to changes in the methodology for estimating roads. For example, in FY2013 and FY2014, FS adjusted the survey methodology for passenger-car roads, with the goal of providing more accurate estimates of the roads backlog. The FS estimate of deferred maintenance for roads fell in current dollars by $0.84 billion (22%) from FY2012 to FY2014, from $3.76 billion to $2.92 billion. The extent to which the drop is attributable to changes in methodology, including regarding the types of roads reflected in the estimates, is not certain. \nFinally, in FY2014, the NPS first reflected deferred maintenance for unpaved roads as part of its total deferred maintenance estimate (in agency financial reports). The agency's total deferred maintenance increased in current dollars by $0.26 billion (4%) from FY2013 to FY2014, from $6.57 billion to $6.83 billion. DOI cited the inclusion of unpaved roads as among the reasons for changes in NPS deferred maintenance estimates, although the extent of the effect on NPS estimates is unclear. \nBroader changes in methodology also occurred during the decade. For example, DOI agencies had been using an accuracy range of -15% to +25% to derive the estimated range of deferred maintenance for industry-standard assets. The change to a single estimate beginning in FY2015 would have affected DOI deferred maintenance estimates as reflected in this report.\n\n\t\tFunding\n\nHow much total funding is provided each year for deferred maintenance for the four agencies is unclear because annual presidential budget requests, appropriations laws, and supporting documents typically do not aggregate funds for deferred maintenance. Portions of deferred maintenance funding (for one or more of the four agencies) have come from agency maintenance and construction accounts, recreation fees, the Highway Trust Fund (Department of Transportation) for roads, the Timber Sale Pipeline Restoration Fund (for FS and BLM), NPS concession fees, and the NPS Centennial Challenge account, among other accounts. \nIn addition, funding figures are not directly comparable to deferred maintenance estimates because the estimates are limited to project costs and thus do not reflect indirect costs, such as salaries and benefits for government employees. Annual appropriations figures typically reflect indirect costs. Evaluations of the sufficiency of federal funding for deferred maintenance may be hindered by the lack of total funding figures and by the incomparability of appropriations and deferred maintenance estimates. \nDeferred maintenance estimates might vary due to economic conditions that are not related to agency efforts or within the control of facility managers. For example, if deferred maintenance estimates reflect costs of needed materials, fuel, supplies, and labor, then the cost of deferred maintenance might change as the costs of these products and services change. Further, DOI has noted that NPS deferred maintenance estimates could fluctuate with market trends and inflation. \nMoreover, consistent and comprehensive information on the effect of federal funding on the condition of facilities and deferred maintenance over the decade does not appear to be available in budget documents. In particular, information based on the facilities condition index (FCI) seems to be incomplete or inconsistent in agency budget justifications. In some cases, budget justifications either do not provide FCI figures for assets or provide figures only for certain years. In other cases, it is not clear whether the FCI figures cover all agency assets or a subset of the assets. Together, the budget justifications present a mix of FCI information using quantitative measurements; percentage measurements; and qualitative statements, such as that a certain number or percentage of structures are in \"good\" condition, but without corresponding FCI figures. \nAlthough amounts and impacts of deferred maintenance funding may not be readily available, the agencies at times have asserted a need for increased appropriations to reduce their backlogs. As a recent example, the Interior Budget in Brief for FY2020 sets out a proposal for the establishment of a \"Public Lands Infrastructure Fund,\" with revenues from energy development on federal lands, to be used for deferred maintenance needs of the four agencies (as well as the Bureau of Indian Education). As a second example, a 2017 audit report asserted that reducing the FS maintenance backlog \"will require devoting the necessary resources over an extended period of time,\" and that \"increasing wildfire management costs have left the agency without extra funding to concentrate on reducing deferred maintenance.\" Moreover, in the past, agencies sometimes attributed reductions in deferred maintenance (or slower rates of increase) in part to additional appropriations, such as those provided in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The FY2016 FWS budget justification notes the ARRA funding as one factor contributing to a reduction in the backlog from the FY2010 high, for instance. \nSome observers and stakeholders have identified ways to potentially address deferred maintenance without solely relying on federal funding. For instance, a 2016 report by the Government Accountability Office (GAO) on NPS deferred maintenance listed various actions that NPS is taking at some park units. They include using donations, volunteers, and partnerships to assist with maintenance; leasing assets to nonfederal parties in exchange for rehabilitation or maintenance; and partnering with states in seeking transportation grants. As another example, a 2016 report by a research institute set out options including outsourcing certain agency operations to the private sector, establishing a franchising system for new park units, and disposal of assets.\n\n\t\tAssets\n\nThe asset portfolios of the four agencies vary considerably in terms of number, type, size, age, and location of agency assets. Although comprehensive data on these variables over the past decade are not readily available, it is likely that they affect agency maintenance responsibilities and maintenance backlogs. For instance, NPS has more assets than the other DOI agencies, a sizeable portion of which were constructed before 1900 or in the first half of the 20 th century. The 2016 GAO report assessed various characteristics of the NPS maintenance backlog, including the age of park units. The agency determined that of the total FY2015 NPS deferred maintenance, park units established over 100 years ago had the largest share (32%). Further, park units established more than 40 years ago collectively accounted for 88% of all NPS deferred maintenance. Moreover, some NPS assets are in urban areas or are iconic structures, which could affect maintenance costs.\nThe effect of changes in agency asset portfolios on deferred maintenance is not entirely clear. However, it could be asserted that the acquisition of assets, such as a sizeable number of large or iconic assets in relatively poor condition, would increase regular maintenance needs and the backlog, if maintenance is not performed when scheduled. For instance, the NPS asserted that \"when parks are created or when new land is acquired, the properties sometimes come with facilities that are in unacceptable condition or are unstable for the park or partner organizations.... When facilities are excess to the park ... they also contribute to the deferred maintenance backlog.\" Similarly, it could be argued that disposal of assets, such as a large quantity of old assets in poor condition, could reduce deferred maintenance. For example, a 2017 audit of the FS recommended that the agency \"establish goals and milestones to aggressively reduce the number of unused or underused assets in the agency's portfolio\" as one way to reduce maintenance backlogs given limited resources.\nAgencies examine whether to retain assets in their current condition or dispose of some assets, as the following examples indicate. FS has sought to reduce its maintenance backlog by conveying unneeded or underused administrative sites, as well as decommissioning roads, road and facility infrastructure , and nonpriority recreation sites. FWS has attributed reductions in deferred maintenance in part to \"disposing of unneeded assets.\" NPS identifies assets that are not critical to the agency's mission and that are in relatively poor condition for potential disposal. In the past, the agency has noted that although the agency seeks to improve the condition of its asset portfolio by disposing of assets, \"analysis of removal costs versus annual costs often precludes the removal option.\"","output":"Each of the four major federal land management agencies maintains tens of thousands of diverse assets, including roads, bridges, buildings, and water management structures. These agencies are the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), National Park Service (NPS), and Forest Service (FS). Congress and the Administration continue to focus on the agencies' deferred maintenance and repair of these assets\u2014in essence, the cost of any maintenance or repair that was not done when it should have been or was scheduled to be done. Deferred maintenance and repair is often called the maintenance backlog.\nIn FY2018, the most recent year for which these estimates are available, the four agencies had combined deferred maintenance estimated at $19.38 billion. This figure includes $11.92 billion (62%) in deferred maintenance for NPS, $5.20 billion (27%) for FS, $1.30 billion (7%) for FWS, and $0.96 billion (5%) for BLM. The estimates reflect project costs.\nOver the past decade (FY2009-FY2018), the total deferred maintenance for the four agencies fluctuated, peaking in FY2012 and ending the decade relatively flat in current dollars. It increased overall by $0.36 billion, from $19.02 billion to $19.38 billion, or 2%. Both the BLM and NPS estimates increased, whereas the FWS and FS estimates decreased. By contrast, in constant dollars, the total deferred maintenance estimate for the four agencies decreased from FY2009 to FY2018 by $3.61 billion, from $22.99 billion to $19.38 billion, or 16%. The BLM estimate increased, whereas estimates for the other three agencies decreased.\nIn each fiscal year, NPS had the largest portion of the total deferred maintenance, considerably more than any of the other three agencies. FS consistently had the second-largest share, followed by FWS and then BLM. Throughout the past decade, the asset class that included roads comprised the largest portion of the four-agency combined deferred maintenance.\nCongressional debate has focused on varied issues, including the level and sources of funds needed to reduce deferred maintenance, whether agencies are using existing funding efficiently, how to balance the maintenance of existing infrastructure with the acquisition of new assets, whether disposal of assets is desirable given limited funding, and the priority of maintaining infrastructure relative to other government functions.\nSome question why deferred maintenance estimates have fluctuated over time. These fluctuations are likely the result of many factors, among them the following:\nAgencies have refined methods of defining and quantifying the maintenance needs of their assets. Levels of funding for maintenance, including funding to address the maintenance backlog, vary from year to year. Economic conditions, including costs of services and products, also fluctuate. The asset portfolios of the agencies change, with acquisitions and disposals affecting the number, type, size, age, and location of agency assets.\nThe extent to which these and other factors affected changes in each agency's maintenance backlog over the past decade is not entirely clear. In some cases, comprehensive information is not readily available or has not been examined."}
{"id":"crs_97-1011","pid":"crs_97-1011_0","input":"\tMember Pay: Constitutional Background, Source of Appropriations, and Current Rates\n\nArticle I, Section 6, of the U.S. Constitution, states that the compensation of Members of Congress shall be \"ascertained by law, and paid out of the Treasury of the United States.\" Additionally, the Twenty-Seventh Amendment to the Constitution states, \"No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.\" This amendment was submitted to the states on September 25, 1789, along with 11 other proposed amendments, 10 of which were ratified and became the Bill of Rights. It was not ratified until May 7, 1992.\nSince FY1983, Member salaries have been funded in a permanent appropriations account. \nThe most recent pay adjustment for Members of Congress was in January 2009. Since then, the compensation for most Senators, Representatives, Delegates, and the Resident Commissioner from Puerto Rico has been $174,000. The only exceptions include the Speaker of the House ($223,500) and the President pro tempore of the Senate and the majority and minority leaders in the House and Senate ($193,400). \n\n\t\tSelected CRS Products\n\nThis report provides historical tables on the rate of pay for Members of Congress since 1789; details on enacted legislation with language prohibiting the automatic annual pay adjustment since the most recent adjustment; the adjustments projected by the Ethics Reform Act as compared with actual adjustments in Member pay; and Member pay in constant and current dollars since 1992.\nAdditional CRS products also address pay and benefits for Members of Congress:\nFor information on actions taken each year since the establishment of the Ethics Reform Act adjustment procedure, see CRS Report 97-615, Salaries of Members of Congress: Congressional Votes, 1990-2018 , by Ida A. Brudnick. Members of Congress only receive salaries during the terms for which they are elected. Following their service, former Members of Congress may be eligible for retirement benefits, which are discussed in CRS Report RL30631, Retirement Benefits for Members of Congress , by Katelin P. Isaacs. For information on health insurance options available to Members, see CRS Report R43194, Health Benefits for Members of Congress and Designated Congressional Staff: In Brief , by Ada S. Cornell. For an overview of compensation, benefits, allowances, and selected limitations, see CRS Report RL30064, Congressional Salaries and Allowances: In Brief , by Ida A. Brudnick.\n\n\tMethods for Member Pay Adjustment\n\nThere are three basic ways to adjust Member pay. \nSpecific legislation was enacted to adjust Member pay prior to 1968. It has been used periodically since, most recently affecting pay for 1991.\nThe second method by which Member pay can be increased is pursuant to recommendations from the President, based on those made by a quadrennial salary commission. In 1967, Congress established the Commission on Executive, Legislative, and Judicial Salaries to recommend salary increases for top-level federal officials (P.L. 90-206). Three times (in 1969, 1977, and 1987) Congress received pay increases made under this procedure; on three occasions it did not. Effective with passage of the Ethics Reform Act of 1989 ( P.L. 101-194 ), the commission ceased to exist. Its authority was assumed by the Citizens' Commission on Public Service and Compensation. Although the first commission under the 1989 act was to have convened in 1993, it did not meet.\nThe third method by which the salary of Members can be changed is by annual adjustments. Prior to 1990, the pay of Members, and other top-level federal officials, was tied to the annual comparability increases provided to General Schedule (GS) federal employees. This procedure was established in 1975 ( P.L. 94-82 ). Such increases were recommended by the President, subject to congressional acceptance, disapproval, or modification. Congress accepted 5 such increases for itself\u2014in 1975, 1979 (partial), 1984, 1985, and 1987\u2014and declined 10 (1976, 1977, 1978, 1980, 1981, 1982, 1983, 1986, 1988, and 1989).\nThe Ethics Reform Act of 1989 changed the method by which the annual adjustment is determined for Members and other senior officials. This procedure employs a formula based on changes in private sector wages and salaries as measured by the Employment Cost Index (ECI). The annual adjustment automatically goes into effect unless\n1. Congress statutorily prohibits the adjustment; 2. Congress statutorily revises the adjustment; or 3. The annual base pay adjustment of GS employees is established at a rate less than the scheduled adjustment for Members, in which case Members would be paid the lower rate. \nUnder this revised method, annual adjustments were\naccepted 13 times (adjustments scheduled for January 1991, 1992, 1993, 1998, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2008, and 2009) and denied 16 times (adjustments scheduled for January 1994, 1995, 1996, 1997, 1999, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019). \nAlthough discussion of the Member pay adjustment sometimes occurs during consideration of annual appropriations bills, these bills do not contain funds for the annual salaries or pay adjustment for Members. Nor do they contain language authorizing an increase. The use of appropriations bills as vehicles for provisions prohibiting the automatic annual pay adjustments for Members developed by custom. A provision prohibiting an adjustment to Member pay could be offered to any bill, or be introduced as a separate bill.\n\n\tJanuary 2020 Potential Pay Adjustment\n\nThe maximum potential January 2020 Member pay adjustment of 2.6%, or $4,500, was known when the Bureau of Labor Statistics (BLS) released data for the change in the Employment Cost Index (ECI) during the 12-month period from December 2017 to December 2018 on January 31, 2019.\nEach year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the General Schedule (GS) base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase.\n\n\tJanuary 2019 Member Pay Adjustment Denied\n\nThe maximum potential January 2019 Member pay adjustment of 2.3%, or $4,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2016 to December 2017 on January 31, 2018.\nEach year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2019 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400.\nThe House-passed ( H.R. 5894 ) and Senate-reported versions ( S. 3071 ) of the FY2019 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. Division B of P.L. 115-244 , enacted September 21, 2018, included the pay freeze provision.\n\n\tJanuary 2018 Member Pay Adjustment Denied\n\nThe maximum potential January 2018 member pay adjustment of 1.8%, or $3,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2015 to December 2016 on January 31, 2017. \nEach year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2018 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400.\nThe House-passed ( H.R. 3162 ) and Senate-reported versions ( S. 1648 ) of the FY2018 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. \nNeither bill was enacted prior to the start of FY2018, and legislative branch activities were initially funded through a series of continuing appropriations resolutions (CRs) ( P.L. 115-56 , through December 8, 2017; P.L. 115-90 , through December 22, 2017; P.L. 115-96 , through January 19, 2018; P.L. 115-120 , through February 8, 2018; P.L. 115-123 , through March 23, 2018). P.L. 115-56 contained a provision, extended in the subsequent CRs, continuing \"section 175 of P.L. 114-223 , as amended by division A of P.L. 114-254 .\" This provision prohibited a Member pay adjustment in FY2017. Section 7 of the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ) prohibited the adjustment for the remainder of the year.\n\n\tJanuary 2017 Member Pay Adjustment Denied\n\nThe maximum potential January 2017 Member pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2014 to December 2015 on January 30, 2016. \nBoth the House-passed ( H.R. 5325 ) and Senate-reported ( S. 2955 ) versions of the FY2017 legislative branch appropriations bill\u2014which would provide approximately $4.4 billion in funding for the activities of the House of Representatives, Senate, and legislative branch support agencies \u2014contained a provision that would prohibit this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. No further action was taken on H.R. 5325 or S. 2955 , but the pay prohibition language was included in the Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ). \nAbsent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase to match the increase in base salaries for GS employees.\n\n\tJanuary 2016 Member Pay Adjustment Denied\n\nThe maximum potential January 2016 Member pay adjustment of 1.7%, or $3,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2013 to December 2014 on January 30, 2015. \nThe House-passed and Senate-reported versions of the FY2016 legislative branch appropriations bill ( H.R. 2250 ) both contained a provision prohibiting this adjustment. \nThe pay adjustment prohibition was subsequently included in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). \nAbsent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase to match the increase in base salaries for GS employees.\n\n\tJanuary 2015 Member Pay Adjustment Denied\n\nThe maximum potential January 2015 pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2012 to December 2013 on January 31, 2014. \nEach year, the adjustment takes effect automatically unless it is either denied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase.\nThe FY2015 legislative branch appropriations bill ( H.R. 4487 ), as reported by the Committee on Appropriations and passed by the House on May 1, 2014, contained a provision prohibiting this adjustment. This provision was continued in the House-passed and Senate-reported versions of this bill, with no separate vote on the Member pay provision. No further action on this bill was taken, but the provision was subsequently included in Section 8 of Division Q of the FY2015 Consolidated and Further Continuing Appropriations Act, which was enacted on December 16, 2014. \nOn August 29, 2014, President Obama issued an \"alternative pay plan for federal civilian employees,\" which called for a 1.0% increase in base salaries for General Schedule employees. Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase. \n\n\tJanuary 2014 Member Pay Adjustment Denied\n\nThe maximum potential 2014 pay adjustment of 1.2%, or $2,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2011 to December 2012 on January 31, 2013. The Continuing Appropriations Act, 2014 ( P.L. 113-46 , enacted October 17, 2013), however, prohibited the scheduled 2014 pay adjustment for Members of Congress.\nEach year, the adjustment takes effect automatically unless it is either \ndenied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The scheduled January 2014 across-the-board increase in the base pay of GS employees under the annual adjustment formula was 1.3%. A scheduled GS annual pay increase may be altered only if the President issues an alternative plan or if a different increase, or freeze, is enacted. The President issued an alternate pay plan for civilian federal employees on August 30, 2013. This plan called for a January 2014 across-the-board pay increase of 1.0% for federal civilian employees, the same percentage as proposed in the President's FY2014 budget. Legislation was not enacted to prohibit or alter the GS adjustment, and Executive Order 13655, issued on December 23, 2013, implemented a 1.0% increase for GS employees. Had the Member pay adjustment not been prohibited by law, the GS base pay adjustment would have automatically limited a salary adjustment for Members of Congress to 1.0% ($1,700).\n\n\tJanuary 2013 Member Pay Adjustment Delayed and Then Denied\n\nThe maximum potential 2013 pay adjustment of 1.1%, or $1,900, was known when the BLS released data for the change in the ECI during the 12-month period from December 2010 to December 2011 on January 31, 2012. The adjustment takes effect automatically unless (1) denied statutorily by Congress or (2) limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. \nThe President's budget, submitted on February 13, 2012, proposed an average (i.e., base and locality) 0.5% adjustment for GS employees. \n\n\t\tPartial Year Pay Freeze Enacted\n\nPresident Obama later stated in a letter to congressional leadership on August 21, 2012, that the current federal pay freeze should extend until FY2013 budget negotiations are finalized. Section 114 of H.J.Res. 117 , the Continuing Appropriations Resolution, 2013, which was introduced on September 10, 2012, extended the freeze enacted by P.L. 111-322 through the duration of this continuing resolution. H.J.Res. 117 was passed by the House on September 13 and the Senate on September 22. It was signed by the President on September 28, 2012 ( P.L. 112-175 ). A delay in the implementation of pay adjustments for GS employees automatically delays any scheduled Member pay adjustment. \n\n\t\tExecutive Order Issued and Subsequent Pay Freeze Enacted\n\nOn December 27, 2012, President Obama issued Executive Order 13635, which listed the rates of pay for various categories of officers and employees that would be effective after the expiration of the freeze extended by P.L. 112-175 . The executive order included a 0.5% increase for GS base pay, which automatically lowered the maximum potential Member pay adjustment from 1.1% to 0.5%. \nAs in prior years, schedule 6 of the 2012 executive order listed the pay rate for Members of Congress for the upcoming year. This executive order indicated that an annual adjustment would take effect after the expiration of the freeze included in P.L. 112-175 . As stated above, the annual adjustments take effect automatically if legislation is not enacted preventing them. The executive order, however, by establishing the GS pay adjustment at a lower rate than the scheduled Member pay adjustment, automatically lowered the Member pay adjustment rate since by law Member pay adjustments cannot be higher than GS pay adjustments.\nSubsequently, a provision in H.R. 8 , the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013 ( P.L. 112-240 ), froze Member pay at the 2009 level for 2013. The language was included in S.Amdt. 3448 , a substitute amendment agreed to by unanimous consent. The bill, as amended, passed the Senate (89-8, vote #251) and the House (257-167, roll call #659) on January 1, 2013. This freeze was subsequently reflected in Executive Order 13641, which was signed April 5, 2013. \nThis represented the second time, the first being in 2006, that Member pay was statutorily frozen for only a portion of the following year at the time of the issuance of the executive order. In both instances, the executive order listed new pay rates and indicated an effective date following the expiration of the statutory freeze. Pay adjustments in both years were further frozen pursuant to subsequent laws.\n\n\tJanuary 2011 and January 2012 Member Pay Adjustments Denied\n\nAs stated above, projected Member pay adjustments are calculated based on changes in the ECI. The projected 2011 adjustment of 0.9% was known when the BLS released data for the ECI change during the 12-month period from December 2008 to December 2009 on January 29, 2010. This adjustment would have equaled a $1,600 increase, resulting in a salary of $175,600.\nThe 2011 pay adjustment was prohibited by the enactment of H.R. 5146 ( P.L. 111-165 ) on May 14, 2010. H.R. 5146 was introduced in the House on April 27 and was agreed to the same day (Roll no. 226). It was agreed to in the Senate the following day by unanimous consent. Other legislation was also introduced to prevent the scheduled 2011 pay adjustment.\nAdditionally, P.L. 111-322 , which was enacted on December 22, 2010, prevents any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay is also frozen during this period. If not limited by GS pay, Members could have received a salary adjustment of 1.3% in January 2012 under the ECI formula. Pay for Members of Congress remained $174,000.\n\n\tJanuary 2010 Member Pay Adjustment Denied\n\nUnder the formula established in the Ethics Reform Act, Members were originally scheduled to receive a pay adjustment in January 2010 of 2.1%. This adjustment was denied by Congress through a provision included in the FY2009 Omnibus Appropriations Act. Section 103 of Division J of the act states, \"Notwithstanding any provision of section 601(a)(2) of the Legislative Reorganization Act of 1946 (2 U.S.C. 31(2)), the percentage adjustment scheduled to take effect under any such provision in calendar year 2010 shall not take effect.\" \nHad this provision not been enacted, the 2.1% projected adjustment would have been automatically reduced to 1.5% to match the 2010 GS base pay adjustment.\n\n\tMember Pay: Other Proposals and Actions by Congress\n\n\t\t116th Congress\n\nAs in previous Congresses, legislation was introduced in the 116 th Congress to\nrepeal the automatic pay adjustment provision (for example, H.R. 751 and H.R. 1466 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution, passage of appropriations, or reaching the debt limit (for example, S. 39 , S. 44 , S. 949 , H.R. 86 , H.R. 102 , H.R. 129 , H.R. 236 , H.R. 298 , H.R. 834 , H.R. 1172 , H.R. 1178 , H.R. 1466 , H.R. 1612 , H.J.Res. 10 , and H.J.Res. 51 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 74 , S. 949 , H.R. 26 , H.R. 211 , H.R. 845 , and H.R. 1612 ). \n\n\t\t115th Congress\n\nLegislation was introduced in the 115 th Congress to\nprohibit adjustments in pay (for example, H.R. 342 ); repeal the automatic pay adjustment provision (for example, H.R. 668 and H.R. 5946 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 429 , H.R. 536 , H.R. 646 , H.R. 1779 , H.R. 1951 , H.R. 2153 , H.R. 2665 , H.R. 3675 , H.R. 4512 , and H.R. 5946 , and S. 14 ); reduce the pay of Members of Congress (for example, H.R. 1786 and H.R. 5539 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 1789 , H.R. 1794 , H.R. 2214 , H.R. 4852 , H.R. 4870 , and S. 2327 ). \n\n\t\t114th Congress\n\nLegislation was introduced in the 114 th Congress to\nprohibit adjustments in pay (for example, H.R. 109 and H.R. 302 ); repeal the automatic pay adjustment provision (for example, H.R. 179 , H.R. 513 , H.R. 688 , H.R. 1585 , and S. 17 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including the passage of a budget resolution or existence of a deficit (for example, H.Con.Res. 27 , S.Con.Res. 11 , H.R. 92 , H.R. 110 , H.R. 174 , H.R. 187 , H.R. 3757 , H.R. 4814 , H.R. 4476 , and S. 39 ); reduce the pay of Members of Congress (for example, H.R. 179 and H.R. 688 ); and prohibit or reduce pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 2074 , H.R. 3562 , H.R. 2023 , and H.R. 1032 ). \n\n\t\t\tLinking Salaries to Passage of a Concurrent Resolution on the Budget\n\nThe House budget resolution for FY2016, H.Con.Res. 27 , included a policy statement that Congress should agree to a concurrent budget resolution each year by April 15, and if not, congressional salaries should be held in escrow (Section 819). The statement proposed that salaries would be released from the escrow account either when a chamber agrees to a concurrent resolution on the budget or the last day of the Congress, whichever is earlier. The House agreed to this resolution on March 25, 2015, and no further action was taken. The Senate agreed to its resolution on the FY2016 budget, S.Con.Res. 11 , on March 27, 2015, without this language. The conference report for S.Con.Res. 11 \u2014agreed to in the House on April 30 and in the Senate on May 5, 2015\u2014contains a \"Policy Statement on 'No Budget, No Pay'\" (Section 6216), which refers to actions by the House. \n\n\t\t113th Congress\n\nLegislation was introduced in the 113 th Congress to\nprohibit adjustments in pay (for example, H.R. 54 , H.R. 243 , H.R. 636 , S. 18 , S. 30 ); repeal the automatic pay adjustment provision (for example, H.R. 134 , H.R. 150 , H.R. 196 , S. 65 , and H.R. 398 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 108 , H.R. 167 , H.R. 284 , H.R. 308 , H.R. 310 , H.R. 325 , H.R. 372 , H.R. 397 , H.R. 396 , H.R. 522 , H.R. 593 , H.R. 1884 , H.R. 2335 , H.R. 3234 , S. 18 , S. 30 , and S. 263 ); reduce the pay of Members of Congress (for example, H.R. 37 , H.R. 150 , H.R. 391 , H.R. 396 , H.R. 398 , and H.R. 1467 ); prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 3160 , H.R. 3215 , H.R. 3224 , H.R. 3234 , and H.R. 3236 ); and apply any sequester to Member pay (for example, S. 436 , H.R. 1181 , H.R. 1478 , and H.R. 2677 ).\n\n\t\t\tLinking Salaries to Passage of a Concurrent Resolution on the Budget\n\nH.R. 325 , which (1) included language holding congressional salaries in escrow if a concurrent resolution on the budget was not agreed to by April 15, 2013, and (2) provided for a temporary extension of the debt ceiling through May 18, 2013, was introduced on January 21, 2013. Salaries would have been held in escrow for Members in a chamber if that chamber had not agreed to a concurrent resolution by that date. Salaries would have been released from the escrow account either when that chamber agreed to a concurrent resolution on the budget or the last day of the 113 th Congress, whichever was earlier. H.R. 325 was agreed to in the House on January 23, 2013, and the Senate on January 31, 2013. It was enacted on February 4, 2013 ( P.L. 113-3 ). Both the House and Senate agreed to a budget resolution prior to that date, however, and salaries were not held in escrow.\n\n\t\t\tLinking Salaries to the Debt Limit\n\nH.R. 807 , the Full Faith and Credit Act, was introduced in the House on February 25, 2013. The bill would have prioritized certain payments in the event the debt reaches the statutory limit. An amendment, H.Amdt. 61 , was offered on May 9, 2013, that would clarify that these obligations would not include compensation for Members of Congress. It was agreed to the same day. The bill passed the House on May 13, 2013. No further action was taken in the 113 th Congress.\nThe House-passed version of H.J.Res. 59 , the Continuing Appropriations Resolution, 2014, also contained a provision addressing actions by the Secretary of the Treasury in the event that the debt limit is reached and not raised. The provision (Section 138) would, in part, prohibit borrowing to provide pay for Members of Congress in the event that the debt reaches the statutory limit prior to December 15, 2014. The bill passed the House on September 20, 2013. It was enacted on December 26, 2013, without this section. \n\n\t\t112th Congress\n\nLegislation was introduced in the 112 th Congress to\nrepeal the automatic pay adjustment provision (for example, S. 133 , S. 148 , H.R. 187 , H.R. 235 , H.R. 246 , H.R. 343 , H.R. 431 , H.R. 3673 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to other action or economic indicators (for example, H.R. 124 , H.R. 172 , H.R. 236 , H.R. 994 , H.R. 1454 , H.R. 3136 , H.R. 3565 , H.R. 3774 , H.R. 3799 , H.R. 3883 , H.R. 4036 , H.R. 6438 , S. 1442 ); reduce the pay of Members of Congress (for example, H.R. 204 , H.R. 270 , H.R. 335 , H.R. 1012 , H.R. 4399 ); otherwise alter or restrict pay for Members under certain conditions (for example, H.R. 6108 ); and freeze Member pay (for example, S. 1931 , S. 1936 , S. 2065 , S. 2079 , S. 2210 , H.R. 3858 , H.R. 6474 , H.R. 6720 , H.R. 6721 , H.R. 6722 ).\n\n\t\t\tActions Related to Member Pay During a Lapse in Appropriations\n\nLegislation was also introduced in the 112 th Congress that would have affected Member pay in the event of a lapse of appropriations resulting in a government shutdown. These included H.R. 819 , H.R. 1255 , H.R. 1305 , H.Con.Res. 56 , and S. 388 . \nThe Senate passed S. 388 on March 1, 2011. The bill would have prohibited Members of the House and Senate from receiving pay, including retroactive pay, for each day that there is a lapse in appropriations or the federal government is unable to make payments or meet obligations because of the public debt limit. The House passed H.R. 1255 on April 1, 2011. The bill would have prohibited the disbursement of pay to Members of the House and Senate during either of these situations. No further action was taken on either bill. \nOn April 8, 2011, the Speaker of the House issued a \"Dear Colleague\" letter indicating that in the event of a shutdown, Members of Congress would continue to be paid pursuant to the Twenty-Seventh Amendment to the Constitution, which as stated above, states: \"No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened\"\u2014although Members could elect to return any compensation to the Treasury. \n\n\t\t\tAdditional Legislation Receiving Floor Action but Not Enacted\n\nAdditional legislation to prohibit any Member pay adjustment in 2013 was introduced but not enacted in the 112 th Congress, including the following:\nSection 5421(b)(1) of H.R. 3630 , as introduced in the House, would have prohibited any adjustment for Members of Congress prior to December 31, 2013. Section 706 of the motion to recommit also contained language freezing Member pay. On December 13, 2011, the motion to recommit failed (183-244, roll call #922), and the bill passed the House (234-193, roll call #923). The House-passed version of the bill was titled the \"Middle Class Tax Relief and Job Creation Act of 2011.\" The Senate substitute amendment, which did not address pay adjustments, passed on December 17. It was titled the \"Temporary Payroll Tax Cut Continuation Act of 2011.\" The bill was enacted on February 22, 2012 ( P.L. 112-96 ), without the pay freeze language. H.R. 3835 , introduced on January 27, 2012, also would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on February 1, 2012. H.R. 6726 , introduced on January 1, 2013, would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on January 2, 2013.\n\n\tReference and Historical Information and Explanation of Tables\n\n Table 1 provides a history of the salaries of Members of Congress since 1789. For each salary rate, both the effective date and the statutory authority are provided. \n Table 2 provides information on pay adjustments for Members since 1992, which was the first full year after the Ethics Reform Act that Representatives and Senators received the same salary. The table provides the projected percentage changes under the formula based on the Employment Cost Index and the actual percentage adjustment. The differences between the projected and actual Member pay adjustments resulted from\nthe enactment of legislation preventing the increase (adjustments for 1994, 1995, 1996, 1997, 1999, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); limits on the percentage increase of Member pay because of the percentage increase in GS base pay (adjustments for 1994, 1995, 1996, 1998, 1999, 2001, 2003, 2007, 2008, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); and a combination of the above. In some years, the percentage adjustment for Member pay would have been lowered to match the percentage adjustment in GS base pay if Congress had not passed legislation denying the adjustment (adjustments for 1994, 1995, 1996, 1999, 2007, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, and 2019). \nIf Members of Congress had received every adjustment prescribed by the ECI formula since 1992, and the 2 U.S.C. \u00a74501 limitation regarding the percentage base pay increase for GS employees remained unchanged, the 2019 salary would be $210,900. \n Table 3 lists the laws which have previously delayed or prohibited Member pay adjustments, the dates these laws were enacted, and the text of the provision. While many of the bills in this list are appropriations bills, a prohibition on Member pay adjustments could be included in any bill, or be introduced as a separate bill. \n Figure 1 , which follows, shows the salary of Members of Congress in current and constant (inflation adjusted) dollars since 1992. It shows that Member salaries, when adjusted for inflation, decreased 15% from 2009 until 2019.","output":"Congress is required by Article I, Section 6, of the Constitution to determine its own pay. In the past, Congress periodically enacted specific legislation to alter its pay; the last time this occurred affected pay in 1991. More recently, pay has been determined pursuant to laws establishing formulas for automatic adjustments.\nThe Ethics Reform Act of 1989 established the current automatic annual adjustment formula, which is based on changes in private sector wages as measured by the Employment Cost Index (ECI). The adjustment is automatic unless denied statutorily, although the percentage may not exceed the percentage base pay increase for General Schedule (GS) employees. Member pay has since been frozen in two ways: (1) directly, through legislation that freezes salaries for Members but not for other federal employees, and (2) indirectly, through broader pay freeze legislation that covers Members and other specified categories of federal employees.\nMembers of Congress last received a pay adjustment in January 2009. At that time, their salary was increased 2.8%, to $174,000. A provision in P.L. 111-8 prohibited any pay adjustment for 2010. Under the pay adjustment formula, Members were originally scheduled to receive an adjustment in January 2010 of 2.1%, although this would have been revised downward automatically to 1.5% to match the GS base pay adjustment. Members next were scheduled to receive a 0.9% pay adjustment in 2011. The pay adjustment was prohibited by P.L. 111-165. Additionally, P.L. 111-322 prevented any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay was also frozen during this period. If not limited by GS pay, Member pay could have been adjusted by 1.3% in 2012. The ECI formula established a maximum potential pay adjustment in January 2013 of 1.1%. P.L. 112-175 extended the freeze on GS pay rates for the duration of this continuing resolution, which also extended the Member freeze since the percentage adjustment in Member pay may not exceed the percentage adjustment in GS base pay. Subsequently, Member pay for 2013 was further frozen in P.L. 112-240. The maximum potential 2014 pay adjustment of 1.2%, or $2,100, was denied by P.L. 113-46. The maximum potential January 2015 Member pay adjustment was 1.6%, or $2,800. President Obama proposed a 1.0% increase in the base pay of GS employees, which would automatically have limited any Member pay adjustment to 1.0%. P.L. 113-235 contained a provision prohibiting any Member pay adjustment. The maximum potential January 2016 pay adjustment of 1.7%, or $3,000, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2016 was frozen by P.L. 114-113. The maximum potential January 2017 pay adjustment of 1.6%, or $2,800, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2017 was frozen by P.L. 114-254. The maximum potential January 2018 pay adjustment of 1.8%, or $3,100, was automatically limited to 1.4%, or $2,400, before being frozen by P.L. 115-141. The maximum potential January 2019 pay adjustment of 2.3%, or $4,000, was automatically limited to 1.4%, or $2,400, before being frozen at the 2009 level by P.L. 115-244. The maximum potential January 2020 pay adjustment is 2.6%, or $4,500.\nIf Members of Congress had received every adjustment prescribed by the ECI formula since 1992, and the 2 U.S.C. \u00a74501 limitation regarding the percentage base pay increase for GS employees remained unchanged, the 2019 salary would be $210,900. When adjusted for inflation, Member salaries have decreased 15% since the last pay adjustment in 2009.\nBoth the automatic annual adjustments and funding for Members' salaries are provided pursuant to other laws (2 U.S.C. \u00a74501)\u2014not the annual appropriations bills\u2014and a provision prohibiting a scheduled adjustment could be included in any bill, or introduced as a separate bill."}
{"id":"gao_GAO-18-128","pid":"gao_GAO-18-128_0","input":"\tBackground\n\nGlobal defense posture is an enabler of U.S. defense activities and  military operations overseas and is a central means of defining and  communicating U.S. strategic interests to allies, partners, and  adversaries. It is driven by a hierarchy of national-level and DOD-specific  guidance, which includes the National Defense Strategy and the National  Military Strategy. Under DOD Instruction 3000.12, global defense posture  includes three elements:\nForces: forward stationed or rotationally deployed forces, U.S.  military capabilities, equipment, and units (assigned or allocated).\nFootprint: networks of U.S. foreign and overseas locations,  infrastructure, facilities, land, and prepositioned equipment.\nAgreements: treaties and access, transit, support, and status- protection agreements and arrangements with allies and partners that  set the terms regarding the U.S. military\u2019s presence within the territory  of the host country.\nEUCOM is one of six geographic combatant commands and is  responsible for missions in all of Europe, large portions of Asia, parts of  the Middle East, and the Arctic and Atlantic Oceans (see figure 1).  EUCOM evaluates the adequacy of posture in Europe to support relevant  plans and achieve military objectives. EUCOM shares responsibility with  the Chairman of the Joint Chiefs of Staff and the Office of the Secretary of  Defense for U.S. military relations with allies and partners in Europe and  the North Atlantic Treaty Organization (NATO).\nThe number of U.S. military sites located in EUCOM\u2019s area of  responsibility and the number of military personnel assigned to Europe  have decreased substantially since the end of the Cold War, and two  heavy combat brigades had been deactivated by the end of fiscal year  2014. As of May 2016, EUCOM supported one airborne infantry brigade  and one Stryker brigade, as well as approximately 62,000 military  personnel across approximately 250 sites.\nSince 2009, we have reported on issues related to DOD\u2019s efforts to  estimate and report on the total cost of its global defense posture. In  2009, we identified weaknesses in DOD\u2019s approach for adjusting its  global defense posture and recommended, among other things, that DOD  issue guidance for estimating total costs for global defense posture and  modify its annual report to Congress to include the total cost to complete  each planned posture initiative. In February 2011, we reported that  EUCOM lacked comprehensive cost data in a key posture planning  document and that therefore decision makers lacked critical information  that they needed to make fully informed posture decisions. We  recommended that the Chairman of the Joint Chiefs of Staff revise the  Joint Staff\u2019s posture planning guidance to include direction on how the  combatant commands should analyze costs and benefits when  considering changes to posture and to require that posture plans include  comprehensive cost estimates. DOD agreed with the recommendations in  both reports and subsequently took steps to implement them.\nIn June 2012, we reported that DOD did not fully understand the cost  implications of two posture initiatives in Europe\u2014including its decision to  return two heavy brigades from Europe to the United States\u2014and that  key posture planning documents did not completely and consistently  include cost data. We recommended that DOD fully estimate the cost  implications of these two initiatives, clarify components\u2019 roles and  responsibilities for estimating costs, and develop a standard reporting  format for cost data. DOD generally agreed with our recommendations  and has taken steps to implement two of them.\nFollowing the President\u2019s June 2014 announcement of ERI, EUCOM  identified five lines of effort that it would pursue under ERI, as described  in table 1.\nThree of ERI\u2019s lines of effort are expected to enhance DOD\u2019s posture in  Europe. For example, DOD is using ERI to increase the forces present in  Europe by rotating an armored brigade combat team and elements of a  combat aviation brigade to Europe every nine months. DOD also plans  to enhance its footprint in Europe by using ERI funding to make  infrastructure improvements and establish locations for prepositioned  equipment. Finally, in order to implement ERI\u2019s lines of effort and support  U.S. activities, DOD is partnering with the State Department to negotiate  host nation agreements that, among other things, establish protections for  U.S. military personnel and provide DOD the authority to improve host  nation installations and infrastructure. DOD is also supporting additional  exercises and training to improve interoperability with partner countries  while providing them with the capability and capacity to defend  themselves, but these efforts are not expected to affect DOD\u2019s long-term  posture in Europe.\n\n\tDOD Has Expanded ERI\u2019s Objectives and Funding, Contributing to Enhancements in Its Posture in Europe\n\nSince 2014, DOD has expanded ERI\u2019s objectives, increased its funding,  and planned enhancements to posture in Europe. In fiscal years 2015  and 2016, ERI\u2019s objective was to provide short-term reassurance to allies,  and the initiative had little funding for long-term enhancements to posture.  DOD focused its efforts on bolstering the security and capacity of NATO  allies and partners by funding training, conducting exercises, and  temporarily rotating Army and Air Force units to Eastern Europe. In fiscal  year 2017, DOD expanded ERI\u2019s objectives to include deterring Russian  aggression in the long term and developing the capacity to field a credible  combined force should deterrence fail.\nRecognizing that ERI\u2019s expanded objectives would require DOD to alter  its posture in Europe, DOD has requested increased ERI funding. DOD  will have requested approximately $4.5 billion in ERI funding for posture  enhancements through the end of fiscal year 2017; about $3.2 billion of  this was requested for use in fiscal years 2017. During the time of our  review, EUCOM had identified a need for additional funding over the next  several years for additional posture enhancements in Europe. Specific  details about EUCOM\u2019s future posture plans and funding requirements  were omitted because they are classified.\nDOD has requested increased funding to support planned enhancements  to all three posture elements\u2014forces, footprint, and agreements\u2014in  Europe:\nForce deployments to Eastern Europe: In fiscal years 2015 and  2016, the Army deployed armored brigade combat teams to Eastern  Europe to provide short-term reassurance to allies and partners,  which DOD officials said included Estonia, Latvia, Lithuania, and  Poland, among other countries. These short-duration deployments  were intermittent and focused on demonstrating U.S. commitment to  allies and partners. Additionally, the Air Force deployed air units on 4- month rotations to help protect allies\u2019 and partners\u2019 air space. In the  fiscal year 2017 budget justification materials provided to Congress,  as ERI\u2019s objectives expanded, DOD requested funding to retain Air  Force fighter units in Europe. It also began deploying a rotational  armored brigade combat team so that one such brigade would be  present in Europe at all times (see figure 2). The first deployment, in  January 2017, included approximately 4,000 personnel, 90 Abrams  tanks, 90 Bradley Infantry fighting vehicles, and 112 supporting  vehicles. Additionally, DOD began procuring and prepositioning  equipment for two planned armored brigades in Europe, one of which  will include modernized tanks, as an additional deterrent. According to  Army officials, these force enhancements in Europe give the Army the  ability to quickly deploy a substantial ground force in the event of a  conflict. As of April 2017, DOD was still evaluating force  enhancements in Europe as part of its fiscal year 2018 budget  submission. Specific details were omitted because they are classified.\nNew locations and improvements to infrastructure: Since ERI was  announced in 2014, DOD has established new enduring locations in  Europe. An enduring location is designated by DOD and is a  geographic site that DOD expects to access and use to support U.S.  security interests for the foreseeable future. During our review, DOD  had not yet determined whether additional enduring locations would  be needed to support ERI.\nIn addition to establishing new enduring locations, DOD plans to improve  installations and infrastructure. From fiscal years 2015 through 2017,  DOD requested funding in its budget justification submissions to  Congress for major military construction projects in nine European  countries and to improve support infrastructure\u2014such as roads,  railheads, and airbasing\u2014at these locations. Major military construction  projects are those projects specified in National Defense Authorization  Acts. During the time of our review, DOD was considering addition  improvements to existing infrastructure, specific details of which are  classified. According to DOD and State Department officials, DOD is also  working with U.S. allies and partners to determine what infrastructure  improvements to roads, railroads, and bridges need to occur outside  enduring locations to allow rapid response to a conflict.\nNew host nation agreements: Since ERI was announced, DOD and  the State Department have completed host nation agreements with  six European nations in support of ERI efforts:\nRomania, Bulgaria, and Poland, implementing previous  agreements, in order to facilitate U.S. construction on installations  and areas in the host country (June and July 2015 and June  2016).\nEstonia, Latvia, and Lithuania, providing an overarching  framework for protections for U.S. personnel and U.S. access to  installations in host nations (January 2017).\n\n\tDOD Does Not Prioritize Posture Initiatives Funded Under ERI against Those in Its Base Budget, Estimate Their Sustainment Costs, or Communicate Future Costs to Congress\n\nDOD is using a separate process instead of its established posture  planning process to plan for ERI\u2019s posture initiatives because of the  emergent nature of ERI requirements and their having been funded  through the OCO budget. DOD has established global defense posture  management and base budget development processes that plan for  posture initiatives and collectively support the department\u2019s efforts to  establish priorities, evaluate resource requirements, and develop strategy  and policy. As a result of its not using its established processes, DOD is  not prioritizing posture initiatives funded under ERI against posture  initiatives funded through its base budget, estimating these initiatives\u2019  long-term sustainment costs, or communicating their future costs to  Congress.\n\n\t\tDOD is Not Using Its Established Processes to Plan for and Fund ERI Posture Initiatives\n\nDOD is planning ERI posture initiatives outside of its established  processes and is funding these enduring initiatives\u2014including rotational  deployments and infrastructure projects\u2014out of its OCO budget. We have  previously identified risks associated with DOD\u2019s practice of completing  construction projects outside of its established processes. For example, in  September 2016 we reported that DOD had not issued implementing  guidance to establish a formal process for reevaluating ongoing  contingency construction projects when missions change and that as a  result DOD risked completing unnecessary construction projects. We  also found that DOD lacked visibility into the amount of funding it was  spending on operations and maintenance-funded construction projects in  U.S. Central Command and that this increased financial risk and  duplication risk for the department.\nLike U.S. Central Command, EUCOM is using DOD\u2019s OCO budget to  fund construction projects and is planning those projects outside of its  established processes. Based on our analysis, DOD plans to spend  approximately $503 million from fiscal year 2015 through the end of fiscal  year 2017 on ERI-related construction projects\u2014about $279 million for  major military construction projects and $224 million for minor military  construction and facilities maintenance and repair projects (hereafter,  minor construction and repair), as shown in table 2.\nDOD has established global defense posture management and base  budget development processes that plan for posture initiatives and  collectively support the department\u2019s efforts to establish priorities,  evaluate resource requirements, and develop strategy and policy.  According to DOD Instruction 3000.12, DOD\u2019s global defense posture  processes apply to DOD forces, footprint, and agreements that support  joint and combined global operations and plans in foreign countries.  According to the instruction, DOD\u2019s components use these processes to  address planning for global defense posture, resource requirements, and  policy development, among other things. Further, it states that these  processes are overseen by an executive council that provides   recommendations, inputs, and expertise on global defense posture to key  national strategy products. DOD\u2019s Planning, Programming, Budgeting,  and Execution Process serves as the annual resource allocation process  for DOD and is intended to enable DOD to align resources to prioritized  capabilities; balance necessary warfighting capabilities with risk,  affordability, and effectiveness; and provide mechanisms for making and  implementing fiscally sound decisions in support of the national security  strategy and the national defense strategy.\nDOD is using a separate and evolving process to plan ERI\u2019s posture  initiatives\u2014rather than following its established processes\u2014because ERI  is being funded through DOD\u2019s OCO budget. According to officials from  the Office of the Secretary of Defense, Cost Assessment and Program  Evaluation, the department has recognized that the short-term planning  process used to develop DOD\u2019s OCO budget can create problems when  it is used to plan for enduring initiatives. As a result, DOD has developed  a separate process to plan for ERI.\nAs part of the fiscal year 2018 planning process, EUCOM provided a  prioritized list of potential requirements and an estimate of its annual  costs by appropriation account to the Director for Cost Assessment and  Program Evaluation. According to officials from the Office of the Secretary  of Defense, Cost Assessment and Program Evaluation, DOD completed  its review and provided recommendations to DOD\u2019s senior leaders for  approval in October 2016 and final decisions were made within DOD in  April 2017. The specific criteria by which DOD assessed EUCOM\u2019s  potential requirements are classified.\nDOD is requesting funds for ERI\u2019s posture initiatives as part of its OCO  budget, which is generally intended to be short-term funding for ongoing  contingency operations. In February 2009, the Office of Management and  Budget, in collaboration with DOD, issued criteria to assist in determining  whether funding properly belonged in DOD\u2019s base budget or in its OCO  budget. These criteria were updated in September 2010 and currently  indicate that funding requests should be for specific geographic areas  where combat or direct combat support operations occur (such as Iraq  and Afghanistan). Further, budget items must meet other criteria. For  example, OCO funding requests may be for constructing facilities and  infrastructure in the theater of operations in direct support of combat  operations. In these cases, the level of construction should be the  minimum needed to meet operational requirements, and construction  completed at enduring locations must be tied to surge operations or major  changes in operational requirements.\nIn January 2017, we reported that DOD did not apply the OCO criteria to  ERI prior to deciding to budget for its requirements using its OCO budget.  We recommended that DOD, in consultation with the Office of  Management and Budget, reevaluate and revise the criteria for  determining what can be included in OCO budget requests. DOD  concurred with our recommendation and noted that it plans to propose  revised OCO criteria. As of May 2017, the department has not  implemented our recommendation.\n\n\t\tDOD Does Not Prioritize ERI Initiatives against Those in Its Base Budget, Estimate Long-Term Sustainment Costs, or Communicate Future Costs to Congress\n\nDOD\u2019s planning for ERI\u2019s posture initiatives does not establish priorities  for ERI initiatives relative to those in the base budget, estimate long-term  sustainment costs for some posture initiatives funded under ERI, or  communicate future ERI costs to Congress.\n\n\t\t\tDOD Does Not Review and Prioritize Posture Initiatives Funded Under ERI Relative to Those in Its Base Budget\n\nWhen planning ERI\u2019s posture initiatives, DOD establishes priorities  among ERI\u2019s initiatives but does not review posture initiatives funded  under ERI relative to those funded in the military services\u2019 base budgets.  DOD\u2019s posture management process is intended to establish priorities  among global posture elements and is overseen by a Global Posture  Executive Council. According to DOD Instruction 3000.12, the Executive  Council is responsible for reviewing, prioritizing, and endorsing across the  combatant commands key posture elements such as military construction  projects and international agreements. The Executive Council\u2019s  endorsements inform the military services\u2019 budget deliberations.\nFor the fiscal year 2017 ERI budget, EUCOM requested funding for  several posture initiatives, including the continuous, rotational deployment  of an armored brigade combat team and the establishment of  prepositioned equipment in Europe. Officials representing the Under  Secretary of Defense for Policy and the Director, Cost Assessment and  Program Evaluation said that as part of its planning process for ERI the  Deputy\u2019s Management Action Group evaluated and prioritized posture  initiatives funded under ERI. However, DOD could not provide  documentation that it had established priorities relative to posture  initiatives funded through the base budget. Further, the Global Posture  Executive Council did not review or prioritize posture initiatives funded   under ERI relative to posture initiatives funded through DOD\u2019s base  budget. Similarly, as DOD prepared the fiscal year 2018 ERI budget  request, the Global Posture Executive Council did not prioritize EUCOM\u2019s  proposed ERI posture initiatives relative to initiatives funded through  DOD\u2019s base budget. More detailed information about these proposals,  and their potential funding requirements, are classified.\nAccording to officials from the Office of the Under Secretary of Defense  for Policy and the Joint Staff, DOD did not prioritize posture initiatives  funded under ERI against base-budget funded posture initiatives,  because ERI is funded through DOD\u2019s OCO budget\u2014which does not  directly affect the services\u2019 base budgets. However, because it does not  prioritize ERI initiatives against other initiatives funded through the base  budget, DOD lacks an understanding of the relative importance of  initiatives funded under ERI and may begin investing in projects that it  would not support in the absence of funding from DOD\u2019s OCO budget.  For example, Army officials noted that if funding were to become  unavailable in DOD\u2019s OCO budget, the Army is unsure how initiatives  funded under ERI would rank in importance relative to other posture  initiatives funded in its base budget. Consequently, the Army would be  forced to make critical\u2014and potentially costly\u2014decisions quickly and  without a clear idea of which posture initiatives were most important to the  department.\n\n\t\t\tDOD Does Not Estimate Long- Term Sustainment Costs for Some Posture Initiatives Funded Under ERI\n\nIn planning for posture initiatives funded under ERI, EUCOM and the  military services have not fully estimated the long-term sustainment costs  of ERI\u2019s posture initiatives to establish prepositioned equipment and  construct new facilities. DOD\u2019s global defense posture guidance indicates  that, when evaluating potential changes to posture, the combatant  commands should work with the military services to estimate the full cost  of planned posture initiatives, including sustainment costs. DOD\u2019s  guidance on economic analysis also notes the importance of  understanding both the size and timing of costs. Finally, our prior work  has demonstrated that comprehensive cost estimates of current and  future resource requirements are critical to making funding decisions and  assessing program affordability.\nDOD leadership emphasized throughout the fiscal year 2018 budget  review process that the services would need to fund ERI posture   sustainment costs through their respective base budgets, but DOD did  not direct the services and EUCOM to estimate these costs as they would  have under their established processes. Officials from the Office of the  Secretary of Defense, Cost Assessment and Program Evaluation said  that DOD leadership emphasized that the military services would need to  fund all future sustainment costs for ERI projects from their base budgets.\nBased on DOD\u2019s approach for calculating rough order sustainment costs,  we determined that ERI sustainment costs for prepositioned equipment  and construction could be substantial. Army and Air Force officials said  that they were working to identify and incorporate these costs into future  base budget submissions. DOD officials said that we correctly applied  DOD\u2019s approach for estimating sustainment costs, but noted that actual  costs may be lower than the estimated costs, because the military services may not fully fund sustainment. Additionally, officials said that  EUCOM is trying to negotiate burden sharing agreements with host  nations; however, it is unclear whether these negotiations will be  successful or how any resulting agreements would affect DOD\u2019s future  costs.\nWithout comprehensive estimates of the sustainment costs for the  prepositioned equipment and major military construction projects in  Europe, DOD decision makers have been limited in their ability to  evaluate the affordability of these initiatives. Further, in the absence of  these estimates, the services have been limited in their ability to plan for  costs in future budgets, because they have an incomplete understanding  of the magnitude of those costs and of when they are likely to be incurred.\n\n\t\t\tDOD Does Not Communicate to Congress the Future Costs of Enduring ERI Activities Funded through OCO\n\nThe funding plan that DOD submits to Congress for ERI does not contain  information about ERI\u2019s future costs. This is in contrast to the way DOD  submits its funding plan for its base budget, where DOD provides  Congress with cost projections over a 5-year period, by appropriation,  leaving Congress with a better understanding of how and when to  allocate resources. In reviewing the fiscal year 2018 ERI request, the  Director for Cost Assessment and Program Evaluation assessed future  costs associated with posture initiatives funded under ERI. We previously  reported that DOD was not developing enduring requirements funded  through its OCO budget as part of its budget and programming process.  Officials from the Office of the Under Secretary of Defense (Comptroller)  and the Office of the Secretary of Defense, Cost Assessment and  Program Evaluation told us that DOD has not been required to provide  estimates for future OCO costs for ERI to Congress previously. An official  from the Office of the Under Secretary of Defense (Comptroller) told us  that DOD does not plan to provide these future costs to Congress along  with its fiscal year 2018 ERI budget submission.\nAdditionally, in preparing its posture requirements, EUCOM did not  identify assumptions regarding host nation and NATO burden sharing.  For example, officials from the Office of the Under Secretary of Defense  for Policy said that DOD has submitted a request to the NATO Security  Investment Programm\u00e9 for $200 million in funding to build a facility in  Poland to store Army equipment. Officials told us that, as a result, this  construction project was identified as a lesser priority in EUCOM\u2019s fiscal  year 2018 request for funding. A senior Army officer told us that  completion of a facility in Poland was critical to its plans in Europe.  Officials from the U.S. Mission to NATO told us that as of July 2016  NATO had approved funding to complete preliminary architectural and  engineering design for this project. Officials expect additional funding will  be made available in July 2017 to complete final design and site  preparation and the full cost of the project will be approved in early 2019.  However, these officials noted that additional funding beyond what has  been approved by NATO may be required to meet U.S.-specific  requirements. Similarly, EUCOM officials said that they are working to  identify opportunities to defray future costs through host nation   contributions, but it is unclear how much funding\u2014if any\u2014host nations  will provide moving forward.\nCongress has expressed interest in knowing the future costs of enduring  activities being funded through DOD\u2019s OCO budget. The Senate  Appropriations Committee\u2019s report accompanying a bill for DOD\u2019s fiscal  year 2015 appropriations stated that the committee does not have an  understanding of enduring activities funded by the OCO budget. The  committee further noted that there is a potential for risk in continuing to  fund non-contingency-related activities through the OCO budget. Both  GAO\u2019s and other federal standards emphasize that agencies should  provide complete and reliable information on the costs of programs  externally, so that decision makers can make informed decisions when  allocating resources.\nDOD has not provided Congress projections of future costs for posture  initiatives funded under ERI because it is reviewing those requirements  outside of its budget and programming processes, and DOD officials said  that the department is not required to provide this information. As a result,  DOD is limiting congressional visibility into the resources needed to  achieve ERI\u2019s objectives. If DOD does not provide Congress with  projections of the future costs of posture initiatives funded under ERI and  information on its assumptions pertaining to host nation support and  burden sharing, it will continue to impede congressional visibility into the  resources that are needed to fully implement these initiatives.\n\n\tConclusions\n\nRussia\u2019s annexation of Crimea and the subsequent threat of further  aggression led DOD to establish and later expand ERI\u2019s objectives and  enhance posture in Europe to support a new U.S. strategy toward Russia.  DOD has requested funding for these enhancements using its OCO  budget; however, the processes DOD uses to develop its OCO budget  were not designed to plan for and fund long-term, enduring initiatives  such as ERI. By following a separate planning process when funding ERI  with OCO, DOD is taking on risk by not reviewing and prioritizing ERI  posture plans against other posture initiatives, estimating the costs for  sustaining ERI initiatives, and providing Congress with estimates of ERI\u2019s  future costs. DOD risks making decisions that lack a strategic vision in  comparison to other DOD priorities and may fund initiatives that cannot  be sustained over the long term. Furthermore, Congress is likely to face  challenges in assessing DOD\u2019s estimated costs for ERI and the  affordability of initiatives funded under ERI over the long term.\n\n\tRecommendations for Executive Action\n\nTo better ensure that DOD can target resources to its most critical  initiatives and establish priorities across its base budget and overseas  contingency operations budget, we recommend that the Secretary of  Defense prioritize posture initiatives under ERI relative to those funded in  its base budget as part of its established posture-planning processes.  (Recommendation 1)\nTo better enable decision makers to evaluate the full long-term costs of  posture initiatives under ERI, we recommend that the Secretary of  Defense direct EUCOM and the military services to develop estimates for  the sustainment costs of prepositioned equipment and other infrastructure  projects under ERI and ensure that the services plan for these long-term  costs in future budgets. (Recommendation 2)\nTo support congressional decision making, we recommend that the  Secretary of Defense provide to Congress, along with the department\u2019s  annual budget submission, estimates of the future costs for posture  initiatives funded under ERI and other enduring costs that include  assumptions such as those pertaining to the level of host nation support  and burden sharing. (Recommendation 3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of the classified report to DOD for review and  comment. DOD partially concurred with all three of our recommendations,  and we have reproduced DOD\u2019s comments on the classified report in  appendix II. DOD also provided technical comments, which we  incorporated as appropriate.\nDOD partially concurred with our first recommendation to use its  established posture-planning processes to prioritize ERI\u2019s posture  initiatives relative to those funded in DOD\u2019s base budget. In its comments,  DOD stated that it will continue to prioritize the negotiation of international  agreements supporting ERI through the Global Posture Executive  Council, and that an on-going Strategic Review will inform ERI and guide  both EUCOM and the services in their program planning efforts. These  are positive steps. DOD also stated it will adjudicate its ERI-funded force  requirements through its global force management process, adding that it  will continue to resource OCO funds for ERI requirements until there is a  sufficient increase in DOD\u2019s base budget to do so. However, we continue  to believe, as noted in our report, that DOD could improve its planning for  posture initiatives funded under ERI, whether or not they are funded  through OCO, by using DOD\u2019s established posture planning processes.  Although DOD\u2019s global force management process directly affects  overseas military posture in the near term, this process is not designed to  evaluate long-term posture priorities. If DOD does not prioritize the forces  and infrastructure projects funded under ERI against those funded using  the military services\u2019 base budgets, it will continue to lack an  understanding of the relative importance of the posture initiatives funded  under ERI. Without such an understanding, DOD increases the risk that  the services will need to make critical and potentially costly decisions  without a clear idea of which posture initiatives are most critical to the  department.\nDOD partially concurred with our second recommendation that EUCOM  and the military services develop estimates for future sustainment costs  and plan for these costs in future budgets. In its comments, DOD stated  that its components will continue to estimate the sustainment costs for  prepositioned stocks and other infrastructure projects during DOD\u2019s  annual program and budget review process. DOD also commented that  without additional topline base budget funding, some portion of the  associated sustainment costs will need to be financed with OCO funds.  However, as we noted in our report, neither the Army nor the Air Force  has fully estimated these potentially significant future costs, nor had either  service incorporated them into their future budgets. Using OCO funds  would mark a departure from DOD leadership\u2019s emphasis that the  services would need to fund ERI posture sustainment costs through their  respective base budgets. Additionally, not developing robust estimates for  sustaining these initiatives could increase long-term fiscal risk for the  department if DOD shifts more ERI-associated enduring costs into its  OCO budget. In the absence of robust cost estimates and deliberate  planning to address those costs in future budgets, DOD will continue to  be limited in its ability to evaluate the affordability of posture initiatives  funded under ERI, and the military services may not plan adequate  funding to sustain posture investments in Europe.\nDOD partially concurred with our third recommendation, to provide  Congress with estimates of the future costs for posture initiatives funded  under ERI and information on any underlying assumptions, such as those  pertaining to the level of host nation support and burden sharing. In its  comments, DOD stated that it does not currently prepare a formal 5-year  Future Years Defense Program for OCO-related costs. Moreover, DOD  commented that it factors in host nation support and burden sharing when  preparing budget estimates for Congress. However, DOD does not state  whether it will begin to provide Congress future estimates and any  underlying assumptions with its budget submission. It is critical that DOD  increase congressional visibility into ERI\u2019s future costs and its underlying  assumptions to facilitate congressional oversight and reasonably ensure  that initiatives can be sustained over the long-term.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Commander, U.S.  European Command. In addition, the report is available at no charge on  the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (404) 679-1816 or pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found   on the last page of this report. GAO staff who made major contributions to  this report are listed in Appendix III.\n\nAppendix I: Unspecified Minor Military Construction and Facilities Maintenance and Repair Projects Funded under the European Reassurance Initiative in Fiscal Years 2015 through 2017\n\nThe Army and Air Force identified approximately $224 million in  unspecified minor military construction and facilities maintenance and  repair projects (hereafter, minor construction and repair) that were  programmed or obligated for the European Reassurance Initiative (ERI) in  fiscal years 2015 through 2017. This includes $157 million for minor  construction and repair projects identified by the Army and nearly $67  million for minor construction and repair projects identified by the Air  Force. According to U.S. European Command officials, Navy and Marine  Corps construction projects funded under ERI were either major military  construction or exercise-related construction projects. The tables below  do not include Navy and Marine Corps exercise-related construction  projects. Using the data provided by the military services, we compiled  the programmed and obligated funding for these minor construction and  repair projects by fiscal year, country, location, and project name in tables  3 and 4. The information in these tables was provided by U.S. Army  Europe and U.S. Air Force Europe in response to our request for a list of  minor military construction and repair projects. The data provided did not  identify the appropriations used for each project. Accordingly, we have  not conducted a review to examine whether funds were appropriately  used for a given project.\n\nAppendix II: DOD Comments\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Kevin O\u2019Neill, Assistant Director;  Alex Winograd, Analyst-in-Charge; Scott Bruckner, Adrianne Cline, Martin  De Alteriis, Joanne Landesman, Jennifer Leotta, Carol Petersen, Michael  Shaughnessy, and Jena Sinkfield all made key contributions to this  report.","output":"Why GAO Did This Study\n\nIn response to Russia's annexation of Crimea in March 2014, the President announced the ERI, to reassure allies in Europe of U.S. commitment to their security. This initiative has been funded using OCO appropriations, which Congress provides in addition to DOD's base budget appropriations.\nThe Joint Explanatory Statement accompanying the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, included a provision for GAO to review matters related to ERI. In this report, we (1) describe changes in ERI's objectives, funding under ERI, and DOD's posture in Europe since 2014 and (2) evaluate the extent to which DOD's planning processes for posture initiatives funded under ERI prioritize those initiatives, estimate their long-term costs, and communicate their estimated costs to Congress. GAO analyzed DOD strategy documentation, budget and cost analysis guidance, budget justification materials, and cost and obligations data. GAO also interviewed knowledgeable officials within the Office of the Secretary of Defense, U.S. European Command, the military services, and the State Department.\n\nWhat GAO Found\n\nSince 2014, the Department of Defense (DOD) has expanded the European Reassurance Initiative's (ERI) objectives, increased its funding, and planned enhancements to European posture. DOD expanded ERI's objectives from the short-term reassurance of allies and partners to include deterring Russian aggression in the long term and developing the capacity to field a credible combined force should deterrence fail. With respect to funding, DOD will have requested approximately $4.5 billion for ERI's posture enhancements through the end of fiscal year 2017 (about $3.2 billion for fiscal year 2017 alone), and in July 2016 EUCOM identified funding needs for future posture initiatives. The expansion of ERI's objectives has contributed to DOD's enhancing its posture in Europe. Specifically, DOD has increased the size and duration of Army combat unit deployments, planned to preposition Army equipment in Eastern Europe, added new enduring locations (e.g., locations that DOD expects to access and use to support U.S. security interests for the foreseeable future), improved infrastructure, and negotiated new agreements with European nations. As of April 2017, DOD was considering further force enhancements under ERI as part of the department's ERI budget request. DOD also was reviewing whether new enduring locations to support ERI were needed and was considering other improvements to existing infrastructure.\nDOD's process for planning ERI has not established priorities among posture initiatives funded under ERI relative to those in its base budget, nor estimated long-term sustainment costs for some posture initiatives funded under ERI, nor communicated future costs to Congress. ERI is being planned using a separate process from DOD's established processes and is funded from DOD's overseas contingency operations (OCO) appropriations. GAO found several weaknesses:\nLack of prioritization : DOD establishes priorities among ERI posture initiatives but has not evaluated them against base budget initiatives using its posture management process. As a result, DOD lacks an understanding of the relative importance of ERI initiatives and may be investing in projects that it will not continue should OCO funding become unavailable.\nLack of sustainment costs : EUCOM and the military services have not fully estimated the long-term costs to sustain equipment and construction funded under ERI. Based on DOD's approach for calculating rough order sustainment costs, GAO determined that these costs could be substantial. DOD officials said that GAO correctly applied DOD's approach for estimating sustainment costs, but noted that actual costs may be lower, because the military services may not fully fund sustainment. In the absence of comprehensive estimates, DOD has been limited in its ability to assess affordability and plan for future costs.\nNot communicating future costs : DOD limits Congress's visibility into the resources needed to implement ERI and achieve its objectives because it does not include future costs in its ERI budget request.\nThis is a public version of a classified report issued in August 2017. Information on specific posture planning, guidance, and budget estimates that DOD deemed to be classified have been omitted from this report.\n\nWhat GAO Recommends\n\nGAO recommends that DOD prioritize ERI posture initiatives against initiatives in its base budget, develop cost estimates for sustaining initiatives, and communicate future costs to Congress. DOD partially concurred with GAO's recommendations. GAO continues to believe that these recommendations are warranted."}
{"id":"crs_R42838","pid":"crs_R42838_0","input":"\tIntroduction\n\nThis report provides an overview of the federal response to domestic violence\u2014defined broadly to include acts of physical and nonphysical violence against spouses and other intimate partners\u2014through the Family Violence Prevention and Services Act (FVPSA). FVPSA programs are carried out by the U.S. Department of Health and Human Services' (HHS's) Administration for Children and Families (ACF) and the Centers for Disease Control and Prevention (CDC). ACF administers most FVPSA programming, including grants to states, territories, and Indian tribes to support local organizations that provide immediate shelter and related assistance for victims of domestic violence and their children. ACF also provides funding for a national domestic violence hotline that responds to calls, texts, and web-based chats from individuals seeking assistance. The funding for ACF also supports state domestic violence coalitions that provide training for and advocacy on behalf of domestic violence providers within each state, as well as multiple resource centers that provide training and technical assistance on various domestic violence issues for a variety of stakeholders. The CDC funds efforts to prevent domestic violence through a program known as Domestic Violence Prevention Enhancement and Leadership Through Allies (DELTA). The House Committee on Education and Labor and the Senate Health, Education, Labor and Pension (HELP) Committee have exercised jurisdiction over FVPSA.\nThe report begins with background on the definitions of domestic violence and related terms. This background section also describes the risk factors for domestic violence and estimates of the number of victims. The next section of the report addresses the history leading up to the enactment of FVPSA, and the major components of the act: a national domestic violence hotline, support for domestic violence shelters and nonresidential services, and community-based responses to prevent domestic violence. The report then discusses efforts under FVPSA to assist children and youth exposed to domestic violence, including teen dating violence. \nFinally, the report provides an overview of FVPSA's interaction with other federal laws, including the Child Abuse Prevention and Treatment Act (CAPTA) and the Violence Against Women Act of 1994 (VAWA, P.L. 103-322 ). FVPSA was the first federal law to address domestic violence, with a focus on providing shelter and services for survivors; however, since the enactment of VAWA in 1994, the federal response to domestic violence has expanded to involve multiple departments and activities that include investigating and prosecuting crimes and providing additional services to victims and abusers. FVPSA also includes provisions that encourage or require program administrators to coordinate FVPSA programs with related programs and research carried out by other federal agencies. The appendices provide further detail about FVPSA-related definitions and funding, and statistics related to domestic violence victimization.\n\n\tBackground\n\n\t\tDefinitions\n\nThe FVPSA statute focuses on \"family violence,\" which can involve many types of family relationships and forms of violence. FVPSA defines the term as acts of violence or threatened acts of violence, including forced detention, that result in physical injury against individuals (including elderly individuals) who are legally related by blood or marriage and\/or live in the same household. This definition focuses on physical forms of violence and is limited to abusers and victims who live together or are related by blood or marriage; however, researchers and others generally agree that family violence is broad enough to include nonphysical violence and physical violence that occurs outside of an intimate relationship. Such a definition can encompass a range of scenarios\u2014rape and other forms of sexual violence committed by a current or former spouse or intimate partner who may or may not live in the same household; stalking by a current or former spouse or partner; abuse and neglect of elderly family members and children; and psychologically tormenting and controlling a spouse, intimate partner, or other member of the household. \nWhile family violence can encompass child abuse and elder abuse, FVPSA programs focus on individuals abused by their spouses and other intimate partners. Further, FVPSA references the terms \"domestic violence\" and \"dating violence\" as they are defined under VAWA, and discusses these terms alongside family violence. (The FVPSA regulations also define these terms as generally consistent with VAWA, but recognize that the term \"dating violence\" encompasses additional acts.) The VAWA definition of \"domestic violence\" encompasses forms of intimate partner violence\u2014involving current and former spouses or individuals who are similarly situated to a spouse, cohabiting individuals, and parents of children in common\u2014that are outlawed under state or local laws. VAWA defines \"dating violence\" as violence committed by a person who has been in a social relationship of a romantic or intimate nature with the victim; and where the existence of such a relationship is determined based on consideration of the length of the relationship, the type of relationship, and the frequency of interaction between the individuals involved. ( Appendix A provides a summary of these and related terms as they are defined in statute.)\nThe federal government responds to child abuse and elder abuse through a variety of separate programs. Federal law authorizes and funds a range of activities to prevent and respond to child abuse and neglect under Titles IV-B and IV-E of the Social Security Act and CAPTA. Separately, the Older Americans Act (OAA), the major federal vehicle for the delivery of social and nutrition services for older persons, has authorized projects to address elder abuse. In addition, the OAA authorizes, and the federal government funds, the National Center on Elder Abuse . The center provides information to the public and professionals regarding elder abuse prevention activities, and provides training and technical assistance to state elder abuse agencies and to community-based organizations. The Social Services Block Grant, as amended, also includes elder justice provisions, including several grant programs and other activities to promote the safety and well-being of older Americans. \n\n\t\tRisk Factors for Domestic Violence\n\nThe evidence base on domestic violence does not point strongly to any one reason that it is perpetrated, in part because of the difficulty in measuring social conditions (e.g., status of women, gender norms, and socioeconomic status, among others) that can influence this violence. Still, the research literature has identified two underlying influences: the unequal position of women and the normalization of violence, both in society and some relationships. Certain risk variables are often associated with\u2014but not necessarily the causes\u2014of domestic violence. Such factors include a pattern of problem drinking, poverty and economic conditions, and early parenthood. For example, substance abuse often precedes incidents of domestic violence. A U.S. Department of Justice (DOJ) study found that substance abuse tracked closely with homicide, attempted homicide, or the most severe violent incidents of abuse perpetrated against an intimate partner. Among men who killed or attempted to kill their intimate partners, over 80% were problem drinkers in the year preceding the incident. \n\n\t\tProfiles of Survivors\n\nEstimating the number of individuals involved in domestic violence is complicated by the varying definitions of the term and methodologies for collecting data. For example, some research counts a boyfriend or girlfriend as a family relationship while other research does not; still other surveys are limited to specific types of violence and whether violence is reported to police. Certain studies focus more broadly on various types of violence or more narrowly on violence committed among intimate partners. In addition, domestic violence is generally believed to be underreported. Survivors may be reluctant to disclose their victimization because of shame, embarrassment, fear, or belief that they may not receive support from law enforcement. \nOverall, two studies\u2014the National Intimate Partner and Sexual Violence Survey (NISVS) and the National Crime Victimization Survey (NCVS)\u2014show that violence involving intimate partners is not uncommon, and that both women and men are victimized sexually, physically, and psychologically. Women tend to first be victimized at a younger age than men. Further, minority women and men tend to be victimized at higher rates than their white counterparts.\n\n\t\t\tNational Intimate Partner and Sexual Violence Survey\n\nNISVS provides information on the prevalence of domestic violence among individuals during their lifetimes and in the past 12 months prior to the survey. The CDC conducted the study annually in each of 2010-2012 and in 2015. The survey examines multiple aspects of intimate partner violence\u2014including contact sexual violence, which encompasses rape and other acts; physical violence, including slapping, kicking, and more severe acts like being burned; and stalking, which is a pattern of harassing or threatening tactics. Select findings from the study are summarized in Table B-1 . Generally, the 2015 survey found that women and men were victimized at about the same rate over their lifetime. Over one-third (36%) of women and more than one-third (34%) of men in the United States reported that they experienced sexual violence, physical violence, and\/or stalking by an intimate partner in their lifetimes. However, women were more likely than men to experience certain types of intimate partner violence, including contact sexual violence (18% vs. 8%), stalking (10% vs. 2%), and severe physical violence (21% vs. 15%). Women were also much more likely than men to report an impact related to partner violence over their lifetimes (25% vs 11%). Such impacts included having injuries, being fearful, being concerned for their safety, missing work or school, needing medical care, or needing help from law enforcement.\nWomen and men of color, particularly individuals who are multiracial, tended to experience domestic violence at higher lifetime rates. As reported in the 2010 NISVS, women who are multiracial (57%) were most likely to report contact sexual violence, physical violence, and\/or stalking by an intimate partner, followed by American Indian or Alaska Native women (48%), black women (45%), white women (37%), Hispanic women of any race (34%), and Asian or Pacific Islander women (18%). Among men, those who were black (40%) and multiracial (39%) were more likely to experience intimate partner violence than white (32%) and Hispanic (29%) men; estimates were not reported for American Indian or Alaska Native or Asian or Pacific Islander males because the data were unreliable.\n\n\t\t\t\tSpecial Populations\n\nThe 2010 NISVS examined the prevalence of this violence based on how adult respondents identified their sexual orientation (heterosexual or straight, gay or lesbian, or bisexual). The study found that overall, bisexual women had significantly higher lifetime prevalence of sexual violence, physical violence, and stalking by an intimate partner when compared to both lesbian and heterosexual women. \nThe 2010 NISVS also surveyed women on active duty in the military and the wives of active duty men. These women were asked to respond to whether they experienced intimate partner violence over their lifetime and during the four years prior to the survey. The study found that the majority of women affiliated with the military were significantly less likely to be victims of intimate partner violence compared to women in the general population. However, active duty women who were deployed during the three years prior to the survey were significantly more likely to have experienced intimate partner violence during this period and over their lifetime compared to active duty women who were not deployed. Among those who deployed, 12% had been victims of physical violence, rape, or stalking by an intimate partner during the past three years and 35% had experienced victimization over their lifetime. This is compared to 10% (during the past three years) and 28% (lifetime prevalence) of women who had not deployed. \n\n\t\t\tNational Crime Victimization Survey\n\nThe National Crime Victimization Survey is a survey coordinated by DOJ's Bureau of Justice Statistics within the Office of Justice Programs. NCVS surveys a nationally representative sample of households. It is the primary source of information on the characteristics of criminal nonfatal victimization and on the number and types of crimes that may or may not be reported to law enforcement authorities. NCVS surveyed respondents about whether they have been victims of a violent crime, including rape\/sexual assault, robbery, aggravated assault, and simple assault; and for victims, the relationship to the perpetrator. The survey reports the share of crimes that are committed by an intimate partner (current or former spouses, boyfriends, or girlfriends), other family members, friends\/acquaintances, or strangers. The survey found that nearly 600,000 individuals were victims of intimate partner violence in 2016. An earlier NCVS study examined changes in the rate of intimate partner violence over time. The study found that the number of female victims of domestic violence declined from 1.8 million in 1994 to about 621,000 in 2011. Over this period, the rate of serious intimate partner violence\u2014rape or sexual assault, robbery, and aggravated assault\u2014declined by 72% for females and 64% for males. Approximately 4% of females and 8% of males who were victimized by intimate partners were shot at, stabbed, or hit with a weapon over the period from 2002 through 2011.\n\n\t\tEffects of Domestic Violence\n\nDomestic violence is associated with multiple negative outcomes for victims, including mental and emotional distress and health effects. The 2015 NISVS study found that these effects appeared to be greater for women. About 1 in 4 women (25.1%) and 1 in 10 men (10.9%) who experienced sexual violence, physical violence, and\/or stalking by an intimate partner in their lifetime reported at least one impact as a result of this violence, including being fearful; being concerned for their safety or having an injury or need for medical care; needing help from law enforcement; missing at least one day of work; or missing at least one day of school. \n\n\tDomestic Violence: Development of the Issue\n\nEarly marriage laws in the United States permitted men to hit their wives, and throughout much of the 20 th century family violence remained a hidden problem. Victims, mostly women, often endured physical and emotional abuse in silence. These victims were hesitant to seek help because of fear of retaliation by their spouses\/partners and concerns about leaving their homes, children, and neighborhoods behind. Women were worried that they would be perceived as deviant or mentally unstable or would be unable to get by financially. In addition, victims were often blamed for their abuse, based on stereotypical notions of women (e.g., demanding, aggressive, and frigid, among other characteristics). \nIn the 1960s, shelters and services for victims of domestic violence became available on a limited basis; however, these services were not always targeted specifically to victims per se. Social service and religious organizations provided temporary housing for displaced persons generally, which could include homeless and abused women. In addition, a small number of organizations provided services to abused women who were married to alcoholic men. Beginning in the 1970s, the \"battered women's movement\" began to emerge; it sought to heighten awareness of women who were abused by spouses and partners. The movement developed from influences both abroad and within the United States. In England, the first battered women's shelter, Chiswick Women's Aid, galvanized support to establish similar types of services. In addition, the feminist movement in the United States increasingly brought greater national attention to the issue. \nAs part of the battered women's movement, former battered women, civic organizations, and professionals opened shelters and began to provide services to victims, primarily abused women and their children. Shelters were most often located in old homes, at Young Women's Christian Association (YWCA) centers, or housed in institutional settings, such as motels or abandoned orphanages. \nIn addition to providing shelter, groups in the battered women's movement organized coalitions to combine resources for public education on the issue, support groups for victims, and services that were lacking. For example, the YWCA and Women in Crisis Can Act formed a hotline for abused women in Chicago. These and other groups convened the Chicago Abused Women's Coalition to address concerns about services for battered women. The coalition spoke to hundreds of community groups and professional agencies about battered women's stories, explained the significance of violence, detailed how violence becomes sanctioned, dispelled common myths, and challenged community members to provide funding and other support to assist abused women. The coalition mobilized around passage of a state law to protect women and require police training on domestic violence, among other accomplishments.\nBased on a survey in the late 1970s, 111 shelters were believed to be operating across all states and in urban, suburban, and rural communities. These shelters generally reported that they provided a safe and secure environment for abused women and their children, emotional support and counseling for abused women, and information on legal rights and assistance with housing, among other supports. Approximately 90 of these shelters fielded over 110,000 calls for assistance in a given year. \nAround this same time, the public became increasingly aware of domestic violence. In 1983, Time magazine published an article, \"Wife Beating: The Silent Crime,\" as part of a series of articles on violence in the United States. The article stated: \"There is nothing new about wife beating\u2026. What is new is that in the U.S. wife beating is no longer widely accepted as an inevitable and private matter. The change in attitude, while far from complete, has come about in the past 10 to 15 years as part of the profound transformation of ideas about the roles and rights of women in society.\" In 1984, then-U.S. Attorney General Benjamin Civiletti established the Department of Justice Task Force on Family Violence, which issued a report examining the scope and impact of domestic violence in America. The report also provided recommendations to improve the nation's law enforcement, criminal justice, and community response to offenses that were previously considered \"family\u00a0matters.\" \n\n\t\tCongressional Response\n\nLargely as a result of efforts by advocates and the Justice Department, Congress began to take an interest in domestic violence issues. The House Select Committee on Children, Youth, and Families conducted a series of hearings in 1983 and 1984 on child abuse and family violence throughout the country, to understand the scope of family violence better and explore possible federal responses to the problem. The committee heard from victims, domestic violence service providers, researchers, law enforcement officials, and other stakeholders about the possible number of victims and the need for additional victim services. In 1984, the Family Violence Prevention and Services Act (FVPSA) was enacted as Title III of the Child Abuse Amendments of 1984 ( P.L. 98-457 ). Title I of that law amended the Child Abuse Prevention and Treatment Act (CAPTA), and most of the seven subsequent reauthorizations of FVPSA have occurred as part of legislation that reauthorized CAPTA. This includes the most recent reauthorization ( P.L. 111-320 ), which extended funding authority for FVPSA through FY2015. As discussed later in this report, Congress subsequently broadened the federal response to domestic violence with the enactment of the Violence Against Women Act of 1994.\n\n\tFVPSA Overview\n\nAs originally enacted, FVPSA included both a social service and law enforcement response to preventing and responding to domestic violence. Grants were authorized for states, territories, and Indian tribes to establish and expand programs to prevent domestic violence and provide shelter for victims. In addition, the law authorized grants to provide training and technical assistance to law enforcement personnel, and this funding was ultimately used to train law enforcement personnel throughout the country. From FY1986 through FY1994, funding for these grants was transferred from HHS to DOJ, which carried out the grants under the Office for Victims of Crime (OVC). DOJ funded 23 projects to train law enforcement officers on domestic violence policies and response procedures, with approximately 16,000 law enforcement officers and other justice system personnel from 25 states receiving this training. The training emphasized officers as participants working with other agencies, victims, and community groups in a coordinated response to domestic violence. Over time, FVPSA was expanded to include support of other activities, including state domestic violence coalitions and grants that focus on prevention activities; however, authorization of funding for FVPSA law enforcement training grants was discontinued in 1992, just before the Violence Against Women Act of 1994 authorized a similar purpose. Specifically, VAWA authorizes training and support of law enforcement officials under the Services, Training, Officers, and Prosecutors (STOP) Grant program. \nAs outlined in Figure 1 , FVPSA currently authorizes three major activities: domestic violence prevention activities under a program known as DELTA; the national domestic violence hotline; and domestic violence shelters, services, and program support. The CDC administers the DELTA program. The Family and Youth Services Bureau (FYSB) in HHS\/ACF administers funding for the hotline and the domestic violence shelters and support.\n\n\tFunding\n\nAuthorization of funding under FVPSA has been extended multiple times, most recently through FY2015 by the CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ). Congress has appropriated funding in subsequent years. Table 1 includes actual funding from FY1993 to FY2018, which includes reductions in some years, and appropriated funding for FY2019 for the three major FVPSA activities. Congress appropriated just over $180 million for FY2019, the highest total to date. \n\n\tDomestic Violence Prevention Enhancement and Leadership Through Alliances (DELTA)34\n\nSince 1994, FVPSA has authorized the HHS Secretary to award cooperative agreements to state domestic violence coalitions that coordinate local community projects to prevent domestic violence, including such violence involving youth. Congress first awarded funding for prevention activities in FY1996 under a pilot program carried out by the Centers for Disease Control and Prevention. The pilot program was formalized in 2002 under a program now known as the Domestic Violence Prevention Enhancement and Leadership Through Alliances (DELTA) program. The focus of DELTA is preventing domestic violence before it occurs, rather than responding once it happens or working to prevent its recurrence. The program has had four iterations:\nDELTA, which was funded from FY1996 through FY2012 and involved 14 states; DELTA Prep, which extended from FY2008 through FY2012 and involved 19 states that had not received the initial DELTA funds; DELTA FOCUS, which extended from FY2013 through FY2017 and involved 10 states, all of which had previously received funding under DELTA or DELTA Prep; and DELTA Impact, which began with FY2018 and involves 10 states, all of which except one has previously received DELTA funding. \nAs originally implemented, the program provided funding and technical assistance to 14 state domestic violence coalitions to support local efforts to carry out prevention strategies and work at the state level to oversee these strategies. Local prevention efforts were referred to as coordinated community responses (CCRs). The CCRs were led by domestic violence organizations and other stakeholders across multiple sectors, including law enforcement, public health, and faith-based organizations. For example, the Michigan Coalition Against Domestic and Sexual Violence supported two CCRs\u2014the Arab Community Center for Economic and Social Services and the Lakeshore Alliance Against Domestic and Sexual Violence\u2014that focused on faith-based initiatives. Both CCRs held forums that provided resources and information about the roles of faith leaders in preventing the first-time occurrence of domestic violence. The 14 state domestic violence coalitions developed five- to eight-year domestic violence prevention plans known as Intimate Partner Violence Prevention Plans. These plans were developed with multiple stakeholders, and they discuss the strategies needed to prevent first-time perpetration or victimization and to build the capacity to implement these strategies. The CDC issued a brief that summarizes the plans and identifies the successes and challenges for state domestic violence coalitions in supporting and enhancing intimate partner violence prevention efforts. Overall, the report found that states improved their capacity to respond to intimate partner violence through evidence-based planning and implementation strategies.\n\n\t\tDELTA Prep\n\nDELTA Prep was a project that extended from FY2008 through FY2012, and was a collaborative effort among the CDC, the CDC Foundation, and the Robert Wood Johnson Foundation. Through DELTA Prep, the CDC extended the DELTA Program to 19 states that did not receive the initial DELTA funds. State and community leaders in these other states received training and assistance in building prevention strategies, based on the work of the 14 state domestic violence coalitions that received DELTA funds. DELTA Prep states integrated primary prevention strategies into their work and the work of their partners, and built leadership for domestic violence prevention in their states. \n\n\t\tDELTA FOCUS\n\nDELTA FOCUS (Focusing on Outcomes for Communities United within States) continued earlier DELTA work. From FY2013 through FY2017, DELTA FOCUS funded 10 state domestic violence coalition grantees to implement and evaluate strategies to prevent domestic violence. Funding was provided by the coalitions to 18 community response teams that engaged in carrying out these strategies. DELTA FOCUS differed from DELTA and DELTA Prep by placing greater emphasis on implementing prevention strategies rather than building capacity for prevention. DELTA FOCUS also put more emphasis on evaluating the program to help build evidence about effective interventions. \n\n\t\tDELTA Impact\n\nDELTA Impact, which began in FY2018, provides funding to 10 state domestic violence coalitions. This grant supports community response teams in decreasing domestic violence risk factors and increasing protective factors by implementing prevention activities that are based on the best available evidence. Grantees are implementing and evaluating policy efforts under three broad strategies to address domestic violence prevention: (1) engaging influential adults and peers, including by engaging men and boys as allies in prevention; (2) creating protective environments, such as improving school climates and safety; and (3) strengthening economic supports for families.\n\n\tNational Domestic Violence Hotline41\n\nAs amended by the Violence Against Women Act (VAWA) of 1994, FVPSA directs the HHS Secretary to award a grant to one or more private entities to operate a 24-hour, national, toll-free hotline for domestic violence. Since 1996, HHS has competitively awarded a cooperative agreement to the National Council on Family Violence in Texas to operate the National Domestic Violence Hotline (hereinafter, hotline). The agreement was most recently awarded for a five-year period that extends through the end of FY2020.\nFVPSA requires that the hotline provide information and assistance to adult and youth victims of domestic violence, family and household members of victims of such violence, and \"persons affected by victimization.\" This includes support related to domestic violence, children exposed to domestic violence, sexual assault, intervention programs for abusive partners, and related issues. As required under FVPSA, the hotline carries out multiple activities:\nIt employs, trains, and supervises personnel to answer incoming calls; provides counseling and referral services; and directly connects callers to service providers. In FY2018, the hotline received about 23,000 calls each month and responded to 74% of all calls. It also had an average of nearly 4,000 online chats on a monthly basis. HHS reported that some calls were missed due to increased media coverage of domestic violence, increased Spanish chat services, and forwarding of calls from local domestic violence hotlines due to severe weather. It maintains a database of domestic violence services for victims throughout the United States, including information on the availability of shelter and services. It provides assistance to meet the needs of special populations, including underserved populations, individuals with disabilities, and youth victims of domestic violence and dating violence. The hotline provides access to personnel for callers with limited English proficiency and persons who are deaf and hard of hearing. \nSince 2007, the hotline has operated a separate helpline for youth victims of domestic violence, the National Dating Abuse Helpline (known as loveisrespect.org), which is funded through the appropriation for the hotline. This helpline offers real-time support primarily from peer advocates trained to provide support, information, and advocacy to those involved in abusive dating relationships, as well as others who support victims. In FY2018, the helpline received a monthly average of about 2,400 calls; 4,000 online chats; and nearly 1,300 texts.\nA 2019 study of these two lines examined a number of their features, including who contacts the lines, the study needs and demographic characteristics of those contacts, how contacts reach the lines, and the type of support they receive. The study found that nearly half (48%) the contacts were victims\/survivors and another 39% did not identify themselves. The remaining contacts were from family\/friends, abusers, and service providers. According to the study, the service most commonly provided to contactors was emotional support and contactors valued this support highly. The National Domestic Violence Hotline has collaborated with the National Indigenous Women's Resource Center to develop and fund the StrongHearts Native Helpline for Native American survivors of domestic abuse. The helpline uses the technology and infrastructure of the hotline, and draws from the National Indigenous Women's Resource Center to provide Native-centered, culturally appropriate services for survivors and others. \n\n\tOverview of Shelter, Services, and Support\n\nFunding for shelter, support services, and program support (hereinafter, shelter and services) encompasses multiple activities: formula grants to states and territories; grants to tribes; state domestic violence coalitions; national and special issue resource centers, including those that provide technical assistance; specialized services for abused parents and children exposed to domestic violence; and program support and administration. Figure 2 shows FY2018 allocations for activities included as part of shelter, support services, and program support. \nThe following sections of the report provide further information about grants to states, territories, and tribes; and state domestic violence coalitions. In addition, the report provides information about national and special issue resource centers. The section of the report on services for children and youth exposed to domestic violence includes information about FY2018 and earlier support for specialized services for abused parents and children exposed to domestic violence.\n\n\t\tFormula Grants to States, Territories, and Tribes\n\nNo less than 70% of FVPSA appropriations for shelter and services must be awarded to states and territories through a formula grant. The formula grant supports the establishment, maintenance, and expansion of programs and projects to prevent incidents of domestic violence and to provide shelter and supportive services to victims of domestic violence. Each of the territories\u2014Guam, American Samoa, U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands\u2014receives no less than one-eighth of 1% of the appropriation, or, in combination, about one-half of 1% of the total amount appropriated. Of the remaining funds, states (including the District of Columbia and Puerto Rico) receive a base allotment of $600,000 and additional funding based on their relative share of the U.S. population. Appendix C provides formula funding for FY2018 and FY2019 by state and territory. \nIn addition, no less than 10% of FVPSA appropriations for shelter and services are awarded to Indian tribes. Indian tribes have the option to authorize a tribal organization or a nonprofit private organization to submit an application for and to administer FVPSA funds. \nIn applying for grant funding, states and territories (hereinafter, states) must make certain assurances pertaining to the use and distribution of funds and to victims. Nearly all of the same requirements that pertain to states and territories also pertain to tribes.\n\n\t\t\tSelected Grant Conditions Pertaining to Use and Distribution of Funds49\n\nStates may use up to 5% of their grant funding for state administrative costs. The remainder of the funds are used to make subgrants to eligible entities for community-based projects (hereinafter, subgrantees) that meet the goals of the grant program. No less than 70% of subgrant funding is to be used to provide temporary shelter and related supportive services, which include the physical space in which victims reside as well as the expenses of running shelter facilities. No less than 25% of subgrant funding is to be used for the following supportive services and prevention services: \nassisting in the development of safety plans, and supporting efforts of victims to make decisions about their ongoing safety and well-being; providing individual and group counseling, peer support groups, and referrals to community-based services to assist victims and their dependents in recovering from the effects of domestic violence; providing services, training, technical assistance, and outreach to increase awareness of domestic violence and increase the accessibility of these services; providing culturally and linguistically appropriate services; providing services for children exposed to domestic violence, including age-appropriate counseling, supportive services, and services for the nonabusing parent that support that parent's role as caregiver (which may include services that work with the nonabusing parent and child together); providing advocacy, case management services, and information and referral services concerning issues related to domestic violence intervention and prevention, including providing assistance in accessing federal and state financial assistance programs; legal advocacy; medical advocacy, including provision of referrals for appropriate health care services (but not reimbursement for any health care services); assistance in locating and securing safe and affordable permanent housing and homelessness prevention services; and transportation, child care, respite care, job training and employment services, financial literacy services and education, financial planning, and related economic empowerment services; providing parenting and other educational services for victims and their dependents; and providing prevention services, including outreach to underserved populations. \nStates must also provide assurances that they will consult with and facilitate the participation of state domestic violence coalitions in planning and monitoring the distribution of grants and administering the grants (the role of state domestic violence coalitions is subsequently discussed further). States must describe how they will involve community-based organizations, whose primary purpose is to provide culturally appropriate services to underserved populations, including how such organizations can assist states in meeting the needs of these populations. States must further provide assurances that they have laws or procedures in place to bar an abuser from a shared household or a household of the abused persons, which may include eviction laws or procedures, where appropriate. Such laws or procedures are generally enforced by civil protection orders, or restraining orders to limit the perpetrators' physical proximity to the victim.\nIn funding subgrantees, states must \"give special emphasis\" to supporting community-based projects of \"demonstrated effectiveness\" carried out by nonprofit organizations that operate shelters for victims of domestic violence and their dependents; or that provide counseling, advocacy, and self-help services to victims. States have discretion in how they allocate their funding, so long as they provide assurances that grant funding will be distributed equitably within the state and between urban and rural areas of the state.\nSubgrantees that receive funding must provide a nonfederal match\u2014of not less than $1 for every $5 of federal funding\u2014directly from the state or through donations from public or private entities. The matching funds can be in cash or in kind. Further, federal funds made available to a state must supplement, and not supplant, other federal, state, and local public funds expended on services for victims of domestic violence.\nStates have two years to spend funds. For example, funds allotted for FY2019 may be spent in FY2019 or FY2020. The HHS Secretary is authorized to reallocate the funds of a state, by the end of the sixth month of a fiscal year that funds are appropriated, if the state fails to meet the requirements of the grant. The Secretary must notify the state if its application for funds has not met these requirements. State domestic violence coalitions are permitted to help determine whether states are in compliance with these provisions. States are allowed six months to correct any deficiencies in their application. \n\n\t\t\tSelected Grant Conditions Pertaining to Victims54\n\nIn FY2017, programs funded by grants for states and tribes supported over 240,000 clients in residential settings and more than 1 million clients in nonresidential settings. Nearly 93% of clients reported that they had improved knowledge of planning for their safety. Also in FY2017, programs were not able to meet 226,000 requests for shelter. \nThe grant for states addresses the individual characteristics and privacy of participants and shelters. Both states and subgrantees funded under FVPSA may not deny individuals from participating in support programs on the basis of disability, sex, race, color, national origin, or religion (this also applies to FPVSA-funded activities generally). In addition, states and subgrantees may not impose income eligibility requirements on individuals participating in these programs. Further, states and subgrantees must protect the confidentiality and privacy of victims and their families to help ensure their safety. These entities are prohibited from disclosing any personally identifying information collected about services requested, and from revealing personally identifying information without the consent of the individual, as specified in the law. If disclosing the identity of the individual is compelled by statutory or court mandate, states and subgrantees must make reasonable attempts to notify victims, and they must take steps to protect the privacy and safety of the individual. \nStates and subgrantees may share information that has been aggregated and does not identify individuals, and information that has been generated by law enforcement and\/or prosecutors and courts pertaining to protective orders or law enforcement and prosecutorial purposes. In addition, the location of confidential shelters may not be made public, except with written authorization of the person(s) operating the shelter. Subgrantees may not provide direct payment to any victim of domestic violence or the dependent(s) of the victim. Further, victims must be provided shelter and services on a voluntary basis. In other words, providers cannot compel or force individuals to come to a shelter, participate in counseling, etc.\n\n\t\tState Domestic Violence Coalitions56\n\nSince 1992, FVPSA has authorized funding for state domestic violence coalitions (SDVCs). A SDVC is defined under the act as a statewide nongovernmental, nonprofit private domestic violence organization that (1) has a membership that includes a majority of the primary-purpose domestic violence service providers in the state; (2) has board membership that is representative of domestic violence service providers, and that may include representatives of the communities in which the services are being provided; (3) has as its purpose to provide education, support, and technical assistance to such service providers so they can maintain shelter and supportive services for victims of domestic violence and their dependents; and (4) serves as an information clearinghouse and resource center on domestic violence for the state and supports the development of policies, protocols, and procedures to enhance domestic violence intervention and prevention in the state. \nFunding for SDVCs is available for each of the 50 states, the District of Columbia, Puerto Rico, and four territories (American Samoa, Guam, Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands). Each jurisdiction has one SDVC, and these coalitions are designated by HHS. Funding is divided evenly among these 56 jurisdictions. SDVCs must use FVPSA funding for specific activities, as follows:\nworking with local domestic violence service programs and providers of direct services to encourage appropriate and comprehensive responses to domestic violence against adults or youth within the state, including providing training and technical assistance and conducting needs assessments; participating in planning and monitoring the distribution of subgrants and subgrant funds within the state under the grant program for states and territories; working in collaboration with service providers and community-based organizations to address the needs of domestic violence victims and their dependents who are members of racial and ethnic minority populations and underserved populations; collaborating with and providing information to entities in such fields as housing, health care, mental health, social welfare, or business to support the development and implementation of effective policies, protocols, and programs that address the safety and support needs of adult and youth victims of domestic\u00a0violence; encouraging appropriate responses to cases of domestic violence against adult and youth victims, including by working with judicial and law enforcement agencies; working with family law judges, criminal court judges, child protective service agencies, and children's advocates to develop appropriate responses to child custody and visitation issues in cases of children exposed to domestic violence, and in cases where this violence is concurrent with child abuse; providing information to the public about prevention of domestic violence and dating violence, including information targeted to underserved populations; and collaborating with Indian tribes and tribal organizations (and Native Hawaiian groups or communities) to address the needs of Indian (including Alaska Native) and Native Hawaiian victims of domestic dating violence, as applicable in the state.\n\n\t\tTraining and Technical Assistance Centers\n\nAs originally enacted, FVPSA authorized a national information and research clearinghouse on the prevention of domestic violence. As part of the act's reauthorization in 1992, the language about the clearinghouse was struck and replaced with authorization for resource centers on domestic violence, including special issue resource centers to address key areas of domestic violence. Reauthorization of FVPSA in 2010 added authorization for a national resource center on American Indian women and three culturally specific resources, which had previously been funded through discretionary funds. The 2010 law also authorized special issue resource centers that provide training and technical assistance on domestic violence intervention and prevention topics and state resource centers to address disparities in domestic violence in states with high proportions of Indian (including Alaska Native) or Native Hawaiian populations. \nIn total, HHS administers grants for 14 training and technical assistance centers that are funded by the FVPSA appropriation for shelter, services, and support. The purpose of these resource centers is to provide information, training, and technical assistance on domestic violence issues. This assistance is provided by nonprofit organizations and other entities to multiple stakeholders\u2014individuals, organizations, governmental entities, and communities\u2014so that they can improve their capacity for preventing and responding to domestic violence. \n\n\tTeen Dating Violence\n\n\t\tBackground\n\nTeenagers may be exposed to violence in their dating relationships. The CDC reports that on an annual basis, 1 in 9 female teens and 1 in 13 male teens experienced physical dating violence involving a person who hurts or tries to hurt a partner by hitting, kicking, or using another type of physical force. Further, over 1 in 7 female teens and nearly 1 in 19 male teens reported experiencing sexual dating violence in the last year, which includes forcing or attempting to force a partner to take part in a sexual act, sexual touching, or a nonphysical sexual event (e.g., sexting) when the partner does not or cannot consent. \nThe FVPSA statute references dating violence throughout and uses the definition of \"dating violence\" that is in VAWA. The term is defined as violence committed by a person who is or has been in a social relationship of a romantic or intimate nature with the victim, and where the existence of the relationship is determined based on the length, type, and frequency of interaction between the persons in it. \nDomestic violence shelters and supportive services funded by FVPSA are intended for adult victims and their children if they accompany the adult into shelter. The law does not explicitly authorize supports for youth victims of dating violence who are unaccompanied by their parents; however, the law does not limit eligibility for shelter and services based on age. Access to domestic violence shelters and supports for teen victims, including protective orders against abusers, varies by state. The primary source of support for teen victims under FVPSA is provided via the National Domestic Violence Hotline. The hotline includes the loveisrespect helpline and related online resources. Youth victims can call, chat, or text with peer advocates for support. The loveisrespect website includes a variety of materials that address signs of abuse and resources for getting help. \n\n\tChildren Exposed to Domestic Violence\n\n\t\tBackground\n\nFVPSA references children exposed to domestic violence, but does not define related terminology. According to the research literature, this exposure can include children who see and\/or hear violent acts, are present for the aftermath (e.g., seeing bruises on a mother's body, moving to a shelter), or live in a house where domestic violence occurs, regardless of whether they see and\/or hear the violence. A frequently cited estimate is that between 10% and 20% of children (approximately 7 million to 10 million children) are exposed to adult domestic violence each year. The literature about the impact of domestic violence is evolving. The effects of domestic violence on children can range from little or no effect to severe psychological harm and physical effects, depending on the type and severity of abuse and protective factors, among other variables. \nMultiple FVPSA activities address children exposed to domestic and related violence:\nOne of the purposes of the formula grant program for states is to provide specialized services (e.g., counseling, advocacy, and other assistance) for these children. The National Resource Center on Domestic Violence is directed to offer domestic violence programs and research that include both victims and their children exposed to domestic violence. The national resource center that addresses mental health and trauma issues is required to address victims of domestic violence and their children who are exposed to this violence. State domestic violence coalitions must, among other activities, work with the legal system, child protective services, and children's advocates to develop appropriate responses to child custody and visitation issues in cases involving children exposed to domestic violence.\nIn addition to these provisions, the FVPSA statute authorizes funding for specialized services for abused parents and their children. FVPSA activities for children exposed to domestic violence have also been funded through discretionary funding and funding leveraged through a semipostal stamp.\n\n\t\tSpecialized Services for Abused Parents and Their Children\/Expanding Services for Children and Youth Exposed to Domestic Violence69\n\nSince 2003, FVPSA has specified that funding must be set aside for activities to address children exposed to domestic violence if the appropriation for shelter, victim services, and program support exceeds $130 million. Under current law, if funding is triggered, HHS must first reserve not less than 25% of funding above $130 million to make grants to a local agency, nonprofit organization, or tribal organization with a demonstrated record of serving victims of domestic violence and their children. These funds are intended to expand the capacity of service programs and community-based programs to prevent future domestic violence by addressing the needs of children exposed to domestic violence. Funding has exceeded $130 million in FY2010 and FY2014 through FY2019.\nIn FY2010, funding for shelter and services was just over $130 million. HHS reserved the excess funding as well as FVPSA discretionary funding (under shelter, victim services, and program support) to fund specialized services for children through an initiative known as Expanding Services for Children and Youth Exposed to Domestic Violence. HHS also used discretionary money to fund the initiative in FY2011 and FY2012. Total funding for the initiative was $2.5 million. This funding was awarded to five grantees\u2014four state domestic violence coalitions and one national technical assistance provider\u2014to expand supports to children, youth, and parents exposed to domestic violence and build strategies for serving this population. For example, the Alaska Network on Domestic Violence and Sexual Assault, the state domestic violence coalition for Alaska, used the funding to improve coordination between domestic violence agencies and the child welfare system. Their work involved developing an integrated training curriculum and policies, and creation of a multidisciplinary team of child welfare and domestic violence stakeholders in four communities.\nFunding again exceeded $130 million in each of FY2014 through FY2019, thereby triggering the set-aside. In FY2014 and FY2015, HHS directed the extra funding for shelter, services, and support. In FY2016 through FY2018, HHS provided funding for specialized services for abused parents and their children and expects to continue such funding for FY2019. Of the approximately $20 million in excess funding for each of these three years, approximately $5.0 million to $5.6 million was allocated in each year for these services. This recent funding has been allocated to 12 grantees to provide direct services under the grant, Specialized Services for Abused Parents and their Children (SSPAC). Grantees include domestic violence coalitions and other entities. They are working to alleviate trauma experienced by children who are exposed to domestic violence, support enhanced relationships between these children and their parents, and improve systemic responses to such families. A separate grant of $500,000 annually\u2014known as Expanding Services to Children, Youth, and Abused Parents (ESCYAP)\u2014has been awarded to the nonprofit organization Futures Without Violence to provide training and technical assistance to the 12 grantees and facilitate coordination among them. \n\n\tFVPSA Interaction with Other Federal Laws\n\nIn addition to the Child Abuse Prevention and Treatment Act (CAPTA), FVPSA has been reauthorized by VAWA and shares some of that law's purposes. In addition, FVPSA interacts with the Victims of Crime Act (VOCA) because some FVPSA-funded programs receive VOCA funding to provide legal and other assistance to victims. Further, FVPSA includes provisions that encourage or require HHS to coordinate FVPSA programs with related programs and research carried out by other federal agencies. \n\n\t\tChild Abuse and Neglect\n\nFVPSA does not focus on child abuse per se; however, in enacting FVPSA as part of the 1984 amendments to CAPTA, some Members of Congress and other stakeholders noted that child abuse and neglect and intimate partner violence are not isolated problems, and can arise simultaneously. The research literature has focused on this association. In a national study of children in families who come into contact with a public child welfare agency through an investigation of child abuse and neglect, investigative caseworkers identified 28% of the children's households as having a history of domestic violence against the caregiver and 12% of those caregivers as being in active domestic violence situations. Further, about 1 out of 10 of the child cases of maltreatment reported included domestic violence.\nCAPTA provides funding to states to improve their child protective services (CPS) systems. It requires states, as a condition of receiving certain CAPTA funds, to describe their policies to enhance and promote collaboration between child protective service and domestic violence agencies, among other social service providers. Other federal efforts also address the association between domestic violence and child abuse. For example, the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program supports efforts to improve the outcomes of young children living in communities with concentrations of domestic violence or child maltreatment, among other factors. The program provides grants to states, territories, and tribes for the support of evidence-based early childhood home visiting programs that provide in-home visits by health or social service professionals with at-risk families.\nSeparately, the Family Connection Grants program, authorized under Title IV-B of the Social Security Act, provided funding from FY2009 through FY2014 to public child welfare agencies and nonprofit private organizations to help children\u2014whether they are in foster care or at risk of entering foster care\u2014connect (or reconnect) with birth parents or other extended kin. The funds were used to establish or support certain activities, including family group decisionmaking meetings that enable families to develop plans that nurture children and protect them from abuse and neglect, and, when appropriate, to safely facilitate connecting children exposed to domestic violence to relevant services and reconnecting them with the abused parent. \nIn addition, HHS and the Department of Justice supported the Greenbook Initiative in the early 2000s. The Greenbook was developed from the efforts of the National Council of Juvenile and Family Court Judges, which convened family court judges and experts on child maltreatment and domestic violence. In 1999, this group developed guidelines for child welfare agencies, domestic violence providers, and dependency courts in responding to domestic violence and child abuse in a publication that came to be known as the Greenbook. Soon after, HHS and DOJ funded efforts in six communities to address domestic violence and child maltreatment by implementing guidelines from the Greenbook. The HHS-led Federal Interagency Working Group on Child Abuse and Neglect includes a Domestic Violence Subcommittee. The committee focuses on interagency initiatives that address children exposed to domestic violence and promoting information exchange and joint planning among federal agencies.\n\n\t\tViolence Against Women Act (VAWA)86\n\nFVPSA has twice been amended by VAWA. Both FVPSA and VAWA are the primary vehicles for federal support to prevent and respond to domestic violence, including children and youth who are exposed to this violence; however, FVPSA has a more singular focus on prevention and services for victims, while VAWA's unique contributions are more focused on law enforcement and legal response to domestic violence.\nVAWA was enacted in 1994 after Congress held a series of hearings on the causes and effects of domestic and other forms of violence against women. Some Members of Congress and others asserted that communities needed a more comprehensive response to violence against women generally\u2014not just against intimate partners\u2014and that perpetrators should face harsher penalties. The shortfalls of legal response and the need for a change in attitudes toward violence against women were reasons cited for the passage of the law. Since VAWA's enactment, the federal response to domestic violence has expanded to involve multiple departments and activities that include investigating and prosecuting crimes, providing additional services to victims and abusers, and educating the criminal justice system and other stakeholders about violence against women.\nAlthough VAWA also addresses other forms of violence against women and provides a broader response to domestic violence, some VAWA programs have a similar purpose to those carried out under FVPSA. Congress currently funds VAWA grant programs that address the needs of victims of domestic violence. These programs also provide support to victims of sexual assault, dating violence, and stalking. For example, like the FVPSA grant program for states, territories, and tribes, VAWA's STOP (Services, Training, Officers, Prosecutors) Violence Against Women Formula Grant program provides services to victims of domestic and dating violence (and sexual assault and stalking) that include victim advocacy designed to help victims obtain needed resources or services, crisis intervention, and advocacy in navigating the criminal and\/or civil legal system. Of STOP funds appropriated, 30% must be allocated to victim services. STOP grants also support activities that are not funded under FVPSA, including for law enforcement, courts, and prosecution efforts. Another VAWA program, Transitional Housing Assistance Grants for Victims of Domestic Violence, provides transitional housing services for victims, with the goal of moving them into permanent housing. Through the grant program to states, territories, and tribes, FVPSA provides immediate and short-term shelter to victims of domestic violence and authorizes service providers to assist with locating and securing safe and affordable permanent housing and homelessness prevention services. \n\n\t\tVictims of Crime Act (VOCA)\n\nFVPSA requires that entities receiving funds under the grant programs for states, territories, and tribes use a certain share of funding for selected activities, including assistance in accessing other federal and state financial assistance programs. One source of federal finance assistance for victims of domestic violence is the Crime Victims Fund (CVF), authorized under the Victims of Crime Act (VOCA) and administered by the Department of Justice's Office of Victims of Crime (OVC). Within the CVF, funds are available for victims of domestic violence through the Victim Compensation Formula Grants program and Victims Assistance Formula Grants program. The Victims Compensation Grants may be used to reimburse victims of crime for out-of-pocket expenses such as medical and mental health counseling expenses, lost wages, funeral and burial costs, and other costs (except property loss) authorized in a state's compensation statute. In recent years, approximately 40% of all claims filed were for victims of domestic violence. The Victims Assistance Formula Grants may be used to provide grants to state crime victim assistance programs to administer funds for state and community-based victim service program operations. The grants support direct services to victims of crime including information and referral services, crisis counseling, temporary housing, criminal justice advocacy support, and other assistance needs. In recent years, approximately 50% of victims served by these grants were victims of domestic violence. \n\n\tFederal Coordination\n\nBoth FVPSA, which is administered within HHS, and VAWA, which is largely administered within DOJ, require federal agencies to coordinate their efforts to respond to domestic violence. For example, FVPSA authorizes the HHS Secretary to coordinate programs within HHS and to \"seek to coordinate\" those programs \"with programs administered by other federal agencies, that involve or affect efforts to prevent family violence, domestic violence, and dating violence or the provision of assistance for adults and youth victims of family violence, domestic violence, or dating violence.\" In addition, FVPSA directs HHS to assign employees to coordinate research efforts on family and related violence within HHS and research carried out by other federal agencies. Similarly, VAWA requires the Attorney General to consult with stakeholders in establishing a task force\u2014comprised of representatives from relevant federal agencies\u2014to coordinate research on domestic violence and to report to Congress on any overlapping or duplication of efforts on domestic violence issues.\nIn 1995, HHS and DOJ convened the first meeting of the National Advisory Council on Violence Against Women. The purpose of the council was to promote greater awareness of violence against women and to advise the federal government on domestic violence issues. Since that time, the two departments have convened subsequent committees to carry out similar work. In 2010, then-Attorney General Eric Holder rechartered the National Advisory Committee on Violence Against Women, which had previously been established in 2006 under his predecessor. As stated in the charter, the committee is intended to provide the Attorney General and the HHS Secretary with policy advice on improving the nation's response to violence against women and coordinating stakeholders at the federal, state, and local levels in this response, with a focus on identifying and implementing successful interventions for children and teens who witness and\/or are victimized by intimate partner and sexual violence. \nSeparately, the director for FVPSA programs and the deputy director of HHS's Office on Women's Health provide leadership to the HHS Steering Committee on Violence Against Women. This committee supports collaborative efforts to address violence against women and their children, and includes representatives from the CDC and other HHS agencies. The members of the committee have established links with professional societies in the health and social service fields to increase attention on women's health and violence issues. In addition to these collaborative activities, multiple federal agencies participate in the Federal Interagency Workgroup on Teen Dating Violence, which was convened in 2006 to share information and coordinate teen dating violence program, policy, and research activities to combat teen dating violence from a public health perspective. The workgroup has funded a project to incorporate adolescents in the process for developing a research agenda to address teen dating violence. Finally, the Office of the Vice President (under Joe Biden) coordinated federal efforts to end violence against women, including by convening Cabinet-level officials to address issues concerning domestic and other forms of violence against women.\nAppendix A. Definitions\nAppendix B. Prevalence and Effects of Domestic Violence\nAppendix C. State and Territory Funding for Selected FVPSA Services\n\n\t\tAppendix.","output":"Family violence broadly refers to acts of physical and sexual violence perpetrated by individuals against family members. The federal government has responded to various forms of family violence, including violence involving spouses and other intimate partners, children, and the elderly. The focus of this report is on the federal response to domestic violence under the Family Violence Prevention and Services Act (FVPSA). \"Domestic violence\" is used in the report to describe violence among intimate partners, including those involved in dating relationships. Generally speaking, victims tend to be women, although a sizable share of men are also victimized. A 2015 survey conducted by the Centers for Disease Control and Prevention (CDC) found that approximately one-third of women and men had experienced sexual violence, physical violence, and\/or stalking in their lifetimes. It showed that women were more likely than men to have experienced contact sexual violence (18% vs. 8%), stalking (10% vs. 2%), and severe physical violence (21% vs. 15%). Women were also more likely than men to report an impact related to partner violence over their lifetimes (25% vs 11%). Such impacts included having injuries, being fearful, being concerned for their safety, missing work or school, needing medical care, or needing help from law enforcement.\nThroughout much of the 20th century, domestic violence remained a hidden problem. Victims, or survivors, of this abuse often endured physical and emotional abuse in silence out of fear of retaliation by their spouses or partners. In the 1970s, former battered women, civic organizations, and professionals began to open shelters and provide services to abused women and their children. As a result of these efforts and greater national attention to domestic violence, Congress conducted a series of hearings in the early 1980s to understand the scope of domestic violence and explore possible responses. FVPSA was enacted in 1984 (Title III of P.L. 98-457), and has been reauthorized seven times, most recently by the CAPTA Reauthorization Act of 2010 (P.L. 111-320).\nFVPSA authorizes three primary sets of activities, all of which are administered by the U.S. Department of Health and Human Services (HHS). These activities are authorized through FY2015, per P.L. 113-320, and funds have continually been appropriated in each subsequent year. FY2019 funding is $180 million. First, a national domestic violence hotline receives calls for assistance related to this violence. The hotline provides crisis intervention and counseling, maintains a database of service providers throughout the United States and the territories, and provides referrals for victims and others affected by domestic violence. Second, FVPSA funds efforts to prevent domestic violence through a program known as Domestic Violence Prevention Enhancement and Leadership Through Allies (DELTA). The program supports efforts in selected communities to prevent domestic violence. Third, FVPSA supports direct services for victims and their families, including victims in underserved and minority communities and children exposed to domestic violence. Most of this funding is awarded via grants to states, territories, and tribes, which then distribute the funds to local domestic violence service organizations. These organizations provide shelter and a number of services\u2014counseling, referrals, development of safety plans, advocacy, legal advocacy, and other services. This funding also supports state domestic violence coalitions that provide training and support for service providers, and national resource centers that provide training and technical assistance on various domestic violence issues for a variety of stakeholders.\nFVPSA was the first federal law to address domestic violence. Since the law was enacted, it has continued to have a primary focus on providing shelter and services for survivors and has increasingly provided support to children exposed to domestic violence and teen dating violence. With the enactment of the Violence Against Women Act of 1994 (VAWA, P.L. 103-322), the federal response to domestic violence has expanded to include investigating and prosecuting crimes and providing additional services to victims and abusers. VAWA activities are administered by multiple federal agencies."}
{"id":"crs_R44000","pid":"crs_R44000_0","input":"\tIntroduction\n\nThis report provides background information and analysis on the following topics:\nVarious aspects of U.S.-Turkey relations, including (1) Turkey's strategic orientation; (2) U.S.\/NATO cooperation and how a Turkish purchase of an S-400 air defense system from Russia could endanger its acquisition of U.S.-origin F-35 aircraft; (3) the situation in northern Syria, including with Kurdish-led militias; (4) criminal cases of note since the failed 2016 coup attempt in Turkey; and (5) congressional proposals. Domestic Turkish developments, including politics under President Recep Tayyip Erdogan's largely authoritarian and polarizing rule (with local elections scheduled for March 2019), and significant economic concerns.\nFor additional information, see CRS Report R41368, Turkey: Background and U.S. Relations , by Jim Zanotti and Clayton Thomas.\n\n\tU.S.-Turkey Relations\n\n\t\tTurkey's Strategic Orientation in Question\n\nNumerous points of bilateral tension have raised questions within the United States and Turkey about the two countries' alliance. Turkish actions and statements on a number of foreign policy issues have contributed to problems with the United States and its other NATO allies, fueling concern about Turkey's commitment to NATO and Western orientation. For its part, Turkey may bristle because it feels like it is treated as a junior partner, and may seek greater foreign policy diversification through stronger relationships with more countries. In the months since the apparent October 2018 killing of Saudi journalist Jamal Khashoggi in Saudi Arabia's Istanbul consulate, some observers speculate that President Erdogan has sought to use information from the event to gain leverage in Turkey's dealings with the United States, and to boost Turkey's regional and global profile.\nA number of considerations drive the complicated dynamics behind Turkey's international relationships. Turkey's history as both a regional power and an object of great power aggression translates into wide popularity for nationalistic political actions and discourse. This nationalistic sentiment might make some Turks wary of Turkey's partial reliance on other key countries (for example, the United States for security, European Union countries for trade and investment, and Russia and Iran for energy). Moreover, Turkey's cooperative relationships with countries whose respective interests may conflict involves a balancing act. Turkey's vulnerability to threats from Syria and Iraq increases the pressure on it to manage this balance. Involvement in Syria and Iraq by the United States, Russia, and Iran further complicates Turkey's situation. Additionally, grievances that President Erdogan and his supporters espouse against seemingly marginalized domestic foes (the military and secular elite who previously dominated Turkey, the Fethullah Gulen movement, Kurdish nationalists, and liberal activists) extend to the United States and Europe due to apparent suspicions of Western sympathies for these foes. \nTurkey's Middle Eastern profile expanded in the 2000s as Erdogan (while serving as prime minister) sought to build economic and political linkages\u2014often emphasizing shared Muslim identity\u2014with Turkey's neighbors. However, efforts to increase Turkey's influence and offer it as a \"model\" for other regional states appear to have been set back by a number of developments since 2011: (1) conflict and instability that engulfed the region and Turkey's own southern border, (2) Turkey's failed effort to help Muslim Brotherhood-aligned groups gain lasting power in Syria and North Africa, and (3) domestic polarization accompanied by government repression. Although Turkey shares some interests with traditional Sunni Arab powers Saudi Arabia and Egypt in countering Iran, these countries' leaders regard Turkey suspiciously because of the Turkish government's Islamist sympathies and close relationship with Qatar. Turkey maintains relations with Israel, but these have become distant and\u2014at times\u2014contentious during Erdogan's rule.\n\n\t\tU.S.\/NATO Cooperation with Turkey\n\n\t\t\tOverview\n\nTurkey's location near several global hotspots makes the continuing availability of its territory for the stationing and transport of arms, cargo, and personnel valuable for the United States and NATO. From Turkey's perspective, NATO's traditional value has been to mitigate its concerns about encroachment by neighbors. Turkey initially turned to the West largely as a reaction to aggressive post-World War II posturing by the Soviet Union. In addition to Incirlik air base near the southern Turkish city of Adana, other key U.S.\/NATO sites include an early warning missile defense radar in eastern Turkey and a NATO ground forces command in Izmir. Turkey also controls access to and from the Black Sea through its straits pursuant to the Montreux Convention of 1936.\nCurrent tensions have fueled discussion from the U.S. perspective about the advisability of continued U.S.\/NATO use of Turkish bases. Reports in 2018 suggested that some Trump Administration officials were contemplating significant reductions in the U.S. presence in Turkey. There are historical precedents for such changes. On a number of occasions, the United States has withdrawn military assets from Turkey or Turkey has restricted U.S. use of its territory or airspace. These include the following:\n196 2\u2014 Cuban Missile Crisis . The United States withdrew its nuclear-tipped Jupiter missiles from Turkey as part of the secret deal to end this crisis with the Soviet Union. 1975\u2014 Cyprus. Turkey closed most U.S. defense and intelligence installations in Turkey during the U.S. arms embargo that Congress imposed in response to Turkey's military intervention in Cyprus. 2003\u2014 Iraq. A Turkish parliamentary vote did not allow the United States to open a second front from Turkey in the Iraq war.\nSome of the plotters of an unsuccessful coup attempt in Turkey in July 2016 apparently used Incirlik air base, causing temporary disruptions of some U.S. military operations. This may have eroded some trust between the two countries, while also raising U.S. questions about Turkey's stability and the safety and utility of Turkish territory for U.S. and NATO assets. As a result of these questions and U.S.-Turkey tensions, some observers have advocated exploring alternative basing arrangements in the region. \nThe cost to the United States of finding a replacement for Incirlik and other sites in Turkey would likely depend on a number of variables including the functionality and location of alternatives, where future U.S. military engagements may happen, and the political and economic difficulty involved in moving or expanding U.S. military operations elsewhere. While an August 2018 report cited a Department of Defense (DOD) spokesperson as saying that the United States is not leaving Incirlik, some reports suggest that expanded or potentially expanded U.S. military presences in Greece and Jordan might be connected with concerns about Turkey.\nCalculating the costs and benefits to the United States of a U.S.\/NATO presence in Turkey, and of potential changes in U.S.\/NATO posture, revolves to a significant extent around three questions:\nTo what extent does strengthening Turkey relative to other regional actors serve U.S. interests? To what extent does the United States rely on the use of Turkish territory or airspace to secure and protect U.S. interests? To what extent does Turkey rely on U.S.\/NATO support, both politically and functionally, for its security and regional influence? \n\n\t\t\tF-35 Aircraft Acquisition Endangered by Possible S-400 Acquisition from Russia\n\nTurkey's plans to take delivery of an S-400 air defense system from Russia sometime in 2019 could hamper its acquisition of U.S.-origin F-35 Joint Strike Fighter aircraft. Turkey is a member of the international consortium that has developed the F-35, and plans to purchase 100 of the aircraft. Training on the F-35 for Turkish pilots is now underway on U.S. soil, and the first aircraft is reportedly scheduled to leave the United States for Turkey sometime in 2020.\n\n\t\t\t\tS-400 Deal and Implications for NATO\n\nTurkey justified its preliminary decision to acquire S-400s instead of U.S. or European alternatives by claiming that it turned to Russia because NATO allies rebuffed its attempts to purchase an air defense system from them. Turkey has also cited various practical reasons, including cost, technology sharing, and territorial defense coverage. However, one analysis from December 2017 asserted that the S-400 deal would not involve technology transfer, would not defend Turkey from ballistic missiles (because the system would not have access to NATO early-warning systems), and could weaken rather than strengthen Turkey's geopolitical position by increasing Turkish dependence on Russia. \nFor some observers, the S-400 issue raises the possibility that Russia could take advantage of U.S.-Turkey friction to undermine the NATO alliance. Previously, in 2013, Turkey reached a preliminary agreement to purchase a Chinese air and missile defense system, but later (in 2015) withdrew from the deal, perhaps partly due to concerns voiced within NATO, as well as China's reported reluctance to share technology.\n\n\t\t\t\tPossible Impact on F-35 Transaction\n\nWhile U.S. officials express desires to avoid disruptions to the F-35's manufacture and rollout, they also express concern that Turkey's potential operation of the S-400 alongside the F-35 could compromise sensitive technology. According to one analysis, \"the Pentagon fears that Turkey's operation of the S-400 would allow the Russian military to study how the F-35 stealth fighters [show up on] Russian-built air defense radars, and potentially facilitate the infiltration of [the F-35] computer system. This could compromise the F-35's effectiveness around the world.\" According to one Turkish press report, Turkey has taken a step intended to assuage U.S. concerns by insisting on an arrangement that allows Turkish technicians to operate the S-400 without Russian involvement, and Turkey may also allow U.S. officials to examine the S-400. \nCongress has enacted legislation that has subjected the F-35 transfer to greater scrutiny. Under Section 1282 of the FY2019 John S. McCain National Defense Authorization Act ( P.L. 115-232 ), DOD submitted a report to Congress in November 2018 on a number of issues affecting U.S.-Turkey defense cooperation, including the S-400 and F-35.\nMuch of the report was classified, but an unclassified summary said that the U.S. government has told Turkey that purchasing the S-400 would have \"unavoidable negative consequences for U.S.-Turkey bilateral relations, as well as Turkey's role in NATO,\" including\npotential sanctions against Turkey under Section 231 of the Countering America's Adversaries Through Sanctions Act (CAATSA, P.L. 115-44 ); risk to Turkish participation in the F-35 program (both aircraft acquisition and industrial workshare); risk to other potential U.S. arms transfers to Turkey, and to broader bilateral defense industrial cooperation; reduction in NATO interoperability; and introduction of \"new vulnerabilities from Turkey's increased dependence on Russia for sophisticated military equipment.\"\n\n\t\t\t\tU.S. Offer of Patriot System as Alternative to S-400\n\nIn July 2018, a State Department official confirmed ongoing U.S. efforts to persuade Turkey to purchase a Patriot air defense system instead of an S-400. However, in October 2018, Turkish Defense Minister Hulusi Akar said that talks with U.S. and European air defense system suppliers had \"not yielded desired results,\" and announced plans for Turkey to begin deploying the S-400 in October 2019. Previously, Turkish officials had indicated some concern about whether Congress would approve a Patriot sale, perhaps because of some congressional opposition for other arms sales to Turkey.\nThe unclassified summary of the November 2018 DOD report to Congress indicated that U.S. officials were continuing to offer a Patriot system to Turkey:\nThe Administration has developed an alternative package to provide Turkey with a strong, capable, NATO-interoperable air and missile defense system that meets all of Turkey's defense requirements. Parts of the package require Congressional Notification. Congressional support for Foreign Military Sales and Direct Commercial Sales to Turkey is essential to provide a real alternative that would encourage Turkey to walk away from a damaging S-400 acquisition.\nIn December 2018, the Defense Security Cooperation Agency (DSCA) notified Congress that \"the State Department has made a determination approving a possible Foreign Military Sale [FMS] of eighty (80) Patriot MIM-104E Guidance Enhanced Missiles (GEM-T) missiles, sixty (60) PAC-3 Missile Segment Enhancement (MSE) missiles and related equipment for an estimated cost of $3.5 billion.\" \nReportedly, discussions between U.S. and Turkish officials over a Patriot sale are ongoing. Turkish officials have stated their intention to proceed with the S-400 purchase regardless of how negotiations over the Patriot sale proceed. In 2009, DSCA notified Congress of a possible FMS to Turkey of Patriot missiles and associated equipment, but the countries did not enter into a transaction for that equipment. Since 2007, Turkey has solicited a number of outside bids to sell it an air defense system, but has not finalized a transaction to date. \n\n\t\tSyria\n\n\t\t\tBackground\n\nTurkey's involvement in Syria's conflict since 2011 has been complicated and costly. During that time, Turkey's priorities in Syria appear to have evolved. While Turkey still officially calls for Syrian President Bashar al Asad to leave power, it has engaged in a mix of coordination and competition with Russia and Iran (Asad's supporters) on some matters since intervening militarily in Syria starting in August 2016. Turkey may be seeking to protect its borders, project influence, promote commerce, and counter other actors' regional ambitions.\nTurkey's chief objective has been to thwart the Syrian Kurdish People's Protection Units (YPG) from establishing an autonomous area along Syria's northern border with Turkey. The YPG has links with the PKK (Kurdistan Workers' Party), a U.S.-designated terrorist organization that for decades has waged an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq. Turkey appears to view the YPG and its political counterpart, the Democratic Union Party (PYD), as the top threat to its security, given the boost the YPG\/PYD's military and political success could provide to the PKK's insurgency within Turkey. The YPG plays a leading role in the umbrella group known as the Syrian Democratic Forces (SDF), which also includes Arabs and other non-Kurdish elements. \nSince 2014, the SDF has been the main U.S. ground force partner against the Islamic State (IS, also known as ISIS\/ISIL). Even though Turkey is also a part of the anti-IS coalition, U.S. operations in support of the SDF\u2014largely based from Turkish territory\u2014has fueled U.S.-Turkey tension because of Turkey's view of the YPG as a threat. As part of SDF operations to expel the Islamic State from the Syrian city of Raqqah in 2017, the U.S. government pursued a policy of arming the YPG directly while preventing the use of such arms against Turkey, and Secretary of Defense Jim Mattis announced an end to the direct arming of the YPG near the end of the year. Following the Raqqah operation, U.S. officials contrasted their long-standing alliance with Turkey with their current but temporary cooperation with the YPG.\nAfter Turkey moved against IS-held territory in northern Syria as a way to prevent the YPG from consolidating its rule across much of the border area between the two countries (Operation Euphrates Shield, August 2016-March 2017), Turkey launched an offensive directly against the YPG in the Afrin province in January 2018. In Afrin and the other areas Turkey has occupied since 2016 with the help of allied Syrian opposition militias (see Figure 2 below) , Turkey has organized local councils and invested in infrastructure . Q uestions persist about how deeply Turkey will influence future governance in these areas .\n\n\t\t\tImplications of Announced U.S. Withdrawal\n\nPresident Trump's announcement in December 2018 that the United States would withdraw approximately 2,000 U.S. troops stationed in Syria has major implications for Turkey and the YPG. The announcement came shortly after a call between Presidents Trump and Erdogan, during which Trump reportedly accepted Erdogan's offer to take responsibility for countering the Islamic State in Syria. U.S. officials have been cited as saying that U.S. troops will redeploy from Syria by summer 2019.\nHow a U.S. withdrawal would happen remains unclear, as does how Turkey and the many other actors in Syria would respond. Turkey has refused to agree to a demand from National Security Advisor John Bolton to guarantee the YPG's safety, with Erdogan insisting that Turkey should have a free hand with the YPG and other groups it considers to be terrorists. In January, amid reports that the U.S. military had begun preparing for withdrawal, President Trump tweeted that he would \"devastate Turkey economically\" if it hit the Kurds, and at the same time proposed the creation of a 20-mile-deep \"safe zone\" on the Syria side of the border. Secretary of State Mike Pompeo later said that the U.S. \"twin aims\" are to make sure that those who helped take down the IS caliphate have security, and to prevent terrorists from attacking Turkey out of Syria. Some sources suggest that U.S. officials favor having a Western coalition patrol any kind of buffer zone inside the Syrian border, with some U.S. support, while Turkey wants its forces and Syrian rebel partners to take that role.\nUncertainty surrounding the announced U.S. withdrawal from northeast Syria also applies to how Turkish forces might operate there. One analyst calculates that additional Turkish military intervention might focus on areas, such as Tal Abyad (aka Tell Abiad), that are less historically Kurdish than others, in an effort to reduce the YPG's control over territorially contiguous regions. Some observers express doubts that Turkish-supported militias would be able to counter the Islamic State as effectively as the YPG-led SDF, and one journalist has stated concerns about what could happen to the IS foreign fighters held by the SDF if Turkey clashes with the YPG. Turkish officials have requested U.S. air and logistical support for their potential operations, despite the two countries' different stances on the YPG. In a New York Times column in January, President Erdogan envisioned that if Turkish-backed forces gain control of predominantly Kurdish areas in Syria currently under YPG rule, these regions would be run by popularly elected local councils advised by Turkish officials. Various analyses surmise that a U.S. troop withdrawal would lead the YPG toward an accommodation with Russia and the Syrian government. A reference by Russian President Vladimir Putin to the 1998 Adana Protocol between Turkey and Syria suggests that Russia may seek to limit direct Turkish involvement in Syria under the premise that Syria's government would take greater responsibility for constraining YPG actions.\nHow U.S.-Turkey coordination plays out in northeastern Syria could influence Turkey's presence in western Syria, particularly in key contested areas like the town of Manbij and Idlib province. Russia and the Syrian government have sent forces near Manbij, possibly as a check on Turkish personnel there who are intent on eradicating YPG influence from the town. In Idlib, Turkey-backed forces stationed at points around the province appear to have failed to prevent territorial gains by Al Qaeda-linked Hayat Tahrir al Sham (HTS) jihadists who also oppose the Syrian government. The HTS gains in Idlib may lead to a Russian-backed Syrian military operation there with the potential for new refugee flows to Turkey. \n\n\t\tVarious Criminal Cases After 2016 Coup Attempt\n\nA number of cases involving criminal allegations or detentions have generated controversy between the United States and Turkey since the July 2016 coup attempt in Turkey. Shortly after the attempt, Turkey's government called for the extradition of Fethullah Gulen (the U.S.-based former cleric whom Turkey's government has accused of involvement in the plot), and the matter remains pending before U.S. officials. Since the coup attempt, sharp criticism of U.S. actions related to Gulen's case has significantly increased in Turkish media. Additionally, Turkey's government has dismissed around 130,000 Turks from government posts, detained more than 60,000, and taken over or closed various businesses, schools, and media outlets. The government's measures appear to have targeted many who are not connected with Gulen.\nAs part of Turkish authorities' postcoup crackdown, they detained Pastor Andrew Brunson (who was released, after a two-year imprisonment, in October 2018) and a number of other U.S. citizens (most of them dual U.S.-Turkish citizens), along with Turkish employees of the U.S. government. Reports suggest that Congress and the State Department are trying to obtain the release of those currently detained, though the Administration lifted sanctions on senior Turkish officials following Pastor Brunson's release.\nSeparately, two prominent Turkish citizens with government ties were arrested by U.S. authorities in 2016 and 2017 for conspiring to evade sanctions on Iran. One, Reza Zarrab, received immunity for cooperating with prosecutors, while the other, Mehmet Hakan Atilla, was convicted and sentenced in May 2018 to 32 months in prison. The case was repeatedly denounced by Turkish leaders, who reportedly expressed concern about the potential implications for Turkey's economy if the case led U.S. officials to impose penalties on Turkish banks. This has not yet happened.\n\n\t\tCongressional Proposals\n\nBilateral tensions contributed to various legislative proposals by Members of Congress during the 115 th Congress. The most significant congressional action against Turkey to date has been an arms embargo that Congress enacted in response to Turkish military intervention in Cyprus. That embargo lasted from 1975 to 1978. \nIn the 116 th Congress, the House-passed Consolidated Appropriations Act, 2019 ( H.R. 648 ) contains foreign aid provisions that also have been introduced in the Senate Appropriations Committee. Section 7046(d) of H.R. 648 includes the following proposals regarding Turkey:\nRequiring DOD to update its FY2019 NDAA report to Congress on Turkey's possible S-400 acquisition. The update, including a detailed description of plans to impose sanctions under CAATSA, is required by November 1, 2019. Until the report is submitted, funding cannot be used to transfer F-35 aircraft to Turkey. Restricting transfer of arms to Turkish P residential Protection Directorate (TPPD) . This restriction, which is subject to a few exceptions, would apply unless the State Department reports to Congress that members of the TPPD who were involved in a violent incident against protestors during a May 2017 Washington, DC, trip by President Erdogan have been \"brought to justice.\"\nH.R. 648 is less stringent than an earlier FY2019 appropriations bill ( S. 3108 ) from the 115 th Congress that would have prohibited transferring F-35s to Turkey if it purchased the S-400, and would have denied entry to senior Turkish officials involved in detaining U.S. citizens.\n\n\tDomestic Turkish Developments\n\n\t\tPolitical Developments Under Erdogan's Rule\n\nPresident Erdogan has ruled Turkey since becoming prime minister in 2003. After Erdogan became president in August 2014 via Turkey's first-ever popular presidential election, he claimed a mandate for increasing his power and pursuing a \"presidential system\" of governance. Analyses of Erdogan sometimes characterize him as one or more of the following: a pragmatic populist, a protector of the vulnerable, a budding authoritarian, an indispensable figure, and an Islamic ideologue. \nErdogan's consolidation of power has continued amid domestic and international concerns about growing authoritarianism in Turkey. He outlasted the July 2016 coup attempt, and then scored victories in the April 2017 constitutional referendum and the June 2018 presidential and parliamentary elections\u2014emerging with the expanded powers he had sought. Some allegations of voter fraud and manipulation surfaced in both elections. U.S. and European Union officials have expressed a number of concerns about rule of law and civil liberties in Turkey, including the government's influence on media and Turkey's reported status as the country with the most journalists in prison.\nWhile there may be some similarities between Turkey under Erdogan and countries like Russia, Iran, or China, some factors distinguish Turkey from them. For example, unlike Russia or Iran, Turkey's economy cannot rely on significant rents from natural resources if foreign sources of revenue or investment dry up. Unlike Russia and China, Turkey does not have nuclear weapons under its command and control. Additionally, unlike all three others, Turkey's economic, political, and national security institutions and traditions have been closely connected with those of the West for decades.\nErdogan is a polarizing figure, with about half the country supporting his rule, and half the country against it. To obtain a parliamentary majority in the June 2018 elections, Erdogan's Islamist-leaning Justice and Development Party ( Adalet ve Kalkinma Partisi , or AKP) relied on a coalition with the Nationalist Action Party ( Milliyet Halk Partisi , or MHP). The MHP is the country's traditional Turkish nationalist party, and is known for opposing political accommodation with the Kurds. Local elections scheduled for March 2019 could be a significant barometer of domestic support for Erdogan under the difficult economic circumstances described below.\n\n\t\tEconomic Concerns\n\nThe Turkish economy appears to be slowing down, with negative consequences both for consumer demand and for companies seeking or repaying loans in global markets. Economic growth was down from over 7% in 2017 to around 3% in 2018, with forecasts for 2019 at or below 1%. By the end of 2018, inflation had essentially doubled year-on-year to more than 20%. During 2018, the Turkish lira depreciated close to 30% against the dollar in an environment featuring a globally stronger dollar, rule of law concerns and political uncertainty, and significant corporate debt. In August 2018, amid U.S.-Turkey tensions on the Pastor Brunson matter, President Trump announced a doubling of tariffs on Turkish steel and aluminum imports. This prompted retaliatory action from Turkey. The lira plunged in value, but recovered somewhat in the final months of 2018 after Turkey's central bank raised its key interest rate by 6.25% in September. In November 2018, the United States granted Turkey (along with seven other countries) a six-month exception from U.S. sanctions on Iranian oil.\nSome observers speculate that Turkey may need to turn to the International Monetary Fund (IMF) for a financial assistance package. This would be a sensitive challenge for President Erdogan because his political success story is closely connected with helping Turkey become independent from its most recent IMF intervention in the early 2000s. Before the central bank's rate hike in September 2018, some commentators voiced concerns about the bank's independence as Erdogan publicly opposed increasing rates. In January 2019, Turkey's parliament voted to grant Erdogan broader emergency powers in case of a financial crisis.\nThe government appears to be trying to stimulate growth via familiar measures to boost consumer demand. A former Turkish economic official has claimed that by offloading the \"debt crisis of the real sector\" onto the banking sector, the government has exacerbated the crisis. In his opinion, a \"harsh belt-tightening policy\" with or without the IMF is thus inevitable after the March 2018 local elections.","output":"The United States and Turkey have been NATO allies since 1952 and share some vital interests, but harmonizing their priorities can be difficult. These priorities sometimes diverge irrespective of who leads the two countries, based on contrasting geography, threat perceptions, and regional roles.\nTurkey's core security and economic relationships and institutional links remain with Western nations, as reflected by some key U.S. military assets based in Turkey and Turkey's strong trade ties with the European Union. However, various factors complicate U.S.-Turkey relations. For example, Turkey relies to some degree on nations such as Russia and Iran for domestic energy needs and coordination on regional security, and therefore balances diplomatically between various actors. Additionally, Turkey's president and longtime leader Recep Tayyip Erdogan appears to be concerned that the United States and some other Western countries harbor sympathies for some of the groups that have been marginalized domestically under Erdogan. Also, Turkey has played a larger role in the Middle East since the 2000s, but has faced a number of setbacks and has problematic relations with Israel and most Sunni Arab countries other than Qatar.\nBilateral relations between the Trump Administration and the Erdogan government have been difficult, but have improved somewhat since October 2018, when a Turkish court allowed Pastor Andrew Brunson to return to the United States after a two-year imprisonment. The following are current points of tension in the U.S.-Turkey relationship.\nF-35 aircraft acquisition endangered by possible S-400 acquisition from Russia. Turkey's planned purchase of an S-400 air defense system from Russia could trigger U.S. sanctions under existing law and decrease Turkey's chances of acquiring U.S.-origin F-35 aircraft. The possible S-400 transaction has sparked broader concern over Turkey's relationship with Russia and implications for NATO. U.S. officials seek to prevent the deal by offering Patriot air defense systems as an alternative to the S-400.\nSyria and the Kurds. Turkey's political stances and military operations in Syria have fed U.S.-Turkey tensions, particularly regarding Kurdish-led militias supported by the United States against the Islamic State over Turkey's strong objections. President Trump's announcement in December 2018 that U.S. troops would withdraw from Syria came after a call with President Erdogan in which Erdogan accepted responsibility for countering the Islamic State in Syria. Efforts to coordinate U.S. and Turkish actions related to a U.S. withdrawal have triggered debate about the possible consequences of Turkish intervention in northeast Syria, especially for those Kurdish-led militias, which have links with the PKK (Kurdistan Workers' Party). The PKK is a U.S.-designated terrorist organization that originated in Turkey and wages an on-and-off insurgency against the Turkish government while using safe havens in both Syria and Iraq.\nCongressional initiatives. Within the tense bilateral context, the 115th Congress required the Trump Administration\u2014in the FY2019 John S. McCain National Defense Authorization Act (NDAA, P.L. 115-232)\u2014to report on the status of U.S.-Turkey relations, with particular emphasis on the possible S-400 deal and its implications. The Department of Defense (DOD) submitted a mostly classified report to Congress in November 2018. Appropriations legislation proposed for FY2019 in the 116th Congress (H.R. 648) would require an update to the DOD report.\nTurkey's domestic trajectory and financial distress. President Erdogan rules in an increasingly authoritarian manner, with his power further consolidated in June 2018 presidential and parliamentary elections. A number of developments (a globally stronger dollar, rule of law concerns and political uncertainty, significant corporate debt) led to a precipitous drop in the value of Turkey's currency during 2018. A major September 2018 interest rate hike by Turkey's central bank helped reverse some of the currency's downward slide, but concerns remain about Turkey's financial position and the possible consequences that higher interest rates might have for economic growth. Local elections are scheduled for March 2018 against the backdrop of these economic concerns.\nThe next steps in relations between the United States and Turkey will take place with Turkey facing a number of political and economic challenges. Given Erdogan's consolidation of power, observers now question how he will govern a polarized electorate and deal with the foreign actors who can affect Turkey's financial solvency, regional security, and political influence. U.S. officials and lawmakers can refer to Turkey's complex history, geography, domestic dynamics, and international relationships in evaluating how to encourage Turkey to align its policies with U.S. interests."}
{"id":"gao_GAO-18-512T","pid":"gao_GAO-18-512T_0","input":"\tBackground\n\nOver the past decade, the federal government has expanded financial  assistance to public and private stakeholders for preparedness activities  through various grant programs administered by DHS through its  component agency, FEMA. Through these grant programs, DHS has  sought to enhance the capacity of states, localities, and other entities,  such as ports or transit agencies, to prevent, respond to, and recover  from a natural or manmade disaster, including terrorist incidents. Two of  the largest preparedness grant programs are the State Homeland  Security Program and the Urban Areas Security Initiative.\nThe State Homeland Security Program provides funding to support  states\u2019 implementation of homeland security strategies to address the  identified planning, organization, equipment, training, and exercise  needs at the state and local levels to prevent, protect against, respond  to, and recover from acts of terrorism and other catastrophic events.  FEMA allocated $402 million for the program in fiscal year 2017.\nThe Urban Areas Security Initiative provides federal assistance to  address the unique needs of high-threat, high-density urban areas,  and assists the areas in building an enhanced and sustainable  capacity to prevent, protect, respond to, and recover from acts of  terrorism. FEMA allocated $580 million for the program in fiscal year  2017.\nThe State Homeland Security Program (SHSP), awarded to the nation\u2019s  56 states and territories, and the Urban Areas Security Initiative (UASI),  awarded to urban areas based on DHS\u2019s risk assessment methodology,  are the largest of the preparedness grant programs, accounting for about  60 percent of Fiscal Year 2017 grant funding. See figure 1 for a history of  funding levels for these programs. Eligible candidates for the FY 2017  UASI program are determined through an assessment of relative risk of  terrorism faced by the 100 most populous metropolitan statistical areas in  the United States, in accordance with the Homeland Security Act of 2002,  as amended.\n\n\tFEMA Has Strengthened Its Coordination, Oversight, and Assessments of Grants But Challenges Remain in the Effectiveness of FEMA\u2019s Grant Management\n\n\t\tFEMA Has Taken Some Steps to Address Coordination Challenges Between Headquarters and Regional Offices, But Some Challenges Still Remain\n\nIn February 2016, we reported that FEMA has taken some steps, but has  not fully addressed longstanding preparedness grant management  coordination challenges between its headquarters and regional offices.  We found that for several preparedness grant programs, FEMA  headquarters staff in GPD and regional staff share management and  monitoring responsibilities. For example, we found that assessments by  GPD and others since 2009 had recommended that regional offices,  rather than headquarters offices, be responsible for managing and  monitoring preparedness grants to avoid confusion and duplication, and  to strengthen coordination with state and local grantees. Further, in July  2011, we found that GPD had efforts underway to regionalize grant  management responsibilities and improve coordination of preparedness  grants, and that these efforts were consistent with internal control  standards. However, GPD officials reported that in 2012 it changed course and decided to continue sharing grant management roles between  headquarters and regions, referred to as a hybrid grant management  structure. GPD officials told us that they changed course because, among  other things, estimates that the costs of regionalization would be greater  than the annual savings FEMA identified in an earlier study and concerns  that inconsistent program implementation would occur across the regions,  and outweighed the potential benefits. GPD officials at that time said they  had taken steps to address coordination challenges associated with this  hybrid grant management structure.\nHowever, we found in February 2016 that these challenges continue. For  example, states and FEMA regional officials told us that GPD staffs in  headquarters and regions did not always coordinate their monitoring  visits, which can be disruptive to the state emergency management  agency\u2019s day-to-day operations. FEMA regional officials also reported  that GPD staffs in headquarters and regions sometimes provided  inconsistent guidance to grantees. Further, while GPD officials identified  some steps they plan to take to address the challenges, we found that  GPD lacked a plan with time frames and goals for addressing them. We  recommended that FEMA develop a plan with time frames, goals,  metrics, and milestones detailing how GPD intends to resolve  longstanding challenges associated with its existing hybrid grants  management model, which divides responsibilities between regional and  headquarters staff. FEMA, however, did not concur with our  recommendation, stating that it disagreed with our characterization of  longstanding challenges in managing preparedness grants. As we stated  in the report, multiple assessments dating back to 2009 have reported  challenges with the hybrid model. As also noted in our report, officials  from four FEMA regional offices and officials from three states within  those regions provided various examples of a lack of coordination  between headquarters and regional staff in managing preparedness  grants, including instances that took place in 2014 and as recently as  September 2015.\nIn October 2017, FEMA developed a plan\u2014the Milestone Action Plan\u2014to  track efforts aimed at improving coordination issues associated with its  hybrid grants management model, as we recommended in February  2016. The plan divides responsibilities for the management of  preparedness grants between regional and headquarters staff and  describes completed, ongoing, and planned efforts taken by FEMA to  improve grants management coordination along with steps taken, goals,  and time frames, among other things. For example, the plan shows that  FEMA developed and finalized the Monitoring Actions Tracker in August  2016, a tool shared by GPD in FEMA headquarters and staff in regional  offices. Through the tracker, GPD headquarters and regional staffs are  able to view planned and completed monitoring activities related to grants  management, as well as the status of any open corrective actions. In  addition to developing the Milestone Action Plan, FEMA officials  described other efforts taken to improve coordination issues. For  example, FEMA officials told us they increased the use of an online  collaboration tool, which allows for instant information sharing between  GPD and the regions. By taking these steps, FEMA should be better  positioned to track and evaluate efforts to improve regional coordination,  as we recommended in 2016.\n\n\t\tFEMA Has Taken Steps to Increase Oversight Across Preparedness Grant Programs\n\nFEMA has been delayed in addressing the need for improved  coordination among grant programs identified in our prior work.  Specifically, we found in February 2012 that multiple factors contribute to  the risk of duplication among four FEMA preparedness grant programs\u2014 the State Homeland Security Program, Urban Areas Security Initiative,  Port Security Grant Program, and Transit Security Grant Program\u2014as  these programs share similar goals, fund similar projects, and provide  funds in the same geographic regions. Further, we found that DHS\u2019s  ability to track grant funding, specific funding recipients, and funding  purposes varies among the programs, giving FEMA less visibility over  some grant programs. Also, DHS\u2019s award process for some programs  based allocation decisions on high-level, rather than specific, project  information, which could further contribute to the risk of duplication.  Although our February 2012 analysis identified no cases of duplication  among a sample of grant projects, the above factors collectively put  FEMA at risk of funding duplicative projects. As a result, in 2012, we  included these challenges in our annual report on duplication, overlap,  and fragmentation in federal programs, agencies, offices, and initiatives.  FEMA has not yet taken action to fully address our concerns.\nWe recommended in February 2012 that as FEMA developed its new  grants management information system (the Non-Disaster Grants  Management System, or ND Grants at that time), that the agency collect  project information with the level of detail needed to better position the  agency to identify any potential unnecessary duplication within and  across the four grant programs. In December 2012, FEMA officials  reported that the agency intended to start collecting and analyzing  project-level data from grantees in fiscal year 2014. Further, in December  2017, FEMA took actions to identify potential unnecessary duplication  across four preparedness grant programs, as we recommended in  February 2012. Although the development of FEMA\u2019s grants  management information system is ongoing, FEMA issued guidance and  adopted interim processes to help identify potential duplication across  these preparedness grant programs until the system\u2019s capabilities are  upgraded over the next several years. For example, in fiscal year 2014,  FEMA modified a legacy grants data system to capture more robust  project-level data\u2014such as project budget data\u2014for the Homeland  Security Grant Program, which includes the State Homeland Security  Grant Program and the Urban Areas Security Initiative.\nIn addition, in fiscal year 2017, FEMA procured a software visualization  tool and developed a set of standard operating procedures to assist staff  in identifying potentially duplicative projects. Specifically, the visualization  tool will use grants award data from the Port Security Grant Program, the  Transit Security Grant Program, and compare the grant programs named  above to highlight ZIP codes that contain multiple projects. These projects  will then be analyzed by FEMA officials. According to the standard  operating procedure, if duplication is suspected within a particular  geographic area, further collaborative reviews should be conducted in  coordination with the Office of Chief Counsel to determine appropriate  remedies. Using an interim approach to collect more specific project-level  data during the grant application process and utilizing the new software  visualization tool should help FEMA strengthen the administration and  oversight of its grant programs until FEMA implements its long-term  solution for the agency\u2019s grants management information system.\n\n\t\tFEMA Is Validating Grant Performance Data,\n\nIn the area of performance assessment, we reported in June 2013 on  limitations in FEMA\u2019s ability to validate the performance data it collects.  Specifically, we found that two of FEMA\u2019s preparedness grant  programs\u2014Emergency Management Performance Grants (EMPG) and  Assistance to Firefighters Grants (AFG) programs\u2014collect performance  information through a variety of reporting mechanisms but face  challenges in identifying verifiable program outcomes. These reporting  mechanisms collect performance data used by FEMA regional offices and  headquarters for different purposes. For example, headquarters focuses  on the development of future program priorities and on reporting progress  toward the National Preparedness Goal, while regions use program  information to monitor primary grant recipients for compliance. DHS  developed agency priority goals that reflect agency-wide, near-term  priorities. According to FEMA officials, the EMPG and AFG programs  have an indirect link to a DHS agency priority goal, as well as the National  Preparedness Goal, because they support states\u2019 level of preparedness  for disasters. According to FEMA officials, neither program has a  standardized tool with which to validate the performance data that are  self-reported by recipients; additionally, the regions are inconsistent in  their approaches to verifying program performance data. We concluded  that the absence of a formal established validation and verification  procedure, as directed by the Office of Management and Budget\u2019s  Circular No. A-11, could lead to the collection of erroneous performance  data.\nIn our June 2013 report, we recommended that FEMA ensure that there  are consistent procedures in place at the headquarters\u2019 office and  regional level to ensure verification and validation of grant performance  data that allow the agency to attest to the reliability of EMPG and AFG  grant data used for reporting progress toward goals. DHS concurred with  our recommendation and stated that FEMA would explore effective and  affordable ways to verify and validate EMPG and AFG grant performance  data. In April 2015, FEMA officials reported that FEMA was in the process  of developing the data verification and validation checks of EMPG  grantee performance reporting. For example, according to FEMA officials,  they have revised reporting templates and uniform table definitions to  make it easier for grantees to submit accurate, complete, and consistent  information on programmatic activities such as the completion of training  and exercise requirements. However, these processes have not yet been  fully implemented, and FEMA officials have not yet provided similar tools  and checklists for the AFG program. In March 2017, FEMA grants  management staff provided us with documentation on the process FEMA  uses to verify and validate grantee data from the EMPG and AFG grant  programs, as we recommended. As a result of having a consistent  approach to verifying data, FEMA\u2019s efforts should reduce the collection of  erroneous performance data.\nIn addition, as part of our September 2016 review of FEMA Fire  Assistance Grant program, we reported that FEMA officials said they  planned to develop and implement a consolidated grant management  system to integrate data used to manage fire grant programs with the  data gathered for FEMA\u2019s other preparedness grants, and ultimately  better measure the impact of fire grants on national preparedness  efforts. Specifically, as we reported in May 2016, FEMA plans to develop  and implement a new Grants Management Modernization system to  provide agency-wide management for all of FEMA\u2019s disaster and  preparedness grants. Further, we are currently performing an on-going  review of FEMA\u2019s consolidated grant management system and plan to  report on this effort later this year.\n\n\t\tFEMA Has Made Progress Assessing Its Grant Preparedness Capabilities, but Continues to Face Challenges Developing a National Preparedness System\n\nWe also reported in March 2011 that FEMA needed to improve its  oversight of preparedness grants by establishing a framework with  measurable performance objectives for assessing urban area, state,  territory, and tribal capabilities to identify gaps and prioritize investments.  Specifically, we recommended that FEMA complete a national  preparedness assessment of capability gaps at each level based on  tiered, capability-specific performance objectives to enable prioritization of  grant funding. With such an assessment, FEMA could identify the  potential costs for establishing and maintaining capabilities at each level  and determine what capabilities federal agencies should provide. We  reported in March 2013 that FEMA has made some progress in assessing  its preparedness capabilities, but continued to face challenges developing  a national preparedness system that could assist FEMA in prioritizing  preparedness grant funding. For example, in March 2012, FEMA issued  the first National Preparedness Report, which describes progress made  to build, sustain, and deliver capabilities. In April 2012, FEMA issued  guidance on developing Threat and Hazard Identification and Risk  Assessments (THIRA) to facilitate the self-assessments of regional, state,  and local capabilities. FEMA requires state, territory, tribal, and urban  area governments receiving homeland security funding to annually  complete THIRAs and use the results to determine the resources required  to achieve the capability targets they set for their jurisdiction. However,  we found in March 2013 that FEMA faced challenges that may reduce the  usefulness of these efforts. For example, the National Preparedness  Report noted that while many programs exist to build and sustain  preparedness capabilities, challenges remain in measuring their progress  over time. According to the report, in many cases, measures do not yet  exist to gauge the performance of these programs, either quantitatively or  qualitatively.\nFEMA has taken some steps to address our recommendation.  Specifically, FEMA reported in February 2018 that the agency has  developed capability-specific performance objectives that will enable a  national preparedness assessment of capability gaps, but no such report  has been issued at this time. FEMA reported that it plans on  implementing new methodology for some core capabilities in December  2018 and for all core capabilities by December 2019, and will be able to  provide complete results in 2020. In addition, FEMA reported that they  are developing a new Threat and Hazard Identification and Risk  Assessment (THIRA) methodology that will assist in measuring the  effectiveness of state and urban areas\u2019 grant projects in reducing risk.  According to FEMA, the new methodology will measure changes in state  and urban area preparedness through the use of standardized capability  targets and key indicators that will show how FEMA preparedness grants  are being used to address gaps in capability targets. This should also  lead to a better understanding of the Nation\u2019s overall preparedness.  Regardless, as of February 2018, FEMA had taken steps to assess  preparedness capabilities, but had not yet completed a national  preparedness assessment with clear, objective, and quantifiable  capability requirements against which to assess preparedness, as we  recommended. Developing such an assessment would help FEMA to  identify what capability gaps exist at the federal level and what level of  resources are needed to close such gaps.\nChairman Donovan, Ranking Member Payne, and Members of the  Subcommittee, this concludes my prepared statement. I would be happy  to respond to any questions you may have.\n\n\tGAO Contacts and Staff Acknowledgments\n\nFor questions about this statement, please contact Chris Currie at (404)  679-1875 or curriec@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include Aditi Archer (Assistant Director), John Vocino (Analyst-In- Charge), Dorian Dunbar, Alexandra Gebhard, Eric Hauswirth, Chuck  Bausell, Heidi Nielson, and Adam Vogt.\n\nRelated GAO Products\n\nFederal Emergency Management Agency: Progress and Continuing  Challenges in National Preparedness Efforts GAO-16-560T: Washington,  D.C.: Apr 12, 2016.\nFire Grants: FEMA Could Enhance Program Administration and  Performance Assessment GAO-16-744: Washington, D.C.: Sep 15, 2016.\nFederal Emergency Management Agency: Strengthening Regional  Coordination Could Enhance Preparedness Efforts. GAO-16-38,  .Washington, D.C.: February 4, 2016.\nEmergency Management: FEMA Has Made Progress since Hurricanes  Katrina and Sandy, but Challenges Remain. GAO-16-90T. Washington,  D.C.: October 22, 2015.\nEmergency Management: FEMA Collaborates Effectively with Logistics  Partners but Could Strengthen Implementation of Its Capabilities  Assessment Tool. GAO-15-781. Washington, D.C.: September 10, 2015.\nEmergency Preparedness: Opportunities Exist to Strengthen Interagency  Assessments and Accountability for Closing Capability Gaps. GAO-15-20.  . Washington, D.C.: December 4, 2014.\nFederal Emergency Management Agency: Opportunities to Achieve  Efficiencies and Strengthen Operations. GAO-14-687T. Washington,  D.C.: July 24, 2014.\nNational Preparedness: Actions Taken by FEMA to Implement Select  Provisions of the Post-Katrina Emergency Management Reform Act of  2006. GAO-14-99R. Washington, D.C.: November 26, 2013.\nNational Preparedness: FEMA Has Made Progress, but Additional Steps  Are Needed to Improve Grant Management and Assess Capabilities.  GAO-13-637T. Washington, D.C.: June 25, 2013.\nGrants Performance: Justice and FEMA Collect Performance Data for  Selected Grants, but Action Needed to Validate FEMA Performance Data.  GAO-13-552. Washington, D.C.: June 24, 2013.\nManaging Preparedness Grants and Assessing National Capabilities:  Continuing Challenges Impede FEMA\u2019s Progress. GAO-12-526T.  Washington, D.C.: March 20, 2012.\nHomeland Security: DHS Needs Better Project Information and  Coordination among Four Overlapping Grant Programs. GAO-12-303.  Washington, D.C.: February 28, 2012.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.  GAO-12- 342SP. Washington, D.C.: February 28, 2012.\nPort Security Grant Program: Risk Model, Grant Management, and  Effectiveness Measures Could Be Strengthened. GAO-12-47.\nWashington, D.C.: November 17, 2011. FEMA Has Made Progress in  Managing Regionalization of Preparedness Grants. GAO-11-732R.  Washington, D.C.: July 29, 2011.\nMeasuring Disaster Preparedness: FEMA Has Made Limited Progress in  Assessing National Capabilities. GAO-11-260T. Washington, D.C.: March  17, 2011.\nOpportunities to Reduce Potential Duplication in Government Programs,  Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington,  D.C.: March 1, 2011.\nFEMA Has Made Limited Progress in Efforts to Develop and Implement a  System to Assess National Preparedness Capabilities. GAO-11-51R.  Washington, D.C.: October 29, 2010.\nUrban Area Security Initiative: FEMA Lacks Measures to Assess How  Regional Collaboration Efforts Build Preparedness Capabilities.   GAO-09-651. Washington, D.C.: July 2, 2009.\nTransit Security Grant Program: DHS Allocates Grants Based on Risk,  but Its Risk Methodology, Management Controls, and Grant Oversight  Can Be Strengthened. GAO-09-491. Washington, D.C.: June 8, 2009.\nNational Preparedness: FEMA Has Made Progress, but Needs to  Complete and Integrate Planning, Exercise, and Assessment Efforts.  GAO-09-369. Washington, D.C.: April 30, 2009.\nHomeland Security: DHS Improved its Risk-Based Grant Programs\u2019  Allocation and Management Methods, But Measuring Programs\u2019 Impact  on National Capabilities Remains a Challenge. GAO-08-488T.  Washington, D.C.: March 11, 2008.\nHomeland Security: DHS\u2019 Efforts to Enhance First Responders\u2019 All-  Hazards Capabilities Continue to Evolve. GAO-05-652. Washington,  D.C.: July 11, 2005.\nHomeland Security: Management of First Responder Grant Programs  Has Improved, but Challenges Remain. GAO-05-121. Washington, D.C.:  February 2, 2005.\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":"Why GAO Did This Study\n\nThe Department of Homeland Security (DHS), through FEMA, provides preparedness grants to state, local, tribal, and territorial governments to improve the nation's readiness in preventing, protecting against, responding to, recovering from and mitigating terrorist attacks, major disasters and other emergencies.\nAccording to DHS, the department has awarded over $49 billion to a variety of DHS preparedness grant programs from fiscal years 2002 through 2017, to enhance the capabilities of grant recipients. For example, the State Homeland Security Program which awards grants to the nation's 56 states and territories, and the Urban Areas Security Initiative which awards grants to urban areas based on DHS's risk methodology, are the largest of the preparedness grant programs (see figure).\nThis statement addresses progress and challenges in FEMA's efforts to manage preparedness grants and GAO's prior recommendations to strengthen these programs. This statement is based on prior GAO reports issued from March 2011 through February 2016 and selected updates conducted in December 2017 through April 2018. To conduct the prior work and updates, GAO analyzed relevant FEMA data and documentation and interviewed relevant officials.\n\nWhat GAO Found\n\nIn February 2012, GAO identified coordination challenges among Federal Emergency Management Agency (FEMA) grant programs that share similar goals and fund similar projects, which contribute to the risk of duplication among the programs. GAO recommended that FEMA take steps, as it develops its new grant management system, to collect project information with sufficient detail to identify potential duplication among the grant programs. FEMA has since addressed these recommendations. Specifically, in 2014, FEMA modified a legacy grants data system to capture more robust grant project-level data, and in fiscal year 2017, procured a software tool and developed a set of standard operating procedures to assist its staff in identifying potentially duplicative projects. These actions should help FEMA strengthen the administration and oversight of its grant programs. Furthermore, FEMA is also developing a new grants management modernization system to consolidate and better manage its grants. GAO is currently reviewing the system for this Committee and will report out next year.\nGAO reported in March 2011 on the need for FEMA to improve its oversight of preparedness grants by establishing a framework with measurable performance objectives for assessing urban area, state, territory, and tribal capabilities to identify gaps and prioritize investments. Specifically, GAO recommended that FEMA complete a national preparedness assessment of capability gaps at each level based on tiered, capability-specific performance objectives to enable prioritization of grant funding. FEMA has taken some steps to address GAO's prior recommendation. Specifically, in February 2018, FEMA reported developing capability-specific performance objectives that will enable a national preparedness assessment of capability gaps. However, FEMA plans to finalize these efforts in 2020 and it is too early to tell how this will impact grant allocations. Until these efforts are completed, GAO will not be able to determine the extent that they address past challenges and recommendations.\n\nWhat GAO Recommends\n\nGAO has made prior recommendations designed to address the challenges discussed in this statement. FEMA has taken actions to address some but not all of these recommendations."}
{"id":"gao_GAO-19-161","pid":"gao_GAO-19-161_0","input":"\tBackground\n\n\t\tTrucking Industry\n\nIn 2016, commercial trucks transported about 70 percent of all U.S.  freight, and over 250,000 heavy trucks were sold in the same year.  These trucks operate within a diverse industry that can be distinguished  in several ways:\nLong-haul vs. local-haul. Long-haul trucking operations are so  named because the drivers frequently drive hundreds of miles for a  single route and can be on the road for days or weeks at a time. For  these operations, freight is usually shipped from a single customer  and may fill an entire trailer by either space or weight. Long-haul  trucking also includes \u201cless-than-truckload\u201d freight shipments, or  freight combined from multiple customers. In comparison, local-haul  trucking operations may involve delivering packages and shipments  between a customer and a freight company\u2019s drop-off point, where  they are combined with other shipments in preparation to move them  over longer distances. This type of operation also includes local  cement trucks, as well as moving shipping containers at ports and  moving freight a short distance from a train that has transported it  long-distance to near its destination.\nFor-hire vs. private (in-house). Different types of companies\u2014or  carriers\u2014engage in long-haul and local trucking and are known either  as \u201cfor-hire\u201d (those that transport goods for others) or \u201cprivate\u201d (those  that transport their own goods in their own trucks). For instance, J.B.  Hunt is a for-hire carrier that transports goods for clients, while  Walmart is a private carrier that uses its in-house fleet of trucks to  transport its own goods between its distribution centers and its  stores.\nCarrier size. In addition, carriers vary in size, with fleets ranging from  one truck to tens of thousands of trucks. For example, a person might  own and drive one for-hire truck; these are known as \u201cowner- operators.\u201d By contrast, the largest for-hire trucking companies in the  country can have fleets of over 20,000 tractors and even more trailers.\nOperating costs. Driver compensation represents either the largest  or second-largest cost component for truck carriers, depending on the  price of fuel; each typically accounts for about one-third of total  operating costs. Other operating costs include purchasing truck  tractors and trailers, as well as repair and maintenance of the trucks  and trailers, and insurance.\n\n\t\tTruck Drivers\n\nBLS data indicate that in 2017, the United States had nearly 1.9 million  truck drivers categorized as \u201cheavy and tractor-trailer truck drivers,\u201d who  operate trucks over 26,000 pounds. This category includes many  different kinds of drivers, including long-haul and local-haul, along with  cement or garbage truck drivers and drivers of specialty loads, such as  trucks transporting cars, logs, or livestock. The number of heavy and  tractor-trailer truck drivers has increased over the last 5 years, from fewer  than 1.6 million in 2012, and is projected to increase to about 2 million  drivers by 2026. The trucking industry has also had high annual driver  turnover, according to industry reports\u2014approaching 100 percent for  large, truckload carriers, though it can be less for small, truckload  carriers. This turnover includes drivers who move to other carriers and  others who leave the field altogether or retire. Some companies that  experience lower turnover rates are able to provide drivers with  predictable schedules and coordinate around the various obligations the  drivers may have. Firms must balance the costs of scheduling drivers to  return home more frequently with the costs of high turnover rates.\nIndustry reports have noted that companies find it difficult to hire and  retain sufficient numbers of long-haul drivers, even with wages reportedly  rising for many drivers. Heavy and tractor-trailer truck drivers make more  on average\u2014$44,500 in 2017\u2014than other types of drivers, according to  BLS data. Many drivers, including most drivers working in long-haul  trucking, are compensated on a per-mile basis rather than a per-hour  basis. The per-mile rate varies from employer to employer and may  depend on the type of cargo and the experience of the driver. Some  long-haul truck drivers are paid a share of the revenue from shipping.\n\n\t\tTruck Driver Training\n\nIn order to operate certain commercial vehicles, including heavy trucks  and tractor-trailers, drivers must obtain a state-issued commercial driver\u2019s  license (CDL). DOT administers the federal CDL program through the  Federal Motor Carrier Safety Administration by setting federal standards  for knowledge and driving skills tests, among other requirements. CDL  applicants must have a state motor vehicle driver\u2019s license and must be at  least 21 years old to operate in interstate commerce. Prior to receiving a  CDL, applicants must first pass the knowledge test and meet other  federal requirements, after which they are eligible to pursue a commercial  learner\u2019s permit. After receiving the learner\u2019s permit, applicants must  wait at least 14 days before taking the skills test. During this period,  applicants may train on their own with a CDL holder, with a truck driver  training school\u2014a private school or public program run through a  community college, for example\u2014or with a motor carrier to prepare for  the skills test. Applicants must pass all three parts of the skills test\u2014pre- trip inspection, basic control skills, and an on-the-road driving test\u2014in the  type of vehicle they intend to operate with their license. Apart from the  CDL requirements, some truck driving jobs (such as those that involve  handling hazardous materials) require additional endorsements, and  some employers require on-the-job training.\nDOL and other federal agencies administer programs that can be used to  provide training for truck drivers. For example, DOL administers federal  employment and training programs, such as those funded through the  Workforce Innovation and Opportunity Act (WIOA), which provide training  dollars that can be used by prospective truck drivers, among others.  Likewise, the Department of Education provides federal student aid funds  that can be used at eligible accredited trucking schools, and DOT and the  Department of Veterans Affairs both operate programs that can assist  veterans interested in becoming truck drivers.\n\n\t\tFederal Regulation of Trucking\n\nFederal regulation of trucking is focused primarily on interstate trucking  activity; states can have separate regulations related to intrastate motor  carriers. DOT is the lead federal agency responsible for overall vehicle  safety, including commercial truck safety. The agency also regulates  other aspects of commercial trucking, such as the maximum number of  hours truck drivers are allowed to drive. For example, under current  hours of service regulations, a truck driver may drive a maximum of 11  total hours within a 14-hour window after coming on duty. In addition,  DOT regulates CDL standards and the maximum weight of trucks allowed  on the Interstate Highway System, among other things. Until recently,  DOT\u2019s National Highway Traffic Safety Administration led automated  vehicles policy with a focus on passenger vehicles. However, DOT\u2019s  October 2018 federal automated vehicles policy was developed by the  Office of the Secretary of Transportation and includes several different  modes of transportation, including automated commercial trucks.\n\n\t\tAutomated Trucks\n\nAutomated vehicles can perform certain driving tasks without human  input. They encompass diverse automated technologies ranging from  relatively simple driver assistance systems to self-driving vehicles.  Certain automated features, like adaptive cruise control, can adjust  vehicle speed in relation to other objects on the road and are currently  available on various truck models. DOT has adopted a framework for  automated driving developed by the Society of Automotive Engineers  International, which categorizes driving automation into 6 levels (see fig.  1).\nCommercial trucks with Level 0 and 1 technologies, as outlined in figure  1, are already available for private ownership and are currently used on  public roadways. Level 0 encompasses conventional trucks where a  human driver controls all aspects of driving and technologies can warn  drivers of safety hazards, such as lane departure warning, but do not take  control away from the driver and are not considered automated. Level 1  technologies incorporate automatic control over one major driving  function, such as steering or speed, and examples include adaptive  cruise control and automatic emergency braking.\nThe Society of Automotive Engineers International categorizes vehicles  with Level 3, 4, and 5 technologies as Automated Driving Systems. At  Level 3, the system can take full control of the vehicle in certain  conditions. However, a human driver must maintain situational awareness  at all times to ensure the vehicle is functioning safely. At Level 4,  automation controls all aspects of driving in certain driving conditions and  environments, such as on highways in good weather. In these particular  driving conditions and environments, a human driver would not be  required to take over the driving task from the automated vehicle and the  system would ensure the vehicle is functioning safely. At Level 5, the  vehicle can operate fully, in any condition or environment, without a  human driver or occupant. There are various automated vehicle  technologies that could help guide a vehicle capable of driving itself,  including cameras and other sensors (see fig. 2).\n\n\tWidespread Deployment of Platooning and Self- Driving Long-Haul Trucks Is Likely Years Away, and Several Factors Will Affect Timeframes\n\n\t\tPlatooning and Self- Driving Trucks Are Being Developed, Generally for Long-Haul Trucking\n\nAccording to stakeholders we spoke with and literature we reviewed,  automated trucks, including self-driving trucks, are being developed,  generally for long-haul trucking. Specifically, we found there could be  various types of automation for long-haul trucks, including platooning,  self-driving for part of a route, and self-driving for an entire route.\nPlatooning. Technology developers and researchers told us there is  ongoing development and testing of truck platoons, which involve one  or more trucks following closely behind a lead truck, linked by  wireless\u2014or vehicle-to-vehicle\u2014communication (see fig. 3).\nIn a platoon, the driver in the lead truck controls the braking and  acceleration for all of the connected trucks in the platoon, while the driver  in each following truck controls its own steering. Several stakeholders  we interviewed and three studies we reviewed identified potential benefits  from platooning, including fuel savings and increased safety, for example,  due to the trucks\u2019 faster reaction times for braking.\nSelf-driving for part of a route. Most of the technology developers  we spoke with said they were developing automated trucks that will be  self-driving for part of a long-haul route, such as exit-to-exit on  highways (see fig. 4).\nRepresentatives from one developer explained that their truck uses self- driving software installed on the truck. The software instructs the truck  what to do, such as to steer or brake. In addition, cameras and other  sensors on the truck\u2019s exterior provide the self-driving software with a  view of the truck\u2019s surroundings to inform the software\u2019s instructions. For  example, Light Detection and Ranging (LIDAR) sensors use lasers to  map a truck\u2019s surroundings (see fig. 5).\nSuch trucks would operate with no driver intervention under favorable  conditions, such as on highways in good weather. Two developers  said that in their business models a driver would be in the truck for the  first and last portions of the route to assist with picking up and  dropping off trailers at hubs outside urban areas. Alternatively, one  developer said a remote driver\u2014one not in the truck but operating  controls from another location\u2014would drive the first and last portions  of a route. Stakeholders identified potential benefits of self-driving for  part of a route, such as increased safety, labor cost savings, and  addressing what they said is a truck driver shortage. Research funded  by industry also suggests that an automated truck could improve  productivity by, for example, continuing to drive to a destination while  a human in the truck conducts other work or rests. In addition, one  study noted that the most likely scenario for widespread adoption of  automated trucks is the one in which trucks are capable of self-driving  from exit-to-exit.\nSelf-driving for an entire route. None of the technology developers  we interviewed told us they are planning to develop automated trucks  that are self-driving for an entire route (see fig. 6).\nSuch trucks would be able to drive under all weather and  environmental conditions. A person would not be expected to  operate these trucks at any time. The potential benefits of these  kinds of trucks are similar to those of trucks that are self-driving for  part of a route, with higher potential labor savings because a  person would not need to drive the first and last portions of a  route.\n\n\t\tWidespread Deployment of Automated Trucks May Be Years to Decades Away, Depending on Technological, Operational, and Other Factors\n\n\t\t\tAnticipated Timeframes\n\nStakeholders we spoke with generally indicated that it will be years to  decades before the widespread deployment of automated commercial  trucks (see text box). However, many stakeholders also noted the  uncertainty of predicting a specific timeframe for particular technologies.\nPlatooning. Many stakeholders said that platooning will likely deploy  within the next 5 years and will be the first automated trucking  technology to be widely available. Notably, one company that is  developing platooning technology said it could begin deployment in  2019. In addition, DOT officials told us that truck platoons are  currently being tested, but that it would be difficult to estimate when  there might be widespread adoption of platooning technology.\nSelf-driving for part of a route. Automated trucks that are self- driving for part of a route may become available for commercial use  within the next 5 to 10 years, according to several stakeholders,  including technology developers. While such trucks may begin  appearing on roads in that timeframe, other stakeholders, including  two researchers, said widespread deployment may take more than 10  years. DOT officials noted that multiple variables make it difficult to  develop a precise estimate for the deployment and widespread  adoption of trucks that are self-driving for part of a route.\nSelf-driving for an entire route. Although none of the technology  developers told us they are developing trucks that would be self- driving for an entire route, other stakeholders we spoke with said such trucks could become available in more than a decade. However, most  stakeholders either did not provide a timeframe for, or said they did  not know, when such trucks might become available. Similarly, at a  listening session in August 2018, DOT officials told attendees that it  will be decades before large trucking operations replace their fleets of  conventional trucks with trucks that self-drive for an entire route.\nOne Stakeholder\u2019s Description of Anticipated Timeframes for Overall Automated  Truck Adoption  One researcher described an anticipated timeframe for automated truck adoption in  which there is an initial, long period of development and testing, which would include  making technological adjustments. This period would then be followed by a period of  automated truck adoption\u2014i.e., when such trucks replace human drivers.  At that point,  technology developers and truck manufacturers would also encounter scenarios in which  it may not be desirable to use an automated truck, such as for the transport of hazardous  materials, according to the researcher. Such scenarios would limit the extent to which  automated trucks could replace human drivers.\n\n\t\t\tFactors That May Affect Timing\n\nStakeholders we interviewed and the literature we examined identified  technological, operational, infrastructure, legal, and other factors that may  affect automated truck development and deployment.\nStakeholders and literature identified several technology-related  limitations that may affect the timing of automated truck deployment.  Specifically, several stakeholders and a study noted that automated  trucks may require simpler operating environments, such as highways, in  the near term because they are less complex for the technology to  navigate than roads in an urban setting, for example. Even so, a  highway presents its own challenges, several stakeholders said. For  instance, a developer, a manufacturer, and a researcher we spoke with  told us that Light Detection and Ranging (LIDAR)\u2014a costly and complex  technology\u2014may not be as useful at higher speeds due to its limited  range and its inability to process information about the surrounding  environment as quickly as needed at these speeds. Further, one  manufacturer told us that LIDAR is not as durable as it needs to be for  commercial trucking\u2014for example, able to withstand dirt and debris.  Stakeholders also discussed the need to have backup systems built into  trucks\u2019 automated systems in case of technology failures, including the  ability to guide the truck to a safe stop.\nStakeholders identified several operational factors that may pose  challenges for the deployment of automated trucks. For example, several  stakeholders said that there may be challenges with self-driving trucks  with no person inside when responding to a tire blowout or other  mechanical problems. Likewise, several stakeholders said there must be  ways for a self-driving truck to respond to required safety inspections and  communicate with inspectors. Representatives from a safety  organization noted that a truck could potentially communicate a unique  identification number through an electronic device. This number would  give the inspector information about the truck, such as safety information  from the sensors on automated trucks. Additionally, several stakeholders  said platooning may not be practical for logistical reasons, for instance, if  trucks are not traveling on the same routes or if cargo is not ready to  depart at the same time. In addition, according to stakeholders we spoke  with and literature we reviewed, the lead truck in a platoon will save less  on fuel than the following trucks. If trucking fleets adopt platooning  systems that work on commercial trucks across different companies\u2014i.e.,  systems that are interoperable\u2014distributing fuel savings in a manner  agreeable to all parties involved may be challenging. Representatives  from two fleet owners and one industry association we spoke with raised  concerns about platooning across different companies, including that  companies might not partner with other fleets to platoon trucks because  they would be primarily concerned with their own fuel savings, not with  saving fuel for their competitors. In addition to these operational factors,  stakeholders noted that automated trucks may be prohibitively expensive  for some smaller fleet owners, including owner-operators, particularly  when these trucks are first deployed.\nSeveral stakeholders and relevant literature noted that certain  infrastructure factors may affect the development, testing, and  deployment of automated trucks. For example, a few stakeholders said if  one truck picks up or drops off trailers for another truck at a location near  highways, land acquisition near these highways may be an issue.  Representatives from a developer that planned to acquire land for its  business model said the land acquisition could take 5 to 10 years. The  representatives explained that they found enabling direct access to  freeways is more difficult than simply acquiring vacant land. They planned  to partner with states to create hubs on under-utilized land with existing  freeway access by, for example, repurposing abandoned rest stops. In  addition to land acquisition, two technology developers and a study  identified the need for widely available data connectivity and the related  ability to use connected vehicle technologies as an infrastructure  challenge. Connected technologies allow vehicles to communicate with  other vehicles (vehicle-to-vehicle), roadway infrastructure (vehicle-to- infrastructure), and personal communication devices. Connectivity has  potential implications for, among other things, the maps self-driving trucks  use to navigate routes and obstacles, as well as the ability for trucks in a  platoon to communicate with one another effectively. However, because  the ability for vehicles to communicate with infrastructure is not  ubiquitous, two of the developers we spoke with are not taking into  account connected infrastructure as they develop and test their  automated trucks. Two stakeholders also expressed concern about  platooning trucks and the stress they could place on bridges, for example,  that were not designed to hold the weight of two or more heavy trucks at  once. In addition, stakeholders noted that automated trucks may  encounter difficulties with things like road work or construction zones.  This may be because the truck relies on pre-built maps, in addition to  sensors, that would potentially be outdated or might not reflect current  road conditions, including any recent or temporary changes.\nSeveral legal factors may affect the timing of development, testing, and  deployment for automated trucks, according to our stakeholder interviews  and literature review. Many stakeholders expressed concern about the  possibility of a \u201cpatchwork\u201d of state laws related to automated trucks that  could affect interstate trucking, with some saying they would like to see a  shared national framework. For example, one technology developer said  that this emerging patchwork can make it difficult for an automated truck  to travel across the country without a driver, because some states  specifically prohibit self-driving vehicles, including trucks. However, this  same developer said that some states are less restrictive regarding the  need for a driver in a self-driving truck, and that others have ambiguous  regulations. Several stakeholders we spoke with and two studies we  reviewed noted that liability issues may arise and become more complex  for automated trucks. This may be because, for example, more parties  may become involved. One of these stakeholders\u2014a fleet owner\u2014said  that these parties could include the software developer, the truck  manufacturer, the owner of the truck, and, if applicable, the truck driver.  These issues could be addressed under the current liability system, and  courts would decide the various liability issues on a case-by-case basis.\nIn addition, several stakeholders have requested that DOT clarify whether  existing regulations require that human drivers always be present in  automated trucks, particularly those capable of Level 4 and 5 driving  automation, in which at least some of the driving is done by the  automated truck. Two technology developers have requested that DOT  confirm that regulations that apply to human drivers do not apply to  automated trucks, and one of these developers also requested  confirmation that a truck capable of at least Level 4 automation is allowed  to operate without a human on board, which could permit testing without a  person in the truck. In Preparing for the Future of Transportation:  Automated Vehicles 3.0, DOT\u2019s automated vehicles voluntary guidance,  the agency laid out its approach to its automated vehicles policy. DOT\u2019s  guidance stated that, going forward, DOT will interpret and, consistent  with all applicable notice and comment requirements, adapt the  definitions of \u201cdriver\u201d and \u201coperator\u201d to recognize that such terms do not  refer exclusively to a human, but may include an automated system. In  the same guidance document, DOT also noted that regulations will no  longer assume that the driver of a commercial truck is always human or  that a human is necessarily present inside of a truck during its operation.\nA few stakeholders also said that DOT may have to clarify the hours of  service rules if a human driver is in an automated truck that is self-driving  for part or all of a route. This is because under current hours of service  regulations, a human driver may drive a maximum of 11 total hours within  a 14-hour window after coming on duty. However, if a truck self-drives  for at least part of a route, it is unclear if a human driver would need to  comply with the existing hours of service requirements and, if not, how  the driver would account for worked time. For example, if the human  driver is not actively engaged in the driving task, whether monitoring the  automated driving system or even sleeping, there could be a question  about whether that time would be counted toward \u201cdriving,\u201d according to  the requirements. For a list of potential legal factors identified by  stakeholders or in literature that may affect timing for the development  and deployment of automated commercial trucks, and related DOT  information, see appendix II.\nStakeholders and relevant literature identified several other factors, such  as public perception and cybersecurity, that could affect timing for the  development and deployment of automated trucks. Several stakeholders  we interviewed and a study we reviewed noted that public acceptance  concerning the safety of platooning and self-driving trucks may pose a  challenge to the deployment of these trucks. One researcher we spoke  with said interactions between truck platoons and cars may be  problematic, because drivers may need to speed in order to change lanes  around the platoons of trucks following each other closely. Similarly, other  stakeholders told us that it may be difficult for the public to accept large  automated commercial trucks. Two of these stakeholders said this is  particularly true for a heavy truck without a human driver on board\u2014 implying that vehicle size and weight play roles in the public\u2019s acceptance  of these types of automated vehicles. Several stakeholders also  expressed concerns about cybersecurity and automated trucks\u2019 reliance  on wireless communication and self-driving software. They said  connectivity could leave automated trucks vulnerable to cyberattacks.\n\n\tWorkforce Changes Due to Automated Trucking Will Depend in Part on the Role of Future Drivers or Operators, and Will Take Time to Develop\n\n\t\tWorkforce Effects of Automated Trucking Could Include Changes to Employment Levels, Wages, Retention, and Skills\n\nPredicting workforce changes in light of future automated trucking is  inherently challenging, as it is based on uncertainties about how the  trucking industry will respond to new technologies that face operational,  regulatory, and other factors that could affect deployment. Many of the  stakeholders we interviewed declined to predict various possible  workforce effects, because they said to do so was too speculative.  However, stakeholders we spoke with and literature we reviewed  presented two main scenarios for the future trucking workforce: one in  which trucks would be self-driving for part of a route, without a driver or  operator, and the other in which trucks would require a driver or operator  in the truck for the entire route. An operator would monitor truck  operations and may not always function as a traditional driver. Because  most stakeholders agreed that the prospect of using fully self-driving  trucks for an entire route is either unlikely or at least several decades into  the future\u2014and no developer we spoke with was planning to develop a  fully self-driving truck\u2014we do not discuss the workforce effects of that  scenario in this report.\n\n\t\t\tPotential Effects If Truck Has No Driver or Operator for Part of Route\n\nTechnology developers we spoke with generally envisioned trucks that  are self-driving for part of a route, which they said would potentially lead  to significant workforce changes. Several technology developers and  researchers, along with two studies, said trucks that are self-driving for  part of a route could decrease the number of long-haul drivers, and  perhaps decrease wages and affect retention as well. Additionally, any  displaced drivers may need new skills if they change jobs, according to  several stakeholders we spoke with and studies we reviewed.\nEmployment levels: Technology developers we interviewed  generally predicted the number of long-haul jobs would decrease with  the adoption of trucks that are self-driving for part of a route. Drivers  constitute a significant operational cost, so part of the reported  economic rationale for self-driving trucks is to employ fewer drivers,  allowing companies to transport the same amount of freight\u2014or  more\u2014at lower labor costs. Several studies have analyzed the  potential number of driving jobs that might be eliminated in this  scenario, but the studies specifically noted the speculative, long-term  nature of those estimates and the inability to identify the number of  current long-haul truck drivers whose jobs could be lost sometime in  the future. Estimates in the studies we reviewed ranged from under  300,000 driver jobs lost to over 900,000 jobs lost\u2014out of a total of  nearly 1.9 million heavy and tractor-trailer truck driver jobs, according  to BLS data\u2014and in each case over periods of 10 to 20 years or  more.\nAlthough long-haul jobs would decrease in this scenario, local-haul  jobs could increase and offset those losses, according to a study and  several stakeholders, including two technology developers. The  study, for example, said that automated trucking would drive long-haul  trucking costs down, leading more companies to use trucking to ship  goods. As a result, demand for trucking could increase, leading to an  increased demand for local-haul truck drivers on either end of the  long-haul routes, two studies noted.\nSeveral stakeholders we spoke with agreed that any decrease in long- haul jobs would likely not affect many current drivers because most  will have voluntarily left driving for a different job or retired by the time  self-driving trucks are widely deployed. According to the Census  Bureau\u2019s American Community Survey data, the average age of truck  and sales delivery drivers from 2012 through 2016 was 46. Many  stakeholders also said that trucking fleets are currently having  difficulty hiring and retaining qualified drivers, and two technology  developers said automation could help move goods in an environment  in which it is difficult to find workers.\nTechnology developers also told us they are focusing the initial  development of automated trucking technology in the southwest  United States because of its good weather and long highways. As a  result, any future job losses could first occur there. Additionally, BLS  data show that the estimated concentration of truck driving jobs varies  in different areas of the country (see fig. 7). One study noted that  trucking job losses in more regionally concentrated occupations are  likely to pose more challenges for workers, because more workers  with similar skills in the same labor markets will be out of work at the  same time, and thus the whole local economy will be more likely to  suffer.\nWages: If the truck is self-driving for parts of a route, wages for long- haul drivers could decrease because there would be lower demand  for\u2014or greater supply of\u2014such drivers, according to several  stakeholders. Moreover, one study noted that average long-haul  wages could decrease because the jobs most likely to be automated  include those that tend to be unionized and have higher wages and  benefits, such as jobs at parcel delivery companies and some private  carriers. Similarly, drivers changing occupations might face  significant wage reductions in new occupations that do not require  retraining, according to a researcher and one study. Wages for  local-haul drivers\u2014generally lower than for long-haul drivers\u2014could  decrease as well, because transitioning long-haul drivers could  increase competition for those jobs, according to two studies. One  technology developer presented a different perspective, saying that  wages for local-haul drivers could increase from current levels due to  increased overall demand for trucking.\nRetention: Overall, retention of truck drivers could improve if the  long-haul portion of the route becomes self-driving, lessening time  drivers spend away from home\u2014a key reason long-haul drivers leave  the profession, according to many stakeholders. However, retention  may depend on several factors, including wages, time at home, and  other working conditions, making it more difficult to predict self-driving  trucks\u2019 effect on retention.\nSkills: Long-haul drivers have skills that would transfer to local-haul  routes, so additional training may not be needed for those who move  to local-haul routes. However, displaced long-haul drivers seeking to  move to a different occupation or industry may need additional  training, according to several stakeholders and two studies. From  2012-2016, the highest level of education attainment for almost 65  percent of truck and sales delivery drivers was high school or its  equivalent.\n\n\t\t\tPotential Effects If Driver or Operator Remains in Truck\n\nMost officials from truck driver training schools, organizations  representing truck drivers, and workforce development boards envisioned  automated trucks as continuing to need either a driver or some kind of  operator in the truck, with several noting that drivers may need to do non- driving tasks. Automated trucking with an operator in the truck would have  a more limited effect on the numbers of truck drivers, but would still result  in workforce changes, according to several stakeholders. As with the  driverless scenario, many stakeholders said future developments were so  uncertain that they could not predict how automated trucking would affect  various aspects of the workforce, such as wages or retention.\nEmployment levels: Under this scenario, automated trucking would  have a more limited effect on employment levels. Several  stakeholders noted, for example, that a person would still be needed  in the truck to manage emergencies, repair flat tires, and secure  cargo, among other duties. (See text box.) For example, one study  noted that even for trucking jobs identified as the most likely to be  automated, driving may represent only about half of drivers\u2019 total work  time. Additionally, particular kinds of long-haul trucking may present  different non-driving tasks that could make automating those driving  jobs more difficult.\nWages: If the truck has an operator, several stakeholders said that  wages might increase if increased skills are needed to operate more  sophisticated equipment. However, several other stakeholders said  wages might not change significantly or could decrease with fewer  driving tasks. Two studies noted that wage changes were difficult to  predict and could be affected by specific policy interventions.\nTruck Drivers: Responsible for More than Just Driving   Truck drivers have many responsibilities other than driving a truck. Non-driving tasks for  heavy and tractor-trailer truck drivers can include:  checking vehicles to ensure that mechanical, safety, and emergency equipment is in  good working order;  loading or unloading trucks, including checking contents for any damage;  inspecting loads to ensure that cargo is secure; and  performing basic vehicle maintenance tasks, such as adding fuel or radiator fluid;  performing minor repairs; or removing debris from loaded trailers.\nRetention: Many stakeholders said new technology could help the  trucking industry bring in and retain more people\u2014such as women  and younger workers\u2014if it could, for example, make truck driving  safer, less stressful, and less physically demanding. Others  cautioned that automated technology may not decrease truck  operators\u2019 time away from home, because they would still have to be  in the truck for the entirety of long-haul routes. One stakeholder, who  was also a truck driver, said that many truck drivers enjoy driving, so  automating aspects of that task would not necessarily entice those  drivers to stay in the job. Two other stakeholders noted that some  drivers may not want to learn how the new technology works and  could leave the field rather than drive automated trucks.\nSkills: Future truck operators may need new skills to work with  automated technology that assists rather than replaces them, many  stakeholders noted. For example, operators may need to adapt to  technology that takes over a number of the standard driving functions,  such as braking, staying in a designated lane, and keeping a safe  distance from other vehicles. Operators may also need to understand  how to monitor software and hardware used to automate the driving  function and how to make appropriate use of advanced safety  systems. Furthermore, officials from many truck driver training schools  and workforce development boards said additional certification  beyond the standard CDL may be needed in order to demonstrate an  understanding of how to operate the technology in automated trucks.  In some instances, the skills needed may vary across trucking  companies and trucks, requiring further on-the-job training.\n\n\t\t\tNew Trucking-Related Jobs\n\nRegardless of their vision for how automated trucking might materialize,  many stakeholders said there could be new trucking-related occupations,  such as specialized technicians, mechanics, and engineers, which will  accompany the deployment of automated trucks. For example, one study  noted that these jobs could include producing the technology used by  automated trucks, in addition to jobs created as a result of potential  greater spending on other consumer goods and services, in the event that  automated trucking decreases overall industry transportation costs.  Another study noted that autonomous trucks, e-commerce, and economic  growth are together poised to create many new trucking jobs. However,  new jobs may be located in different geographical areas than any jobs  lost, and as noted above, may require different skills than the prior jobs.  One study noted this development could potentially leave lower-skilled  workers competing for jobs that pay little and have few opportunities for  advancement.\n\n\t\tStakeholders Said the Anticipated Timeframe for Automated Trucking\u2019s Effects on the Workforce Provides an Opportunity for a Federal Response\n\nWhile many stakeholders we spoke with and several studies we reviewed  stated that the potential workforce effects of automated trucking were  difficult to predict, they generally agreed that any effect would not occur  for at least 5 to 10 years. Several stakeholders and two studies said this  time horizon provides an opportunity for federal agencies and workers to  prepare for potential workforce changes. One of these studies noted that  trucking policy is complex; any changes could take a long time to fully  materialize. That same study suggested that now is the appropriate time  for policy research and debate. The other study and several stakeholders  stated that potential workforce effects are not set in stone, and that public  policy could influence specific workforce outcomes. That study said that  with advance planning, the federal government and other stakeholders  could realize the possible benefits of automated trucks and other vehicles  while mitigating potential workforce effects and other costs.\n\n\tDOT and DOL Could Take Additional Steps to Fully Consider Automated Trucking\u2019s Potential Workforce Effects, as Technology Evolves\n\n\t\tDOT Has Gathered Stakeholder Perspectives to Inform Potential Regulatory Changes, and DOL Has Incorporated Technology Changes into Employment Projections\n\nDOT and DOL have both taken some steps to prepare for the potential  workforce effects of automated trucking. DOT has held events to obtain  stakeholder perspectives on automated vehicles policy, including how it  affects commercial long-haul trucks. For example, DOT had public  listening sessions in 2017 and 2018 to solicit information on the design,  development, testing, and integration of Automated Driving Systems, and  requests for comment to inform potential rulemaking efforts for the  Federal Motor Carrier Safety Regulations. DOT officials said their role  during these discussions was to hear stakeholder concerns. They also  said that their ongoing goal is to identify barriers in their regulations to  safe deployment of automated driving technology. Stakeholders have  raised concerns about the potential workforce effects of automated trucks  at DOT\u2019s listening sessions. For example, after participants questioned  potential job losses at a listening session in August 2018, DOT officials  said that automation may eventually change the role of a truck driver from  driver to technician and that any changes would probably not be  immediate. DOL officials said they have participated in some of DOT\u2019s  listening sessions.\nFor its part, DOL has taken steps to study how automated trucking may  affect the near-term demand for truck drivers as part of their standard,  biennial employment projections for all occupations. DOL officials said they consulted experts and economic studies prior to publishing their  most recent projections, covering 2016 to 2026, and included information  on possible effects of automation in projections for heavy and tractor- trailer truck drivers. The projections state that the demand for these  drivers is expected to grow by 5.8 percent between 2016 and 2026, with  an average of over 200,000 job openings each year, of which 10,000 are  projected to be new jobs. DOL\u2019s analysis anticipated that automation  will not reduce the number of drivers by 2026. DOL officials said that  they expect automation to assist drivers rather than displace them in the  near term. Unlike estimates developed by other researchers, these  numbers do not include potential job losses after 2026, though DOL  officials noted that the agency\u2019s next projections, for 2018 to 2028, will  incorporate information on how automated trucking technology has  evolved since the 2016-2026 projections. Additionally, officials said the  agency is transitioning to annual updates of projections to more quickly  incorporate developing information.\nCongress has directed DOT to consult with DOL to study the workforce  impacts of automated trucking technology. Specifically, the Explanatory  Statement accompanying the Consolidated Appropriations Act, 2018  instructs the Secretary of Transportation to consult with the Secretary of  Labor to conduct a comprehensive analysis of the effect of advanced  driver-assistance systems and highly automated vehicle technology on  drivers and operators of commercial vehicles, including commercial  trucks. Congress directed DOT to include stakeholder outreach in its  analysis and provide information on workers who may be displaced as a  result of such technology, as well as minimum and recommended training  requirements for operating vehicles with these systems. DOL officials told  us that they have begun collaborating with DOT on this study by  consulting with organized labor and other stakeholders. In October 2018,  DOT issued a request for information to solicit comments on the scope of  this analysis and detailed several potential research questions, including  which commercial drivers are likely to be affected and what skills might be  needed to operate new vehicles or transition to new jobs. DOT also  announced that it is planning to coordinate with the Departments of  Commerce and Health and Human Services, in addition to consulting with  DOL to conduct this analysis. The Explanatory Statement directs DOT to  conduct this analysis by March 23, 2019, and DOT officials told us they  expect to meet this deadline and report on the analysis by that date.\n\n\t\tDOL and DOT Do Not Have Plans to Gather and Share Information about the Potential Workforce Effects of Automated Trucking as Technology Evolves\n\n\t\t\tConvening Key Groups of Stakeholders on an Ongoing Basis to Gather Information\n\nDOL and DOT have taken some steps to convene stakeholders to inform  DOT\u2019s analysis of automated trucking in advance of March 2019.  However, DOL and DOT have not made plans to continue collaborating to  convene key groups of stakeholders as the technology evolves to gather  information about potential workforce effects of automated trucking.  Insofar as automated trucking technology is still evolving, convening  stakeholders solely to inform the March 2019 analysis will not provide  agency officials with sufficient information about important developments  that may occur after the analysis is completed. This analysis will be an  important step. However, DOT must complete it before potential  workforce effects can be more fully predicted. After its completion,  developers will likely continue to test their technologies, and issues  related to operational and other factors that will affect the deployment of  automated trucks may change or be resolved. For the agencies to more  fully understand these developments and clarify the range of associated  workforce effects, they would need to collaborate and to continue to  gather information in the future, for example by continuing to convene key  groups of stakeholders as the technology evolves. The majority of  stakeholders we spoke with, including representatives from local  workforce development boards, truck driver training schools, technology  developers, and groups representing truck drivers, told us it would be  helpful for federal agencies to play a convening role so that DOL and  DOT can better anticipate and understand any potential workforce  changes. Several stakeholders also said that convening stakeholders  would enable DOL and DOT to surface different parties\u2019 concerns.  Additionally, our recent report on emerging technologies found that  federal agencies can play an important role in convening stakeholders to  gather information in areas where technology is still under development,  including information on the research plans of industry stakeholders and  ways to address national needs.\nContinuing to convene stakeholders could also help agencies to identify  any information or data gaps that may need to be addressed to  understand the potential workforce effects of automated trucking. DOL  officials said that because the technology is still advancing, the related  workforce effects, including the magnitude of any job losses, are  uncertain. They also said they do not have information to identify the  number of long-haul truck drivers, whose jobs may be the most likely to  be affected by automation. Specifically, the occupational code DOL uses  to classify heavy and tractor-trailer truck drivers captures drivers who  operate any type of heavy truck. Along with long-haul drivers, this code  includes other drivers whose jobs may be harder to automate, such as  tow truck operators. Experts who participated in the National Science  Foundation-sponsored workshop on the potential workforce effects of  automated trucking also identified information gaps. They noted that  more information is needed in several areas, including a better  understanding of current truck drivers\u2019 skills beyond driving, how those  skills might translate to other occupational areas, and new jobs and skills  that will be required with the deployment of automated trucks. DOL  officials said that the agency provides information on knowledge, skills,  and abilities for various driver occupations, as well as detailed work  activities, on its Occupational Information Network (O*NET). However,  that information is based on surveys to current workers and therefore  does not include what skills future drivers may need as automated  technology evolves.\nDOL officials told us they do not typically convene stakeholders on an  industry-specific basis. They also said that state and local workforce  development boards are best positioned to identify and respond to  changes in their local economy and employment needs, because these  boards include members from the local business community who know  which industries are growing in their local labor markets. However, there  are close to 1.9 million heavy and tractor-trailer truck drivers across the  country, making the trucking industry an important segment of the  national workforce. In addition, one of DOL\u2019s objectives in its fiscal year  2018-2022 strategic plan is to provide timely, accurate, and relevant  information on labor market activity, working conditions, and price  changes. While DOL officials said they consider the agency\u2019s national  labor statistics as the primary tool in understanding macroeconomic  changes, they acknowledged that gathering information from local boards  and other stakeholders may complement those statistics. DOL officials  said they may consider continuing to convene stakeholders to learn more  about automated trucking if they find that their current efforts with DOT  provide fruitful information, but they currently do not have plans to do so.  If DOL waits until the effects of automated trucking on the workforce are  widespread enough to affect multiple local economies, the agency will  have missed the opportunity to proactively gather information that could  help it anticipate large-scale workforce changes in this important industry  before they take effect.\nDOT officials told us they have likewise not made plans to work with DOL  to convene stakeholders on an ongoing basis to gather information.  Rather, they said they have concentrated on developing the analysis  described by the Explanatory Statement accompanying the Consolidated  Appropriations Act, 2018 and they do not plan to update that analysis  after it is completed. Nonetheless, one of the objectives outlined by DOT  in its fiscal year 2018-2022 strategic plan is to promote economic  competitiveness by supporting the development of appropriately skilled  transportation workers (including truck drivers who transport freight) and  strategies to meet emerging workforce challenges. Working with DOL to  gather and analyze information from stakeholders as technology  continues to develop could assist DOT in meeting this goal. DOT has  previously collaborated with DOL on transportation workforce issues. For  example, in 2015, DOT and DOL worked with the Department of  Education on a blueprint for aligning investments in transportation,  including trucking, with career pathways. The report highlighted  potential future growth areas in the transportation industry and identified  potential jobs that may be in demand through 2022. Unless DOL and  DOT continue to gather information from stakeholders as automated  trucking technology evolves, they may be unable to fully anticipate the  emerging workforce challenges that may result. DOT\u2019s prior efforts to  convene stakeholders to address automated vehicles could serve as a  model for gathering information from stakeholders about automated  trucking. For example, DOT held a series of meetings across the country  to gather information, identify key issues, and support the transportation  community to integrate automated vehicles onto roads for its National  Dialogue on Highway Automation. Further, analyzing information from  ongoing meetings with stakeholders could help DOT as it considers  potential workforce-related regulatory changes that might be affected by  automated truck technologies, such as the requirements to obtain a  commercial driver\u2019s license or the maximum number of hours commercial  truck drivers are permitted to work.\n\n\t\t\tSharing Information\n\nDOL has not provided information to stakeholders about the potential  workforce effects of automated trucking technology, including how the  skills needed to operate a truck may change in the future. DOL officials  told us they have not done so, in part, because they do not yet know how  skills and training needed to be a truck driver might change, if at all.  Representatives from all of the truck driver training schools and training  associations we interviewed said they expect drivers to need new skills to  operate or maintain automated trucks, and that future truck drivers may  need an additional certification or endorsement to their commercial driver\u2019s license. However, in the absence of specific information about  future skill changes, they all said they did not know what specific  adjustments would be needed to their curriculum. Additionally, nearly all  stakeholders we spoke with\u2014including representatives of technology  developers, truck driver training schools, and local workforce  development boards\u2014told us that federal agencies can help prepare the  future workforce by sharing information with stakeholders about  impending workforce changes. In particular, some workforce officials we  spoke with said they would benefit from information about technology  developers\u2019 plans that would affect future demand or skills for truck  drivers.\nFurthermore, DOL officials told us that heavy and tractor-trailer truck  driving was the most common type of occupational training funded  through the WIOA Adult and Dislocated Worker programs between April  2017 and March 2018, the most recent period for which data are  available. Specifically, local workforce development boards provided  funding from these programs to roughly 17,000 individuals for heavy and  tractor-trailer truck driver training during that year, or about 15 percent of  all individuals who received training services that began within that  timeframe. This was more than twice as many individuals as those who  received funding for nursing assistant training, the second most frequently  funded type of training through these programs.\nAs previously noted, one of DOL\u2019s strategic objectives is to provide timely  and accurate labor market information. In addition, according to  Standards for Internal Control in the Federal Government, an agency\u2019s  management should externally communicate the necessary quality  information to achieve the entity\u2019s objective. This includes  communicating quality information so that external parties can help the  entity address related risks. Additionally, our work has shown that federal  agencies can play an important role in sharing information. We have  noted that such information sharing is important to help maintain U.S.  competiveness. DOT\u2019s strategic plan highlights the agency\u2019s concern  that the lack of credentialed workers, combined with projected  retirements, threaten to cause significant worker shortages, and that the  introduction of innovations and new technologies adds additional  complexity for workforce development. Consulting with DOT to provide stakeholders with information about how automated technology could  affect the number of trucking jobs and the skills needed to drive or  operate commercial trucks would better position local workforce  development boards, truck driver training schools, and others to  adequately prepare the workforce for future needs.\n\n\t\t\tResponding to Potential Job Losses\n\nDOL officials said that existing employment and training programs  administered by the agency, usually through grants, are generally  designed to respond to economic changes that may result in job losses,  including any that may result from automated trucking. In addition, DOL  officials said that the agency has several resources to support state and  local workforce areas to respond to mass layoffs and help workers  upgrade their skills. For example, Rapid Response, which is carried out  by states and local workforce development agencies, can provide  services to employees after a layoff, including career counseling, job  search assistance, and information about unemployment insurance and  training opportunities. Additionally, under WIOA, local workforce  development boards can use up to 20 percent of their Adult and  Dislocated Worker allocations to help fund the cost of providing  incumbent worker training designed to help avert potential layoffs or  increase the skill levels of employees. While these programs may help  mitigate any future job losses due to automated trucking, DOL would be  better positioned to help local economies leverage them effectively if the  agency continued to convene stakeholders, building on its efforts to  gather and share good information on when and how those workforce  effects are likely to materialize as technology evolves.\n\n\tConclusions\n\nAutomated and self-driving technology for commercial trucks could make  the industry safer and more efficient, but it also introduces significant  uncertainties for the trucking workforce that DOL and DOT, in  consultation with other federal agencies and stakeholders, can help  navigate. For example, there is uncertainty about the widespread  deployment of self-driving trucks as well as what the resulting effects will  be on employment levels, wages, and needed skills. Although technology  companies generally envision self-driving trucks being used for long-haul  routes\u2014which could result in fewer long-haul trucking jobs\u2014other  stakeholders argued that a truck will always need a driver or operator.  Stakeholders we interviewed also lacked consensus about what  automated trucking might mean for wages and what new skills will be  needed to drive or operate automated trucks.\nFederal agencies have an opportunity to prepare truck drivers for the  possible workforce effects of automated trucking. Many stakeholders  noted that the effects would be gradual, giving the government time to  act, but studies note the effects could eventually be significant, possibly  affecting hundreds of thousands of truck driving jobs.\nDOT is taking an important step toward learning about these workforce  effects by consulting with DOL and other stakeholders to inform DOT\u2019s  analysis of these developments. However, these agencies have not made  plans to continue to convene stakeholders to gather information on an  ongoing basis or update their analysis as the technology evolves and the  effects become more apparent. Doing so could allow DOL and DOT the  foresight to consider whether additional policy changes are needed to  prepare for any possible future workforce effects. Similarly, DOL\u2019s  publication of routine employment projections and current driver skills and  tasks provide useful information. However, DOL has not shared  information on what skills drivers might require in the future with other key  stakeholders, including technology developers, industry experts, truck  driver representatives, training schools, local workforce development  boards, and other relevant federal agencies. As a result, those  stakeholders may miss an opportunity to better anticipate and plan for  changes that may arise from automated trucking technology, including  potential labor displacement, wage changes, and the need for new skills.\n\n\tRecommendations for Executive Action\n\nWe are making the following four recommendations, including two for the  Department of Labor and two for the Department of Transportation:  1.  The Secretary of Labor should collaborate with the Secretary of  Transportation to continue to convene key groups of stakeholders to  gather information on potential workforce changes that may result  from automated trucking as the technology evolves, including  analyzing needed skills and identifying any information or data gaps,  to allow the agencies to fully consider how to respond to any changes.  These stakeholders could include, for example, representatives of  other relevant federal agencies, technology developers, the trucking  industry, organizations that represent truck drivers, truck driver  training schools, state workforce agencies, and local workforce  development boards. (Recommendation 1)  2.  The Secretary of Transportation should collaborate with the Secretary  of Labor to continue to convene key groups of stakeholders to gather  information on potential workforce changes that may result from  automated trucking as the technology evolves, including analyzing  needed skills and identifying any information or data gaps, to allow the  agencies to fully consider how to respond to any changes. These  stakeholders could include, for example, representatives of other  relevant federal agencies, technology developers, the trucking  industry, organizations that represent truck drivers, truck driver  training schools, state workforce agencies, and local workforce  development boards. (Recommendation 2)  3.  The Secretary of Transportation should consult with the Secretary of  Labor to further analyze the potential effects of automated trucking  technology on drivers to inform potential workforce-related regulatory  changes, such as the requirements to obtain a commercial driver\u2019s  license or hours of service requirements (e.g., the maximum hours  commercial truck drivers are permitted to work). This could include  leveraging the analysis described by the Explanatory Statement  accompanying the Consolidated Appropriations Act, 2018 once it is  complete, as well as information the department obtains from  stakeholders as the technology evolves. (Recommendation 3)  4.  The Secretary of Labor should consult with the Secretary of  Transportation to share information with key stakeholders on the  potential effects of automated trucking on the workforce as the  technology evolves. These stakeholders could include, for example,  representatives of other relevant federal agencies, technology  developers, the trucking industry, organizations that represent truck  drivers, truck driver training schools, state workforce agencies, and  local workforce development boards. (Recommendation 4)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report for review and comment to the  Departments of Education, Labor (DOL), Transportation (DOT), and  Veterans Affairs. We received formal written comments from DOL and  DOT, which are reproduced in appendices III and IV, respectively. In  addition, DOL and DOT provided technical comments, which we have  incorporated as appropriate. The Departments of Education and Veterans  Affairs did not have comments on our report.\nIn its written comments, DOL agreed with our recommendations and  noted several efforts that it said will help the agency assess and provide  information on the potential workforce effects of evolving technologies,  such as automated trucking. For example, DOL noted that the agency\u2019s  employment projections incorporate expert interviews and other  information to identify shifts in industry employment. DOL is also currently  consulting with DOT to study these workforce effects, and agreed to  consider what other information and stakeholder meetings remain  necessary after that study\u2014due in March 2019\u2014is completed. Likewise,  DOL agreed to share related information as the technology evolves, and  the agency noted it currently publishes employment projections and other  occupational information. While useful, these efforts alone will not allow  DOL to sufficiently anticipate the future workforce effects of automated  trucking. For instance, the broad employment projections do not provide  estimates specifically for the long-haul truck drivers who could be affected  by automated trucking first. Further, DOL\u2019s occupational information is  based on surveys of current workers, so it does not include the skills  future drivers will need as automated trucking evolves. Therefore, we  continue to believe that convening stakeholders and sharing information  about potential workforce effects in the future will position DOL to better  understand and inform key stakeholders of these changes.\nIn its written comments, DOT agreed with our recommendations. DOT  noted two of its current efforts related to automated trucking technology,  namely its October 2018 automated vehicles voluntary guidance,  Preparing for the Future of Transportation: Automated Vehicles 3.0, and  its forthcoming Congressionally-directed research on the impact of  automated vehicle technologies on the workforce.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretaries of Education, Labor, Transportation, and  Veterans Affairs, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions concerning this report, please  contact us at (202) 512-7215 or brownbarnesc@gao.gov or  flemings@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives were to examine: (1) what is known about how and when  automated vehicle technologies could affect commercial trucks; (2) what  is known about how the adoption of automated trucks could affect the  commercial trucking workforce; and (3) the extent to which the  Department of Transportation (DOT) and Department of Labor (DOL) are  preparing to assist drivers whose jobs may be affected by automated  trucking.\nFor all the objectives, we reviewed relevant federal laws and regulations  as well documentation from DOT and DOL. To determine the extent to  which federal agencies are preparing to assist current and future drivers,  we compared DOT and DOL\u2019s efforts against their strategic plans as well  as Standards for Internal Control in the Federal Government.  Additionally, we:\nConducted Interviews: We interviewed officials from several federal  agencies to obtain relevant information about our objectives, including  the Departments of Education, Labor, Transportation, and Veterans  Affairs, as well as the National Science Foundation.\nTo obtain information about all of our objectives, we also interviewed  other selected stakeholders. We used our initial research and  interviews to develop a list of stakeholder categories that would  provide informed perspectives, which when taken as a whole,  provided a balanced perspective to answer our objectives. We  selected stakeholders who had a range of perspectives regarding the  timing for adoption of automated trucking technology, and how this  adoption could affect the truck driving workforce. We used the  following criteria to select interviewees:  1.  authored a report, article, book, or paper regarding automated  trucking technology or its potential workforce effects;  2.  participated in panels, hearings, or roundtables regarding automated  trucking or its potential workforce effects; or  3.  was recommended by at least one of our interviewees.\nWe interviewed organized labor representatives; researchers; and  representatives from three truck manufacturers and three companies  operating their own trucking fleet; two national industry organizations; one  national safety organization; four truck driver training schools; an  association of state and local workforce organizations; and four local  workforce development boards. We selected the schools in part based on  recommendations from an association of truck driver training schools, and  included two accredited and two non-accredited schools in our selection.  We selected three of the workforce development boards due to the  prevalence of trucking jobs in their areas and the other board because it  was in an area that several stakeholders suggested could be early to  adopt automated trucking technology.\nAdditionally, we visited California, where we interviewed representatives  of four automated truck technology developers and a manufacturer, and  viewed demonstrations of automated trucking technology. We selected  California because it had the largest number of technology developers  that we identified through our research efforts.\nWe asked all of these stakeholders a core set of questions, as well as  tailored questions based on their expertise. Some of the questions we  asked stakeholders varied, and some stakeholders chose not to answer  every question we asked because they either did not think they had  sufficient knowledge about the specific question or did not want to make  predictions about future industry developments. Therefore, we generally  did not report the specific number of stakeholder responses in this report.  The views of the stakeholders we interviewed are illustrative examples  and may not be generalizable. For a full list of stakeholders we  interviewed, see table 1.\nAnalyzed federal data. To examine how the adoption of automated  trucks could affect the current and future trucking workforce, we  analyzed relevant data from the Bureau of Labor Statistics (BLS) and  the Census Bureau on the current trucking workforce. Specifically, we  examined BLS\u2019s Occupational Employment Statistics to obtain  employment level and wage data for heavy and tractor-trailer truck  drivers (Standard Occupational Classification code 53-3032). The  Occupational Employment Statistics survey is a federal-state  cooperative program between the Bureau of Labor Statistics and  State Workforce Agencies. The survey provides estimates regarding  occupational employment and wage rates for the nation as a whole,  by state, by metropolitan or nonmetropolitan area, and by industry or  ownership. Data from self-employed persons are not included in the  estimates. For our analysis of geographic concentration of heavy and  tractor-trailer truck driving jobs, we carried out a one-sided test at the  0.05 percent level of significance of the null hypothesis that a region\u2019s  concentration is equal to or less than twice the national concentration  versus the alternative hypothesis, that the region\u2019s concentration is  greater than twice the national concentration. We classified the  results, excluding any unreliable areas (i.e., areas with a 95 percent  confidence level margin of error for the estimated number of truck  drivers that was larger than 30 percent of the estimate itself). We used  Poisson tests because these are more appropriate for event  occurrences in smaller populations or on a small number of cases. In  addition, we analyzed data from the Census Bureau\u2019s American  Community Survey regarding the education level, sex, and age of  current truck drivers and other drivers. The American Community  Survey is an ongoing survey that collects information about the U.S.  population such as jobs and occupations, educational attainment,  income and earnings and other topics. According to the Census  Bureau\u2019s description of the American Community Survey, this survey  uses a series of monthly samples to produce annually updated  estimates for the same small areas (census tracts and block groups)  formerly surveyed via the decennial census long-form sample. Based  on our review of related documents and interviews with  knowledgeable agency officials, we found the data to be reliable for  our purposes.\nSynthesized literature. To explore how and when automated vehicle  technologies could affect the current fleet of commercial trucks and  gather information about the possible employment effects of this  technology, we conducted a review of key research related to  automated vehicle technologies for commercial trucks. We searched  bibliographic databases for articles that were published between  January 1, 2014 and May 22, 2018 and included key terms such as  \u201cautonomous\u201d, \u201cautomated\u201d, \u201cdriverless\u201d, and \u201ctruck platoon\u201d to  describe the trucking technology. We also asked the researchers we  interviewed to identify any studies that may be relevant to our work.\nOur search initially resulted in over 250 articles with potential  relevance to our objectives. Two analysts reviewed the abstracts of  these articles to determine if the articles in this initial search were  germane to our objectives. We excluded any articles that were not  relevant to our objectives or did not meet our standards for empirical  analysis.\nWe included articles that were published in peer review journals, by  industry, or by government agencies, as well as articles that were  recommended by researchers we interviewed. We identified a final list  of 12 studies that met our criteria. Although we reviewed each study\u2019s  methodological approach, we did not independently assess the  evidence in the articles or verify the analysis of the evidence that was  used to come to the conclusions these studies reached.\n\nAppendix II: Potential Legal Factors That May Affect Timing of Automated Trucking\n\nAppendix III: Comments from the Department of Labor\n\nAppendix IV: Comments from the Department of Transportation\n\nAppendix V: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\nCindy Brown Barnes or Susan Fleming, (202) 512-7215 or  brownbarnesc@gao.gov or flemings@gao.gov.\n\n\tStaff Acknowledgments\n\nGAO staff who made major contributions to this report include Brandon  Haller (Assistant Director), Rebecca Woiwode (Assistant Director), Drew  Nelson (Analyst-in-Charge), MacKenzie Cooper, Marcia Fernandez, and  Hedieh Fusfield. Additional assistance was provided by Susan Aschoff,  David Ballard, James Bennett, Melinda Cordero, Patricia Donahue, Philip  Farah, Camilo Flores Monckeberg, David Hooper, Angie Jacobs, Michael  Kniss, Terence Lam, Ethan Levy, Sheila R. McCoy, Madhav Panwar,  James Rebbe, Benjamin Sinoff, Pamela Snedden, Almeta Spencer, John  Stambaugh, Walter Vance, Sonya Vartivarian, and Stephen C. Yoder.","output":"Why GAO Did This Study\n\nAutomated vehicle technology may eventually make commercial trucking more efficient and safer, but also has the potential to change the employment landscape for nearly 1.9 million heavy and tractor-trailer truck drivers, among others. GAO was asked to examine the potential workforce effects of automated trucking.\nThis report addresses (1) what is known about how and when automated vehicle technologies could affect commercial trucks; (2) what is known about how the adoption of automated trucks could affect the commercial trucking workforce; and (3) the extent to which DOT and DOL are preparing to assist drivers whose jobs may be affected. GAO reviewed research since 2014 on automated trucking technology, viewed demonstrations of this technology, and analyzed federal data on the truck driver workforce. GAO also interviewed officials from DOT and DOL, as well as a range of stakeholders, including technology developers, companies operating their own trucking fleets, truck driver training schools, truck driver associations, and workforce development boards.\n\nWhat GAO Found\n\nAutomated trucks, including self-driving trucks, are being developed for long-haul trucking operations, but widespread commercial deployment is likely years or decades away, according to stakeholders. Most technology developers said they were developing trucks that can travel without drivers for part of a route, and some stakeholders said such trucks may become available within 5 to 10 years. Various technologies, including sensors and cameras, could help guide a truck capable of driving itself (see figure). However, the adoption of this technology depends on factors such as technological limitations and public acceptance.\nStakeholders GAO interviewed predicted two main scenarios for how the adoption of automated trucks could affect the trucking workforce, which varied depending on the future role of drivers or operators. Technology developers, among others, described one scenario in which self-driving trucks are used on highway portions of long-haul trips. Stakeholders noted this scenario would likely reduce the number of long-haul truck drivers needed and could decrease wages because of lower demand for such drivers. In contrast, groups representing truck drivers, among others, predicted a scenario in which a truck would have an operator at all times for complex driving and other non-driving tasks, and the number of drivers or operators would not change as significantly. However, stakeholders lacked consensus on the potential effect this scenario might have on wages and driver retention. Most stakeholders said automated trucking could create new jobs, and that any workforce effects would take time\u2014providing an opportunity for a federal response, such as any needed policy changes.\nThe Department of Transportation (DOT) is consulting with the Department of Labor (DOL) to conduct a congressionally-directed analysis of the workforce impacts of automated trucking by March 2019. As part of this analysis, DOT and DOL have coordinated to conduct stakeholder outreach. However, they do not currently plan to convene stakeholders on a regular basis to gather information because they have focused on completing this analysis first. Continuing to convene stakeholders could provide the agencies foresight about policy changes that may be needed to prepare for any workforce effects as this technology evolves.\n\nWhat GAO Recommends\n\nGAO is making four recommendations, including that both DOT and DOL should continue to convene key stakeholders as the automated trucking technology evolves to help the agencies analyze and respond to potential workforce changes that may result. DOT and DOL agreed with the recommendations."}
{"id":"crs_R43783","pid":"crs_R43783_0","input":"\tIntroduction and Background\n\nThe federal child nutrition programs provide assistance to schools and other institutions in the form of cash, commodity food, and administrative support (such as technical assistance and administrative funding) based on the provision of meals and snacks to children. In general, these programs were created (and amended over time) to both improve children's nutrition and provide support to the agriculture economy. \nToday, the child nutrition programs refer primarily to the following meal, snack, and milk reimbursement programs (these and other acronyms are listed in Appendix A ):\nNational School Lunch Program (NSLP) (Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)); School Breakfast Program (SBP) (Child Nutrition Act, Section 4 (42 U.S.C. 1773)); Child and Adult Care Food Program (CACFP) (Richard B. Russell National School Lunch Act, Section 17 (42 U.S.C. 1766)); Summer Food Service Program (SFSP) (Richard B. Russell National School Lunch Act, Section 13 (42 U.S.C. 1761)); and Special Milk Program (SMP) (Child Nutrition Act, Section 3 (42 U.S.C. 1772)). \nThe programs provide financial support and\/or foods to the institutions that prepare meals and snacks served outside of the home (unlike other food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) where benefits are used to purchase food for home consumption). Though exact eligibility rules and pricing vary by program, in general the amount of federal reimbursement is greater for meals served to qualifying low-income individuals or at qualifying institutions, although most programs provide some subsidy for all food served. Participating children receive subsidized meals and snacks, which may be free or at reduced price. Forthcoming sections discuss how program-specific eligibility rules and funding operate. \nThis report describes how each program operates under current law, focusing on eligibility rules, participation, and funding. This introductory section describes some of the background and principles that generally apply to all of the programs; subsequent sections go into further detail on the workings of each. \nUnless stated otherwise, participation and funding data come from USDA-FNS's \"Keydata Reports.\" \n\n\t\tAuthorization and Reauthorization\n\nThe child nutrition programs are most often dated back to the 1946 enactment of the National School Lunch Act, which created the National School Lunch Program, albeit in a different form than it operates today. Most of the child nutrition programs do not date back to 1946; they were added and amended in the decades to follow as policymakers expanded child nutrition programs' institutional settings and meals provided: \nThe Special Milk Program was created in 1954, regularly extended, and made permanent in 1970. The School Breakfast Program was piloted in 1966, regularly extended, and eventually made permanent in 1975. A program for child care settings and summer programs was piloted in 1968, with separate programs authorized in 1975 and then made permanent in 1978. These are now the Child and Adult Care Food Program and Summer Food Service Program. The Fresh Fruit and Vegetable Program began as a pilot in 2002, was made permanent in 2004, and was expanded nationwide in 2008.\nThe programs are now authorized under three major federal statutes: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and the Workforce Committee; and, to a limited extent (relating to commodity food assistance and Section 32 issues), the House Agriculture Committee. \nCongress periodically reviews and reauthorizes expiring authorities under these laws. The child nutrition programs were most recently reauthorized in 2010 through the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ); some of the authorities created or extended in that law expired on September 30, 2015. WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children) is also typically reauthorized with the child nutrition programs. WIC is not one of the child nutrition programs and is not discussed in this report. \nThe 114 th Congress began but did not complete a 2016 child nutrition reauthorization (see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview ). There was no significant legislative activity with regard to reauthorization in the 115 th Congress.\n\n\t\tProgram Administration: Federal, State, and Local\n\nThe U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administers the programs at the federal level. The programs are operated by a wide variety of local public and private providers and the degree of direct state involvement differs by program and state. At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to millions of children (e.g., there were 30.0 million in the National School Lunch Program, the largest of the programs, in FY2017), through some 100,000 public and private schools and residential child care institutions, nearly 170,000 child care centers and family day care homes, and just over 50,000 summer program sites.\nAll programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa). \n\n\t\tFunding Overview\n\nThis section summarizes the nature and extent to which the programs' funding is mandatory and discretionary, including a discussion of appropriated entitlement status. Table 3 lists child nutrition program and related expenditures.\n\n\t\t\tOpen-Ended, Appropriated Entitlement Funding\n\nMost spending for child nutrition programs is provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws. That is, the level of spending for such programs, referred to as appropriated mandatory spending, is not controlled through the annual appropriations process, but instead is derived from the benefit and eligibility criteria specified in the authorizing laws. The appropriated mandatory funding is treated as mandatory spending. Further, if Congress does not appropriate the funds necessary to fund the program, eligible entities may have legal recourse. Congress typically considers the Administration's forecast for program needs in its appropriations decisions. For the majority of funding discussed in this report, the formula that controls the funding is not capped and fluctuates based on the reimbursement rates and the number of meals\/snacks served in the programs. \n\n\t\t\t\tCash Reimbursements and Commodity Foods\n\nIn the meal service programs, such as the National School Lunch Program, School Breakfast Program, summer programs, and assistance for child care centers and day care homes, federal aid is provided in the form of statutorily set subsidies (reimbursements) paid for each meal\/snack served that meets federal nutrition guidelines. Although all (including full-price) meals\/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal\/snack subsidy rates are indexed annually (each July) for inflation, as are the income eligibility thresholds for free and reduced-price meals\/snacks. Subsequent sections discuss how a specific program's eligibility and reimbursements work. \nMost subsidies are cash payments to schools or other providers, but a smaller portion of aid is provided in the form of USDA-purchased commodity foods . Laws for three child nutrition programs (NSLP, CACFP, and SFSP) require the provision of commodity foods (or in some cases allow cash in lieu of commodity foods). \nMeal and snack service entails nonfood costs. Federal child nutrition per-meal\/snack subsidies may be used to cover local providers' administrative and operating costs. However, the separate direct federal payments for administrative\/operating costs (\"State Administrative Expenses,\" discussed in the \" Related Programs, Initiatives, and Support\u00a0Activities \" section) are limited. \n\n\t\t\tOther Federal Funding\n\nIn addition to the open-ended, appropriated entitlement funds summarized above, the child nutrition programs' funding also includes certain other mandatory funding and a limited amount of discretionary funding. Some of the activities discussed in \" Related Programs, Initiatives, and Support\u00a0Activities ,\" such as Team Nutrition, are provided for with discretionary funding.\nAside from the annually appropriated funding, the child nutrition programs are also supported by certain permanent appropriations and transfers. Notably, funding for the Fresh Fruit and Vegetable Program is funded by a transfer from USDA's Section 32 program, a permanent appropriation of 30% of the previous year's customs receipts. \n\n\t\t\tState, Local, and Participant Funds\n\nFederal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers. States and localities help cover program costs, as do children's families by paying charges for nonfree or reduced-price meals\/snacks. There is a nonfederal cost-sharing requirement for the school meals programs (discussed below), and some states supplement school funding through additional state per-meal reimbursements or other prescribed financing arrangements. \n\n\t\tChild Nutrition Programs at a Glance\n\nSubsequent sections of this report delve into the details of how each of the child nutrition programs support the service of meals and snacks in institutional settings; first, it is useful to take a broader perspective of primary program elements. Table 1 is a top-level look at the different programs that displays distinguishing characteristics (what meals are provided, in what settings, to what ages) and recent program spending.\n\n\t\tLinks to Resources\n\nOther relevant CRS reports in this area include\nCRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview CRS Report R44588, Agriculture and Related Agencies: FY2017 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program\nOther relevant resources include \nUSDA-FNS's website, https:\/\/www.fns.usda.gov\/school-meals\/child-nutrition-programs USDA-FNS's Healthy, Hunger-Free Kids Act page, http:\/\/www.fns.usda.gov\/school-meals\/healthy-hunger-free-kids-act The FNS page of the Federal Register , https:\/\/www.federalregister.gov\/agencies\/food-and-nutrition-service\n\n\tSchool Meals Programs\n\nThis section discusses the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). Principles and concepts common to both programs are discussed first; subsections then discuss features and data unique to the NSLP and SBP, respectively.\n\n\t\tGeneral Characteristics\n\nThe federal school meals programs provide federal support in the form of cash assistance and USDA commodity foods; both are provided according to statutory formulas based on the number of reimbursable meals served in schools. The subsidized meals are served by both public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced-price meals to eligible low-income children. Both cash and commodity support to participating schools are calculated based on the number and price of meals served (e.g., lunch or breakfast, free or full price), but once the aid is received by the school it is used to support the overall school meal service budget, as determined by the school. This report focuses on the federal reimbursements and funding, but it should be noted that some states have provided state financing through additional state-specific funding.\nFederal law does not require schools to participate in the school meals programs. However, some states have mandated that schools provide lunch and\/or breakfast, and some of these states require that their schools do so through NSLP and\/or SBP. The program is open to public and private schools. \nA reimbursable meal requires compliance with federal school nutrition standards, which have changed throughout the history of the program based on nutritional science and children's nutritional needs. Food items not served as a complete meal meeting nutrition standards (e.g., a la carte offerings) are not reimbursable meals, and therefore are not eligible for federal per-meal, per-snack reimbursements. Following rulemaking to implement provisions in the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ), USDA updated the nutrition standards for reimbursable meals in January 2012 (see \" Nutrition Standards \" for more information). Schools serving meals that meet the updated nutrition standards are eligible for an increased reimbursement of 6 cents per lunch. \nUSDA-FNS administers the school meals programs federally, and state agencies (typically state departments of education) oversee and transmit reimbursements through agreements with school food authorities (SFAs) (typically local educational agencies (LEAs); usually these are school districts). Figure 1 provides an overview of the roles and relationships between these levels of government.\nThere is a cost-sharing requirement for the programs, which amounts to a contribution of approximately $200 million from the states. There also are states that choose to supplement federal reimbursements with their own state reimbursements. \n\n\t\tSchool Meals Eligibility Rules\n\nThe school meals programs and related funding do not serve only low-income children. All students can receive a meal at a NSLP- or SBP-participating school, but how much the child pays for the meal and\/or how much of a federal reimbursement the state receives will depend largely on whether the child qualifies for a \"free,\" \"reduced-price,\" or \"paid\" (i.e., advertised price) meal. Both NSLP and SBP use the same household income eligibility criteria and categorical eligibility rules. States and schools receive the largest reimbursements for free meals, smaller reimbursements for reduced-price meals, and the smallest (but still some federal financial support) for the full-price meals.\nThere are three pathways through which a child can become certified to receive a free or reduced-price meal:\n1. Household income eligibility for free and reduced-price meals (information typically collected via household application), 2. Categorical (or automatic) eligibility for free meals (information collected via household application or a direct certification process), and 3. School-wide free meals under the Community Eligibility Provision (CEP) , an option for eligible schools that is based on the share of students identified as eligible for free meals.\nEach of these pathways is discussed in more detail below.\n\n\t\t\tIncome Eligibility\n\nThe income eligibility thresholds (shown in Table 2 ) are based on multipliers of the federal poverty guidelines. As the poverty guidelines are updated every year, so are the eligibility thresholds for NSLP and SBP. \nFree Meals: Children receive free meals if they have household income at or below 130% of the federal poverty guidelines; these meals receive the highest subsidy rate. (Reimbursements are approximately $3.30 per lunch served, less for breakfast.) Reduced-Price Meals: Children may receive reduced-price meals (charges of no more than 40 cents for a lunch or 30 cents for a breakfast) if their household income is above 130% and less than or equal to 185% of the federal poverty guidelines; these meals receive a subsidy rate that is 40 cents (NSLP) or 30 cents (SBP) below the free meal rate. (Reimbursements are approximately $2.90 per lunch served.) Paid Meals: A comparatively small per-meal reimbursement is provided for full-price or paid meals served to children whose families do not apply for assistance or whose family income does not qualify them for free or reduced-price meals. The paid meal price is set by the school but must comply with federal regulations. (Reimbursements are approximately 30 cents per lunch served.)\nThe above reimbursement rates are approximate; exact current-year federal reimbursement rates for NSLP and SBP are listed in Table B -1 and Table B -3 , respectively. \nHouseholds complete paper or online applications that collect relevant income and household size data, so that the school district can determine if children in the household are eligible for free meals, reduced-price meals, or neither.\nThough these income guidelines primarily influence funding and administration of NSLP and SBP, they also affect the eligibility rules for the SFSP, CACFP, and SMP (described further in subsequent sections).\n\n\t\t\tCategorical Eligibility\n\nIn addition to the eligibility thresholds listed above, the school meals programs also convey eligibility for free meals based on household participation in certain other need-tested programs or children's specified vulnerabilities (e.g., foster children). Per Section 12 of the National School Lunch Act, \"a child shall be considered automatically eligible for a free lunch and breakfast ... without further application or eligibility determination, if the child is\"\nin a household receiving benefits through SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations) benefits; or TANF (Temporary Assistance for Needy Families) cash assistance; enrolled in Head Start; in foster care; a migrant; a runaway; or homeless.\nFor meals served to students certified in the above categories, the state\/school receive a reimbursement at the free meal amount and children receive a free meal. (See Table B -1 and Table B -3 for school year 2018-2019 rates.)\nSome school districts collect information for these categorical eligibility rules via paper application. Others conduct a process called direct certification \u2014a proactive process where government agencies typically cross-check their program rolls and certify a household's children for free school meals without the household having to complete a school meals application. \nPrior to 2004, states had the option to conduct direct certification of SNAP (then, the Food Stamp Program), TANF, and FDPIR participants. In the 2004 child nutrition reauthorization ( P.L. 108-265 ), states were required under federal law to conduct direct certification for SNAP participants, with nationwide implementation taking effect in school year 2008-2009. Conducting direct certification for TANF and FDPIR remains at the state's discretion.\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made further policy changes to expand direct certification (discussed further in the next section). One of those changes was the initiation of a demonstration project to look at expanding categorical eligibility and direct certification to some Medicaid households. The law also funded performance incentive grants for high-performing states and authorized correcting action planning for low-performing states in direct certification activities. \nUnder SNAP direct certification rules generally, schools enter into agreements with SNAP agencies to certify children in SNAP households as eligible for free school meals without requiring a separate application from the family. Direct certification systems match student enrollment lists against SNAP agency records, eliminating the need for action by the child's parents or guardians. Direct certification allows schools to make use of SNAP's more in-depth eligibility certification process; this can reduce errors that may occur in school lunch application eligibility procedures that are otherwise used. From a program access perspective, direct certification also reduces the number of applications a household must complete.\n Figure 2 , created by GAO and published in a May 2014 report, provides an overview of how school districts certify students for free and reduced-price meals under the income-based and category-based rules, via applications and direct certification. A USDA-FNS study of school year 2014-2015 estimates that 11.1 million students receiving free meals were directly certified\u201468% of all categorically eligible students receiving free meals.\n\n\t\t\tCommunity Eligibility Provision (CEP)\n\nHHFKA also authorized the school meals Community Eligibility Provision (CEP), an option in NSLP and SBP law that allows eligible schools and school districts to offer free meals to all enrolled students based on the percentage of their students who are identified as automatically eligible from nonhousehold application sources (primarily direct certification through other programs). \nBased on the statutory parameters, USDA-FNS piloted CEP in various states over three school years and it expanded nationwide in school year 2014-2015. Eligible LEAs have until June 30 of each year to notify USDA-FNS if they will participate in CEP. According to a database maintained by the Food Research and Action Center, just over 20,700 schools in more than 3,500 school districts (LEAs) participated in CEP in SY2016-2017, an increase of approximately 2,500 schools compared to SY2015-2016.\nFor a school (or school district, or group of schools within a district) to provide free meals to all children\nthe school(s) must be eligible for CEP based on the share (40% or greater) of enrolled children that can be identified as categorically (or automatically) eligible for free meals, and the school must opt-in to CEP. \nThough CEP schools serve free meals to all students, they are not reimbursed at the \"free meal\" rate for every meal. Instead, the law provides a funding formula: the percentage of students identified as automatically eligible (the \"identified student percentage\" or ISP) is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free meal rate, with the remainder reimbursed at the far lower paid meal rate. For example, if a CEP school identifies that 40% of students are eligible for free meals, then 64% of the meals served will be reimbursed at the free meal rate and 36% at the paid meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free meal reimbursement for all meals served.\nSome of the considerations that may impact a school's decision to participate in CEP include whether the new funding formula would be beneficial for their school meal budget; an interest in reducing paperwork for families and schools; and an interest in providing more free meals, including meals to students who have not participated in the program before.\n\n\t\tNutrition Standards\n\n\t\t\tSchool Meals\n\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) set in motion changes to the nutrition standards for school meals, requiring USDA to update the standards within a certain timeframe. The law required that the revised standards be based on recommendations from the Institute of Medicine (IOM) (now the Health and Medicine Division) at the National Academy of Sciences. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance related to implementation. \nUSDA published the final regulations in January 2012. The final rule sought to align school meal patterns with the 2010 Dietary Guidelines for Americans, and, generally consistent with IOM's recommendations, increased the amount of fruits, vegetables, whole grains, and low-fat or fat-free milk in school meals. The regulations also included calorie maximums and sodium limits to phase in over time, among other requirements. \nThe nutrition standards largely took effect in SY2012-2013 for lunches and in SY2013-2014 for breakfasts. A few other requirements were scheduled to phase in over multiple school years. Some schools experienced difficulty implementing the new guidelines, and Congress and USDA have made changes to the 2012 final rule's whole grain, sodium, and milk requirements. For SY2019-2020 and onwards, schools are operating under a final rule published December 12, 2018.\n\n\t\t\tCompetitive Foods\n\nThe HHFKA also gave USDA the authority to regulate other foods in the school nutrition environment. Sometimes called \"competitive foods,\" these include foods and drinks sold in a la carte lines, vending machines, snack bars and concession stands, and fundraisers. \nRelying on recommendations made by a 2007 IOM report, USDA-FNS promulgated a proposed rule and then an interim final rule in June 2013, which went into effect for SY2014-2015. The interim final rule created nutrition guidelines for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published on July 29, 2016, maintained the interim final rules with minor modifications. Under the final standards, these foods must meet whole-grain requirements; have certain primary ingredients; and meet calorie, sodium, and fat limits, among other requirements. Schools are limited to a list of no- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). \nThere are no limits on fundraisers selling foods that meet the interim final rule's guidelines. Fundraisers outside of the school day are not subject to the guidelines. HHFKA and the interim final rule provide states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards.\nThe rule does not limit foods brought from home, only foods sold at school during the school day. The federal standards are minimum standards; states and school districts are permitted to issue more stringent policies. \n\n\t\tNational School Lunch Program (NSLP)\n\nIn FY2017, NSLP subsidized 4.9 billion lunches to children in close to 96,000 schools and 3,200 residential child care institutions (RCCIs). Average daily participation was 30.0 million students (58% of children enrolled in participating schools and RCCIs). Of the participating students, 66.7% (20.0 million) received free lunches and 6.5% (2.0 million) received reduced-price lunches. The remainder were served full-price meals, though schools still receive a reimbursement for these meals. Figure 3 shows FY2017 participation data.\nFY2017 federal school lunch costs totaled approximately $13.6 billion (see Table 3 for the various components of this total). The vast majority of this funding is for per-meal reimbursements for free and reduced-price lunches.\nThe HHFKA also provided an additional 6-cent per-lunch reimbursement to schools that provide meals that meet the updated nutritional guidelines requirements. This bonus is not provided for breakfast, but funds may be used to support schools' breakfast programs. NSLP lunch reimbursement rates are listed in Table B -1 .\nIn addition to federal cash subsidies, schools participating in NSLP receive USDA-acquired commodity food s . Schools are entitled to a specific, inflation-indexed value of USDA commodity foods for each lunch they serve. Also, schools may receive donations of bonus commodities acquired by USDA in support of the farm economy. In FY2017, the value of federal commodity food aid to schools totaled nearly $1.4 billion. The per-meal rate for commodity food assistance is included in Table B-4 .\nWhile the vast majority of NSLP funding is for lunches served during the school day, NSLP may also be used to support snack service during the school year and to serve meals during the summer. These features are discussed in subsequent sections, \" Summer Meals \" and \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\" Reimbursement rates for snacks are listed in Table B -2 .\n\n\t\tSchool Breakfast Program (SBP)\n\nThe School Breakfast Program (SBP) provides per-meal cash subsidies for breakfasts served in schools. Participating schools receive subsidies based on their status as a severe need or nonsevere need institution. Schools can qualify as a severe need school if 40% or more of their lunches are served free or at reduced prices. See Table B -3 for SBP reimbursement rates.\n Figure 4 displays SBP participation data for FY2017. In that year, SBP subsidized over 2.4 billion breakfasts in over 88,000 schools and nearly 3,200 RCCIs. Average daily participation was 14.7 million children (30.1% of the students enrolled in participating schools and RCCIs). The majority of meals served through SBP are free or reduced-price. Of the participating students, 79.1% (11.6 million) received free meals and 5.7% (835,000) purchased reduced-price meals. Federal school breakfast costs for the fiscal year totaled approximately $4.3 billion (see Table 3 for the various components of this total).\nSignificantly fewer schools and students participate in SBP than in NSLP. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal and eat before school starts. Some schools offer (and anti-hunger groups have encouraged) models of breakfast service that can result in greater SBP participation, such as Breakfast in the Classroom, where meals are delivered in the classroom; \"grab and go\" carts, where students receive a bagged breakfast that they bring to class, or serving breakfast later in the day in middle and high schools. \nUnlike NSLP, commodity food assistance is not a formal part of SBP funding; however, commodities provided through NSLP may be used for school breakfasts as well.\n\n\tOther Child Nutrition Programs\n\nIn addition to the school meals programs discussed above, other federal child nutrition programs provide federal subsidies and commodity food assistance for schools and other institutions that offer meals and snacks to children in early childhood, summer, and after-school settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit child care centers, (3) family\/group day care homes, and (4) nongovernmental institutions\/organizations that offer outside-of-school programs for children. (Although this report focuses on the programs that serve children, one child nutrition program (CACFP) also serves day care centers for chronically impaired adults and elderly persons under the same general per-meal\/snack subsidy terms.) The programs in the sections to follow serve comparatively fewer children and spend comparatively fewer federal funds than the school meal programs. \n\n\t\tChild and Adult Care Food Program (CACFP)\n\nCACFP subsidizes meals and snacks served in early childhood, day care, and after-school settings. CACFP provides subsidies for meals and snacks served at participating nonresidential child care centers, family day care homes, and (to a lesser extent) adult day care centers. The program also provides assistance for meals served at after-school programs. CACFP reimbursements are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, children with disabilities of any age, and, in the case of adult care centers, chronically impaired and elderly adults. Children in early childhood settings are the overwhelming majority of those served by the program. \nCACFP provides federal reimbursements for breakfasts, lunches, suppers, and snacks served in participating centers (facilities or institutions) or day care homes (private homes). The eligibility and funding rules for CACFP meals and snacks depend first on whether the participating institution is a center or a day care home (the next two sections discuss the rules specific to centers and day care homes). According to FY2017 CACFP data, child care centers have an average daily attendance of about 56 children per center, day care homes have an average daily attendance of approximately 7 children per home, and adult day care centers typically care for an average of 48 chronically ill or elderly adults per center. \nProviders must demonstrate that they comply with government-established standards for other child care programs. Like in school meals, federal assistance is made up overwhelmingly of cash reimbursements calculated based on the number of meals\/snacks served and federal per-meal\/snack reimbursements rates, but a far smaller share of federal aid (4.3% in FY2017) is in the form of federal USDA commodity foods (or cash in lieu of foods). Federal CACFP reimbursements flow to individual providers either directly from the administering state agency (this is the case with many child\/adult care centers able to handle their own CACFP administrative functions) or through \"sponsors\" who oversee and provide administrative support for a number of local providers (this is the case with some child\/adult care centers and with all day care homes). \nIn FY2017, total CACFP spending was over $3.5 billion, including cash reimbursement, commodity food assistance, and costs for sponsor audits. (See Table 3 for a further breakdown of CACFP costs.) This total also includes the after-school meals and snacks provided through CACFP's \"at-risk after-school\" pathway; this aspect of the program is discussed later in \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\"\n\n\t\t\tCACFP Nutrition Standards\n\nAs with school foods, the HHFKA required USDA to update CACFP's meal patterns. USDA's final rule revised the meal patterns for both meals served in child care centers and day care homes, as well as preschool meals served through the NSLP and SBP, effective October 1, 2017. For infants (under 12 months of age), the new meal patterns eliminated juice, supported breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older, the new meal patterns increased whole grains, fruits and vegetables, and low-fat and fat-free milk; limited sugar in cereals and yogurts; and prohibited frying, among other requirements. \n\n\t\t\tCACFP at Centers\n\n\t\t\t\tParticipation\n\nChild care centers in CACFP can be (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet certain requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2017, over 65,000 child care centers with an average daily attendance of over 3.6 million children participated in CACFP. Over 2,700 adult care centers served nearly 132,000 adults through CACFP. \n\n\t\t\t\tEligibility and Administration\n\nParticipating centers may receive daily reimbursements for up to either two meals and one snack or one meal and two snacks for each participant, so long as the meals and snacks meet federal nutrition standards. \nThe eligibility rules for CACFP centers largely track those of NSLP: children in households at or below 130% of the current poverty line qualify for free meals\/snacks while those between 130% and 185% of poverty qualify for reduced-price meals\/snacks (see Table 2 ). In addition, participation in the same categorical eligibility programs as NSLP as well as foster child status convey eligibility for free meals in CACFP. Like school meals, eligibility is determined through paper applications or direct certification processes.\nLike school meals, all meals and snacks served in the centers are federally subsidized to some degree, even those that are paid. Different reimbursement amounts are provided for breakfasts, lunches\/suppers, and snacks, and reimbursement rates are set in law and indexed for inflation annually. The largest subsidies are paid for meals and snacks served to participants with family income below 130% of the federal poverty income guidelines (the income limit for free school meals), and the smallest to those who have not met a means test. See Table B -5 for current CACFP center reimbursement rates. \nUnlike school meals, CACFP institutions are less likely to collect per-meal payments. Although federal assistance for day care centers differentiates by household income, centers have discretion on their pricing of meals. Centers may adjust their regular fees (tuition) to account for federal payments, but CACFP itself does not regulate these fees. In addition, centers can charge families separately for meals\/snacks, so long as there are no charges for children meeting free-meal\/snack income tests and limited charges for those meeting reduced-price income tests.\nIndependent centers are those without sponsors handling administrative responsibilities. These centers must pay for administrative costs associated with CACFP out of nonfederal funds or a portion of their meal subsidy payments. For centers with sponsors, the sponsors may retain a proportion of the meal reimbursement payments they receive on behalf of their centers to cover such costs. \n\n\t\t\tCACFP for Day Care Homes\n\n\t\t\t\tParticipation\n\nCACFP-supported day care homes serve a smaller number of children than CACFP-supported centers , both in terms of the total number of children served and the average number of children per facility. Roughly 17% of children in CACFP (approximately 757,000 in FY2017 average daily attendance) are served through day care homes. In FY2017, approximately 103,000 homes (with just over 700 sponsors) received CACFP support.\n\n\t\t\t\tEligibility and Reimbursement\n\nAs with centers, payments to day care homes are provided for up to either two meals and one snack or one meal and two snacks a day for each child. Unlike centers, day care homes must participate under the auspices of a public or, more often, private nonprofit sponsor that typically has 100 or more homes under its supervision. CACFP day care home sponsors receive monthly administrative payments based on the number of homes for which they are responsible. \nFederal reimbursements for family day care homes differ by the home's status as \"Tier I\" or \"Tier II.\" Unlike centers, day care homes receive cash reimbursements (but not commodity foods) that generally are not based on the child participants' household income. Instead, there are two distinct, annually indexed reimbursement rates that are based on area or operator eligibility criteria\nTier I homes are located in low-income areas (defined as areas in which at least 50% of school-age and enrolled children qualify for free or reduced-price meals) or operated by low-income providers whose household income meets the free or reduced-price income standards. They receive higher subsidies for each meal\/snack they serve. Tier II (lower) rates are by default those for homes that do not qualify for Tier I rates; however, Tier II providers may seek the higher Tier I subsidy rates for individual low-income children for whom financial information is collected and verified. (See Table B-6 for current Tier I and Tier II reimbursement rates.)\nAdditionally, HHFKA introduced a number of additional ways (as compared to prior law) by which family day care homes can qualify as low-income and get Tier I rates for the entire home or for individual children. \nAs with centers, there is no requirement that meals\/snacks specifically identified as free or reduced-price be offered; however, unlike centers, federal rules prohibit any separate meal charges. \n\n\t\tSummer Meals\n\nCurrent law SFSP and the NSLP\/SBP Seamless Summer Option provide meals in congregate settings nationwide; the related Summer Electronic Benefits Transfer (SEBTC or Summer EBT) demonstration project is an alternative to congregate settings. \n\n\t\t\tSummer Food Service Program (SFSP)\n\nSFSP supports meals for children during the summer months. The program provides assistance to local public institutions and private nonprofit service institutions running summer youth\/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash reimbursements for each meal or snack served; however, federally donated commodity foods are also offered. Participating service institutions are often entities that provide ongoing year-round service to the community including schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. \nSimilar to the CACFP model, sponsors are institutions that manage the food preparation, financial, and administrative responsibilities of SFSP. Sites are the places where food is served and eaten. At times, a sponsor may also be a site. State agencies authorize sponsors, monitor and inspect sponsors and sites, and implement USDA policy. Unlike CACFP, sponsors are required for an institution's participation in SFSP as a site.\n\n\t\t\t\tParticipation\n\nIn FY2017, nearly 5,500 sponsors with 50,000 food service sites participated in the SFSP and served an average of approximately 2.7 million children daily (according to July data). \nParticipation of sites and children in SFSP has increased in recent years. Program costs for FY2017 totaled over $485 million, including cash assistance, commodity foods, administrative cost assistance, and health inspection costs.\n\n\t\t\t\tEligibility and Administration\n\nThere are several options for eligibility and meal\/snack service for SFSP sponsors (and their sites)\nOpen sites provide summer food to all children in the community. These sites are certified based on area eligibility measures, where 50% or more of area children have family income that would make them eligible for free or reduced-price school meals (see Table 2 ). Closed or Enrolled sites provide summer meals\/snacks free to all children enrolled at the site. The eligibility test for these sites is that 50% or more of the children enrolled in the sponsor's program must be eligible for free or reduced-price school meals based on household income. Closed\/enrolled sites may also become eligible based on area eligibility measures noted above. Summer camps (that are not enrolled sites) receive subsidies only for those children with household eligibility for free or reduced-price school meals. Other programs specified in law , such as the National Youth Sports Program and centers for homeless or migrant children. \nSummer sponsors get operating cost (food, storage, labor) subsidies for all meals\/snacks they serve\u2014up to one meal and one snack, or two meals per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. See Table B -7 for current SFSP reimbursement rates. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor.\n\n\t\t\tSchool Meals' Seamless Summer Option64\n\nAlthough SFSP is the child nutrition program most associated with providing meals during summer months, it is not the only program option for providing these meals and snacks. The Seamless Summer Option, run through NSLP or SBP programs, is also a means through which food can be provided to students during summer months. Much like SFSP, Seamless Summer operates in summer sites (summer camps, sports programs, churches, private nonprofit organizations, etc.) and for a similar duration of time. Unlike SFSP, schools are the only eligible sponsors , although schools may operate the program at other sites. Reimbursement rates for Seamless Summer meals are the same as current NSLP\/SBP rates. \n\n\t\t\tSummer EBT for Children Demonstration\n\nBeginning in summer 2011 and (as of the date of this report) each summer since, USDA-FNS has operated Summer Electronic Benefit Transfer for Children (SEBTC or \"Summer EBT\") demonstration projects in a limited number of states and Indian Tribal Organizations (ITOs). These Summer EBT projects provide electronic food benefits over summer months to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided, through a WIC or SNAP EBT card model. In the demonstration projects, these benefits were provided as a supplement to the Summer Food Service Program (SFSP) meals available in congregate settings.\nSummer EBT and other alternatives to congregate meals through SFSP were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of alternatives were tested and evaluated, findings from Summer EBT were among the most promising, and Congress provided subsequent funding. Summer EBT evaluations showed significant impacts on reducing child food insecurity and improving nutritional intake. \u00a0Summer EBT was funded by P.L. 111-80 in the summers from 2011 to 2014. Projects have continued to operate and were annually funded by FY2015-FY2018 appropriations; most recently, the FY2018 appropriations law ( P.L. 115-141 ) provided $28 million. According to USDA-FNS, in summer 2016 Summer EBT served over 209,000 children in nine states and two tribal nations\u2014an increase from the 11,400 children served when the demonstration began in summer 2011. \n\n\t\tSpecial Milk Program (SMP)\n\nSchools (and institutions like summer camps and child care facilities) that are not already participating in the other child nutrition programs can participate in the Special Milk Program. Schools may also administer SMP for their part-day sessions for kindergartners or pre-kindergartners.\nUnder SMP, participating institutions provide milk to children for free and\/or at a subsidized paid price, depending on how the enrolled institution opts to administer the program (see Table B -8 for current Special Milk reimbursement rates for each of these options)\nAn institution that only sells milk will receive the same per-half pint federal reimbursement for each milk sold (approximately 20 cents). An institution that sells milk and provides free milk to eligible children (income eligibility is the same as free school meals, see Table 2 ), receives a reimbursement for the milk sold (approximately 20 cents) and a higher reimbursement for the free milks. An institution that does not sell milk provides milk free to all children and receives the same reimbursement for all milk (approximately 20 cents). This option is sometimes called nonpricing.\nIn FY2017, over 41 million half-pints were subsidized, 9.5% of which were served free. Federal expenditures for this program were approximately $8.3 million in FY2017. \n\n\t\tFresh Fruit and Vegetable Program (FFVP)\n\nStates receive formula grants through the Fresh Fruit and Vegetable Program, under which state-selected schools receive funds to purchase and distribute fresh fruit and vegetable snacks to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population. States select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per-student grant amounts (between $50 and $75). \nFunding is set by law at $150 million for school year 2011-2012 and inflation-indexed for every year after. In FY2017, states used approximately $184 million in FFVP funds. FFVP is funded by a mandatory transfer of funds from USDA's Section 32 program\u2014a permanent appropriation of 30% of the previous year's customs receipts. This transfer is required by FFVP's authorizing laws (Section 19 of the Richard B. Russell National School Lunch Act and Section 4304 of P.L. 110-246 ). Up until FY2018's law, annual appropriations laws delayed a portion of the funds to the next fiscal year.\nAfter a pilot period, the Child Nutrition and WIC Reauthorization Act of 2004 ( P.L. 108-265 ) permanently authorized and funded FFVP for a limited number of states and Indian reservations. In recent years, FFVP has been amended by omnibus farm bill laws rather than through child nutrition reauthorizations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding, specifically providing funds through Section 32, and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to this program but did include, and fund at $5 million in FY2014, a pilot project that requires USDA to test offering frozen, dried, and canned fruits and vegetables and publish an evaluation of the pilot. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in SY2014-2015 and the evaluation was published in 2017. Other proposals to expand fruits and vegetables offered in FFVP have been introduced in both the 114 th and 115 th Congress.\n\n\tOther Topics\n\n\t\tAfter-School Meals and Snacks: CACFP, NSLP Options\n\nTwo of the child nutrition programs discussed in previous sections, the National School Lunch Program (NSLP) and Child and Adult Care Food Program (CACFP), provide federal support for snacks and meals served during after-school programs. \nNSLP provides reimbursements for after-school snacks; however, this option is open only to schools that already participate in NSLP. These schools may operate after-school snack-only programs during the school year, and can do so in two ways: (1) if low-income area eligibility criteria are met, provide free snacks in lower-income areas; or (2) if area eligibility criteria are not met, offer free, reduced-price, or fully paid-for snacks, based on household income eligibility (like lunches in NSLP). The vast majority of snacks provided through this program are through the first option. Through this program, approximately 206 million snacks were served in FY2017 (a daily average of nearly 1.3 million). This compares with nearly 4.9 billion lunches served (a daily average of 27.8 million).\nCACFP provides assistance for after-school food in two ways. First, centers and homes that participate in CACFP and provide after-school care may participate in traditional CACFP (the eligibility and administration described earlier). Second, centers in areas where at least half the children in the community are eligible for free or reduced-price school meals can opt to participate in the CACFP At-Risk Afterschool program, which provides free snacks and suppers. Expansion of the At-Risk After-School meals program was a major policy change included in HHFKA. Prior to the law, 13 states were permitted to offer CACFP At-Risk After-School meals (instead of just a snack); the law allowed all CACFP state agencies to offer such meals. In FY2017, the At-Risk Afterschool program served a total of approximately 242.6 million free meals and snacks to a daily average of more than 1.7 million children. \n\n\t\tRelated Programs, Initiatives, and Support Activities\n\nFederal child nutrition laws authorize and program funding supports a range of additional programs, initiatives, and activities. \nThrough State Administrative Expenses funding, states are entitled to federal grants to help cover administrative and oversight\/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 2% of child nutrition reimbursements. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for CACFP, commodity distribution, and Administrative Review efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit, and appropriated funding is available to states for two years. State Administrative Expense spending in FY2017 totaled approximately $279 million.\nTeam Nutrition is a USDA-FNS program that includes a variety of school meals initiatives around nutrition education and the nutritional content of the foods children eat in schools. This includes Team Nutrition Training Grants, which provide funding to state agencies for training and technical assistance, such as help implementing USDA's nutrition requirements and the Dietary Guidelines for Americans. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge (HUSSC), which originated in the 2004 reauthorization of the Child Nutrition Act. HUSSC was a voluntary certification initiative designed to recognize schools that have created a healthy school environment through the promotion of nutrition and physical activity. \nFarm-to-school programs broadly refer to \"efforts that bring regionally and locally produced foods into school cafeterias,\" with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education to school districts and farmers. HHFKA amended existing child nutrition programs to establish mandatory funding of $5 million per year for competitive farm-to-school grants that support schools and nonprofit entities in establishing farm-to-school programs that improve a school's access to locally produced foods. The FY2018 appropriations law provided an additional $5 million in discretionary funding to remain available until expended. Grants may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, developing partnerships, and implementing farm-to-school programs. USDA's Office of Community Food Systems provides additional resources on farm-to-school issues. \nThrough an Administrative Review process (formerly referred to as Coordinated Review Effort (CRE)), USDA-FNS, in cooperation with state agencies, conducts periodic on-site NSLP school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. State agencies are required to conduct administrative reviews of all school food authorities (SFAs) that operate the NSLP under their jurisdiction at least once during a three-year review cycle. Federal Administrative Review expenditures were approximately $9.9 million in FY2017. \nUSDA-FNS and state agencies conduct many other child nutrition program support activities for which dedicated funding is provided. Among other examples, there is the Institute of Child Nutrition (ICN), which provides technical assistance, instruction, and materials related to nutrition and food service management; it receives $5 million a year in mandatory funding appropriated in statute. ICN is located at the University of Mississippi. USDA-FNS provides training on food safety education. Funding is also provided for USDA-FNS to conduct studies, provide training and technical assistance, and oversee payment accuracy. \nAppendix A. Acronyms Used in This Report \nAppendix B. Per-meal or Per-snack Reimbursement Rates for Child Nutrition Programs\nThis appendix lists the specific reimbursement rates discussed in the earlier sections of the report. Reimbursement rates are adjusted for inflation for each school or calendar year according to terms laid out in the programs' authorizing laws. Each year, the new rates are announced in the Federal Register .","output":"The \"child nutrition programs\" refer to the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) programs that provide food for children in school or institutional settings. The best known programs, which serve the largest number of children, are the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). The child nutrition programs also include the Child and Adult Care Food Program (CACFP), which provides meals and snacks in day care and after school settings; the Summer Food Service Program (SFSP), which provides food during the summer months; the Special Milk Program (SMP), which supports milk for schools that do not participate in NSLP or SBP; and the Fresh Fruit and Vegetable Program (FFVP), which funds fruit and vegetable snacks in select elementary schools.\nFunding: The vast majority of the child nutrition programs account is considered mandatory spending, with trace amounts of discretionary funding for certain related activities. Referred to as open-ended, \"appropriated entitlements,\" funding is provided through the annual appropriations process; however, the level of spending is controlled by benefit and eligibility criteria in federal law and dependent on the resulting levels of participation. Federal cash funding (in the form of per-meal reimbursements) and USDA commodity food support is guaranteed to schools and other providers based on the number of meals or snacks served and participant category (e.g., free meals for poor children get higher subsidies).\nParticipation: The child nutrition programs serve children of varying ages and in different institutional settings. The NSLP and SBP have the broadest reach, serving qualifying children of all ages in school settings. Other child nutrition programs serve more-narrow populations. CACFP, for example, provides meals and snacks to children in early childhood and after-school settings among other venues. Programs generally provide some subsidy for all food served but a larger federal reimbursement for food served to children from low-income households.\nAdministration: Responsibility for child nutrition programs is divided between the federal government, states, and localities. The state agency and type of local provider differs by program. In the NSLP and SBP, schools and school districts (\"school food authorities\") administer the program. Meanwhile, SFSP (and sometimes CACFP) uses a model in which sponsor organizations handle administrative responsibilities for a number of sites that serve meals.\nReauthorization: The underlying laws covering the child nutrition programs were last reauthorized in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296, enacted December 13, 2010). This law made significant changes to child nutrition programs, including increasing federal financing for school lunches, expanding access to community eligibility and direct certification options for schools, and expanding eligibility options for home child care providers. The law also required an update to school meal nutrition guidelines as well as new guidelines for food served outside the meal programs (e.g., snacks sold in vending machines and cafeteria a la carte lines).\nCurrent Issues: The 114th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant legislative activity with regard to reauthorization in the 115th Congress. However, the vast majority of operations and activities continue with funding provided by appropriations laws. Current issues in the child nutrition programs are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues."}
{"id":"gao_GAO-19-19","pid":"gao_GAO-19-19_0","input":"\tBackground\n\nAccording to the National Inventory of Dams, as of January 2016 there  are approximately 90,500 dams in the United States and about 2.5  percent of these (approximately 2,100 dams) are associated with  hydropower projects. Hydropower projects are owned and operated by  both non-federal entities\u2014such as private utility companies,  municipalities, and state government agencies\u2014or federal government  agencies\u2014primarily the U.S. Army Corps of Engineers (the Corps) and  the Bureau of Reclamation. Collectively, these dams associated with  hydropower projects account for about 8 percent of the total electric  generating capacity in the United States. Hydropower projects generally  consist of one or more dams and other key components associated with  hydroelectric power generation and water storage, and are uniquely  designed to accommodate watersheds, geology, and other natural  conditions present at the time of construction. These components  include both those that allow operators to adjust reservoir water levels,  such as spillways and gates, as well as those that produce and distribute  electricity, such as transmission lines and powerhouses, among others.  (See fig. 1.)\nThe Federal Power Act provides for FERC\u2019s regulatory jurisdiction over a  portfolio of about 1,000 non-federal hydropower projects comprising over  2,500 dams. While FERC does not construct, own, or operate dams, it  licenses and provides oversight of non-federal hydropower projects to  promote their safe operation. Licensees are responsible for the safety and  liability of dams, pursuant to the Federal Power Act, and for their  continuous upkeep and repair using sound and prudent engineering  practices. FERC officials in each of the agency\u2019s five regional offices work  directly with licensees to help ensure these projects comply with licenses  and meet federal guidelines for dam safety. In addition, stakeholder  groups such as the Association of State Dam Safety Officials can assist  licensees in staying current on federal and state dam laws and  regulations, dam operations and maintenance practices, and emergency  action planning, among other things.\nFERC\u2019s regulations, supplemented by its Operating Manual and  Engineering Guidelines, establish a framework for its dam safety  oversight approach. FERC\u2019s Operating Manual provides guidelines for the  FERC staff performing inspections that are aimed at ensuring that  structures are safe, are being properly maintained, and are being  operated safely. FERC\u2019s Engineering Guidelines provides FERC staff and  licensees with procedures and criteria for the review and analysis of  license applications, project modification proposals, technical studies, and  dam designs. For example, one chapter presents guidelines for FERC  staff to use to determine the appropriateness and level of geotechnical  investigations and studies for dams. The Engineering Guidelines states  that every dam is unique and that safety analysis of each dam require  that engineers apply technical judgement based on their professional  experience.\nAs part of FERC\u2019s safety oversight approach, it assigns a hazard  classification to each dam in accordance with federal guidelines that  consider the potential human or economic consequences of the dam\u2019s  failure. The hazard classification does not indicate the structural integrity  of the dam itself, but rather the probable effects if a failure should occur.  Depending on the hazard classification, the extent of and the frequency of  safety oversight activities can vary.\nLow hazard dams are those where failure \u2014an uncontrolled release  of water from a water-retaining structure\u2014would result in no probable  loss of human life but could cause low economic and\/or environmental  losses.\nSignificant hazard dams are those dams where failure would result in  no probable loss of human life, but could cause economic loss,  environmental damage, or other losses.\nHigh hazard dams are those dams where failure would probably  cause loss of human life.\nFERC has designed a multi-layered oversight approach that involves both  independent and coordinated actions with dam owners and independent  consultants. Key elements of this approach include ensuring licensees  have a safety program in place, conducting regular safety inspections,  reviewing technical analyses, and analyzing safety as a part of project  relicensing. (See fig. 2.)\nLicensee\u2019s dam safety program. According to FERC guidance,  licensees have the most important role in ensuring dam safety  through continuous visual surveillance and ongoing monitoring to  evaluate the health of the structure. Beyond this expectation for  continuous oversight, FERC requires licensees of high and significant  hazard dams to have an Owner\u2019s Dam Safety Program.\nFERC dam safety inspection. The dam safety inspection, also called  operation inspection, is a regularly-scheduled inspection conducted by  a FERC regional office project engineer primarily addressing dam and  public safety. FERC\u2019s Operating Manual establishes the frequency  that a FERC engineer conducts dam safety inspections.\nIndependent consultant inspection and potential failure mode  analysis. FERC requires licensees to hire a FERC-approved  independent consulting engineer to inspect and evaluate high hazard  dams and certain types of dams above a certain height or size and  submit a report detailing the findings. Additionally, FERC requires  the licensee of a high or significant hazard dam to conduct a potential  failure mode analysis. A potential failure mode analysis is an  exercise to identify and assess all potential failure modes under  normal operating water levels and under extreme conditions caused  by floods, earthquakes, and other events.\nFERC relicensing of projects. FERC issues hydropower licenses for  the construction of new hydropower projects, and reissues licenses  for existing projects when licenses expire. Licensees may submit  applications for a new license for the continued operation of existing  projects as part of a process known as relicensing. During relicensing,  in addition to the power and development purposes for which FERC  issues licenses, FERC must evaluate safety, environmental,  recreational, cultural, and resource development among other factors  when evaluating projects, according to its guidance.\nIn addition, FERC requires licensees to conduct various engineering  studies related to dam performance in accordance with FERC safety  requirements. Required engineering studies focus on dam performance  as affected by hydrology, seismicity, and dam stability. Licensees may  also produce engineering studies, such as a focused spillway  assessment, for their own operations or at the request of FERC.\n\n\tFERC Staff Collect Safety Information during Inspections of Individual Dams, but FERC Has Not Analyzed Dam Safety across Its Entire Portfolio\n\n\t\tFERC Staff Generally Followed Guidance to Collect Information during Safety Inspections of Individual Dams That We Reviewed but Have Inconsistently Recorded Such Information Information Collection\n\nWe found, based on our analysis of the 42 dam safety inspections we  reviewed, that FERC staff generally conducted and collected information  from these inspections consistent with guidance in its Operating Manual.  According to FERC\u2019s Operating Manual, staff\u2019s approach to conducting  these inspections and collecting information is to include preparing for the  inspection by reviewing documents, conducting a field inspection of the  dam and associated project components, and discussing inspection  findings with licensees and with FERC supervisors.\nPreparation for inspection: We found that FERC staff generally met  document review requirements in preparation for safety inspections of  the 42 dams we reviewed. (See table 1.) According to the Operating  Manual, FERC staff are to review safety-related information contained  in documents such as potential failure mode analyses and hazard  potential classifications. For example, we found that staff documented  their review of the most recent independent consultant inspection  report and potential failure mode analysis for each of the 16 high  hazard dams we reviewed. FERC staff told us that they generally  used checklists when preparing for these inspections. For example,  some of the staff told us they tailor the checklist included in the  Operating Manual, based on the dam\u2019s type, characteristics, and  hazard classification. Additionally, for each of the dams in our sample,  staff stated that they prepared for the inspection by reviewing prior  inspection reports and recommendations.\nField inspection: We found that FERC staff generally met  requirements for reviewing project components and documenting their  findings from field inspections of the 42 dams we reviewed. (See table  2.) According to the Operating Manual, FERC staff are to conduct  visual inspections of the dam, typically alongside the licensee, to  assess the dam and project components by observing their condition  and identifying any safety deficiency or maintenance requirement.  Also during the inspection, FERC staff are to compare current  conditions of the dam and project components to those described in  prior inspection reports, and as applicable, collect information on the  licensee\u2019s progress towards resolving deficiencies and maintenance  issues that can affect safety. To assess safety, FERC staff we  interviewed stated that they primarily rely on their engineering  judgment.\nInspection findings: According to our interviews with FERC staff from  selected projects, we found that staff generally followed FERC  guidance in discussing inspection findings with licensees and  supervisors prior to preparing inspection reports to document their  findings. According to the Operating Manual, following the dam safety  inspection, FERC staff are to discuss the inspection with the licensee,  giving direction on how to address any findings. Additionally, upon  returning to the office, staff are to discuss inspection findings with their  supervisors who may suggest additional actions. FERC staff are  then to develop a dam safety inspection report that documents  observations and conclusions from their pre-inspection preparation  and their field inspection and identifies follow-up actions for the  licensee. We found that FERC staff prepared inspection reports to  document findings from the 42 dam safety inspections we reviewed.  In response to inspection findings, FERC requires licensees to submit  a plan and schedule to remediate any deficiency, actions that FERC  staff then reviews, approves, and monitors until the licensees have  addressed the deficiency.\n\n\t\t\tInformation Recording\n\nWhile we found that FERC staff conducted inspections and collected  inspection findings consistently in the files we reviewed, FERC\u2019s  approach to recording information varies across its regions, thus limiting  the usefulness of the information. FERC\u2019s approach to recording  inspection information relies on multiple systems to record inspection  information and affords broad discretion to its staff on how to characterize  findings, such as whether to track inspection findings as maintenance  issues or as safety deficiencies.\nAs related to systems for recording inspection information, FERC staff  use the Data and Management System (DAMS), the Office of Energy  Projects-IT (OEP-IT) system, as well as spreadsheets. In particular,  according to FERC staff:\nFour out of FERC\u2019s five regional offices use DAMS\u2014which is primarily  a workload tracking tool\u2014to track plans and schedules associated  with safety investigations and modifications as well as inspection  follow-up items. FERC staff stated that since the inspection  information in DAMS is recorded as narrative text in a data field  instead of as discrete categories, sorting or analysis of the information  is difficult.\nOne regional office uses OEP-IT to track safety deficiencies while the  system is more widely used across FERC to track licensees\u2019  compliance with the terms and conditions of their licenses.\nThree out of FERC\u2019s five regional offices also use spreadsheets and  other tools that are not integrated with DAMS or OEP-IT to track  inspection information and licensee progress toward resolving safety  deficiencies.\nFERC staff said that use of these different systems to record deficiencies  identified during inspections limits their ability to analyze safety  information. For example, according to FERC officials, OEP-IT was not  designed to track safety deficiency information and is not compatible with  DAMS for use in tracking information on a national level. Furthermore,  because spreadsheets and other tools are specific to the regional office in  which they are used, FERC staff does not use the information they  contain for agency-wide analysis.\nConcerning decisions on how to characterize inspection findings, FERC  staff relies on professional judgment, informed by their experience and  the Engineering Guidelines, to determine whether to track inspection  findings as a safety deficiency or as a maintenance item, according to  FERC officials. With input from their supervisors, FERC staff also  determines what information to record and how to track the status of the  inspection finding. For example, staff assigned to a dam at a FERC- licensed project in New Hampshire observed concrete deterioration on  several parts of the dam and its spillway and asked the licensee to  monitor all concrete surfaces, making repairs as necessary. According to  staff we interviewed, regional staff and supervisors decided not to identify  this as a deficiency to be tracked in DAMS because concrete  deterioration is normal and to be expected in consideration of the area\u2019s  harsh winter weather. In contrast, staff assigned to a dam at a FERC- licensed project in Minnesota observed concrete deterioration on several  parts of the project, including the piers and the powerhouse walls, and  entered the safety item in DAMS as requiring repair by the licensee.  FERC officials stated they are comfortable with the use of professional  judgement to classify and address inspection findings because it is  important to allow for consideration of the characteristics unique to each  situation and how they affect safety.\nFERC\u2019s approach to recording inspection information is inconsistent  because FERC has not provided standard language and procedures  about how staff should record and track deficiencies including which  system to use. Federal standards for internal control state that agencies  should design an entity\u2019s information system and related control activities  to achieve objectives and control risks. In practice, this means that an  agency would design control activities\u2014such as policies and  procedures\u2014over the information technology infrastructure to support the  completeness, accuracy, and validity of information processing by  information technology. FERC officials acknowledged that there are  inconsistent approaches in where and how staff record safety deficiency  information, approaches that limit the information\u2019s usefulness as an input  to its oversight. While the agency has not developed guidance, officials  stated that FERC plans to take steps to improve the consistency of  recorded information by replacing the OEP-IT system with a new system,  tentatively scheduled for September 2018, that will have a specific  function to track dam safety requirements. However, this new system will  not replace the functions of DAMS, which FERC will continue to use to  store inspection information. The two will exist as parallel systems with  the eventual goal of the two systems\u2019 sharing information. By developing  standard language and procedures to standardize the recording of  information collected during inspections, FERC officials could help ensure  that the information shared across these systems is comparable, steps  that would allow FERC to identify the extent of and characteristics  associated with common safety deficiencies across its entire portfolio of  regulated dams. Moreover, with a consistent approach to recording  information from individual dam safety inspections, FERC will be  positioned to proactively identify comparable safety deficiencies across its  portfolio and to tailor its inspections towards evaluating them.\n\n\t\tFERC Has Not Used Inspection Information to Fully Assess Safety Risks across Its Regulated Portfolio of Dams\n\nWhile FERC uses inspection information to monitor a licensee\u2019s efforts to  address a safety deficiency for an individual dam, FERC has not analyzed  information collected from its dam safety inspections to evaluate safety  risks across the entire regulated portfolio of dams. For example, FERC  has not reviewed inspection information to identify common deficiencies  among certain types of dams. Federal standards for internal control state  that agencies should identify, analyze, and respond to risks related to  their objectives. These standards note that one method for management  to identify risks is the consideration of deficiencies identified through  audits and other assessments. Dam safety inspections are an example of  such an assessment. As part of such an approach, the agency analyzes  risks to estimate their significance, which provides a basis for responding  to the risk through specific actions. Furthermore, in our previous work on  federal facilities, we have identified that an advanced use of risk  management involving the ability to gauge risk across a portfolio of  facilities could allow stakeholders to comprehensively identify and  prioritize risks at a national level and direct resources toward alleviating  them.\nFERC officials stated that they have not conducted a portfolio-wide  analysis in part due to the inconsistency of recorded inspection data and  because such an evaluation has not been a priority compared to  inspecting individual dams. According to officials, the FERC headquarters  office collects and reviews information semi-annually from each of its five  regional offices on the progress of outstanding dam investigations and  modifications in those regions. FERC\u2019s review is designed to monitor  the status of investigations on each individual dam but does not analyze  risks across the portfolio of dams at the regional or national level. For  example, officials from the New York Regional Office stated they do not  perform trend analysis across the regional portfolio of dams under their  authority, but they compile year-to-year data for each separate dam to  show any progression or changes from previous data collected from  individual dams.\nA portfolio-wide analysis could help FERC proactively identify safety risks  and prioritize them at a national level. FERC officials stated that a  proactive analysis of its portfolio could be useful to determining how to  focus its inspections to alleviate safety risks, but it was not an action that  FERC had taken to date. The benefits of a proactive analysis, for  example, could be similar to those FERC derived from the analysis it  conducted in reaction to the Oroville Dam incident. To conduct this  analysis, FERC required 184 project licensees, identified by FERC  regional offices as having spillways similar to the failed spillway at the  Oroville Dam, to assess the spillways\u2019 safety and capacity. According to  FERC officials, these assessments identified 27 dam spillways with  varying degrees of safety concerns. They stated that FERC\u2019s spillway  assessment initiative was a success because they were able to target a  specific subgroup of dams within the portfolio and identify these safety  concerns at 27 dam spillways. FERC officials stated that they are working  with the dam licensees to address these safety concerns. A similar and  proactive approach based on analysis of common deficiencies across the  portfolio of dams under FERC\u2019s authority could also help to identify any  safety risks that may not have been targeted during the inspections of  individual dams and prior to a safety incident.\n\n\tFERC Applies Agency Guidance and Uses Professional Judgment to Analyze Engineering Studies of Dam Performance and Evaluate Safety\n\n\t\tLicensees and Their Consultants Develop the Engineering Studies Used to Assess Dam Performance\n\nAs directed by FERC, licensees and their consultants develop and  review, or update, various engineering studies related to dam  performance to help ensure their dams meet FERC requirements and  remain safe. FERC regulations and guidelines describe the types and  frequency of studies and analyses required based on dams\u2019 hazard  classifications. For all high hazard and some significant hazard dams,  existing studies are to be reviewed by each licensee\u2019s consultants every 5  years, as part of the independent consultant inspection and  accompanying potential failure mode analysis. According to FERC  officials, for those significant hazard dams that do not require an  independent consultant inspection and for low hazard dams, FERC\u2019s  regulations and guidelines do not require any studies, but in practice  FERC directs many licensees to conduct them. FERC also may request  engineering studies in response to dam safety incidents at other projects,  or engage a board of consultants to oversee the completion of a study.  For example, as previously noted, following the Oroville Dam incident in  2017, FERC requested a special assessment of all dams with spillways  similar to the failed spillway at the Oroville Dam.\nTo develop these studies, all six of the consultants we interviewed stated  that they follow guidelines provided by FERC and other dam safety  agencies. Specifically, they stated that they use FERC\u2019s Engineering  Guidelines, which provide engineering principles to guide the  development and review of engineering studies. In recognition of the  unique characteristics of each dam, including its construction, geography,  and applicable loading conditions, the Guidelines provides consultants  with flexibility to apply engineering judgment, and as a result, the  approach that licensees and their consultants use and the focus of their  reviews of engineering studies may vary across regions or projects. For  example, one independent consultant we interviewed noted that  seismicity studies are not highlighted during the independent consultant  inspections for projects in the Upper Midwest in comparison to projects in  other areas of the country because the region is not seismically active,  but that inspections do look closely at ice loads during the winter months.\nTo create these studies, we found that licensees and their consultants  generally use data from other federal agencies and rely on available  modeling tools developed by federal agencies and the private sector to  evaluate dam performance. For example, many of the engineering  studies we reviewed rely on data from the National Weather Service and  the National Oceanic and Atmospheric Administration to estimate  precipitation patterns and the U.S. Geological Survey to estimate seismic  activity. In addition, licensees and their consultants use modeling tools  and simulations, such as those developed by the Corps to estimate  hydrology, to develop engineering studies.\nFERC staff noted that the engineering studies developed by licensees  and their consultants generally focus on the analysis of extreme events,  such as earthquakes and floods. In reference to extreme events, FERC  staff said that both actual past events and likely future events are  considered in determining their magnitude. FERC staff noted the probable  maximum flood\u2014the flood that would be expected to result from the most  extreme combination of reasonably possible meteorological and  hydrological conditions\u2014as an example of a dam design criterion that is  based on application of analysis of extreme events. In describing the  efficacy of probable maximum flood calculations, FERC officials stated  that they had not observed a flood that exceeded the probable maximum  flood calculated for any dam and noted that their Engineering Guidelines  provides a conservative approach to estimating the probable maximum  flood and other extreme events. FERC officials stated that requiring a  conservative approach to estimating extreme events helps to mitigate the  substantial uncertainty associated with these events, including in  consideration of emerging data estimating the effects of climate change  on extreme weather events.\nOnce developed, engineering studies we reviewed often remained in  effect for a number of years, until FERC or the licensee and its consultant  determined an update was required. For example, we found that the  hydrology studies were 20 years or older for 17 of the 42 dams in our  review, including for 9 of the 16 high hazard dams in our sample. FERC\u2019s  Engineering Guidelines states that studies should be updated as  appropriate. For example, FERC\u2019s Engineering Guidelines on hydrology  studies state that previously accepted flood studies are not required to be  reevaluated unless it is determined that a re-analysis is warranted. The  Guidelines notes that FERC or the consultant may consider reanalyzing  the study for several reasons, including if they identify (1) significant  errors in the original study; (2) new data that may significantly alter  previous study results; or (3) significant changes in the conditions of the  drainage basin. FERC staff and consultants we interviewed stated that  age alone is not a primary criterion to update or replace studies and that  studies should be updated as needed depending on several factors  including age, new or additional data, and professional judgment.\nConsultants we interviewed identified some limitations that can affect their  ability to develop engineering studies for a dam. For example, they noted  that some dams may lack original design information, used prior to  construction of the dam, which includes the assumptions and calculations  used to determine the type and size of dam, the amount of water storage  capacity, and information on the pre-construction site geology and  earthquake potential. FERC officials estimated that for a large percentage  of the dams they relicense, the original information is no longer available.  For example, according to the report from the independent forensic team  investigating the Oroville Dam incident and as previously noted, some  design drawings and construction records for the dam\u2019s spillway could not  be located and some other documents that were available were not  included in the most recent independent consultant inspection report  submitted to FERC. To overcome the lack of original design information,  FERC told us that licensees and their consultants may use teams of  experts, advanced data collection techniques, and other modern  methods, where feasible, to assess the dam\u2019s ability to perform given  current environmental conditions. In cases where design or other  engineering information is incomplete, consultants stated that they  generally recommend the licensee conduct additional studies based on  the risk presented by the missing information but also noted that the  financial resources of a licensee may affect its willingness and ability to  conduct additional studies. However, FERC officials stated that FERC  staff are ultimately responsible for making decisions on whether additional  engineering studies are needed to evaluate a dam\u2019s performance.\n\n\t\tFERC\u2019s Staff Reviews of Engineering Studies of Dam Performance Are Based on Its Engineering Guidance, and Professional Judgment Informs Aspects of Its Safety Oversight Approach\n\nFERC has established policies and procedures that use formal guidance,  and permit the use of professional judgment, to evaluate and review  engineering studies of dam performance submitted by licensees and their  consultants. FERC officials in both the headquarters and regional  offices emphasized that their role as the regulator is to review and  validate engineering studies developed by the licensee and their  consultants. FERC generally does not develop engineering studies as  officials noted that dam safety, including the development of engineering  studies, is primarily the licensee\u2019s responsibility.\nTo carry out their responsibility to ensure public safety, FERC staff stated  they use procedures and criteria in the FERC Engineering Guidelines to  review engineering studies and apply professional judgment to leverage  their specialized knowledge, skills, and abilities to support their  determinations of dam safety. FERC\u2019s Engineering Guidelines provides a  framework for the review of engineering studies, though the Guidelines  recognizes that each dam is unique and allows for flexibility and  exemptions in their use. Moreover, the Guidelines notes that analysis of  data is useful when evaluating a dam\u2019s performance, but should not be  used as a substitute for judgment based on experience and common  sense.\nBecause FERC\u2019s Engineering Guidelines allows for the application of  professional judgment, the methods used to review these studies vary  depending on the staff, the region, and individual dam characteristics. For  example, FERC staff said that when they review consultants\u2019  assumptions, methods, calculations and conclusions, in some cases they  may decide to conduct a sensitivity analysis if\u2014based on the staff\u2019s  judgment\u2014they need to take additional steps to validate or confirm  factors of safety for the project. FERC officials also stated that staff may conduct their own independent analyses, as appropriate, such as  evaluating a major structural change to the dam or validating submitted  studies. For example, as part of its 2016 review of the Union Valley Dam  in California, FERC staff validated the submitted hydrology study by  independently calculating key inputs, such as precipitation rates and peak  floods, to evaluate the dam\u2019s performance and verify the spillway\u2019s  reported capacity.\nIn addition, FERC has established various controls to help ensure the  quality of its review, including using a risk-based review process,  assigning multiple staff to review the studies, and rotating staff  responsibilities over time. We have previously found in our reporting on  other regulatory agencies that practices such as rotating staff in key  decision-making roles, and including at least two supervisory staff when  conducting oversight reviews help reduce threats to independence and  regulatory capture.\nRisk-based review process. FERC\u2019s review approach is risk-based, as  the frequency of staff\u2019s review of these studies is based on the hazard  classification of the dam as well as professional judgment. FERC  relies on three primary engineering studies (hydrology, seismicity, and  stability), and others as appropriate, which form the basis for  determining if a dam is safe. In addition, FERC requires licensees to  hire a FERC-approved independent consulting engineer at least every  5 years to inspect and evaluate high hazard and other applicable  dams and submit a report detailing the findings as part of the  independent consultant inspection process. In general, for the dams  we reviewed, we found that FERC staff reviewed engineering studies  for dams subject to independent consultant inspections (which are  typically high or significant hazard dams) more frequently than those  engineering studies associated with dams for which FERC does not  require an independent consultant inspection (typically low hazard  dams). For example, we found FERC staff had reviewed the most  recent hydrology studies for all 22 high and significant hazard dams in  our sample subject to independent consultant inspections within the  last 6 years and documented their analysis. According to FERC  officials, for dams not subject to an independent consultant inspection,  FERC staff review engineering studies on an as needed basis,  depending on whether the underlying assumptions and information  from the previous studies are still relevant. For example, for the 20  dams in our study not subject to an independent consultant  inspection, we found that most (15) of these studies were reviewed by  FERC within the past 10 years, usually during the project\u2019s  relicensing.\nMultiple levels of supervisory review. As part of FERC\u2019s quality control  and internal oversight process, multiple FERC staff are to review the  studies produced by the licensee and its consultant, with the number  of successive reviews proportional to the complexity or importance of  the study, according to FERC officials. FERC\u2019s Operating Manual  establishes the general procedure for the review of engineering  studies. To begin the review process, the staff assigned to a dam is to  review the engineering study and prepares an internal memo on its  findings; that memo is then to be reviewed for accuracy and  completeness by both a regional office Branch Chief, and the  Regional Engineer. If necessary, Washington, D.C., headquarters  office staff are to review and approve the final memo. Upon  completion of review, FERC staff are to provide a letter to the licensee  indicating any particular areas where additional information is needed  or where more studies are needed to evaluate the dam\u2019s  performance. According to FERC officials, each level of review adds  successive quality control steps performed by experienced staff. We  have previously found in reporting on other regulatory agencies that  additional levels of review increases transparency and accountability  and diminishes the risk of regulatory capture.\nRotation of FERC staff responsibilities. As part of an internal quality  control program to help minimize the risk of missing important safety- related items, FERC officials told us they rotate staff assignments and responsibilities approximately every 3 to 4 years. According to FERC  officials, this practice decreases the chance that a deficiency would be  missed over time due to differences in areas of engineering expertise  between or among staff. We have previously found in our reporting on  other regulatory agencies that strategies such as more frequently  rotating staff in key roles can help reduce the risk to supervisory  independence and regulatory capture.\nSome FERC regional offices have developed practices to further enhance  their review of these studies. For example, the New York Regional Office  established a subject matter expert team that helps review dams with  unusually complex hydrology issues. This team was created, in part,  because FERC staff noted that some of the hydrology studies conducted  in the 1990s and 2000s were not as thorough as they would have wanted,  and warranted a re-examination. Currently, the New York Regional Office  is reviewing the hydrology analysis associated with 12 dam break studies  to determine if the hydrology data used in developing these studies were  as rigorously developed and validated. According to the FERC staff in  this office, utilizing a team of subject matter experts has reduced Regional  Office review time and improved the hydrology studies\u2019 accuracy. FERC  staff in the New York Regional Office also told us that they are working  with other regional offices on setting up similar technical teams. For  example, FERC staff in the New York Regional Office have been working  with the Portland Regional Office to set up a similar team.\nFERC procedures require the use of engineering studies at key points  over the dam\u2019s licensing period to inform components of its safety  oversight approach, including during the potential failure mode analyses  of individual dams as well as during relicensing.\nPotential failure mode analysis. The potential failure mode analysis is  to occur during the recurring independent consultant inspection and is  conducted by the licensee\u2019s independent consultant along with other  key dam safety stakeholders. As previously explained, the analysis  incorporates the engineering studies and identifies events that could  cause a dam to potentially fail. During the potential failure mode  analysis, FERC, the licensee, the consultant, and other key dam  safety stakeholders are to refer to the engineering studies to establish  environmental conditions that inform dam failure scenarios, the risks  associated with these failures, and their consequences for an  individual dam. Further, according to a FERC white paper on risk  analysis, FERC is beginning to use information related to potential  failure modes as inputs to an analysis tool that quantifies risks at each  dam. With this information, FERC expects to make relative risk  estimates of dams within its inventory and establish priorities for  further study or remediation of risks at individual dams, according to  the white paper.\nRelicensing. During relicensing, FERC staff are to review the  engineering studies as well as information such as historical  hydrological data and extreme weather events, which also inform their  safety evaluation of the licensee\u2019s application. FERC officials also  stated that as a result of their relicensing review, they might alter the  articles of the new license before it is issued should their reviews  indicate that environmental conditions affecting the dam\u2019s safety have  changed.\n\n\tFERC Summarizes Information from Required Sources to Evaluate Dam Safety during Relicensing\n\nWe found that FERC generally met its requirement to evaluate dam  safety during the relicensing process for the 42 dams we reviewed.  During the relicensing process, we found that for the dams we reviewed,  FERC staff review safety information such as the past reports,  inspections, and studies conducted by FERC, the licensee, and  independent consultants and determine whether or not a dam owner  operated and maintained its dam safely. According to FERC staff, the  safety review for relicensing is generally a summary of prior safety and  inspection information, rather than an analysis of new safety information,  unless the licensee proposes a change to the operation or structure.\nFERC\u2019s review during relicensing for the high hazard and significant  hazard dams we reviewed was generally consistent with its guidance and  safety memo template, though the extent of its review of low hazard dams  varied. (See fig. 3.) For example, for the 22 high and significant hazard  dams we reviewed, the safety relicensing memos followed the template  and nearly all included summaries of hydrology studies, stability analyses,  prior FERC inspections, and applicable independent consultant reports.  For the 20 low hazard dams, FERC staff noted that some requirements in  the template are not applicable or have been exempted and therefore  were not reviewed during relicensing. While low hazard dams were  more inconsistently reviewed during relicensing, FERC staff also noted  that there has been a recent emphasis to more closely review, replace, or  conduct engineering studies, such as the stability study, for low hazard  dams during relicensing. Moreover, FERC staff told us that the safety  risks associated with these dams are minimal, as the failure of a low  hazard dam, by definition, does not pose a threat to human life or  economic activity.\nAccording to FERC staff, if a licensee proposed altering the dam or its  operations in any way as part of its application for a new license, FERC  staff would review the proposed change and may recommend adding  articles to the new license prior to its issuance to ensure dam safety.  FERC officials noted that, as part of their review, any structural or  operational changes proposed by the licensee during relicensing are  reviewed by FERC. These officials also noted that FERC generally  recommends modifications to the licensees\u2019 proposed changes prior to  their approval and inclusion in the new license. However, FERC officials  noted that, in some cases, additional information is needed prior to  approving the structural or operational change to ensure there are no  risks posed by the changes. In those instances, FERC may recommend  that articles be added to the new license, that require the licensee to  conduct additional engineering studies of the issue and submit them to  FERC for review and approval. For example, during the relicensing of the  Otter Creek project in Vermont in 2014, the licensee proposed changes to  the project\u2019s operation resulting from construction. As a result, FERC\u2019s  staff recommended adding a number of articles to the license, including  that the licensee conduct studies to evaluate the effect of the change on  safety and to ensure safety during construction.\nDuring relicensing, third parties\u2014such as environmental organizations,  nearby residents and communities, and other federal agencies, such as  the U.S. Fish and Wildlife Service\u2014may provide input on various topics  related to the project, including safety. However, FERC officials said that  very few third parties file studies or comments related to dam safety  during relicensing. FERC\u2019s template and guidance do not specifically  require the consideration of such analyses as part of its safety review,  and we did not identify any safety studies submitted by third parties for  dams or reviewed by FERC in our sample. According to FERC officials,  when stakeholders submit comments during relicensing, the comments  tend to focus on environmental aspects of the project, such as adding  passages for fish migration. Further, FERC is not required under the  Federal Power Act to respond to any comments, including those related  to dam safety, from third parties, according to FERC officials. However,  according to FERC officials, courts have held that the Administrative  Procedure Act precludes an agency from arbitrarily and capriciously  ignoring issues raised in comments. Furthermore, these officials stated  that if a court determines that FERC did not sufficiently address issues  raised during the relicensing process, its orders are subject to being  reversed and remanded by applicable United States courts of appeals.  Moreover, FERC officials noted that the information needed to develop  third party safety studies, such as the dam design drawings and  engineering studies, are property of the licensee, rather than FERC. In addition, this information may not be readily available to third parties or  the public if FERC designates it as critical energy infrastructure  information, which would preclude its release to the general public.\nFERC staff we interviewed stated that there have been no instances  where the Commission denied a new license to a licensee as a result of  its safety review during relicensing. FERC staff stated that given the  frequency of other inspections, including the FERC staff inspections, and  independent consultant inspections, it is unlikely staff would find a  previously unknown major safety issue during relicensing. FERC staff told  us that rather than deny a license for safety deficiencies, FERC will keep  a dam owner under the terms of a FERC license to better ensure the  licensee remedies existing safety deficiencies. Specifically, FERC staff  noted that under a license, FERC can ensure dam safety by (1) closely  monitoring the deficiency\u2019s remediation progress through its inspection  program, (2) adding license terms in the new license tailored to the  specific safety deficiency, and (3), as necessary, pursuing compliance  and enforcement actions, such as civil penalties or stop work orders, to  enforce the terms and conditions of the license. For example, prior to  and during the relicensing of a FERC-licensed project in Wisconsin in  2014, FERC\u2019s review identified that the spillway capacity was inadequate.  While the project was relicensed in 2017 without changes to the spillway,  FERC officials stated that they have been overseeing the plans and  studies of the remediation of the spillway through their ongoing inspection  program. However, if an imminent safety threat is identified during the  relicensing review, FERC officials stated that they will order that the  licensee take actions to remedy the issue immediately. Moreover, FERC  officials noted that, if necessary, a license can be revoked for failure to  comply with the terms of its license.\n\n\tConclusions\n\nFERC designed a multi-layered safety approach\u2014which uses  inspections, studies, and other assessments of individual dams\u2014to  reduce exposure to safety risks. However, as the spillway failure at the  Oroville Dam project in 2017 demonstrated, it is not possible to eliminate  all uncertainties and risks. As part of a continuing effort to ensure dam  safety at licensed projects, FERC could complement its approach to  evaluating the safety of individual dams by enhancing its capability to  assess and identify the risks across its portfolio of licensed dams.  Specifically, while FERC has collected and stored a substantial amount of  information from its individual dam safety inspections, FERC\u2019s approach  to recording this information is inconsistent due to a lack of standard  language and procedures. By clarifying its approach to the recording of  information collected during inspections, FERC officials could help ensure  that the information recorded is comparable when shared across its  regions. Moreover, the absence of standard language and procedures to  consistently record inspection information impedes a broader, portfolio- wide analysis of the extent of and characteristics associated with common  safety deficiencies identified during FERC inspections. While FERC has  not yet conducted such an analysis, a proactive assessment of common  safety inspection deficiencies across FERC\u2019s portfolio of licensed dams\u2014 similar to its identification of dam spillways with safety concerns following  the Oroville Dam incident\u2014could help FERC and its licensees identify  safety risks prior to a safety incident and to develop approaches to  mitigate those risks.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to FERC:\nFERC should provide standard language and procedures to its staff  on how to record information collected during inspections, including  how and where to record information about safety deficiencies, in  order to facilitate analysis of safety deficiencies across FERC\u2019s  portfolio of regulated dams. (Recommendation 1)\nFERC should use information from its inspections to assess safety  risks across its portfolio of regulated dams to identify and prioritize  safety risks at a national level. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this report to FERC for review and comment. In its  comments on the draft report, FERC said it generally agreed with the  draft report\u2019s findings and found the recommendations to be constructive.  FERC said that it would direct staff to develop appropriate next steps to  implement GAO\u2019s recommendations. These comments are reproduced in  appendix IV. In addition, FERC provided technical comments, which we  incorporated as appropriate.\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 Chairman of FERC  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http:\/\/www.gao.gov.\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 major contributions to this report are  listed in appendix V.\n\nAppendix I: Summary of the Federal Energy Regulatory Commission\u2019s Actions to Help Ensure Licensee Compliance with Requirements Related to Dam Safety\n\nFERC seeks to ensure licensees\u2019 compliance with FERC regulations and  license requirements, including remediating safety deficiencies, by using  a mix of preventative strategies to help identify situations before they  become problems and reactive strategies such as issuing penalties. As  part of its efforts, FERC published a compliance handbook in 2015 that  provides an overall guide to compliance and enforcement of a variety of  license requirements, including dam safety. The handbook includes  instructions for implementing FERC rules, regulations, policies, and  programs designed to ensure effective compliance with license  conditions, which include dam safety, to protect and enhance beneficial  public uses of waterways. FERC developed a range of enforcement  actions, that include holding workshops to encourage compliance and  issuing guidance, that increase in severity depending on the non- compliance issue. (See fig. 4.) More broadly, FERC\u2019s guidance directs  officials to determine enforcement actions and time frames for those  actions on a case-by-case basis, depending on the characteristics of the  specific compliance issue.\nAccording to FERC officials, many of these safety compliance  discussions are handled informally. In addition, their compliance  approach emphasizes activities that assist, rather than force, licensees to  achieve compliance, according to its guidance. These activities include  facilitating open lines of communication with licensees, participating in  technical workshops, and publishing brochures and guidance documents,  among other efforts. Also, according to these officials, FERC works with  licensees to provide guidance and warnings of possible non-compliance  matters, in order to avoid usage of any enforcement tools, if possible.  According to FERC officials, any safety issues that endanger the public  will result in immediate penalty or removal of the dam from power  generation, but this action is not lightly taken. Additionally, the length of  time between when a safety deficiency is identified and is resolved varies  substantially depending on the specific project. As stated earlier in this  report, FERC works with licensees to determine a plan and schedule for  investigating safety issues and making any needed modifications.  However, FERC officials stated that the majority of safety compliance  issues are resolved within a month.\nHowever, FERC officials stated that if a licensee repeatedly does not take  steps to address a compliance issue, FERC will explore enforcement  actions through a formal process. According to officials, FERC\u2019s  enforcement options are based on authorities provided under the Federal  Power Act and such options are flexible because of the variation in  hazards, consequences, and dams. According to FERC officials, to  ensure compliance with safety regulations, if a settlement cannot be  reached, FERC may, among other things, issue an order to show cause,  issue civil penalties in the form of fines to licensees, impose stop work or  cease power generation orders, revoke licenses, and seek injunctions in  federal court. Nevertheless, FERC officials stated that there is no  specific requirement for how quickly the compliance issues or deficiencies  should be resolved and that some issues can take years to resolve. For  example, in 2004, the current licensee of a hydroelectric project operating  in Edenville, Michigan, acquired the project, which was found by FERC to  be in a state of non-compliance at that time. FERC staff made numerous  attempts to work with the licensee to resolve the compliance issues.  However, they were unable to resolve these issues and as a result issued  a cease generation order in 2017, followed in 2018 by a license  revocation order. In practice, FERC\u2019s use of these enforcement tools to  resolve safety issues has been fairly limited, particularly in comparison to  other license compliance issues, according to FERC officials. Since 2013,  FERC has issued one civil penalty for a safety-related hydropower  violation and has issued compliance orders on eight other projects for  safety-related reasons, including orders to cease generation on three  projects.\n\nAppendix II: Information on Selected Models and Data Sets Used to Develop and Evaluate Dam Performance Studies\n\nFor the 14 projects and 42 dams we reviewed, FERC licensees and their  consultants used a variety of tools to develop engineering studies of dam  performance (see table 3). These tools included programs and modeling  tools developed by government agencies, such as the U.S. Army Corps  of Engineers (the Corps), as well as commercially available modeling  tools. FERC officials stated that they also used a number of the same  tools used by its licensees and consultants.\nSimilarly, for the 14 projects and 42 dams we reviewed, FERC licensees  and their consultants used a variety of datasets to develop engineering  studies of dam performance (see table 4). These datasets included data  maintained and updated by various government agencies, including the  United States Geological Survey and National Oceanic and Atmospheric  Administration. FERC officials stated that they also used a number of the  same datasets used by its licensees and consultants.\n\nAppendix III: Objectives, Scope, and Methodology\n\nThis report assesses: (1) how FERC collects information from its dam  safety inspections and the extent to which FERC analyzes it; (2) how  FERC evaluates engineering studies of dam performance to analyze  safety, and (3) the extent to which FERC reviews dam safety information  during relicensing and the information FERC considers. This report also  includes information on FERC actions to ensure licensee compliance with  license requirements related to dam safety (app. I) and selected models  and data sets used to develop and evaluate engineering studies of dam  performance (app. II).\nFor each of the objectives, we reviewed laws, regulations, FERC  guidance, templates, and other documentation pertaining to FERC\u2019s  evaluation of dam safety. In addition, we reviewed an independent  forensic team\u2019s assessment of the causes of the Oroville Dam incident,  including the report\u2019s analysis of FERC\u2019s approach to ensuring safety at  the project, to understand any limitations of FERC\u2019s approach identified  by the report. We also reviewed dam safety documentation, including  dam performance studies, FERC memorandums, the most recent  completed inspection report, and other information, from a non-probability  sample of 14 projects encompassing 42 dams relicensed from fiscal  years 2014 through 2017. (See table 5.) We selected these projects and  dams to include ones that were geographically dispersed, had varying  potential risks associated with their potential failure, and had differences  in the length of their relicensing process. We developed a data collection  instrument to collect information from the dam safety documentation and  analyzed data from the sample to evaluate the extent to which FERC  followed its dam safety guidance across the selected projects. To  develop the data collection instrument, we reviewed and incorporated  FERC oversight requirements from its regulations, guidance, and  templates. We conducted three pre-tests of the instrument, and revised  the instrument after each pre-test. To ensure consistency and accuracy in  the collection of this information, for each dam in the sample, one analyst  conducted an initial review of the dam safety documentation; a second  analyst reviewed the information independently; and the two analysts  reconciled any differences. Following our review of the information from  the dam safety documentation, we conducted semi-structured interviews  with FERC engineering staff associated with each of the 14 projects and  42 dams to obtain information about FERC\u2019s inspections, review of dam  performance studies, and analysis of safety during the relicensing of  these projects. Our interviews with these FERC staff provided insight into  FERC\u2019s dam safety oversight approach and are not generalizable to all  projects. We also interviewed FERC officials responsible for dam safety  about dam safety practices.\nIn addition, to review how FERC collects information from its dam safety  inspections and the extent to which FERC analyzes it, we also reviewed  inspection data from FERC\u2019s information management systems from  fiscal years 2014 through 2017. To assess the reliability of these data, we  reviewed guidance and interviewed FERC officials. We determined that  the data were sufficiently reliable for our purposes. We compared FERC\u2019s  approach to collecting, recording and using safety information to federal  internal control standards for the design of information systems and  related control activities. We also reviewed our prior work on portfolio- level risk management.\nTo evaluate how FERC evaluates engineering studies of dam  performance to analyze dam safety, we reviewed FERC policies and  guidance. We interviewed six independent consultants having experience  inspecting and analyzing FERC-regulated dams to understand how  engineering studies of dam performance are developed. We selected  consultants who had submitted an inspection report to FERC recently  (between December 2017 and February 2018) based on the geographic  location of the project they reviewed and experience conducting these  inspections, and the number of reports submitted to FERC over this time  period. (See table 6.) Our interviews with these consultants provided  insight into FERC\u2019s approach to conducting and reviewing studies and  are not generalizable to all projects or consultants.\nTo evaluate the extent to which FERC reviews dam safety information  during relicensing and the information it considers, we reviewed  templates developed by FERC to assess safety during the relicensing  and analyzed the extent to which staff followed guidance in these  templates for the 14 projects and 42 dams in our sample. We also  interviewed stakeholders, including the National Hydropower Association  and Friends of the River to obtain general perspectives on FERC\u2019s  relicensing approach. Our interviews with these stakeholders provided  insight into FERC\u2019s approach to relicensing, and these views are not  generalizable across all stakeholders.\nTo review actions to ensure licensee compliance with license  requirements related to dam safety, we reviewed FERC\u2019s guidance  related to compliance and enforcement and interviewed FERC officials  responsible for implementation of the guidance. To review information on  models and datasets used to develop and evaluate engineering studies of  dam performance, we reviewed dam safety documentation associated  with the projects in our sample (described previously), reviewed FERC  documentation, and interviewed FERC officials.\nWe conducted this performance audit from July 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix IV: Comments from the Federal Energy Regulatory Commission\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nAndrew Von Ah, (202) 512-2834 or vonaha@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Mike Armes (Assistant Director);  Matt Voit (Analyst-in-Charge); David Blanding; Brian Chung; Geoff  Hamilton; Vondalee Hunt; Rich Johnson; Jon Melhus; Monique Nasrallah;  Madhav Panwar; Malika Rice; Sandra Sokol; and Michelle Weathers  made key contributions to this report.","output":"Why GAO Did This Study\n\nIn February 2017, components of California's Oroville Dam failed, leading to the evacuation of nearly 200,000 nearby residents. FERC is the federal regulator of the Oroville Dam and over 2,500 other dams associated with nonfederal hydropower projects nationwide. FERC issues and renews licenses\u2014which can last up to 50 years\u2014to dam operators and promotes safe dam operation by conducting safety inspections and reviewing technical engineering studies, among other actions.\nGAO was asked to review FERC's approach to overseeing dam safety. This report examines: (1) how FERC collects information from its dam safety inspections and the extent of its analysis, and (2) how FERC evaluates engineering studies of dam performance to analyze safety, among other objectives. GAO analyzed documentation on a non-generalizable sample of 42 dams associated with projects relicensed from fiscal years 2014 through 2017, selected based on geography and hazard classifications, among other factors. GAO also reviewed FERC regulations and documents; and interviewed FERC staff associated with the selected projects and technical consultants, selected based on the frequency and timing of their reviews.\n\nWhat GAO Found\n\nThe Federal Energy Regulatory Commission's (FERC) staff generally followed established guidance in collecting safety information from dam inspections for the dams GAO reviewed, but FERC has not used this information to analyze dam safety portfolio-wide. For these 42 dams, GAO found that FERC staff generally followed guidance in collecting safety information during inspections of individual dams and key structures associated with those dams. (See figure.) However, FERC lacks standard procedures that specify how and where staff should record safety deficiencies identified. As a result, FERC staff use multiple systems to record inspection findings, thereby creating information that cannot be easily analyzed. Further, while FERC officials said inspections help oversee individual dam's safety, FERC has not analyzed this information to identify any safety risks across its portfolio. GAO's prior work has highlighted the importance of evaluating risks across a portfolio. FERC officials stated that they have not conducted portfolio-wide analyses because officials prioritize the individual dam inspections and response to urgent dam safety incidents. However, following the Oroville incident, a FERC-led initiative to examine dam structures comparable to those at Oroville identified 27 dam spillways with varying degrees of safety concerns, on which FERC officials stated they are working with dam licensees to address. A similar and proactive portfolio-wide approach, based on analysis of common inspection deficiencies across the portfolio of dams under FERC's authority, could help FERC identify safety risks prior to a safety incident.\nGuidelines recognize that each dam is unique and allow for flexibility and exemptions in its use. FERC staff use the studies to inform other components of their safety approach, including the analysis of dam failure scenarios and their review of safety to determine whether to renew a license.\n\nWhat GAO Recommends\n\nGAO recommends that FERC: (1) develop standard procedures for recording information collected as part of its inspections, and (2) use inspection information to assess safety risks across FERC's portfolio of dams. FERC agreed with GAO's recommendations."}
{"id":"gao_GAO-19-122","pid":"gao_GAO-19-122_0","input":"\tBackground\n\nWhile its core mission of protecting federal facilities has remained  constant as FPS moved from one agency to another, its responsibilities  have changed. While in GSA\u2019s PBS, FPS was responsible for protecting  GSA held-or\u2013leased facilities, providing both physical security and law  enforcement services. To protect buildings, FPS officers developed  physical security risk assessments, installed security equipment, and  oversaw contract guard services. As a part of its law enforcement  services, among other duties, FPS officers enforced laws and regulations  aimed at protecting federal facilities and the persons in such facilities and  conducted criminal investigations. Following the September 11, 2001  attacks, the Homeland Security Act of 2002 was enacted; it created  DHS and moved FPS from GSA to the new department, effective in  March of 2003. Within DHS at ICE, FPS\u2019s responsibilities grew beyond  solely protecting GSA buildings to include homeland security activities  such as implementing homeland security directives and providing law  enforcement, security, and emergency-response services during natural  disasters and special events.\nIn 2009, DHS proposed transferring FPS from ICE to NPPD. In explaining  the proposed transfer in DHS\u2019s fiscal year 2010 budget justification to  Congress, DHS noted that this move would allow ICE to focus on its law  enforcement mission of protecting the American people by targeting the  people, money, and materials that support terrorist and criminal activities  relating to our nation\u2019s borders. DHS noted that FPS should reside  within NPPD given that both agencies had responsibilities for  implementing the National Infrastructure Protection Plan. DHS further  noted that FPS would be able to gain synergy by working alongside  NPPD\u2019s Office of Infrastructure Protection and that having FPS and the  Office of Infrastructure Protection in the same organization would further  solidify NPPD as DHS\u2019s lead for critical infrastructure protection. The  fiscal year 2010 DHS appropriations act, which was signed into law on  October 28, 2009, funded FPS under NPPD via revenue and collections  of security fees. While in NPPD, FPS continued to lead physical security  and law enforcement services at GSA-held or GSA-leased facilities and  continued its efforts in homeland security activities.\nThroughout FPS\u2019s different organizational placements in DHS, we have  reported that FPS faces persistent challenges meeting its mission to  protect facilities. In 2003, we designated federal real-property  management as a high-risk area, in part, because of physical security  challenges at federal facilities, such as the need for a risk-based  approach to determining the level of security required. In 2011, we  reported on FPS\u2019s challenges in transferring mission support functions  when transitioning from ICE into NPPD. While FPS has been in NPPD,  we also reported on challenges FPS faced, such as in performing risk  assessments, managing and overseeing contract guards, collaborating  with GSA and the Marshals on facility security, and funding its  operations. We made recommendations to help address these  challenges, and FPS has made progress in addressing some of these  recommendations. For example, FPS (1) developed a Modified  Infrastructure Survey Tool to help it more effectively perform risk  assessments, (2) coordinated with GSA and other agencies to reduce  unnecessary duplication in risk assessments, (3) implemented new  procedures to better manage and oversee contract guards, and (4) as of  September 2018, established a formal agreement with GSA on roles and  responsibilities related to facility protection. However, as we discuss later  in this report, challenges related to other aspects of overseeing contract  guards, collaborating with GSA and Marshals, and funding persist.\nIn November 2018, legislation was enacted that could result in FPS  moving for a third time, although the location has not been determined.  This legislation\u2014which reorganizes NPPD to an organization that has a  greater statutory focus on managing cyber risks\u2014requires the Secretary of Homeland Security to, within 90 days after the completion of our  review, determine the appropriate placement for FPS within DHS and  begin transfer of FPS to that entity. If the Secretary determines that  DHS is not an appropriate placement for FPS, the Secretary would be  required to submit to the Director of OMB and Congress an explanation  for the reasons of such a determination\u2014including, among other things,  how DHS considered the results of our current review\u2014and a  recommendation on the appropriate placement of FPS within the  executive branch of the federal government.\nWhen DHS was established, we identified organizational and  accountability criteria for the department. From this prior work, we  identified key criteria that are relevant to assessing potential placement  options for FPS, as shown in table 2.\nIn addition, other practices provide valuable insights for agency officials to  consider when evaluating or implementing a reorganization or  transformation. For example, we have previously reported (1) on key  practices and questions for organizational transformations, mergers and  consolidations, and agency reform efforts and (2) on best practices for the  analyses of alternatives. We reported that organizational  transformations, such as a change in organizational placement, can take  many years to fully implement, can result in reduced productivity and  morale in the short-term, and may require up-front investments.  Therefore, we found that these practices and questions offer valuable  insights for agency officials to consider when evaluating or implementing  a reorganization or transformation. For example, in May 2012, we  reported that a key practice in organizational change is for agency  officials to identify and agree on the specific goals of the change\u2014that is,  what the agency expects to achieve by making the change\u2014or the  problems a change will solve. In July 2003, we reported that  implementing a large-scale organizational transformation requires the  concerted efforts of both leadership and employees to accomplish new  organizational goals. In October 2015, we identified best practices for  analyzing alternatives, such as defining criteria to assess alternatives,  identifying a range of alternatives to assess, and analyzing the benefits  and trade-offs of each alternative.\n\n\tMoving FPS to Any of the Selected Agencies Evaluated Would Result in Both Benefits and Trade- offs\n\nWe found that none of the selected agencies met all the organizational  placement criteria; thus, any of the organizational placement options  could result in both benefits and trade-offs. Officials from FPS and some  of the selected agencies as well as representatives from other  stakeholders we interviewed (e.g., an association of federal law  enforcement officers, a union representing FPS employees, and others)  provided us with examples of how those benefits and trade-offs might  affect FPS.\nIn instances where selected agencies met organizational placement  criteria (that is, in instances where selected agencies were similar to  FPS), FPS could experience benefits. See table 3 for a summary of how  selected agencies met and did not meet key organizational placement  criteria, and appendix II and III for additional details. For example, for the  mission, goals, and objectives criterion, DHS, NPPD, and Secret Service  could provide benefits to FPS because, like FPS, their mission or goal  statements as noted in their strategic plans include an explicit focus on  the protection of infrastructure or specific facilities. Also, GSA has a  statutory facility protection mission. Our prior work found that placing an  agency into an organization that has a similar mission may help ensure  that the agency\u2019s mission receives adequate funding, attention, visibility,  and support. For the responsibilities criterion, DHS, CBP, Secret  Service, Justice, and the Marshals could provide benefits to FPS,  because all of these agencies, like FPS, perform both physical security  and law enforcement activities. In the past, FPS faced challenges  ensuring that both these activities were prioritized, according to FPS  officials. Officials explained that a parent agency that is able to focus on  both activities could help ensure equal and adequate attention in both  areas. While there are similarities in responsibilities between FPS and  these agencies, there are differences in the extent to which and for what  purpose these agencies perform the responsibilities, some of which we  discuss following table 3.\nBecause none of the agencies met all criteria, placing FPS in any of the  selected agencies would require trade-offs. For example:\nWhile placing FPS in DHS, NPPD, or the Secret Service may provide  FPS benefits in areas related to mission, responsibilities, and  information sharing, there could be some adverse effect on FPS\u2019s law  enforcement operations or other activities. Specifically, as discussed  above, placement in DHS, NPPD, or the Secret Service could provide  FPS benefits because these agencies have similar missions and  facility protection responsibilities, and have access to and share  information related to national homeland security that FPS needs to  carry out its mission. However, NPPD, for example, does not perform  law enforcement activities. Therefore, according to FPS officials,  FPS\u2019s law enforcement activities may not continue to receive full  attention. Further, keeping FPS in NPPD may not address some of  the challenges related to culture, such as morale issues that,  according to an official from the association of law enforcement  officers, stem in part from FPS not being placed in a law enforcement  organization. If placed in the Secret Service, this agency may not  have the administrative capacity to handle the additional FPS human  capital workload. Secret Service officials told us that they have a  staffing shortage, which is exacerbated by the time it takes to vet  applicants and process new staff through background checks and  security clearances.\nAs another example, FPS\u2019s placement in GSA or Marshals could  enhance coordination among these agencies, but there could be  some adverse effect on FPS\u2019s ability to carry out its mission or  responsibilities. Specifically, GSA and Marshals could be appropriate  choices as these agencies currently coordinate with FPS on facility  protection. For GSA\u2019s held or leased facilities, FPS is primarily  responsible for protecting federal employees and visitors in those  facilities while GSA, as the federal government\u2019s landlord, performs  some physical security activities, such as funding and repairing  security fixtures. At federal courthouses, FPS is the primary federal  agency responsible for patrolling and protecting the perimeter while  Marshals is responsible for the security of the federal judiciary and as  such provides for security inside the building. However, we have  found challenges FPS has faced in coordinating with these agencies.  In December 2015, for example, we found that FPS and GSA had not  agreed on a common outcome related to facility protection or the roles  and responsibilities to accomplish their missions. Further, in  September 2011, we reported that FPS and Marshals faced  challenges related to coordination, such as in the implementation of  roles and responsibilities and the use or participation in existing  collaboration mechanisms. In September 2018, NPPD and GSA  signed a memorandum of agreement that, among other things,  describes FPS\u2019s and GSA\u2019s roles and responsibilities, and FPS,  Marshals, and other agencies involved in protecting courthouses (i.e.,  GSA and the Administrative Office of the U.S. Courts) are working to  finalize a separate agreement for courthouse security. As these  agreements are implemented, coordination between these agencies  should improve as we have previously reported that establishing clear  roles and responsibilities, in agreements or through other  mechanisms, contribute to effective coordination. In addition,  Marshals may be a good placement option for FPS since both  agencies perform physical security and law enforcement activities,  and because both agencies use a large number of contract guards.  However, because FPS does not share mission and goals with  Marshals, it may be less equipped to prioritize FPS\u2019s activities in the  law enforcement and physical security areas. Justice and Marshals  officials said that, in their view, Marshals is different from FPS  because Justice and Marshals perform limited physical security  activities and have an extensive law enforcement mission, while the  opposite is the case for FPS. Further, Marshals officials said that  FPS\u2019s and Marshal\u2019s law enforcement activities support different  purposes\u2014with Marshals supporting a violent-crime reduction mission  and FPS supporting a facility protection mission. As a result, Marshals  officials said that FPS\u2019s facility protection mission may not receive full  attention. Regarding contract guards, Marshal\u2019s guard force is  smaller, performs different activities, and has different requirements  compared to FPS\u2019s guard force. Regarding GSA, while GSA performs  some physical security activities, it does not perform law enforcement,  which is a critical part of FPS\u2019s responsibilities and, according to some  stakeholders we interviewed, a key aspect of FPS\u2019s culture. GSA also  does not have the same access to information related to national  homeland security as FPS currently has, and therefore, FPS\u2019s access  to this information could be affected, according to officials.\nFinally, various placement options could help FPS address some of its  long-standing challenges such as in overseeing contract guards,  collaborating with GSA and the Marshals, and funding. However,  these placements could also affect whether FPS\u2019s needs are  prioritized. For example, placing FPS in GSA or the Marshals may  further help address coordination challenges. Additionally, placing  FPS in GSA could address challenges FPS faces with funding. If  placed in GSA, GSA and FPS could consider whether to use the  Federal Buildings Fund for security projects related to facility  management, such as installing cameras. OMB staff said that there  are limitations with the Federal Buildings Fund, such as the amount of  funding available for security projects. Further, the adverse effect of  placing FPS in either GSA or the Marshals is that Marshals does not  share mission and goals with FPS and that GSA does not have law  enforcement responsibilities; therefore, these agencies may not  prioritize FPS\u2019s needs.\nFor additional information on how the various agencies met each  criterion, see appendixes II and III.\n\n\tDHS Has Not Taken Key Steps to Fully Assess Potential Placement Options\n\nWhen managing an agency or considering an organizational change,  such as that of FPS\u2019s placement within or outside of DHS, our prior work  has stated that an agency can benefit from periodically evaluating its  organizational structure, identifying what a change is expected to achieve,  and analyzing alternatives. Specifically, Standards for Internal Control in  the Federal Government states that agency management should  establish an organizational structure to achieve the agency\u2019s objectives.  According to the Standards, an effective management practice for  attaining this outcome includes periodically evaluating the organizational  structure to ensure that it meets its objectives and has adapted to  changes. We have also reported that a key practice in organizational  change is to identify and agree on what a change is expected to achieve  or the problems the change will solve. The process of defining such  expected outcomes can help decision makers reach a shared  understanding of what challenges need to be addressed. Furthermore,  we have reported on best practices for analyzing alternatives to help  ensure that agencies select the option that best meets their needs.  These practices can be applied to a wide range of activities or programs  in which an alternative must be selected from a set of possible options.  The practices include assessing the current environment to provide a  basis for comparison with other alternatives and identifying and assessing  benefits and trade-offs of each alternative.\nHowever, DHS has not taken key steps to fully assess potential  placement options. Specifically, DHS has not assessed the organizational  structure of FPS, such as its placement in NPPD, even though both have  evolved since FPS was placed in NPPD in 2010. For example, NPPD has  increased its focus on protecting the nation\u2019s cyber infrastructure as  threats in this area have grown, and its funding for this purpose has  increased. In light of these changes, in 2015 and 2016, DHS proposed  that NPPD restructure itself to increase its focus on cybersecurity.  However, the proposals did not include an assessment of FPS\u2019s  organizational placement. The November 2018 legislation gave NPPD a  greater statutory focus on cyber risk and may result in additional changes  to the organization\u2019s activities. Additionally, while in NPPD, FPS also  has been increasingly engaged in providing law enforcement for  homeland security, with the establishment of a rapid protection force of  that can respond to heightened threat situations. Given these changes,  without an assessment, DHS cannot be certain that FPS is currently  placed in an agency that enables FPS to meet its mission.\nAdditionally, because DHS did not analyze FPS\u2019s current placement in  NPPD, it does not have a benchmark for comparison to other agencies.   Without such an analysis, it is unclear whether FPS needed to be moved  from NPPD. On one hand, FPS made progress while placed in NPPD in  addressing many of our recommendations, and some stakeholders we  spoke with (officials from DHS and NPPD) said that FPS was in the right  place in NPPD. For example, a DHS official stated that from a resource  perspective there was no good reason to move FPS out of NPPD as the  official had not seen a business case to do so. Additionally, an NPPD  official stated that mission alignment and an opportunity to influence the  national facility-security policy were compelling reasons for FPS to stay in  NPPD. Further, NPPD officials said that FPS was meeting its mission and  objectives. On the other hand, FPS continued to experience challenges in  carrying out its mission in NPPD\u2014such as in overseeing contract guards,  collaborating with GSA and the Marshals, and having adequate funding\u2014 such that questions have been raised as to whether placing FPS in NPPD  was successful.\nDHS has recently initiated an effort to evaluate FPS\u2019s placement, but it  lacks several of the elements for a successful evaluation. Specifically, in  August 2018, DHS, NPPD, and FPS established a working group with a  draft charter with the objective of making a recommendation to the  Secretary of Homeland Security on the organizational placement of FPS  within DHS. The working group\u2019s evaluation criteria for FPS placement  consist of mission, command and control, resources, implementation schedule, and workforce and culture. While establishing this group and  identifying criteria are positive steps in assessing FPS\u2019s placement, the  group\u2019s planned activities are limited in several ways. For example, while  the charter is a draft, it does not indicate that the working group will  describe what changing FPS\u2019s placement is expected to achieve. This  factor is particularly important given that each placement option has its  benefits and trade-offs and that stakeholders\u2019 opinions of the options  varied. Changing FPS\u2019s placement could include: addressing one or more of the key criteria previously discussed in this addressing some or all of the challenges that persist, such as in  collaboration or contract guard oversight; or a combination of both.\nFurther, the draft charter does not indicate that the working group will  evaluate agencies outside of DHS or incorporate best practices for  analyzing alternatives, such as evaluating FPS\u2019s current placement in  NPPD and the benefits and trade-offs of placement options. Without  conforming to the best practices, DHS will not have assurance that the  working group recommends the alternative that best meets mission  needs.\nDHS\u2019s current approach to evaluating FPS\u2019s placement limits DHS\u2019s  ability to reliably assess the merits of placement options supported by  GSA and FPS. GSA officials said GSA would take FPS and moving FPS  back to GSA could benefit tenants in federal facilities, strengthen security  support, and reduce redundancies because both agencies have federal  facility protection responsibilities. Further, according to GSA, if  consolidated under GSA, FPS could become more efficient, better  manage costs, and leverage acquisition processes by making use of  GSA\u2019s existing services. FPS officials stated that they prefer FPS to be a  standalone entity that reports directly to DHS leadership. According to  FPS, being a standalone agency in DHS would establish the protection of  federal facilities as a critical mission of DHS and provide FPS with the  direct support of DHS leadership. Further, according to FPS officials,  having this support would better enable them to carry out their mission.  However, neither GSA nor FPS has conducted analyses to support their  preferences, and DHS is not planning to look at options outside of DHS at  this time. As a result, DHS cannot fully assess FPS\u2019s or GSA\u2019s positions.\nOnce DHS identifies what it expects to achieve by moving FPS, in line  with key practices for organizational change, and establishes an  evaluation approach that reflects best practices for an analysis of  alternatives, it will be in a position to best assess benefits and trade-offs  previously discussed. In absence of these steps, DHS may not be  positioning itself to make an informed decision as to what organization  best supports FPS.\n\n\tConclusions\n\nOver the past 15 years, FPS has been located in three different agencies  (GSA, ICE, and NPPD), and there continues to be disagreement about  whether it is currently in the best place to achieve its objectives. Further,  agency and stakeholder opinions vary about where and whether FPS  should move. DHS has established a working group to evaluate  placement options for FPS. However, the working group\u2019s planned  activities do not include key steps to fully assess potential placement  options. Specifically, while the group\u2019s charter is a draft, it does not state  whether it plans to assess FPS\u2019s current placement in NPPD, what DHS  expects to achieve by changing FPS\u2019s placement, or effective placement  options for relocating FPS.\nThese steps would help DHS address legislation enacted in November  2018 requiring the review of placement options for FPS\u2014including how  DHS considered the results of our review. Regardless of the legislation,  DHS cannot have a complete discussion that leads to an informed  decision on FPS\u2019s placement without taking these steps. Identifying the  expected outcomes of changing FPS\u2019s placement and performing  analyses are critical because organizational change can take many years  to fully implement, can result in reduced productivity and morale in the  short-term, and may require up-front investments. Without determining  what it expects to achieve by moving FPS and conducting an evaluation  using appropriate criteria, DHS may not be well-positioned to identify an  organization that best supports FPS.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to the Secretary of  Homeland Security:  The Secretary of Homeland Security\u2014in consultation with NPPD and  FPS\u2014should identify the specific goals of a change in FPS\u2019s placement\u2014 that is, what DHS expects to achieve by moving FPS to another agency.  (Recommendation 1)\nThe Secretary of Homeland Security\u2014in consultation with NPPD, FPS,  and other agencies as relevant\u2014should fully evaluate placement options  for FPS based on what DHS expects to achieve by changing FPS\u2019s  placement, an assessment of FPS\u2019s current placement, and other best  practices such as an analysis of alternatives assessing the benefits and  trade-offs discussed in this report. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this product to DHS, GSA, Justice, and OMB for  comment. In its comments, reproduced in appendix IV, DHS concurred  with our recommendations and outlined steps it plans to take to address  them. DHS also provided technical comments, which we incorporated as  appropriate. GSA, Justice, and OMB only provided technical comments,  which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Administrator of  General Services, the Attorney General, the Director of OMB, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf you or your staff has any questions about this report, please contact me  at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nTo address our objectives, we reviewed our prior work related to  organizational transformation, where we identified organizational and  accountability criteria that Congress should consider when determining  which agencies to include or exclude from the newly created DHS. The  criteria are relevant to our review of FPS\u2019s organizational placement as  Congress considers whether to include or exclude FPS in various  agencies within and outside DHS. We selected a subset of the criteria  that are the most relevant to FPS\u2019s organizational placement to include in  our review. For each criterion, we also identified elements (i.e.,  characteristics) that are specific to FPS based upon our review of FPS  documents and our prior work on topics related to the criteria, and our  discussions with federal officials with experience in facility security, the  Federal Law Enforcement Officers Association, and a former high-ranking  official in NPPD with knowledge of FPS.\nTo identify challenges facing FPS, we reviewed our past work and the  status of our prior recommendations, and interviewed stakeholders and  agency officials. We reviewed pertinent proposed and enacted legislation  related to DHS\u2019s reauthorization and FPS. We reviewed Standards for  Internal Control in the Federal Government for relevant management  responsibilities. And, we reviewed our prior reports on key practices and  questions for organizational change and best practices for an analysis of  alternatives process. We used practices identified in these reports as  well as internal controls to assess the steps DHS has taken to assess  placement options for FPS.\nWe applied the key criteria to eight selected agencies in DHS, GSA, and  the Department of Justice (Justice) that we determined could be potential  organizational placement options for FPS, as shown in table 4.\nWe selected three of our eight placement options (CBP, ICE, and Secret  Service) based upon our review of the most recently available data from  the Department of Justice on the number of federal law enforcement  officers. We selected these three agencies because they employed the  largest number of law enforcement officers within DHS. Our selection of  agencies with federal law enforcement officers is relevant because FPS  employs such officers. We selected three options (GSA, NPPD, and a  standalone entity in DHS) because FPS was previously organizationally  placed within GSA, is currently placed in NPPD, and because of FPS\u2019s  preference to be a standalone entity reporting directly to the Deputy  Secretary of DHS. We selected our remaining two options (a standalone  entity within Justice and the Marshals) because the duties of the Marshals  include law enforcement and protection of federal courthouses and  because legislation proposed during our review would have, if enacted,  instructed the Secretary of Homeland Security to recommend the  appropriate placement of FPS within the executive branch of the federal  government. We also identified DHS\u2019s Office of the Chief Security  Officer as an office within DHS that has the facility security responsibility  for managing contract guards at DHS\u2019s former headquarters at the  Nebraska Avenue Complex in Washington, D. C. We determined that this  security office is a policy office within DHS\u2019s Management Directorate  with its primary mission being the security of DHS employees and a focus  on expanding internal security policy. For the purposes of our review, we  did not include OCSO as a potential placement option for FPS because  the security office does not have a large number of law enforcement  officers, plans to divest operational security responsibilities, and was not  a previous, current or FPS desired placement. Our exclusion of OCSO  does not preclude DHS from assessing OCSO as a placement option for  FPS.\nWe reviewed documentation and interviewed officials from FPS and the  selected agencies to identify similarities, differences, and other  considerations with regard to each of the key criteria. For the first four key  criteria\u2014(1) mission, goals, and objectives; (2) responsibilities; (3)  organizational culture; and (4) information sharing and coordination\u2014we  determined that a selected agency met the criteria if the agency or its  subcomponents have any similarities to FPS. For the last criterion\u2014 mission support\u2014we determined that a selected agency met the criterion  if the agency or its subcomponents have mission support similar to FPS  or could provide mission support that FPS needs. Although we used the  key criteria to assess eight agencies we selected, the criteria can be used  to assess any potential placement option for FPS.\nWe also reviewed documentation and conducted interviews with  stakeholders including:  representatives from the Federal Law Enforcement Officers  Association;  representatives from the American Federation of Government  Employees Local 918 (the union that represents NPPD employees\u2014 including FPS);  representatives from two unions that represent a large number of  Protective Security Officers (i.e., contract guards),  the United Government Security Officers of America and Security  and\nSecurity, Police and Fire Professionals Association of America;  representatives from the National Association of Security Companies  (an association of contract guard companies); officials from agencies that coordinate with or use FPS for facility  the Department of Justice for law enforcement coordination and  the Internal Revenue Service and the Social Security  Administration as large users of FPS facility protection;  staff from the Office of Management and Budget; and officials from DHS\u2019s Interagency Security Committee, which develops  the security standards for non-military federal facilities.\nWe also obtained views from a former high-ranking official in NPPD with  knowledge of FPS. Additionally, we obtained views from officials, staff,  and representatives from FPS, the selected agencies and stakeholders  on the alignment between FPS and the agencies as well as on the  potential placement options. The results of these interviews are non- generalizable to all of FPS\u2019s stakeholders but provide useful examples of  considerations related to various placement options.\nWe conducted this performance audit from June 2017 to January 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Comparison of Selected Agencies and the Federal Protective Service (FPS) in Elements Associated with Key Organizational-Placement Criteria\n\nBased on our prior work related to organizational transformation, we  identified five key criteria to consider when assessing placement options  for FPS: (1) mission, goals, and objectives; (2) responsibilities; (3)  organizational culture; (4) information sharing and coordination; and (5)  mission support. For each criterion, we identified elements that are  specific to FPS. We identified these elements from documentation and  interviews from federal officials with experience in facility security, the  Federal Law Enforcement Officers Association, a former high-ranking  official in NPPD with knowledge of FPS, and our review of prior work on  topics related to the criteria. We compared selected agencies that could  be placement options to FPS in each of the elements\u2014see tables below.  The selected agencies are the Department of Homeland Security (DHS),  U.S. Customs and Border Protection (CBP), U.S. Immigration and  Customs Enforcement (ICE), National Protection and Programs  Directorate (NPPD), United States Secret Service (Secret Service),  General Services Administration (GSA), Department of Justice (Justice),  and the U.S. Marshals Service (Marshals). We assumed that FPS would  be a standalone entity in DHS, GSA, and Justice.\nFor elements in the first four criteria\u2014(1) mission, goals, and objectives;  (2) responsibilities; (3) organizational culture; and (4) information sharing  and coordination\u2014a \u201cyes\u201d in the table means that any function of the  selected agency or its subcomponents have similarities to FPS. For  elements in the last criterion\u2014mission support\u2014a \u201cyes\u201d means that any  function of the selected agencies or its subcomponents have mission  support similar to FPS or could provide mission support that FPS needs.  For all criteria, the \u201cyes\u201d designation does not account for the magnitude  of the effort or activities performed by each of the selected agencies.\n\nAppendix III: Summary of Selected Agencies\u2019 Similarities and Differences Related to Key Organizational-Placement Criteria\n\nWe identified five key organizational placement criteria that are relevant  to consider when assessing FPS\u2019s placement: (1) mission, goals, and  objectives; (2) responsibilities; (3) organizational culture; (4) information  sharing and coordination; and (5) mission support. We evaluated whether  selected agencies that could be placement options for FPS met the key  organizational placement criteria. The selected agencies are the  Department of Homeland Security (DHS); U.S. Customs and Border  Protection (CBP); U.S. Immigration and Customs Enforcement (ICE);  National Protection and Programs Directorate (NPPD); United States  Secret Service (Secret Service); General Services Administration (GSA);  Department of Justice (Justice); and the U.S. Marshals Service  (Marshals). We assumed that FPS would be a standalone entity in DHS,  GSA, and Justice.\nFor the first four criteria\u2014(1) mission, goals, and objectives; (2)  responsibilities; (3) organizational culture; and (4) information sharing and  coordination\u2014we determined that a selected agency met the criteria if the  agency or its subcomponents have similarities to FPS in relevant  elements identified in appendix II. We determined that a selected agency  met the mission support criterion if the agency or its subcomponents have  similarities to FPS or could provide FPS needed mission support in  relevant elements.\n\n\tMission, Goals, and Objectives\n\nFPS\u2019s mission focuses on the protection of federal facilities and the  people working in and visiting those facilities.\nIn table 10 and subsequent paragraphs, we describe how selected  agencies met the mission, goals, and objectives criterion\u2014that is, the  selected agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.\nDHS, NPPD, and Secret Service are similar to FPS in that their mission  statements or goals as stated in their strategic plans include an explicit  focus on the protection of infrastructure or specific facilities. GSA has a  statutory facility protection mission. Our prior work found that placing an  agency into an organization that has a similar mission may help ensure  that the agency\u2019s mission receives adequate funding, attention, visibility,  and support. One of DHS\u2019s goals\u2014as noted in its strategic plan covering  fiscal years 2014 to 2018\u2014is to reduce risk to the nation\u2019s critical  infrastructure. In addition, NPPD\u2019s mission is to lead the national effort to  protect and enhance the resilience of the nation\u2019s physical and cyber  infrastructure. To carry out this mission, NPPD coordinates efforts to  protect infrastructure in 16 critical infrastructure sectors, including a  government facilities sector. Further, the Secret Service\u2019s mission is to  ensure, among other things, the security of the United States President,  Vice President, and other individuals. The Secret Service\u2019s Uniformed  Division protects locations necessary for accomplishing its mission of  protecting these individuals. Per statute, GSA is responsible for the  operation, maintenance, and protection of buildings and grounds  occupied by the federal government and under the jurisdiction, custody,  and control of GSA.\nWhile DHS, NPPD, Secret Service, and GSA may be good placement  options for FPS given their similarities in mission or goals (i.e., focus on  infrastructure or facility protection), stakeholders we interviewed identified  some key areas of consideration that may have a bearing on how well  FPS would fit in NPPD, Secret Service, and GSA.\nNPPD: FPS and NPPD officials expressed concerns about the fit  between the two agencies given differences in how they perform their  infrastructure protection missions. Specifically, FPS has employees  who directly protect federal facilities, while NPPD\u2019s physical  infrastructure protection efforts provide guidance and resources to  federal, state, and local governments, and private sector companies  so that they can protect their facilities. Furthermore, officials from  FPS, NPPD, the union representing FPS officials, an association  representing federal law enforcement officers, and a former high- ranking official in NPPD said that a difference between the two  agencies is that FPS performs law enforcement activities to carry out  its protection mission while NPPD does not.\nSecret Service: Officials from FPS and Secret Service said that  placing FPS in the Secret Service could present challenges because  the two agencies\u2019 missions have some fundamental differences\u2014FPS  focuses on protecting federal facilities and Secret Service focuses on  protecting individuals such as the United States President and Vice  President. Furthermore, another difference is that the scope of  facilities that the Secret Service protects is smaller and narrower than  FPS, according to FPS and Secret Service officials. FPS protects  about 9,000 facilities throughout the United States, while Secret  Service\u2019s Uniformed Division\u2014which is responsible for protecting  facilities\u2014protects a limited number of facilities in the National Capital  Region (e.g., the White House, the Vice President\u2019s residence). FPS  officials said that another consideration between the two agencies is  that FPS\u2019s mission of protecting federal facilities would get lost in  Secret Service\u2019s mission of protecting the President of the United  States and other key individuals.\nGSA:  Stakeholders provided differing views on how well FPS would  fit in GSA. An official from CBP and officials from Justice said that  FPS should be placed in GSA because FPS focuses on GSA-held or- leased facilities. Furthermore, GSA officials stated FPS and GSA  could merge as both have the authority to protect federal facilities,  and there is an intuitive relationship between GSA\u2019s focus on the  management and operations of federal facilities and FPS\u2019s mission of  the security of federal facilities. Conversely, officials from FPS, staff  from OMB, and officials of an association that represents security  companies, said that FPS should not move to back to GSA. These  officials and staff said that FPS should not move to GSA because,  among other reasons, the two agencies have different missions: GSA  focuses on federal real estate and some physical security activities  not homeland security or law enforcement.\nCBP, ICE, Justice, and Marshals do not have mission statements or goals  that focus explicitly on infrastructure or facility protection. Nonetheless, as  we discuss in the next section of this report, CBP, Justice, and Marshals  have some facility protection responsibilities.\nIn addition, FPS and the selected agencies share few or no operational  objectives. DHS, ICE and NPPD share one or two operational objectives  with FPS\u2014DHS shares objectives that focuses on mitigating risks and  responding to incidents, ICE shares one that focuses on intelligence  gathering, and NPPD shares one that focuses on facility assessments.  FPS, Justice, and Marshals have a few similar operational objectives. The  three agencies have objectives that focus on the integration and use of  intelligence information. FPS and Marshals also have similar objectives that focus on facility assessments, mitigating risks, and on rapidly  responding to emergencies and incidents.\n\n\tResponsibilities\n\nTo carry out its facility protection mission at about 9,000 federal facilities,  FPS performs physical security as well as law enforcement activities. As  a part of its physical security activities, FPS conducts facility security  assessments, identifies countermeasures (e.g., equipment and contract  guards) best suited to secure a facility, and oversees contract guards. As  a part of its law enforcement activities, FPS proactively patrols facilities,  responds to incidents, and conducts criminal investigations, among other  things. FPS also provides additional operational law enforcement support,  at the direction of the Secretary of Homeland Security, to address  emerging threats and homeland security incidents. According to FPS  officials, previous placements have focused on physical security or law  enforcement, but not both. For example, FPS officials told us that  because of ICE\u2019s focus on law enforcement, FPS\u2019s physical security  activities took a backseat to ICE\u2019s law enforcement mission. Similarly,  according to FPS officials, NPPD has not prioritized FPS\u2019s law  enforcement activities because NPPD does not have a focus on law  enforcement.\nOne of FPS\u2019s most critical activities is overseeing about 13,500 contract  guards who are posted at federal facilities and are responsible for  controlling access to facilities, responding to emergency situations  involving facility safety and security, and performing other duties. FPS is  responsible for overseeing these guards to ensure, among other things,  that they are performing their assigned duties and have the necessary  training and certifications. We have reported on challenges FPS faces in  overseeing contract guards. For example, in August 2012, we reported  that FPS faced challenges ensuring that contract guards have the  necessary training and certifications. We found that although FPS verifies  contractor-reported guard certification and training information by  conducting monthly audits, FPS does not independently verify the  contractor\u2019s information.\nIn table 11 and subsequent paragraphs, we describe how selected  agencies met the \u201cresponsibilities\u201d criterion\u2014that is, the selected  agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.\nLike FPS, DHS, the selected agencies in DHS (except ICE), GSA,  Justice, and Marshals have responsibilities for federal facility protection.  As discussed above, DHS, NPPD, and the Secret Service have mission  or goal statements that explicitly address infrastructure or facility  protection. CBP\u2019s, GSA\u2019s, Justice\u2019s, and Marshals\u2019 mission or goal  statements do not explicitly state a focus on infrastructure or facility  protection, but these agencies have some facility protection  responsibilities to help achieve their missions. For example, GSA has  some protection responsibilities for about 8,700 GSA-held or GSA-leased  facilities in support of its mission of managing the federal real estate  portfolio. GSA conducts repairs that affect the operation of building  security equipment and develops policy and requirements for the building  security used in the design and construction of GSA buildings. Marshals  have security responsibilities at federal courthouses in support of its  mission to protect, defend, and enforce the nation\u2019s justice system.\nStakeholders we interviewed identified some areas of consideration that  may have a bearing on how well FPS would fit in agencies that have  facility protection responsibilities:\nOfficials from FPS and Marshals questioned how FPS would meld  with agencies that protect facilities on a smaller scale. CBP, Justice,  and Marshals perform facility protection at a smaller number of  facilities as compared to FPS and GSA: CBP has facility protection  responsibilities at about 1,200 border patrol stations, ports of entry,  and other facilities; Justice (excluding Marshals) at 36 facilities; and  Marshals at about 430 facilities with a judicial presence, while FPS  and GSA have protection responsibilities at about 9,000 and 8,700  facilities, respectively.\nJustice and Marshals officials said that there are some differences  between their agencies and FPS\u2019s facility protection responsibilities.  Specifically, these officials said that unlike FPS, Justice and Marshals  have limited responsibilities for facility protection, and in the case of  Marshals, this responsibility is related to the protection of the federal  judiciary.\n\n\t\tPhysical Security and Law Enforcement Activities\n\nFPS most closely aligns with DHS, CBP, Secret Service, Justice, and  Marshals because these agencies perform both physical security and law  enforcement activities. However, as discussed in the paragraph below,  there are differences in the extent to which and for what purpose these  agencies perform these activities. The remaining agencies perform either  physical security (NPPD, GSA) or law enforcement activities (ICE), but  not both.\nWhile DHS, CBP, Secret Service, Justice, and Marshals align with FPS  with regard to the two types of activities it performs, there are differences  in how these agencies perform these activities because these agencies\u2019  activities and missions differ from FPS. For example, Justice and  Marshals officials explained that in their view, Justice and Marshals are  different from FPS because Justice and Marshals perform limited physical  security activities and have extensive law enforcement missions, whereas  FPS has a limited law enforcement mission and an extensive facility  protection mission. Further, Marshals officials said that FPS\u2019s and  Marshal\u2019s law enforcement activities support different purposes\u2014with  Marshals supporting a violent-crime reduction mission and FPS  supporting a facility protection mission. As a result, Marshals officials said  that FPS\u2019s facility protection mission may not receive full attention.  Further while FPS performs law enforcement activities relevant to federal  facility protection, the Secret Service performs law enforcement relevant  to protecting key individuals, such as the President. Furthermore,  although GSA does not perform law enforcement activities, GSA officials  said that if FPS moved to GSA, its leadership would provide FPS  organizational support that would enable both FPS\u2019s law enforcement and  physical security activities. FPS officials stated that if FPS moved outside  of DHS, the Secretary of Homeland Security\u2014who is responsible for  protecting the nation\u2014may lose protection responsibilities for federal  facilities as well as the ability to use FPS for law enforcement support  when needed for homeland security.\n\n\t\tContract Guard Responsibilities\n\nLike FPS, Marshals also employs a large number of contract guards for  facility protection. The remaining agencies (DHS, CBP, ICE, NPPD,  Secret Service, GSA, and Justice) use FPS\u2019s contract guards, procure a  limited number of guards or use their own federal officers for facility  protection, according to officials from these agencies. Similar to FPS,  Marshals also performs compliance reviews of training and certification  information maintained by its contractors, and Marshals officials explained  that these reviews are performed periodically.\nStaff from OMB and an association of security companies said that  Marshals may be a good fit for FPS because Marshals, like FPS, uses a  contract guard force. We have previously reported that a consideration of  moving one agency into another is whether the move can help improve  the efficiency and effectiveness of agency missions by, among other  things, addressing gaps. In this regard, one consideration is whether  FPS could leverage the Marshals\u2019 oversight of its own contract guards to  address its ongoing challenges in this area.\nHowever, differences between FPS\u2019s and Marshals\u2019 contract guard  programs exist. For example, Marshals\u2019 guard force is smaller than FPS\u2019s  with about 4,400 guards and the day-to-day duties of FPS\u2019s contract  guards are different from Marshals\u2019 contract guards. Both FPS\u2019s and  Marshals\u2019 contract guards control access to facilities. However, Marshals  contract guards also provide security for the judicial process, such as  providing armed escort services to judges, jurors, and other court  personnel and providing security in a courtroom during hearings.  Furthermore, some requirements between the two guard forces vary. For  example, Marshals has more stringent requirements for contract guards  in the areas of education and law enforcement experience.\n\n\tOrganizational Culture\n\nWhile there are many areas relevant to organizational culture, law  enforcement is a key aspect of FPS\u2019s organizational culture, according to  officials from an association of security companies and a former high- ranking official in NPPD. One area that has affected FPS\u2019s culture,  particularly morale, according to an official from the association of law  enforcement officers, is that FPS\u2019s criminal investigators receive federal  law enforcement officer retirement benefits, while its inspectors\u2014who  also perform some law enforcement and who form the majority of FPS\u2019s  workforce\u2014do not.\nIn table 12 and subsequent paragraphs, we describe how selected  agencies met the organizational culture criterion\u2014that is, the selected  agencies that were similar to FPS for this criterion\u2014areas of  consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.\nDHS, nearly all the selected agencies in DHS, and Justice have cultures  similar to FPS because they are all law enforcement agencies, but NPPD  and GSA do not. An official from an association of federal law  enforcement officers said moving FPS to a law enforcement agency may  improve FPS\u2019s employee satisfaction. Specifically, this official explained  that one advantage of moving FPS to a law enforcement agency is that it  could mean that FPS inspectors could be reclassified into positions that  would receive federal law enforcement officer retirement benefits, leading  to improved employee satisfaction and retention. FPS officials said that  Justice\u2019s long-standing culture that is focused on law enforcement is  something that FPS sees as one of Justice\u2019s advantages.\nAlthough FPS and some of the selected agencies are similar in that their  cultures focus on law enforcement, there are differences among their  cultures. For example, FPS officials questioned how their agency would  meld with the Secret Service since it has long history, and Marshals  officials said that FPS and the Marshals do not have comparable  legacies. The Secret Service and Marshals have been around for about  150 and 230 years, respectively, while FPS has a 47-year history. In  addition, FPS and the law enforcement agencies may have different  hiring practices, which can influence the culture of the workforce. Secret  Service, for example, requires that all its employees hold a top-secret  security clearance. This level of clearance is not required for all of FPS\u2019s  employees, according to an FPS official. If FPS moved to Secret Service,  Secret Service officials stated that there may be a need to create different  workforce categories due to differences in the hiring requirements, a  situation that may affect FPS\u2019s and the Secret Service\u2019s employee  morale.\n\n\tInformation Sharing and Coordination\n\nRegarding information sharing, in 2016, DHS designated a division within  FPS as a Component Intelligence Program (CIP). CIPs are organizations  in DHS that collect, gather, process, analyze, produce, or disseminate  information related to national homeland security. According to FPS  officials, FPS\u2019s participation in meetings held by the CIPs is important  because it provides FPS more visibility on the threats that other DHS  agencies have identified and actions they plan to take. Further, FPS  shares information obtained in CIP meetings with federal agencies across  the United States to support emergency preparedness, security, and  employee safety. Additionally, as a CIP, FPS has an opportunity to  provide input on the national homeland-security information that the  Secretary of Homeland Security receives. Finally, FPS has greater  access to information than it might otherwise receive without the CIP  designation. FPS officials said that FPS\u2019s designation as a CIP was a  \u201cgame changer\u201d for FPS\u2019s abilities to identify and share information on  emerging threats. FPS officials explained that FPS\u2019s placement could  influence whether FPS continues to have direct access to information  related to national homeland security that it needs to carry out its mission.\nRegarding coordination, FPS currently coordinates with both GSA and  Marshals to fulfill its facility protection mission; however, we have  reported on challenges FPS has faced in coordinating with these  agencies.\nFPS\u2019s coordination with GSA: FPS and GSA share responsibility for  protecting federal facilities. FPS is primarily responsible for protecting  federal employees and visitors in federal facilities held or leased by  GSA. GSA serves as the federal government\u2019s landlord and, in this  role, performs some physical security activities such as funding and  repairing security fixtures. In December 2015, we found that FPS and  GSA had not agreed on a common outcome related to facility  protection or the roles and responsibilities to accomplish their  missions.\nFPS\u2019s coordination with Marshals: FPS coordinates with Marshals to  protect about 430 federal courthouses. At courthouses held or leased  by GSA, FPS is the primary federal agency responsible for patrolling  and protecting the perimeter of the facilities and for enforcing federal  laws and regulations in those facilities. Marshals has primary  responsibility for the security of the federal judiciary, including the safe  conduct of court proceedings and the security of federal judges, court  personnel, jurors, and the visiting public. In September 2011, we  reported that FPS, Marshals, and other agencies involved in  protecting courthouses (i.e., GSA and the Administrative Office of the  U.S. Courts) faced challenges related to coordination, such as in the  implementation of roles and responsibilities and the use or  participation in existing collaboration mechanisms.\nIn table 13 and subsequent paragraphs, we describe how selected  agencies that met the information sharing and coordination criterion\u2014that  is, the selected agencies that were similar to FPS for this criterion\u2014areas  of consideration if FPS is placed in those agencies, and how the selected  agencies did not meet the criterion.\nLike FPS, all of the selected agencies except GSA have access to and  can share information related to national homeland security, and these  agencies could share that same information with FPS. Specifically, like  FPS, the selected agencies in DHS are CIPs or participate in other  groups that have access to and can share information related to national  homeland security. Justice and Marshals have access to homeland  security information through the Federal Bureau of Investigation and  participate in separate groups where national homeland security  information is shared, including the Joint Terrorism Task Force and the  National Counterterrorism Center.\nWhile selected agencies in DHS and Justice are similar to FPS in the  area of information sharing, there are some differences and challenges  that decision makers would need to consider before placing FPS in these  agencies. For example, FPS and the selected agencies in DHS and  Justice require different types of information to meet respective mission  needs. In previous organizational placements, FPS has faced challenges  with information sharing. For example, FPS officials told us that when  FPS was part of ICE, they relied on ICE to provide them with information,  which slowed down FPS\u2019s ability to react to information specific to facility  protection. This may not be an issue if FPS continues to have direct  access to information as a CIP.\nWhile GSA does not have access to national homeland security  information, GSA has access to and shares information pertinent to the  security of government facilities through, among other sources,  participation in the government facilities sector of the Government  Coordinating Council and Interagency Security Committee. Officials from  FPS, an association of security companies, and a former high-ranking  official in NPPD\u2014said if FPS moved to GSA, FPS could lose direct  access to critical information that is necessary for it to accomplish its  mission. Furthermore, staff from OMB said FPS\u2019s participation in DHS\u2019s  homeland security groups has given the agency some level of credibility.  Thus, if FPS moved to an agency that does not have access to national  homeland security information, such as GSA, there may be resistance  from DHS agencies and others in sharing information with FPS, according  to the OMB staff. If FPS moved to Justice or Marshals, FPS officials said  that they would be able to continue to access and share homeland  security information through Justice\u2019s information sharing community.  Thus, a move to either of these two agencies would not have as great an  impact to their access to homeland security information as a move to  GSA would, according to FPS officials.\n\n\t\tCoordination\n\nBased on the coordination challenges we found in our prior work, FPS  and GSA or Marshals may continue to disagree on roles and  responsibilities if FPS is placed in these agencies. However, in  September 2018, NPPD and GSA signed a memorandum of agreement  that, among other things, describes FPS\u2019s and GSA\u2019s roles and  responsibilities, and FPS, Marshals, GSA, and the Administrative Office  of the U.S. Courts are working to finalize a separate agreement for  courthouse security. Accordingly, coordination between these agencies  should improve with the implementation of these agreements as we have  previously reported that establishing clear roles and responsibilities, in  agreements or through other mechanisms, contribute to effective  coordination.\nMoving one agency into another does not necessarily mean that the two  agencies will coordinate better. As discussed earlier in this report, FPS  moved from ICE to NPPD so that FPS could gain synergy with NPPD\u2019s  Office of Infrastructure Protection, which is responsible for coordinating  infrastructure protection across government and the private sector.  According to OMB staff we interviewed, this synergy has not happened in  part because NPPD and FPS missions are self-contained\u2014with FPS  focused on federal facility infrastructure and the Office of Infrastructure  Protection focused on other types of infrastructure, including privately  owned infrastructure.\nDHS, CBP, ICE, NPPD, and Secret Service do not have joint  responsibilities for coordinating facility protection because these agencies  rely on FPS to provide security services or provide their own security  services.\n\n\tMission Support\n\nFPS officials told us that over the course of its previous organizational  placements, FPS\u2019s mission support capabilities have matured and that it  is now able to provide its own mission support in most areas. For  example, FPS owns and uses many of the key operational and business- related information technology (IT) systems and applications it needs to  carry out its mission. Despite the maturation of FPS\u2019s in-house mission  support activities, FPS still receives some mission support services from  other agencies in DHS, such as human capital and some aspects of  information technology. FPS would need mission support in these areas if  it changed its organizational placement. Separately, FPS has faced  challenges in the area of financial management, and changing FPS\u2019s  placement could help address those challenges. Finally, FPS offers its  own training courses and has access to DHS\u2019s Federal Law Enforcement  Training Centers (FLETC), and therefore it does not need mission support  from a parent agency in this area.\nIn table 14 and subsequent paragraphs, we describe how selected  agencies met the mission support criterion\u2014that is, the selected agencies  that had mission support that FPS needs\u2014areas of consideration if FPS  is placed in those agencies, and how the selected agencies did not meet  the criterion.\nAmong the agencies we reviewed, GSA has the infrastructure to support  FPS in its funding approach. FPS officials told us that one of the key  challenges they experienced in ICE was that ICE did not have institutional  knowledge on FPS\u2019s funding approach, particularly FPS\u2019s fee structure,  and FPS experienced changes in fees that were not aligned to what was  needed to cover its efforts. FPS funds its operations by collecting security  fees from federal agencies that use FPS for facility protection. GSA is well  positioned to support FPS\u2019s funding approach because it is the only  agency we reviewed that also collects monies from multiple federal  agencies to support some of its operations. According to documentation  we reviewed and interviews with officials from selected agencies, we  found that among the remaining agencies, some do not collect fees  (NPPD, Secret Service) and others collect fees to support operations, but  not from other federal agencies (DHS, CBP, ICE, Justice, Marshals).\nFurther, based on our review of FPS\u2019s fiscal year 2019 budget request to  Congress and our past work, we found that FPS faces challenges in  generating enough revenue to cover its operational costs. If placed in  GSA, GSA and FPS could consider whether to use the Federal Buildings  Fund for security projects related to facility management, such as  installing cameras. OMB staff said that there are limitations with the  Federal Buildings Fund, such as the amount of funding available for  security projects. Further, OMB staff said that finding cost-effective ways  for FPS to carry out its operations will help the agency address its funding  challenges.\n\n\t\tHuman Capital\n\nAny of the selected agencies could provide FPS needed human capital  support. FPS performs some human capital activities, such as estimating  the number of staff it needs to perform its mission but does not have  delegated examining authority that allows it to fill competitive civil service  jobs. NPPD\u2014FPS\u2019s current parent agency\u2014has this authority and is  responsible for recruiting, hiring, and performing other human capital  services on behalf of FPS. All the selected agencies we reviewed have  delegated examining authority. Thus, any one of these agencies could  provide human capital services on behalf of FPS. Officials from three of  the selected agencies\u2014ICE, the Secret Service, and Marshals\u2014said that  they already face challenges with hiring enough staff to fulfill their own  missions or may not have the administrative capacity to handle an  additional human capital workload for FPS. For example, officials from the  Secret Service and Marshals said they have staffing shortages, which  negatively affects their ability to fulfil their missions. The shortage is  exacerbated by the time it takes to vet applicants and process new staff  through background checks and security clearances, according to the  officials. Marshals officials said absorbing FPS would not help the agency  address the staffing shortage because FPS employees perform a  different mission, including a different law enforcement mission, which  require different skill sets, training, etc. Further, Marshals officials said  that given the time it takes to vet its own applicants and process its own  staff, it lacks the administrative capacity to take on a new agency. Finally,  Justice officials said that if FPS moved into Marshals, FPS staff would  require ongoing human resources support for such things as performance  management, payroll, personnel action processing, and benefits  counseling. They said that Marshals is not staffed to assume the full  human capital services required of another agency. Separately, an official  from ICE said that the agency\u2019s human capital office is currently  undergoing a major realignment of service functions and that given FPS\u2019s  large workforce, ICE would not have the administrative capacity to take  on the additional human capital workload for FPS.\nNPPD may experience some gaps in providing some human capital  functions if FPS moved out of NPPD. According to NPPD, FPS provides  NPPD 23 staff positions to help NPPD carry out its human capital  activities. If FPS moved out of NPPD, NPPD staff said that 15 of the  positions could be realigned back to FPS. The remaining 8 positions,  which perform major functions including processing pay and managing  information technology systems for human capital needs, would need to  remain in NPPD if they are not replaced by NPPD. According to NPPD  officials, the human capital teams that perform these functions are  already understaffed and the skillsets for these functions are not plentiful  in the workforce. Thus, if NPPD were unable to retain these positions,  NPPD officials said that there may be significant gaps, such as in  processing pay.\n\n\t\tInformation Technology (IT)\n\nFPS\u2019s operational and business-related IT systems and applications  would not be greatly affected by a change in FPS\u2019s organizational  placement because FPS owns many of the systems and applications it  needs to carry out its mission. For example, FPS owns a system to help  agency officials conduct and track facility security assessments and  another system to track law enforcement activities (e.g., tracking  investigative cases and incidents). If FPS\u2019s placement changed, the  agency could take its systems with it, though there may be some  transition or integration costs, according to FPS officials.\nFPS uses some IT systems or applications that it does not own and that  would need some consideration if FPS changed its organizational  placement, particularly if FPS moved outside DHS. For example, FPS  uses ICE\u2019s system for managing financial transactions and ICE\u2019s IT  network. If FPS moved outside of DHS, resources would be needed to  remove FPS from this ICE system and network, according to FPS  officials. GSA and Justice have financial management systems that FPS  could use. Marshals do not have its own financial management but uses  Justice\u2019s system. According to Justice and Marshals officials, Justice\u2019s  financial management system is currently not configured to support the  collection of fees that support operations. Any changes to the  configuration of Justice\u2019s financial management system, such as the  inclusion of FPS\u2019s fee-based collections, would require the approval of  Justice and possibly other Justice components that use the system. If  FPS stayed within DHS, including as a standalone entity within DHS, it  could potentially continue to use ICE\u2019s system or use CBP or the Secret  Service\u2019s systems.\n\n\t\tTraining\n\nDHS, CBP, ICE, Secret Service, Justice, and Marshals provide law  enforcement training, but FPS would not need access to such training if  placed in these agencies because FPS provides its own training on topics  related to facility protection. For example, FPS provides training to its  inspectors on physical security activities, such as identifying  countermeasures needed at facilities. FPS officials said that there would  be no efficiency gained in merging FPS and these agencies\u2019 training  programs because FPS performs activities that most other law  enforcement agencies do not perform. NPPD and GSA do not perform  law enforcement activities and therefore do not have law enforcement  training programs. If moved to either of these two agencies, FPS could  continue to use its own training courses.\nFurthermore, CBP, ICE, Secret Service, and Marshals are Federal Law  Enforcement Training Centers (FLETC) Partner Organizations, meaning  that they have access to training provided at FLETC training facilities.  FPS is also currently designated as a FLETC Partner Organization and  therefore would not need to rely on these agencies to obtain this  designation. All Partner Organizations, regardless of whether they are  DHS agencies or not, share the same equal privileges at FLETC,  including priority scheduling for basic and advanced law enforcement  training. Nonetheless, Justice and Marshals officials explained that their  FLETC training curriculum, planning, and structure are vastly different  than other Partner Organizations due to the differing mission sets. NPPD  and GSA are not FLETC Partner Organizations. According to FLETC  officials, however, because FPS is currently a FLETC Partner  Organization, it would continue to have access to FLETC while in NPPD  or GSA.\n\nAppendix IV: Comments from the U.S. 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, Amelia Bates Shachoy  (Assistant Director); Roshni Dav\u00e9 (Analyst-in-Charge); Ben Atwater;  Jazzmin Cooper; George Depaoli; Adam Gomez; Geoffrey Hamilton;  Malika Rice; Amy Rosewarne; Kelly Rubin; Sarah Veale; and Amelia  Michelle Weathers made key contributions to this report.","output":"Why GAO Did This Study\n\nFPS, within DHS's NPPD, conducts physical security and law enforcement activities for about 9,000 federal facilities and the millions of employees or visitors who work in or visit these facilities. FPS moved from GSA to DHS's ICE in 2003 and to NPPD in 2009. GAO has reported that FPS faced challenges in each location. Legislation enacted in November 2018 requires DHS to review placement options for FPS and could result in FPS moving again within DHS or to another executive branch agency.\nGAO was asked to review issues related to organizational placement options for FPS. This report examines (1) the potential effects of FPS's placement in selected agencies and (2) steps DHS has taken to assess placement options for FPS. GAO identified five key organizational placement criteria based on prior work and identified eight agencies as potential placement options. The agencies were selected because they have the largest number of law enforcement officers or perform physical security, among other reasons. GAO reviewed documentation and interviewed officials from FPS, selected agencies, and key stakeholders. GAO compared agencies to FPS to determine if they meet the organizational placement criteria. An agency meets the criteria if it has similarities to FPS.\n\nWhat GAO Found\n\nIn considering organizational placement options for the Department of Homeland Security's (DHS) Federal Protective Service (FPS), GAO found that none of the eight agencies GAO selected met all the key organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs. For example, keeping FPS in DHS's National Protection and Programs Directorate (NPPD) could provide FPS some benefits because FPS and NPPD have missions that include the protection of infrastructure or specific facilities, facility protection responsibilities, and access to and sharing of information related to national homeland security. However, unlike FPS, NPPD does not perform both physical security and law enforcement activities, which is a potential trade-off. In another example, the General Services Administration (GSA) and the United States Marshals Service (Marshals) could provide benefits because they currently coordinate with FPS on facility protection. However, Marshals does not have a mission or goals that explicitly focus on the protection of infrastructure or facilities and GSA does not perform law enforcement, which are potential trade-offs.\nDHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though FPS and NPPD have evolved since FPS was placed in NPPD in 2010. Standards for Internal Control state that agency management should establish an organizational structure to achieve the agency's objectives and that an effective management practice for attaining this outcome includes periodically evaluating the structure to ensure that it has adapted to changes. Additionally, because DHS did not analyze FPS's current placement in NPPD, DHS does not have a benchmark for comparison to other agencies. DHS recently established a working group to assess the placement of FPS. However, the group's planned activities are limited in several ways. For example, the group's draft charter does not indicate that the working group will describe what DHS expects to achieve by changing FPS's placement. Further, the draft charter does not indicate that the working group will evaluate the benefits and trade-offs of placement options. GAO has previously identified these and other steps as key to successful organizational change or analysis of alternatives. These steps would help DHS address the 2018 legislation to review placement options for FPS\u2014including, how DHS considered the results of GAO's review. Regardless of the legislation, DHS may not be positioning itself to make an informed decision as to what organization best supports FPS.\n\nWhat GAO Recommends\n\nDHS should identify the expectations for changing FPS's placement and take steps to fully evaluate placement options. DHS concurred with the recommendations and outlined steps it plans to take to address them."}
{"id":"crs_R44822","pid":"crs_R44822_0","input":"\tRecent Developments\n\nOn January 2, 2019, for the second year in a row, the Cuban Commission for Human Rights and National Reconciliation (CCDHRN) reported a significant decline in the annual number of short-term detentions for political reasons. In 2018, according to the CCDHRN, there were 2,873 short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. (See \" Human Rights ,\" below.)\nOn December 22, 2018, Cuba's National Assembly approved a draft constitution that will be subject to a national referendum planned for February 24, 2019. Due to public opposition orchestrated by religious groups, the draft eliminated a provision that eventually could have led to approval of same-sex marriage and instead remained silent on defining matrimony. (See discussion on constitutional changes in \" Cuba's Transition to a New President ,\" below.)\nOn December 20, 2018, President Trump signed into law the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), with a provision that permits funding for two export promotion programs\u2014the Market Access Program and the Foreign Market Development Cooperation Program\u2014for U.S. agricultural products in Cuba. (See \" U.S. Exports and Sanctions ,\" below.)\nOn December 19, 2018, Major League Baseball announced it had reached an agreement with the Cuban Baseball Federation to allow baseball players from Cuba to sign contracts without defecting from Cuba. Some press reports indicate that the Trump Administration might take action to prevent the deal from moving forward. \nOn November 15, 2018, the Trump Administration updated its list of restricted Cuban entities controlled by the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. Currently, there are 205 entities on the list, including 99 hotels. (See \" Partial Rollback of Engagement and Increased Sanctions ,\" below.)\nOn November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights. In a press interview, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (LIBERTAD Act; P.L. 104-114) to allow lawsuits in U.S. federal court against those \"trafficking\" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba. (For more on Title III, see \" U.S. Property Claims ,\" below.)\nOn November 1, 2018, the United Nations General Assembly approved a resolution (as it has annually since 1991) opposing the U.S. embargo on Cuba. The vote was 189-2, with Israel joining the United States in opposing it. The United States also proposed eight amendments to the resolution criticizing Cuba's human rights record, but all these amendments were defeated by wide margins. (See \" Cuba's Foreign Relations ,\" below.)\nOn October 26, 2018, U.S. media reports highlighted a disturbing TV Mart\u00ed program originally aired in May 2018 that disparaged U.S. businessman George Soros through anti-Semitic language and unfounded conspiracy theories. Subsequently, the Office of Cuba Broadcasting pulled the program from its website and the chief executive officer of the U.S. Agency for Global Media stated that the program was \"inconsistent with our professional standards and ethics.\" (See \" Radio and TV Mart\u00ed ,\" below.)\nOn October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to Cuba's estimated 130 political prisoners. (See \" Human Rights ,\" below.)\nOn October 15, 2018, the Cuban government released Cuban political opposition activist Tom\u00e1s N\u00fa\u00f1ez Magdariaga from prison after a 62-day hunger strike. The State Department had called for his release, maintaining that he was imprisoned on false charges and convicted in a sham trial. (See \" Human Rights ,\" below.)\nOn October 6, 2018, President Trump signed into law the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) with a provision requiring the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security, develop and implement a mechanism to better track public air charter flights between the United States and Cuba, and direct public air charters to provide updated data on such flights. (See \" U.S. Travel to Cuba ,\" below.)\n\n\tIntroduction\n\nPolitical and economic developments in Cuba and U.S. policy toward the island nation, located just 90 miles from the United States, have been significant congressional concerns for many years. Especially since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ). Both measures strengthened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s but also provided road maps for a normalization of relations, dependent upon significant political and economic changes in Cuba. Congress partially modified its sanctions-based policy toward Cuba when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba.\nOver the past decade, much of the debate in Congress over U.S. policy has focused on U.S. sanctions. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in 2009 by lifting all restrictions on family travel and on cash remittances by family members to their relatives in Cuba. In 2011, the Obama Administration announced the further easing of restrictions on educational and religious travel to Cuba and on donative remittances to other than family members. \nIn December 2014, just after the adjournment of the 113 th Congress, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement and a normalization of relations. The policy shift led to the restoration of diplomatic relations, the rescission of Cuba's designation as a state sponsor of international terrorism, and the easing of some restrictions on travel and commerce with Cuba. There was mixed reaction in Congress, with some Members of Congress supporting the change and others opposing it. Legislative initiatives in the 114 th Congress reflected this policy divide, with some bills introduced that would have further eased U.S. economic sanctions and others that would have blocked the policy shift and introduced new sanctions. \nThis report examines U.S. policy toward Cuba in the 115 th Congress. It is divided into three major sections analyzing Cuba's political and economic environment; U.S. policy toward Cuba; and selected issues in U.S.-Cuban relations, including restrictions on travel and trade, funding for democracy and human rights projects in Cuba and for U.S. government-sponsored radio and television broadcasting, migration, antidrug cooperation, U.S. property claims, and U.S. fugitives from justice in Cuba. Legislative initiatives in the 115 th Congress are noted throughout the report, and Appendix A lists enacted measures and other bills and resolutions. Appendix B provides links to U.S. government information and reports on Cuba. For more on Cuba from CRS, see\nCRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; CRS Report R43888, Cuba Sanctions: Legislative Restrictions Limiting the Normalization of Relations , by Dianne E. Rennack and Mark P. Sullivan; CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by Mark P. Sullivan; CRS Insight IN10798, U.S. Response to Injuries of U.S. Embassy Personnel in Havana, Cuba , by Mark P. Sullivan and Cory R. Gill; CRS Insight IN10788, Hurricanes Irma and Maria: Impact on Caribbean Countries and Foreign Territories , by Mark P. Sullivan; CRS Insight IN10722, Cuba: President Trump Partially Rolls Back Obama Engagement Policy , by Mark P. Sullivan; CRS Report R44119, U.S. Agricultural Trade with Cuba: Current Limitations and Future Prospects , by Mark A. McMinimy; CRS Report R44137, Naval Station Guantanamo Bay: History and Legal Issues Regarding Its Lease Agreements , by Jennifer K. Elsea and Daniel H. Else; and CRS Report R44714, U.S. Policy on Cuban Migrants: In Brief , by Andorra Bruno.\n\n\tCuba's Political and Economic Environment\n\n\t\tBrief Historical Background1\n\nCuba became an independent nation in 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer, with slaves from Africa arriving in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but independence came about only after the United States entered the conflict, when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment, which became part of the Cuban Constitution of 1901. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed.\nCuba's political system as an independent nation often was dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952, and his rule progressed into a brutal dictatorship that fueled popular unrest and set the stage for Fidel Castro's rise to power. \nCastro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. He was jailed but subsequently freed. He went into exile in Mexico, where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra Mountains in eastern Cuba, and it joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to 47 years of rule under Fidel Castro until he stepped down from power provisionally in July 2006 because of poor health and ceded power to his brother Ra\u00fal Castro. \nAlthough Fidel Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union, and relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties. In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991.\nFrom 1959 until 1976, Castro ruled by decree. In 1976, however, the Cuban government enacted a new Constitution setting forth the Cuban Communist Party (PCC) as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. Cuba's Constitution also outlined national, provincial, and local governmental structures. Since then, legislative authority has been vested in a National Assembly of People's Power that meets twice annually for brief periods, although the Assembly has permanent commissions that work throughout the year. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the president of the Council of State is the country's head of state and government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, that is, the president of the Council of State. \nFidel Castro served as head of state and government through his position as president of the Council of State from 1976 until February 2008. Although he provisionally stepped down from power in July 2006 because of poor health and ceded power to his brother Ra\u00fal (who held the position of first vice president), Fidel still officially retained his position as head of state and government. National Assembly elections were held in January 2008, and Fidel was once again among the slate of candidates elected to the legislative body. But as the new Assembly was preparing to select the members of the Council of State from among its ranks in February 2008, Fidel announced that he would not accept the position as president of the Council of State. This announcement confirmed his departure as titular head of the Cuban government, and Ra\u00fal was selected as president. \nMore than 10 years after stepping down from power, Fidel Castro died in November 2016 at 90 years of age. While out of power, Fidel had continued to author essays published in Cuban media that cast a shadow on Ra\u00fal Castro's rule, and many Cubans reportedly believed that he had encouraged so-called hard-liners in Cuba's Communist Party and government bureaucracy to slow the pace of economic reforms advanced by his brother. His death accentuated the generational change that has already begun in the Cuban government and a passing of the older generation of the 1959 revolution. \n\n\t\tPolitical Conditions\n\nCurrent President Miguel D\u00edaz-Canel Berm\u00fadez was selected by Cuba's National Assembly of People's Power to succeed 86-year-old Ra\u00fal Castro on April 19, 2018, after Castro completed his second five-year term as president. Most observers saw D\u00edaz-Canel, who had been serving as first vice president since 2013, as the \"heir apparent,\" but Ra\u00fal will continue in his position as first secretary of the PCC until 2021. Cuba does not have direct elections for president. Instead, Cuba's legislature, the National Assembly of People's Power, selects the president of the country's 31-member Council of State; the president, pursuant to Cuba's constitution (Article 74), serves as Cuba's head of state and government.\nRa\u00fal Castro had succeeded his long-ruling brother Fidel Castro in 2006, serving provisionally until 2008 and then officially serving two five-year terms as president. He had announced in 2013 that he would not seek a third term, in line with his government's imposition of a two-term limit in 2012. Under Ra\u00fal, Cuba implemented gradual market-oriented economic policy changes over the past decade, but critics maintain that the government did not take enough action to foster sustainable economic growth. \nElections for the 605 member-National Assembly (as well as for 15 provincial assemblies) had been expected to be held in January 2018, but the elections were postponed until March 2018. The delay was not unexpected since Cuba's municipal elections, scheduled for September 2017, had been postponed to November 2017 because of significant damage caused by Hurricane Irma. The municipal contests involved the direct election of more than 12,000 officials among 27,000 candidates, but the electoral process was tightly controlled, with the government preventing 175 independent candidates from being nominated. Candidates for the National Assembly and provincial assemblies were also tightly controlled by candidacy commissions, and voters were presented with one candidate for each position.\n\n\t\t\tCuba's Transition to a New President\n\nPresident D\u00edaz-Canel, who turned 58 a day after becoming president, is an engineer by training. His appointment as first vice president in 2013 made him the official constitutional successor in case Castro died or could not fulfill his duties. His appointment also represented a move toward bringing about generational change in Cuba's political system. D\u00edaz-Canel became a member of the Politburo in 2003 (the PCC's highest decisionmaking body), held top PCC positions in two provinces, and was higher education minister from 2009 until 2012, when he was tapped to become a vice president on the Council of State. \nAlthough some observers believed D\u00edaz-Canel to be a moderate and more open to reform, a leaked video released in August 2017 appears to contradict that characterization. The video shows him speaking at a closed Communist Party meeting earlier in the year in which he strongly criticized dissidents and independent voices (including those arguing for reform of the socialist system), criticized the expansion of Cuba's private sector, and characterized U.S. efforts toward normalization under President Obama as an attempt to destroy the Cuban revolution. Some observers believe that D\u00edaz-Canel's rhetoric could have been aimed at increasing his acceptance by so-called hard-liners in Cuba's political system who are more resistant to change.\nCuba's political transition is notable because it is the first time since the 1959 Cuban revolution that a Castro is not in charge of the government. A majority of Cubans today have lived under the rule only of the Castros. Ra\u00fal's departure can be viewed as a culmination of the generational leadership change that began several years ago in the government's lower ranks.\nIt is also the first time that Cuba's head of government is not leader of the PCC. Although separating the roles of government and party leaders could elevate the role of government institutions over the PCC, Ra\u00fal Castro has indicated that he expects D\u00edaz-Canel to take over as first secretary of the PCC when his term as party leader ends. \nAnother element of the transition is the composition of the new 31-member Council of State. The National Assembly selected 72-year-old Salvador Vald\u00e9s Mesa as First Vice President, not from the younger generation, but also not from the historical revolutionary period. Vald\u00e9s Mesa, who already had been serving as one of five vice presidents and is on the Politburo, is the first Afro-Cuban to hold such a high government position. Of the Council of State's members, 45% are new, 48% are women, and 45% are Afro-Cuban or mixed race. Several older revolutionary-era leaders remained on the Council, including Ramiro Vald\u00e9s, 86 years old, who continues as a vice president. Nevertheless, the average age of Council of State members was 54, with 77% born after the 1959 Cuban revolution.\nChallenges for President D\u00edaz-Canel . Although most observers do not anticipate immediate major policy changes under President D\u00edaz-Canel, his government will face two enormous challenges\u2014reforming the economy and responding to desires for greater freedom. \nRa\u00fal Castro managed the opening of Cuba's economy to the world, with diversified trade relations, increased foreign investment, and a growing private sector. Yet the slow pace of economic reform has stunted economic growth and disheartened Cubans yearning for more economic freedom. From mid-2017 through much of 2018, the government appeared to backtrack by restricting private-sector development and slowing reforms, and for several years the government has delayed a long-anticipated end to its dual-currency system that creates economic distortion (see \" Economic Conditions \" below). A challenge for D\u00edaz-Canel will be moving forward with economic reforms opposed by some conservative elements in the party and state bureaucracy. \nFew observers expect the D\u00edaz-Canel government to ease tight control over the political system, at least in the short to medium term, but it will need to contend with increasing calls for political reform and freedom of expression. The liberalization of some individual freedoms that occurred under Ra\u00fal Castro (such as legalization of cell phones and personal computers, and expansion of internet connectivity) has increased Cubans' appetite for access to information and the desire for more social and political expression. More broadly, if the next government continues to repress political dissidents and human rights activists, it will remain a point of contention in Cuba's foreign relations. \nAn important question looking ahead is the extent of influence that Castro and other revolutionary figures will have on government policy. Some observers assert that Ra\u00fal will continue to have a role in the decisionmaking process because he will head the PCC until 2021.The former president also headed up a commission making changes to Cuba's 1976 constitution (see discussion below). In July 2018, President D\u00edaz-Canel named his Council of Ministers or Cabinet, but a majority of ministers were holdovers from the Castro government, including those occupying key ministries such as defense, interior, finance, and foreign relations; just 9 of 26 ministers were new, including 2 vice presidents and 7 new ministers. After D\u00edaz-Canel marked his first 100 days in office in July 2018, some observers maintained that little had changed politically or economically.\nBy the end of 2018, however, President D\u00edaz-Canel made several decisions that appeared to demonstrate his independence from the previous Castro government and indicate that he was more responsive to public concerns and criticisms. In early December, as described below in the section on \" Economic Conditions ,\" D\u00edaz-Canel eased forthcoming harsh regulations that were about to be implemented on the private sector; many observers believed these regulations would have shrunk the sector. Also in December, the Cuban government backed away from full implementation of controversial Decree 349 that had been issued in July 2018 to regulate artistic expression. After the unpopular decree triggered a flood of criticism from Cuba's artistic community, the government announced that the measure would be implemented gradually and applied with consensus (it remains to be seen, however, whether the government's action will satisfy those working in Cuba's vibrant arts community). In a third action in December, the government eliminated a proposed constitutional change that could have paved the way for same-sex marriage after strong public criticisms of the provision (see discussion below on constitutional changes).\nConstitutional Changes. As noted, Cuba is in the midst of a process to rewrite and update its 1976 constitution that will be subject to a referendum in February 2019. Drafted by a commission headed by Ra\u00fal Castro and approved by the National Assembly in July 2018, the proposed changes were subject to public debate in thousands of workplaces and community meetings into November. After considering public suggestions, the National Assembly made additional changes to the draft constitution, and the National Assembly approved this new version on December 22, 2018. Voters are now scheduled to go to the polls to approve the new constitution on February 24, 2019; it would then be approved in April 2019. \nOne of the more controversial changes made by the commission in its new draft in December was the elimination of a provision that would have redefined matrimony as gender neutral compared to the current constitution, which refers to marriage as the union between a man and a woman. Cuba's evangelical churches orchestrated a campaign against the provision, and Cuban bishops issued a pastoral message against it. The commission chose to eliminate the proposed provision altogether, with the proposed constitution remaining silent on defining matrimony, and maintained that the issue would be addressed in future legislation within two years. \nAmong other provisions of the draft constitution are the addition of an appointed prime minster to oversee government operations, an age limit of 60 to become president (Article 127) with a limit of two five-year terms (Article 126), and the right to own private property (Article 22). The draft constitution would still ensure the state's control over the economy and the role of centralized planning (Article 19), and the Communist Party still would be the only recognized party (Article 5).\n\n\t\tHuman Rights\n\nThe Cuban government has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. The government has continued to harass members of human rights and other dissident organizations. These organizations include the Ladies in White ( Las Damas de Blanco ), currently led by Berta Soler, formed in 2003 by the female relatives of the \"group of 75\" dissidents arrested that year, and the Patriotic Union of Cuba (UNPACU), led by Jos\u00e9 Daniel Ferrer Garc\u00eda, established in 2011 by several dissident groups with the goal of fighting peacefully for civil liberties and human rights; in August 2018, the Cuban government imprisoned Ferrer arbitrarily for 11 days with no access to his family, according to Amnesty International. In recent years, several political prisoners have conducted hunger strikes; two hunger strikers died\u2014Orlando Zapata Tamayo in 2010 and Wilman Villar Mendoza in 2012. In February 2017, Hamel Santiago Maz Hern\u00e1ndez, a member of UNPACU who had been imprisoned since June 2016 after being accused of descato (lack of respect for the government), died in prison. \nAlthough the human rights situation in Cuba remains poor, the country has made some advances in recent years. In 2008, Cuba lifted a ban on Cubans staying in hotels that previously had been restricted to foreign tourists in a policy that had been pejoratively referred to as \"tourist apartheid.\" In recent years, as the government has enacted limited economic reforms, it has been much more open to debate on economic issues. In 2013, Cuba eliminated its long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. The change has allowed prominent dissidents and human rights activists to travel abroad and return to Cuba. In recent years, the Cuban government has moved to expand internet connectivity through \"hotspots\" first begun in 2015 and through the launching of internet capability on cellphones in late 2018. As noted below, short-term detentions for political reasons declined significantly in 2017 and 2018, although there were still almost 2,900 such detentions in 2018. \nCongressional Resolutions. On April 11, 2018, the Senate approved S.Res. 224 (Durbin), which commemorated the legacy of democracy activist Oswaldo Pay\u00e1, called on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding Pay\u00e1's death in a car accident in July 2012, and called on the Cuban government to cease violating human rights and begin providing democratic freedoms to Cuban citizens. In 2012, the Senate had approved S.Res. 525 (Nelson), which honored the life and legacy of Pay\u00e1 and also called for an impartial, third-party investigation. Pay\u00e1 had founded the Christian Liberation Movement in 1988, a civil society group advocating peaceful democratic change and respect for human rights. He founded the Varela Project in 1996, which collected thousands of signatures supporting a national plebiscite for political reform in Cuba.\nTwo similar but not identical resolutions introduced in May 2018, S.Res. 511 (Rubio) and H.Res. 916 (Diaz-Balart), would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. The resolutions also would have expressed solidarity and commitment to the democratic aspirations of the Cuban people and call on the Cuban government to allow members of the group to travel freely.\nPolitical Prisoners. On October 16, 2018, the State Department's U.S. Mission to the United Nations launched a campaign to call attention to the plight of Cuba's \"estimated 130 political prisoners.\" Cuban diplomats attempted to disrupt the event by making noise and shouting, although their actions appeared to call more attention to the event and, for some observers, demonstrated the Cuban government's disdain for freedom of expression. Secretary of State Mike Pompeo wrote an open letter to Cuban Foreign Minister Bruno Rodriguez on December 7, 2018, asking for a substantive explanation for the continued detention of eight specific political prisoners and an explanation of the charges and evidence against other individuals held as political prisoners.\nIn January 2019, the Havana-based Cuban Commission for Human Rights and National Reconciliation (CCDHRN) estimated that Cuba held some 130-140 political prisoners in some 150 prisons and internment camps. In June 2018, the CCDHRN made public a list with 120 prisoners for political reasons, consisting of 96 opponents or those disaffected toward the regime (over 40 are members of UNPACU) and 24 accused of employing or planning some form of force or violence. \nAccording to the State Department's human rights report on Cuba covering 2017, issued in April 2018, the exact number of political prisoners was difficult to determine, but human rights organizations estimated that there were 65 to 100 political prisoners. The report noted the lack of governmental transparency, along with its systematic violations of due process rights, which masked the nature of criminal charges and prosecutions and allowed the government to prosecute peaceful human rights activists for criminal violations or \"dangerousness.\" As noted in the report, the government refused international humanitarian organizations and the United Nations access to its prisons and detention centers, and closely monitored and often harassed domestic organizations that tracked political prisoner populations. \nPolitical activist Dr. Eduardo Cardet, designated by Amnesty International (AI) as a \"prisoner of conscience,\" has been imprisoned since November 2016 for publicly criticizing Fidel Castro and was sentenced to three years in prison. AI maintains that Cardet, a leader in the dissident Christian Liberation Movement, was sent to prison solely for peacefully exercising his right to freedom of expression and has called for his immediate release. The human rights group issued an urgent action notice in January 2018 calling attention to Cardet's case after he was attacked by several prisoners in December 2017. In June 2018, AI issued another urgent action notice for Cardet, maintaining that Cuban authorities suspended family visiting rights for him because of his family's activism on the case.\nA second AI-designated prisoner of conscience, Cuban biologist Dr. Ariel Ruiz Urquiola, was sentenced to a year in prison in May 2018 for the crime of disrespecting authority ( desacato ). Urquiola reportedly had referred to several Cuban government forest rangers as \"rural guards,\" a derogatory reference to a repressive agency before the Cuban revolution. The rangers had been checking whether Urquiola had proper permits to cut down several trees and build a fence, which reportedly he had. In June 2018, AI issued two urgent action notices on Urquiola calling for his release and for visits while imprisoned. He was conditionally released from prison on July 3, 2018, following a prolonged hunger strike.\nOn October 15, 2018, the Cuban government released UNPACU activist Tom\u00e1s N\u00fa\u00f1ez Magdariaga from prison after a 62-day hunger strike. Magdariaga had been sentenced to a year in jail for allegedly making threats to a security agent. The State Department had called for his release, maintaining he was falsely charged and convicted in a sham trial. Amnesty International had expressed concern for his health and called on Cuba to make public evidence against him.\nOver the past decade, the Cuban government has released large numbers of political prisoners at various junctures. In 2010 and 2011, with the intercession of the Cuban Catholic Church, the government released some 125 political prisoners, including the remaining members of the \"group of 75\" arrested in 2003 who were still in prison. In the aftermath of the December 2014 shift in U.S. policy toward Cuba, the Cuban government released another 53 political prisoners, although several were subsequently rearrested. In 2017, the Cuban government released several political prisoners that had been dubbed \"prisoners of conscience\" by Amnesty International. This included graffiti artist Danilo Maldonado Machado (known as El Sexto) who subsequently testified before a Senate Foreign Relations Committee hearing in February 2017. \nShort- T erm Detentions. Short-term detentions for political reasons increased significantly from 2010 through 2016, a reflection of the government's change of tactics in repressing dissent away from long-term imprisonment. The CCDHRN reports that the number of such detentions grew annually from at least 2,074 in 2010 to at least 8,899 in 2014. The CCDHRN reported a very slight decrease to 8,616 short-term detentions in 2015, but this figure increased again to at least 9,940 detentions for political reasons in 2016, the highest level recorded by the human rights organization. \nSince 2017, however, the CCDHRN has reported a significant decline in short-term detentions. In 2017, the number of short-term detentions fell to 5,155, almost half the number detained in 2016 and the lowest level since 2011. The decline in short-term detentions continued in 2018, with 2,873 reported short-term detentions, almost a 45% decline from 2017 and the lowest level since 2010. \nBloggers and Civil Society Groups. Over the past several years, numerous independent Cuban blogs have been established. Cuban blogger Yoani S\u00e1nchez has received considerable international attention since 2007 for her website, Generaci\u00f3n Y , which includes commentary critical of the Cuban government. In May 2014, S\u00e1nchez launched an independent digital newspaper in Cuba, 14 y medio , available on the internet, distributed through a variety of methods in Cuba, including CDs, USB flash drives, and DVDs.\nThe Catholic Church became active in broadening the debate on social and economic issues through its publications. The Church also has played a role in providing social services, including soup kitchens, services for the elderly and other vulnerable groups, after-school programs, job training, and even college coursework. \nEstado de SATS , a forum founded in 2010 by human rights activist Antonio Rodiles, has had the goal of encouraging open debate on cultural, social, and political issues. The group has hosted numerous events and human rights activities over the years, but it also has been the target of government harassment, as has its founder. \nOther notable online forums and independent or alternative media that have developed include Cuba Posible (founded by two former editors of the Catholic publication Espacio Laical ) , Periodismo del Barrio (focusing especially on environmental issues), El Toque , and O nCuba (a Miami-based digital magazine with a news bureau in Havana).\nTrafficking in Persons. The State Department released its 2018 Trafficking in Persons (TIP) Report on June 28, 2018, and for the fourth consecutive year Cuba was placed on the Tier 2 Watch List (in prior years, Cuba had Tier 3 status). Tier 3 status refers to countries whose governments do not fully comply with the minimum standards for combatting trafficking and are not making significant efforts to do so. In contrast, Tier 2 Watch List status refers to countries whose governments, despite making significant efforts, do not fully comply with the minimum standards and still have some specific problems (e.g., an increasing number of victims or failure to provide evidence of increasing antitrafficking efforts) or whose governments have made commitments to take additional antitrafficking steps over the next year. A country normally is automatically downgraded to Tier 3 status if it is on the Tier 2 Watch List for three consecutive years unless the Secretary of State authorizes a waiver. The State Department issued such a waiver for Cuba in 2017 because the government had devoted sufficient resources to a written plan that, if implemented, would constitute significant efforts to meet the minimum standards for the elimination of trafficking. In the 2018 TIP report, the State Department again issued a waiver for Cuba allowing it to remain on the Tier 2 Watch List for the fourth consecutive year. Such a waiver, however, is only permitted for two years. After the third year, the country must either go up to Tier 2 or down to Tier 3.\nThe State Department initially upgraded Cuba from Tier 3 to Tier 2 Watch List status in its 2015 TIP report because of the country's progress in addressing and prosecuting sex trafficking, including the provision of services to sex-trafficking victims, and its continued efforts to address sex tourism and the demand for commercial sex. \nIn its 2016 TIP report, the State Department maintained that Cuba remained on the Tier 2 Watch List for the second consecutive year because the country did not improve antitrafficking efforts compared to 2015. Nevertheless, the 2016 report noted that the Cuban government continued efforts to address sex trafficking, including prosecution and conviction, and the provision of services to victims. The State Department noted that the Cuban government released a report on its antitrafficking efforts in October 2015; that multiple government ministries were engaged in antitrafficking efforts; and that the government funded child protection centers and guidance centers for women and families, which served crime victims, including trafficking victims. However, the report also noted that the Cuban government did not prohibit forced labor, report efforts to prevent forced labor, or recognize forced labor as a possible issue affecting Cubans in medical missions abroad. \nIn its 2017 TIP report, the State Department maintained that the Cuban government demonstrated significant efforts during the reporting period by prosecuting and convicting sex traffickers, providing services to sex trafficking victims, releasing a written report on its antitrafficking efforts, and coordinating antitrafficking efforts across government ministries. The State Department noted, however, that the Cuban penal code did not criminalize all forms of trafficking and did not prohibit forced labor, report efforts to prevent forced labor domestically, or recognize forced labor as a possible issue affecting Cubans working in medical missions abroad.\nIn its 2018 TIP report, the State Department noted the Cuban government's significant efforts of prosecuting and convicting more traffickers, creating a directorate to provide specialized attention to child victims of crime and violence, including trafficking, and publishing its antitrafficking plan for 2017-2020. The State Department also noted, however, that the Cuban government did not demonstrate increasing efforts compared to the previous reporting period. It maintained that the government did not criminalize most forms of forced labor or sex trafficking for children ages 16 or 17, and did not report providing specialized services to identified victims. The State Department also made several recommendations for Cuba to improve its antitrafficking efforts, including the enactment of a comprehensive antitrafficking law that prohibits and sufficiently punishes all forms of trafficking. \nEngagement between U.S. and Cuban officials on antitrafficking issues has increased in recent years. In January 2017, U.S. officials met with Cuban counterparts in their fourth such exchange to discuss bilateral efforts to address human trafficking. Subsequently, on January 16, 2017, the United States and Cuba signed a broad memorandum of understanding on law enforcement cooperation in which the two countries stated their intention to collaborate on the prevention, interdiction, monitoring, and prosecution of transnational or serious crimes, including trafficking in persons. In February 2018, the State Department and the Department of Homeland Security hosted meetings in Washington, DC, with Cuban officials on efforts to combat trafficking in persons.\n\n\t\tEconomic Conditions\n\nCuba's economy continues to be largely state-controlled, with the government owning most means of production and employing a majority of the workforce. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with an estimated 4.75 million tourists visiting Cuba in 2018; nickel mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic health care system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, also have become an important source of hard currency, amounting to some $3 billion in 2016. The once-dominant sugar industry has declined significantly over the past 20 years. Because of drought, damage from Hurricane Irma, and subsequent months of heavy rains, the 2017-2018 sugar harvest dropped by almost 44% to just over 1 million metric tons (MT), compared to 1.8 million MT the previous year. The outlook for the 2018-2019 harvest is 1.5 million MT, almost a 50% improvement; for comparison, in 1990, Cuba produced 8.4 million MT of sugar. \nFor more than 15 years, Cuba has depended heavily on Venezuela for its oil needs. In 2000, the two countries signed a preferential oil agreement (essentially an oil-for-medical-personnel barter arrangement) that until recently provided Cuba with some 90,000-100,000 barrels of oil per day, about two-thirds of its consumption. Cuba's goal of becoming a net oil exporter with the development of its offshore deepwater oil reserves was set back in 2012, when the drilling of three exploratory oil wells was unsuccessful. This setback, combined with Venezuela's economic difficulties, has raised Cuban concerns about the security of the support received from Venezuela. Since 2015, Venezuela has cut the amount of oil that it sends to Cuba, and Cuba has increasingly turned to other suppliers for its oil needs, including Russia and Algeria. In the summer of 2018, from June through August, Venezuela reportedly resumed exporting a key crude oil to Venezuela that it had suspended in 2017 due to needs in Venezuela. \nThe government of Ra\u00fal Castro implemented a number of economic policy changes, but economists were disappointed that more far-reaching reforms were not implemented. At the PCC's seventh party congress, held in April 2016, Ra\u00fal Castro reasserted that Cuba would move forward with updating its economic model \"without haste, but without pause.\" A number of Cuba's economists have pressed the government to enact more far-reaching reforms and embrace competition for key parts of the economy and state-run enterprises. These economists criticize the government's continued reliance on central planning and its monopoly on foreign trade. \nEconomic Growth. Cuba experienced severe economic contraction from 1990 to 1993, with an estimated decline in gross domestic product ranging from 35% to 50% when the Soviet Union collapsed and Russian financial assistance to Cuba practically ended. Growth resumed after that time, as Cuba moved forward with some limited market-oriented economic reforms, and growth was especially strong in the 2004-2007 period, averaging more than 9% annually. The economy benefitted from the growth of the tourism, nickel, and oil sectors and from support from Venezuela and China in terms of investment commitments and credit lines. The economy was hard-hit by several hurricanes and storms in 2008 and the global financial crisis in 2009, with the government forced to implement austerity measures that slowed growth. From 2010 to 2015, Cuba's economy experienced low to moderate economic growth, ranging from a low of 1% in 2014 to a high of 4.4% in 2015. In 2016, however, the economy grew by just 0.5% because of lower export earnings, reduced support from Venezuela, and austerity measures (preliminary Cuban government estimates had forecast an economic contraction of 0.9%, but this was revised to 0.5% growth in January 2018).\nIn September 2017, Hurricane Irma struck in September, killing 10 people in Cuba and affecting more than 2 million people along 300 miles of the northern coast. The storm damaged infrastructure (electric power, water and sanitation systems), the agricultural sector, and tourism facilities, and it flooded low-lying areas of Havana.\nNevertheless, the Cuban government reports that the economy grew 1.8% in 2017 and an estimated 1.2% in 2018, and it predicts 1.5% growth in 2019. President D\u00edaz-Canel has said that austerity measures begun in 2016 will continue in 2019. The economy has been hurt by reduced support from Venezuela over the past several years and the unexpected December 2018 ending of Cuba's program sending medical professionals to Brazil, which had provided Cuba with some $400 million a year. The Economist Intelligence Unit (EIU) predicts economic growth will slow to 0.8% in 2019 and 0.4% in 2020, as tourism grows more moderately because of a slowdown in arrivals from the United States. According to the EIU, the biggest risk to Cuba's economic performance is the complete elimination of support from Venezuela.\nPrivate Sector. The Cuban government employs a majority of the labor force, but the government has been allowing more private-sector activities. In 2010, the government opened up a wide range of activities for self-employment and small businesses to almost 200 categories of work allowed; the number of self-employed or cuentapropistas rose from 144,000 in 2009 to about 588,000 as of October 2018. Analysts contend that the government needs to do more to aid the development of the private sector, including an expansion of authorized activities to include more white-collar occupations and state support for credit to support small businesses. \nBeginning in mid-2017, the government took several steps to restrict private-sector development. In August 2017, it stopped issuing new licenses for 27 private-sector occupations, including for private restaurants and for renting private residences; closed a fast-growing cooperative that had provided accounting and business consultancy services; and put restrictions on construction cooperatives. The government maintains that it took the actions to \"perfect\" the functioning of the private sector and curb illicit activities, such as the sale of stolen state property, tax evasion, and labor violations.\nIn February 2018, press reports provided details about draft government regulations being considered that would increase state control over the private sector, limit business licenses to a single activity, reduce and consolidate the current 200 categories of work to 123 categories, and limit the size of private restaurants. The regulations ultimately were released in July 2018 and were to take effect in December, at the same time the government would resume issuing licenses for business activities that had been frozen since August 2017. The objectives of the new regulations were to increase taxation oversight of the private sector and to control the concentration of wealth and rising inequality, but many observers believed the regulations were aimed at stifling private-sector growth because of the government's concerns regarding that sector's independence from the government.\nJust two days before the regulations were to go into effect, President D\u00edaz-Canel did an about-face and announced on December 5, 2018, that some aspects of the regulations viewed as especially egregious by the private sector would be eliminated or eased. Most significantly, individuals would not be limited to one licensed activity; restaurants, bars, and cafeterias would not be not subject to a limit of 50 seats; and the requirements for maintaining a minimum balance in bank accounts would be reduced from the equivalent of three months of tax payments to two months and would apply to just 6 of the 123 categories of employment. Analysts view the backtracking as an indication that President D\u00edaz-Canel is willing to make policy changes in response to public opinion and as a sign that the government does not want to shrink the private sector.\nCurrency Unification\/Reform. A major challenge for the development of the private sector is the lack of money in circulation. Most Cubans do not make enough money to support the development of small businesses. Cuba has two official currencies\u2014Cuban pesos (CUPs) and Cuban convertible pesos (CUCs); for personal transaction, the exchange rate for the two currencies is CUP24\/CUC1. Most people are paid CUPs, and the minimum monthly wage in Cuba is 225 CUPs (just over $9), although this minimum wage does not apply to the nonstate sector. According to the State Department, even with other government support such as free education, housing, some food, and subsidized medical care, the average monthly wage of 700 CUPs ($29) does not provide for a reasonable standard of living. For increasing amounts of consumer goods, CUCs are used. Cubans with access to foreign remittances or who work in private-sector activities catering to tourists and foreign diplomats have fared better than those serving the Cuban market.\nThe Cuban government announced in 2013 that it would end its dual-currency system and move toward monetary unification, but the action has been delayed for several years. Currency reform is ultimately expected to lead to productivity gains and improve the business climate, but an adjustment would create winners and losers. At the PCC's April 2016 Congress, Ra\u00fal Castro called for moving toward a single currency as soon as possible to resolve economic distortions. In January 2018, EU officials visiting Cuba offered technical assistance regarding currency reform and unification. Some economists assert, however, that Cuba is unlikely to go forward with currency reform this year because of the country's deep structural economic problems and because of the ongoing constitutional reform process.\nAgricultural Sector. A reform effort under Ra\u00fal Castro focused on the agricultural sector, a vital issue because Cuba reportedly imports some 70%-80% of its food needs, according to the World Food Programme. In an effort to boost food production, the government turned over idle land to farmers and given farmers more control over how to use their land and what supplies to buy. Despite these and other efforts, overall food production has been significantly below targets. In addition, as noted above, Hurricane Irma caused damage to the agricultural sector, particularly sugar, in September 2017. As a result, in the first six months of 2018, overall food production reportedly decreased about 10% to 15% compared to the same period in 2017.\nForeign Investment. The Cuban government adopted a new foreign investment law in 2014 with the goal of attracting increased levels of foreign capital to the country. The law cuts taxes on profits by half, to 15%, and exempts companies from paying taxes for the first eight years of operation. The law also eliminates employment or labor taxes, although companies still must hire labor through state-run companies, with agreed wages. A fast-track procedure for small projects reportedly streamlines the approval process, and the government agreed to improve the transparency and time of the approval process for larger investments. \nA Mariel Special Development Zone (ZED Mariel) was established in 2014 near the port of Mariel to attract foreign investment. To date, ZED Mariel has approved some 43 investment projects, which are at various stages of development. In November 2017, Cuba approved a project for Rimco (the exclusive dealer for Caterpillar in Puerto Rico, the U.S. Virgin Islands, and the Eastern Caribbean) to become the first U.S. company to be located in the ZED Mariel. Rimco plans to set up a warehouse and distribution center in 2018 to distribute Caterpillar equipment. In September 2018, the Roswell Park Comprehensive Cancer Center of Buffalo, NY, announced it was entering into a joint venture with Cuba's Center for Molecular Immunology focused on the development of cancer therapies; the joint venture will be located in the ZED Mariel. \nAccording to Cuba's Minister of Foreign Trade and Investment Rodrigo Malmierca, Cuba has signed more than 200 investment projects valued at $5.5 billion since it made changes to its investment law in 2014, with $1.5 billion of that in 2018. The actual amount invested reportedly is much less, with about $500 million annually. In November 2018, the Cuban government updated its wish list for foreign investment, which includes 525 projects representing potential investment of $11.6 billion in such high-priority areas as tourism, agriculture and food production, oil, the industrial sector, and biotechnology.\n\n\t\tCuba's Foreign Relations\n\nDuring the Cold War, Cuba had extensive relations with, and support from, the Soviet Union, which provided billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped to fund an activist foreign policy and support for guerrilla movements and revolutionary governments abroad in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and engage in economic relations with countries worldwide. In ensuing years, Cuba diversified its trading partners, although Venezuela under populist leftist President Hugo Ch\u00e1vez (1999-2013) became one of Cuba's most important partners, leading to Cuba's dependence on Venezuela for oil imports. In 2017, the leading sources of Cuba's imports in terms of value were Venezuela (18.1%, down from 40% in 2014), China (16.3%), and Spain (10.8%); the leading destinations of Cuban exports were Canada (19.4%), Venezuela (15.6%), China (5.2%), and Spain (8.6%).\nRussia. Relations with Russia, which had diminished significantly in the aftermath of the Cold War, have strengthened somewhat over the past several years. Cuban President D\u00edaz-Canel visited Russia for three days beginning November 1, 2018, after which he visited North Korea, China, Vietnam, and Laos. \nRussia's interest in the broader Latin America and Caribbean region appeared to increase in response to U.S. actions taken in the aftermath of Russia's intervention in Georgia in 2008 and Russia's annexation of the Crimea region and military intervention in Ukraine in 2014. For many observers, one of Russia's main objectives in the Latin American and Caribbean region is to demonstrate that it is a global power that can operate in the U.S. neighborhood, or \"backyard.\" \nJust before a 2014 trip to Cuba, Russian President Vladimir Putin signed into law an agreement writing off 90% of Cuba's $32 billion Soviet-era debt, with some $3.5 billion to be paid back by Cuba over a 10-year period that would fund Russian investment projects in Cuba. In the aftermath of Putin's trip, press reports claimed that Russia would reopen its signals intelligence facility at Lourdes, Cuba, which had closed in 2002, but President Putin denied that his government would reopen the facility.\nTrade relations between Russia and Cuba have not been significant, although they grew in 2017 because of new Russian oil exports to Cuba. According to Russian trade statistics, total trade between the two countries was valued at $290 million in 2017, an almost 17% increase over 2016. This represented less than 2% of Cuba's trade worldwide. Russia's imports from Cuba amounted to almost $14 million in 2017, led by pharmaceutical products and rum, while Russia's exports to Cuba amounted to almost $277 million, led by motor vehicles (and parts) and oil.\nRussian energy companies have been involved in oil exploration in Cuba. Gazprom was in a partnership with the Malaysian state oil company, Petronas, which conducted unsuccessful deepwater oil drilling off Cuba's western coast in 2012. The Russian oil company Zarubezhneft began drilling in Cuba's shallow coastal waters east of Havana in late 2012 but stopped work in 2013 because of disappointing results. In 2014, Russian energy companies Zarubezhneft and Rosneft signed an agreement with Cuba's state oil company Uni\u00f3n Cuba- Petr\u00f3leo (CUPET) for the development of an offshore exploration block, and Rosneft agreed to cooperate with Cuba in studying ways to optimize existing production at mature fields. In 2017, Rosneft began to ship oil to Cuba, a result of Cuba's efforts to diversify its sources of foreign oil because of Venezuela's diminished capacity.\nRussian officials publicly welcomed the improvement in U.S.-Cuban relations under the Obama Administration, although some viewed the change in U.S. policy as setback for Russian overtures in the region. As U.S.-Cuban normalization talks were beginning in Havana in January 2015, a Russian intelligence ship docked in Havana. In October 2016, a Russian military official maintained that Russia was reconsidering reestablishing a military presence in Cuba (and Vietnam), although there was no indication that Cuba would be open to the return of the Russian military. The two countries signed a bilateral cooperation agreement in December 2016 for Russia's support to help Cuba modernize its defense sector until 2020.\nIn June 2017, when President Trump announced a partial rollback of the U.S. policy of engagement with Cuba, Russia's foreign ministry criticized the president for resorting to \"Cold War\" rhetoric. Some reports indicate that as U.S. relations with Cuba have deteriorated over the past year, Russia has been attempting to further increase its ties to Cuba, with high-level meetings between Cuban and Russian officials and increased economic, military, and cultural engagement. In March 2018, the same Russian intelligence ship noted above again stopped in Havana.\nFor Cuba, a deepening of relations with Russia could help economically, especially regarding oil, and also could serve as a counterbalance to the partial rollback of U.S. engagement policy by the Trump Administration. However, President D\u00edaz-Canel's November 2018 trip to Russia reportedly did not yield significant results. Press reports indicate that Cuba received a $50 million credit line for purchases of Russian military weapons and spare parts and contracts valued at more than $260 million (some that already were in the pipeline) to modernize three power plants and a metal processing plant and upgrade Cuba's railway system.\nThe U.S. Southern Command's February 2018 posture statement presented to Congress expressed concern about Russia's increased role in the Western Hemisphere. It stated that Russia's expanded port and logistics access in Cuba (as well as Nicaragua and Venezuela) provide the country \"with persistent, pernicious presence, including more frequent maritime intelligence collection and visible force projection in the Western Hemisphere.\" It stated that Russia's robust relationships with these three countries provide it \"with a regional platform to target U.S. and partner nation facilities and assets, exert negative influence over undemocratic governments, and employ strategic options in the event of a global contingency.\" Along these lines, there has been concern in Congress about the role of Russia in Latin America, including in Cuba. The conference report to the John S. McCain National Defense Authorization Act for FY2019, P.L. 115-232 ( H.R. 5515 ), requires the Defense Intelligence Agency to submit a report on security cooperation between Russia, and Cuba, Nicaragua, and Venezuela, including a description of any military or intelligence infrastructure, facilities, and assets developed by Russia in the three countries and any associated agreements or understanding between Russia and the three countries.\nChina. During the Cold War, Cuba and China did not have close relations because of Sino-Soviet tensions, but bilateral relations with China have grown closer over the past 15 years, including a notable increase in trade. Since 2004, Chinese leaders have made a series of visits to Cuba: then-President Hu Jintao visited in 2004 and 2008; President Xi Jinping visited in 2014 (and when he was vice president in 2011); and, most recently, Chinese Premier Li Keqiang visited in 2016, reportedly signing some 30 economic cooperation agreements. Ra\u00fal Castro also visited China in 2008 and 2012; during the 2012 trip, he signed cooperation agreements focusing on trade and investment issues. In January 2018, Ra\u00fal Castro met with Song Tong, a special envoy of President Xi Jinping, with discussion reportedly focused on strengthening ties. Castro noted that the Cuban Communist Party (PCC) would like to promote exchanges with its Chinese counterpart in an effort to help upgrade Cuba's social and economic model. \nMore recently, as noted above, Cuban President D\u00edaz-Canel visited China in early November 2018. According to Chinese state media, President Xi called for a long-term plan to promote the development of China-Cuba ties and said that China would welcome Cuba's participation in the Belt and Road Initiative, which is focused on infrastructure development around the world. President Xi called on both countries to enhance cooperation on trade, energy, agriculture, tourism, and biopharmaceutical manufacturing. \nWhile Cuba's relationship with China undoubtedly has an ideological component since both are the among the world's remaining communist regimes, economic linkages and cooperation appear to be the most significant component of bilateral relations.\nAccording to Cuban trade statistics, total Cuba-China trade in 2017 was valued at almost $2 billion (accounting for 16.1% of Cuba's trade worldwide), with Cuba exporting $364 million to China and importing almost $1.7 billion. This was a 21% drop from 2016, when total Cuba-China trade almost reached $2.6 billion, and an almost 30% drop in Cuba's imports from China in 2016. The fall in imports from China in reflects Cuba's difficult economic situation as Venezuelan support has diminished. In response to a cash crunch, the Cuban government has cut imports and reduced the use of fuel and electricity. In contrast to declining imports from China, Cuba's exports to China increased by about 42% in 2017, led by increased exports of seafood, nickel, and to a lesser extent cigars. According to Chinese trade statistics, the lion's share of Cuba's exports to China in 2017 were sugar (53%), nickel (35%), and fish (almost 9%), whereas Cuba's imports from China included electrical machinery and equipment (22%), motor vehicles (17%), machinery and appliances (15%), and a wide variety of other industrial and consumer products.\nChina reportedly had been reluctant to invest in Cuba because of the uninviting business environment, but that has begun to change over the past several years. In 2015, the Chinese cellphone company Huawei reached an agreement with the Cuban telecommunications company ETECSA to set up Wi-Fi hotspots at public locations, and is helping to wire homes. In 2016, the Chinese company Haier set up a plant assembling laptops and tablets in Cuba. Over the past two years, Chinese financing has been supporting the modernization of a port in Santiago Cuba. Other planned Chinese investment projects reportedly include pharmaceuticals as well as the tourism sector involving two hotels and a golf course.\nEuropean Union. The European Union (EU) and Cuba held seven rounds of talks from 2014 to 2016 on a Political Dialogue and Cooperation Agreement covering political, trade, and development issues; ultimately, a cooperation agreement was reached and initialed in Havana in March 2016 and the European Council signed the agreement in December 2016. The agreement was submitted to the European Parliament, which overwhelmingly endorsed the agreement in early July 2017, welcoming it as a framework for relations and emphasizing the importance of the human rights dialogue between the EU and Cuba. The agreement will enter into force in full after it has been ratified in all EU member states, but the provisional application of the agreement began in November 2017. \nThe new cooperation agreement replaces the EU's 1996 Common Position on Cuba, which stated that the objective of EU relations with Cuba included encouraging \"a process of transition to pluralist democracy and respect for human rights and fundamental freedoms.\" The position also had stipulated that full EU economic cooperation with Cuba would depend upon improvements in human rights and political freedom. Nevertheless, the new agreement states that a human rights dialogue will be established within the framework of the overall political dialogue and has numerous provisions related to democracy, human rights, and good governance. In October 2018, the EU and Cuba held their first human rights dialogue under the agreement, with the meeting addressing issues related to civil and political rights, economic, social and cultural rights, and multilateral cooperation.\nAs noted above, EU officials visiting Cuba in January 2018 offered to provide Cuba with technical assistance regarding the country's long-awaited currency unification (see \" Economic Conditions ,\" above).\nVenezuela and Other Latin American Countries. For more than 15 years, Venezuela has been a significant source of support for Cuba. Dating back to 2000 under populist President Hugo Ch\u00e1vez, Venezuela began providing subsidized oil and investment to Cuba. For its part, Cuba has sent thousands of personnel to Venezuela. Cuba has been concerned about the future of Venezuelan financial support, however, as a result of Ch\u00e1vez's death in 2013 and Venezuela's mounting economic and political challenges since 2014 due to the rapid decline in oil prices and the unpopularity of the increasingly authoritarian regime of President Nicol\u00e1s Maduro. As noted above, oil imports from Venezuela have declined, leading to Cuba's imposition of austerity measures and contributing to economic contraction. \nEstimates of the number of Cuban personnel in Venezuela vary, but a 2014 Brookings study reported that \"by most accounts there are 40,000 Cuban professionals in Venezuela,\" with 75% of those healthcare workers. The roughly 30,000 healthcare personnel include doctors and nurses, while the balance of Cuban personnel in Venezuela includes teachers, sports instructors, military advisers, and intelligence operatives. According to the Brookings study, various sources estimate that the number of Cuban military and intelligence advisers in Venezuela range from hundreds to thousands, coordinated by Cuba's military attach\u00e9 in Venezuela. The extent to which the level of Cuban personnel in Venezuela has declined because of the drop in Venezuelan oil exports to Cuba and Venezuela's deepening economic crisis is uncertain, but Cuba may have withdrawn some personnel.\nCuba also is engaged in Latin America beyond its close relations with Venezuela. Cuba is a member of the Bolivarian Alliance for the Americas, a Venezuelan-led integration and cooperation scheme founded in 2004 that has been weakened by Venezuela's economic and political decline. For several years, Cuba also hosted peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia, which culminated in a peace agreement in 2016. \nBrazil was a major investor in the development of the port of Mariel, west of Havana, from 2009 to 2014, although in 2018 Cuba missed payments to Brazil's development bank on loans for the project. In 2013, Cuba began deploying thousands of doctors to rural Brazil in a program known as Mais M\u00e9dicos , with Cuba earning hard currency for supplying the medical personnel. Even before his inauguration in January 2019, Brazil's new right-wing president, Jair Bolsonaro, espoused a more confrontational policy approach toward Cuba by warning in November 2018 that he may break diplomatic relations with Cuba and abolish the medical assistance program. Bolsonaro strongly criticized the medical program, maintaining that Cuban doctors should be able to receive 100% of the money Brazil pays Cuba for them (instead of the 25% they receive) and should be able to bring their families with them to Brazil. Cuba responding by ending the program and bringing its more than 8,000 medical personnel home by late December 2018. Although Bolsonaro and other critics have labeled the medical workers as \"slave labor,\" others contend that the Cuban medical personnel understand the conditions they will be working in and sign contracts for the work. Cuba has a long history of providing medical personnel overseas. \nInternational and Regional Organizations. Cuba is an active participant in international forums, including the United Nations (U.N.) and the controversial United Nations Human Rights Council. Cuba also has received support over the years from the United Nations Development Programme and the United Nations Educational, Scientific, and Cultural Organization, both of which have offices in Havana. Cuba is also a member of the U.N. Economic Commission for Latin America and the Caribbean (ECLAC, also known by its Spanish acronym, CEPAL), one of the five regional commissions of the U.N., and hosted ECLAC's 37 th session in May 2018. U.N. Secretary-General Ant\u00f3nio Guterres attended the opening of the conference. ECLAC's Executive Secretary Alicia B\u00e1rcena reaffirmed the organization's commitment to accompanying Cuba in its efforts toward achieving sustainable development. B\u00e1rcena referred to the U.S. embargo on Cuba as costing Cuba more than $130 billion at current prices, the same estimate as the Cuban government. Since 1991, the U.N. General Assembly (UNGA) has approved a resolution annually criticizing the U.S. embargo and urging the United States to lift it (see text box above).\nAmong other international organizations, Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. In 2016, Cuba signed a memorandum of understanding with the Development Bank of Latin America (CAF) with the objective of supporting technical cooperation programs for Cuba's social and economic development and laying the foundation for Cuba's future membership in the CAF; the CAF's current membership includes 17 Latin American and Caribbean countries as well as Spain and Portugal.\nCuba was excluded from participation in the Organization of American States (OAS) in 1962 because of its identification with Marxism-Leninism, but in 2009, the OAS overturned that policy in a move that eventually could lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. Although the Cuban government welcomed the OAS vote to overturn the 1962 resolution suspending Cuba's OAS participation, it asserted that it would not return to the OAS. In February 2017, Cuba denied OAS Secretary-General Luis Almagro entry into the country to accept a democracy award in honor of the late democracy activist Oswaldo Pay\u00e1.\nCuba became a full member of the Rio Group of Latin American and Caribbean nations in November 2008 and a member of the succeeding Community of Latin American and Caribbean States (CELAC) officially established in December 2011 to boost regional cooperation, but without the participation of the United States or Canada. In 2013, Cuba assumed the presidency of the organization for one year. Cuba also hosted the group's second summit in 2014, which was attended by leaders from across the hemisphere as well as by then-U.N. Secretary-General Ban Ki-moon, who reportedly raised human rights issues with Cuban officials. \n\n\tU.S. Policy Toward Cuba\n\n\t\tBackground on U.S.-Cuban Relations94\n\nIn the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis, in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo Bay, Cuba, and Panama; and the 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban-American group Brothers to the Rescue, which resulted in the deaths of four U.S. crew members.\nBeginning in the early 1960s, U.S. policy toward Cuba consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. President Kennedy proclaimed an embargo on trade between the United States and Cuba in February 1962, citing Section 620(a) of the Foreign Assistance Act of 1961 (FAA), which authorizes the President \"to establish and maintain a total embargo upon all trade between the United States and Cuba.\" At the same time, the Department of the Treasury issued the Cuban Import Regulations to deny the importation into the United States of all goods imported from or through Cuba. The authority for the embargo was later expanded in March 1962 to include the Trading with the Enemy Act (TWEA). \nIn July 1963, the Department of the Treasury revoked the Cuban Import Regulations and replaced them with the more comprehensive Cuban Assets Control Regulations (CACR)\u201431 C.F.R. Part 515\u2014under the authority of TWEA and Section 620(a) of the FAA. The CACR, which include a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States, remain the main body of Cuba embargo regulations and have been amended many times over the years to reflect changes in policy. They are administered by the Department of the Treasury's Office of Foreign Assets Control (OFAC) and prohibit financial transactions as well as trade transactions with Cuba. The CACR also require that all exports to Cuba be licensed by the Department of Commerce, Bureau of Industry and Security (BIS), under the provisions of the Export Administration Act of 1979, as amended ( P.L. 96-72 ; 50 U.S.C. Appendix 2405(j)). The Export Administration Regulations (EAR) are found at 15 C.F.R. Sections 730-774.\nCongress subsequently strengthened sanctions on Cuba with enactment of the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). \nAmong its provisions, the CDA prohibits U.S. foreign subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any seaborne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days unless licensed by the Department of the Treasury. (In October 2016, OFAC issued a general license for vessels involved in trade with Cuba.) The LIBERTAD Act, enacted in the aftermath of Cuba's shooting down two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the act codified the Cuban embargo as permanent law, including all restrictions imposed by the executive branch under the CACR. This provision is noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is prevented from lifting the economic embargo without congressional concurrence through legislation until certain democratic conditions set forth in the law are met, although the President retains broad authority to amend the regulations therein. Another significant sanction in Title III of the law holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, all Administrations (including the Trump Administration) have suspended the implementation of Title III at six-month intervals, most recently in June 2018 (effective August 1, 2018 through January 2019). In November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. (For additional information, see section on \" U.S. Property Claims ,\" below.) TSRA authorizes U.S. commercial agricultural exports to Cuba, but it also includes prohibitions on U.S. assistance and private financing and requires \"payment of cash in advance\" or third-country financing for the exports. The act also prohibits tourist travel to Cuba.\nIn addition to these acts, Congress enacted numerous other provisions of law over the years that impose sanctions on Cuba, including restrictions on trade, foreign aid, and support from international financial institutions. The State Department also designated the government of Cuba as a state sponsor of international terrorism in 1982 under Section 6(j) of the Export Administration Act and other laws because of the country's alleged ties to international terrorism.\nBeyond sanctions, another component of U.S. policy has consisted of support measures for the Cuban people. This support includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the CDA, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. The enactment of TSRA by the 106 th Congress also led to the United States becoming one of Cuba's largest commercial suppliers of agricultural products. Authorization for purposeful travel to Cuba and cash remittances to Cuba has constituted an important means to support the Cuban people, although significant congressional debate has occurred over these issues for many years. \nDespite the poor state of U.S.-Cuban relations, several examples of bilateral cooperation took place over the years in areas of shared national interest. Three areas that stand out are alien migrant interdiction (with migration accords negotiated in 1994 and 1995), counternarcotics cooperation (with increased cooperation dating back to 1999), and cooperation on oil spill preparedness and prevention (since 2011). \n\n\t\tObama Administration Policy\n\nDuring its first six years, the Obama Administration continued the dual-track policy approach toward Cuba that had been in place for many years. It maintained U.S. economic sanctions and continued measures to support the Cuban people, such as U.S. government-sponsored radio and television broadcasting and funding for democracy and human rights projects. \nAt the same time, however, the Obama Administration instituted some changes in policy that advanced support for the Cuban people. In April 2009, at the Summit of the Americas held in Trinidad and Tobago, President Obama fulfilled a campaign pledge by lifting all restrictions on family travel and remittances (for more details, see \" U.S. Travel to Cuba ,\" below). The President said that \"the United States seeks a new beginning with Cuba.\" While recognizing that it would take time to \"overcome decades of mistrust,\" the President said \"there are critical steps we can take toward a new day.\" He stated that he was prepared to have his Administration \"engage with the Cuban government on a wide range of issues\u2014from drugs, migration, and economic issues, to human rights, free speech, and democratic reform.\" In 2011, the Obama Administration introduced new measures to further reach out to the Cuban people through increased purposeful travel (including people-to-people educational travel) and an easing of restrictions on nonfamily remittances. \nOverall, however, engagement with the Cuban government during the Administration's first six years was stymied because of Cuba's December 2009 imprisonment of an American subcontractor, Alan Gross, who had been working on democracy projects funded by the U.S. Agency for International Development. Securing the release of Alan Gross became a top U.S. priority, and the State Department maintained that it was using every appropriate channel to press for his release.\n\n\t\t\tShift Toward Normalizing Relations\n\nOn December 17, 2014, President Obama announced major developments in U.S.-Cuban relations and unveiled a new policy approach toward Cuba. First, he announced that the Cuban government had released Alan Gross on humanitarian grounds after five years of imprisonment. He also announced that, in a separate action, the Cuban government released an individual imprisoned since 1995 who had been an important U.S. intelligence asset in Cuba in exchange for three Cuban intelligence agents who had been imprisoned in the United States since 1998. In the aftermath of these releases, President Obama announced a major shift in U.S. policy toward Cuba, moving away from a sanctions-based policy aimed at isolating Cuba toward a policy of engagement. The President said that his Administration would \"end an outdated approach that, for decades, has failed to advance our interests.\" He maintained that the United States would continue to raise concerns about democracy and human rights in Cuba but stated that \"we can do more to support the Cuban people and promote our values through engagement.\"\nPresident Obama outlined three major steps to move toward normalization: (1) a review of Cuba's designation by the Department of State as a state sponsor of international terrorism; (2) the reestablishment of diplomatic relations with Cuba; and (3) an increase in travel, commerce, and the flow of information to and from Cuba.\n\n\t\t\t\tRescission of Cuba's Designation as a State Sponsor of International Terrorism\n\nCuba was first added to the so-called terrorism list in 1982 pursuant to Section 6(j) of the Export Administration Act of 1979 and other laws because of its alleged ties to international terrorism and support for terrorist groups in Latin America. President Obama directed the State Department to review Cuba's designation as a state sponsor of terrorism and stated that \"at a time when we are focused on threats from al Qaeda to ISIL, a nation that meets our conditions and renounces the use of terrorism should not face this sanction.\"\nFollowing the State Department's review, the President transmitted a report to Congress in April 2015 justifying the rescission, which maintained that Cuba had provided assurances that it would not support acts of international terrorism. No resolutions of disapproval were introduced in Congress to block the rescission, which paved the way for then-Secretary of State John Kerry to rescind Cuba's designation on May 29, 2015, 45 days after the submission of the report to Congress. Subsequently, to reflect the rescission of Cuba's designation as a state sponsor of terrorism in U.S. regulations, the Department of the Treasury's OFAC amended the Cuban Assets Control Regulations (CACR) in June 2015 and the Department of Commerce's BIS amended the Export Administration Regulations (EAR) in July 2015. \n\n\t\t\t\tReestablishment of Diplomatic Relations and Advancement of Engagement\n\nU.S.-Cuban diplomatic relations were severed by the Eisenhower Administration in January 1961 in response to the Cuban government's demand to decrease the number of U.S. Embassy staff within 48 hours. In 1977, under the Carter Administration, both countries established Interests Sections in each other's capitals to represent each country's interests. Beginning in January 2015, the United States and Cuba conducted four rounds of talks on reestablishing relations. Ultimately, the United States and Cuba reestablished diplomatic relations in July 2015 and embassies were reopened in Havana and Washington. \nWith the restoration of diplomatic relations, government-to-government engagement increased significantly under the Obama Administration. U.S. and Cuban officials held five Bilateral Commission meetings to coordinate efforts to advance the normalization process. \nOfficials negotiated numerous bilateral agreements after the restoration of relations, including those in the following areas: marine protected areas (November 2015); environmental cooperation on range of issues (November 2015); direct mail service (December 2015); civil aviation (February 2016); maritime issues related to hydrography and maritime navigation (February 2016); agriculture (March 2016); health cooperation (June 2016); counternarcotics cooperation (July 2016); federal air marshals (September 2016); cancer research (October 2016); seismology (December 2016); meteorology (December 2016); wildlife conservation (December 2016); animal and plant health (January 2017); oil spill preparedness and response (January 2017); law enforcement cooperation (January 2017); and search and rescue (January 2017). The United States and Cuba also signed a bilateral treaty in January 2017 delimiting their maritime boundary in the eastern Gulf of Mexico. Bilateral dialogues were held on all of these issues as well as on other issues including counterterrorism, claims (U.S. property, unsatisfied court judgments, and U.S. government claims), economic and regulatory issues, human rights, renewable energy and efficiency, trafficking in persons, and migration.\nIn March 2016, President Obama traveled to Cuba, the first presidential visit since 1928, with the goals of building on progress toward normalizing relations and expressing support for human rights. In a press conference with Ra\u00fal Castro, President Obama said that the United States would \"continue to speak up on behalf of democracy, including the right of the Cuban people to decide their own future.\" He also spoke out forcefully for advancing human rights during his televised speech to the Cuban nation. He stated his belief that citizens should be free to speak their minds without fear and that the rule of law should not include arbitrary detentions.\nIn October 2016, President Obama issued a presidential policy directive on the normalization of relations with Cuba. The directive set forth the Administration's vision for normalization of relations and laid out six medium-term objectives: (1) government-to-government interaction; (2) engagement and connectivity; (3) expanded commerce; (4) economic reform; (5) respect for universal human rights, fundamental freedoms, and democratic values; and (6) Cuba's integration into international and regional systems. The directive also outlined the roles and responsibilities for various U.S. departments and agencies to move the normalization process forward. It noted that the Administration would seek to build support in Congress to lift the embargo and other statutory provisions constraining efforts to normalize economic relations with Cuba. The directive can be viewed as an attempt to keep up the momentum toward normalizing relations in the next Administration and to protect the changes that have been made to date in U.S. policy toward Cuba. (As noted below, however, President Trump issued a national security presidential memorandum on June 16, 2017, that superseded and replaced the October 2016 policy directive.)\n\n\t\t\t\tIncrease in Travel, Commerce, and the Flow of Information\n\nThe Obama Administration's third step of increasing travel, commerce, and the flow of information to and from Cuba required amendments to U.S. regulations\u2014the CACR and EAR\u2014administered, respectively, by the Department of the Treasury's OFAC and the Commerce Department's BIS. To implement the President's new policy, the two agencies issued five rounds of amendments to the CACR and EAR in January and September 2015 and in January, March, and October 2016. \nThe Treasury and Commerce Department amendments to the regulations eased restrictions on travel, remittances, trade, telecommunications, and banking and financial services. They also authorized certain U.S. companies or other entities to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. These entities include news bureaus, exporters of authorized goods to Cuba, entities providing mail or parcel transmission services, telecommunication or internet-based service providers, entities organizing or conducting certain educational activities, religious organizations, and carrier and travel service providers. (For more on the regulatory changes, see \" U.S. Travel to Cuba \" and \" U.S. Exports and Sanctions ,\" below.)\nSuch changes fall within the scope of the President's discretionary licensing authority to make changes to the embargo regulations. When President Obama unveiled his policy shift, however, he acknowledged that he did not have the authority to lift the embargo because it was codified in permanent law (Section 102(h) of the LIBERTAD Act). As noted above, the LIBERTAD Act ties the lifting of the embargo to conditions in Cuba (including that a democratically elected government is in place). Lifting the overall economic embargo would require amending or repealing the LIBERTAD Act as well as other statutes that have provisions impeding normal economic relations with Cuba, such as the CDA and TSRA.\n\n\t\tTrump Administration Policy\n\nDuring the electoral campaign, then-candidate Trump said he would cancel or reverse President Obama's policy on Cuba unless Cuba took action to improve political and religious freedom and free political prisoners. After Fidel Castro's death in November 2016, then-President-elect Trump issued a statement referring to Castro as a \"brutal dictator who oppressed his own people for nearly six decades.\" This statement was followed by a longer message maintaining that \"If Cuba is unwilling to make a better deal for the Cuban people, the Cuban\/American people and the U.S. as a whole, I will terminate [the] deal.\" \nIn February 2017, the White House maintained that the Trump Administration was conducting a full review of U.S. policy toward Cuba and that human rights would be at the forefront of those policy discussions. In May 2017, then-Acting Assistant Secretary of State for Western Hemisphere Affairs Francisco Palmieri emphasized that \"one of the areas that is going to be a high priority is ensuring that Cuba makes more substantive progress toward a greater respect for human rights inside the country.\"\nOn May 20, 2017, President Trump issued a statement to the Cuban American community and the people of Cuba in celebrating the anniversary of Cuban independence. That date is in commemoration of Cuba's independence from the United States in 1902 in the aftermath of the Spanish-American War in 1898, but is not celebrated in Cuba because of the continued U.S. intervention in Cuba under the Platt Amendment until its repeal in 1935 (see \" Brief Historical Background \" above). In the strongly worded statement, President Trump said, \"The Cuban people deserve a government that peacefully upholds democratic values, economic liberties, religious freedoms, and human rights, and my Administration is committed to achieving that vision.\" Cuba's state television published an \"official note\" describing the statement as \"controversial and ridiculous.\"\n\n\t\t\tPartial Rollback of Engagement and Increased Sanctions\n\nPresident Trump unveiled his Administration's policy on Cuba on June 16, 2017, which partially rolls back some of the Obama Administration's efforts to normalize relations with Cuba. President Trump set forth his Administration's policy in a speech in Miami, FL, where he signed a national security presidential memorandum (NSPM) on Cuba replacing President Obama's October 2016 presidential policy directive (discussed above), which had laid out objectives for the normalization process. The new policy leaves most of the Obama-era policy changes in place, including the reestablishment of diplomatic relations and a variety of eased sanctions to increase travel and commerce with Cuba. The new policy also keeps in place the Obama Administration's action ending the so-called wet foot\/dry foot policy toward Cuban migrants, which, according to the NSPM, had \"encouraged untold thousands of Cuban nationals to risk their lives to travel unlawfully to the United States.\"\nThe most significant policy changes set forth in President Trump's NSPM included (1) restrictions on financial transactions with companies controlled by the Cuban military, intelligence, or security services or personnel and (2) the elimination of individual people-to-people travel. President Trump's memorandum directed the heads of departments (Treasury and Commerce, in coordination with the State Department) to initiate a process within 30 days to adjust current regulations. On November 8, 2017, the Treasury and Commerce Departments issued amended regulations (effective November 9) to implement the new policy, and, as discussed below, the State Department took complementary action in November 2017 and November 2018.\nOn November 1, 2018, National Security Adviser John Bolton made a speech in Miami, FL, strongly criticizing the Cuban government on human rights and stating that that \"we will only engage with a Cuban government that is willing to undertake necessary and tangible reforms\u2014a government that respects the interests of the Cuban people.\" Bolton's speech was full of anti-communist rhetoric reminiscent of the Cold War era. Bolton referred to Cuba, Venezuela, and Nicaragua as a \"troika of tyranny\" and the \"cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere.\" He referred to the three countries' leaders as \"three stooges of socialism\" and as \"clownish pitiful figures.\" In a press interview before the speech, Bolton also maintained that the Administration was considering whether to continue to suspend Title III of the LIBERTAD Act to allow lawsuits in U.S. federal court against those \"trafficking\" in confiscated property in Cuba, an action that would significantly ratchet up U.S. sanctions on Cuba; since the enactment of the LIBERTAD Act in 1996, all Administrations have suspended, at six month intervals, the right to file such lawsuits. (For more on Title III, see \" U.S. Property Claims ,\" below.)\nRestrictions on Transactions with the Cuban Military. Pursuant to the NSPM, the State Department was tasked with identifying entities controlled by the Cuban military, intelligence, or security services or personnel and publishing a list of those entities with which direct financial transactions would disproportionately benefit those services or personnel at the expense of the Cuban people or private enterprise in Cuba. The NSPM specifically identified the Grupo de Administraci\u00f3n Empresarial S.A . (GAESA), a holding company of the Cuban military involved in most sectors of the Cuban economy, particularly the tourism sector. \nThe State Department issued a list of \"restricted entities\" in November 2017 and updated the list with additional entries in November 2018. Currently, there are 205 entities on the list, including 2 ministries, 5 holding companies (including GAESA) and 43 of their subentities (including the Mariel Special Development Zone), 99 hotels (with 28 in Havana), 2 tourist agencies, 5 marinas, 10 stores in Old Havana, and 39 entities serving the defense and security sectors. The Treasury Department forbids financial transactions with those entities, with certain exceptions, including transactions related to air or sea operations supporting permissible travel, cargo, or trade; the sale of agricultural and medical commodities; direct telecommunications or internet access for the Cuban people; and authorized remittances. The new prohibitions limit U.S. economic engagement with Cuba, particularly in travel-related transactions and potential investment opportunities.\nRestrictions on People-to-People Travel. With regard to people-to-people travel, the Department of the Treasury amended the CACR to require that people-to-people educational travel take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization. Individuals are no longer authorized to engage in such travel on their own. The Obama Administration had authorized such individual travel in March 2016, which, combined with the beginning of regular commercial flights and cruise ship service, led to an increase in Americans visiting Cuba. With the new Treasury Department regulations issued, the level of U.S. travel to Cuba has fallen. (Also see \" U.S. Travel to Cuba ,\" below.)\nCuban Government Reaction. As expected, the Cuban government's reaction to President Trump's June 2017 speech announcing Cuba policy changes was critical. Foreign Minister Bruno Rodr\u00edguez asserted that the speech \"was a grotesque spectacle straight from the Cold War.\" Nevertheless, the Cuban government also reiterated its willingness to continue a respectful and cooperative dialogue on issues of mutual interest and the negotiation of outstanding issues, although it maintained that Cuba would not make concessions to its sovereignty and independence. \nAt a meeting of Cuba's National Assembly in July 2017, then-Cuban President Ra\u00fal Castro criticized the Trump Administration's new policy toward Cuba as a setback to bilateral relations and reaffirmed that any strategy with the goal of destroying the Cuban revolution would fail. Nevertheless, Castro also reiterated that Cuba has the will to continue negotiating outstanding bilateral issues with the United States. He maintained that \"Cuba and the United States can cooperate and live side by side, respecting differences and promoting all that can benefit both countries and peoples,\" but he also asserted that no one should expect Cuba to make concessions inherent to its sovereignty and independence. \n\n\t\t\tContinued Focus on Human Rights\n\nWhen President Trump announced his Cuba policy, he asserted that he was \"canceling the last administration's policy change with Cuba,\" which he labeled as \"a terrible and misguided deal with the Castro regime.\" The President maintained that \"the outcome of the last administration's executive action has been only more repression and a move to crush the peaceful democratic movement.\" Although the Cuban government's human rights record remained poor after the Obama Administration's policy of engagement was initiated in December 2014, President Obama continued to speak out strongly about human rights conditions in Cuba, including during his March 2016 visit to Havana; the two countries subsequently engaged in a bilateral human rights dialogue in October 2016. \nIn his June 2017 Miami speech, President Trump called for the Cuban government to end the abuse of dissidents, release political prisoners, stop jailing innocent people, and return U.S. fugitives from justice in Cuba, all issues that the Obama Administration had raised with the Cuban government. The President stated that \"any changes to the relationship between the United States and Cuba will depend on real progress toward these and other goals.\" Once Cuba takes concrete steps in these areas, President Trump said \"we will be ready, willing and able to come to the table to negotiate that much better deal for Cubans, for Americans.\"\nThe Trump Administration also cited concern about human rights for its November 1, 2017, vote against the annual UNGA resolution condemning the U.S. embargo. In October 2016, under the Obama Administration, the United States abstained for the first time on the resolution, but U.S. officials also took the opportunity to express profound concerns about the Cuban government's Cuba's poor human rights record. (For more on the U.N. votes, see \" Cuba's Foreign Relations \" above.)\nTrump Administration officials continued to speak out on Cuba's human rights situation in 2018. Vice President Mike Pence spoke out on the human rights situation in Cuba during an address to the OAS in May. Pence stated that \"the longest-surviving dictatorship in the Western Hemisphere still clings to power\" and that even though \"the Castro name is now fading, the oppression and police state they imposed is as powerful as ever.\" He asserted, \"Today, the United States once again stands with the Cuban people in their stand for freedom.\" As noted above, National Security Adviser John Bolton also spoke out on Cuba's poor human rights record in a November 1, 2018, speech in Miami, \nThe State Department has continued to call attention to the plight of political prisoners in Cuba. In April 2018, then-Acting Secretary of State John Sullivan and USAID Administrator Mark Green met with members of Cuba's independent civil society on the margins of the Summit of the Americas held in Peru. According to the State Department, Sullivan called \"for democratic reforms to Cuba's flawed electoral process and an end to arbitrary detention and intimidation of independent civil society.\" In June 2018, the State Department reiterated the U.S. call for the release of all political prisoners in Cuba and highlighted U.S. concern for two Cuban political prisoners declared \"prisoners of conscience\" by Amnesty International\u2014Dr. Eduardo Cardet and Dr. Ariel Ruiz Urquiola, who was subsequently released in July 2018. In October 2018, the State Department called for the release of UNPACU activist Tom\u00e1s N\u00fa\u00f1ez Magdariaga, who had been on a hunger strike since August; the Cuban government subsequently released him on October 15, 2018. A day later, the U.S. Mission to the United Nations launched a campaign to call attention to Cuba's \"estimated 130 political prisoners.\" Cuban diplomats attempted to disrupt the event by making noise, an action that Secretary of State Mike Pompeo dubbed \"a childish tantrum.\" Secretary of State Pompeo subsequently wrote an open letter to Cuban Foreign Minister Bruno Rodriguez in early December 2018 asking for evidence against those held as political prisoners. (For more details, see \" Human Rights \" section, above.)\nInternet Task Force. In January 2018, the State Department announced the establishment of a Cuba Internet Task Force, composed of U.S. government and non-U.S. government representatives, to examine the technological challenges and opportunities for expanding internet access and independent media in Cuba. The task force was convened pursuant to President Trump's NSPM on Cuba and held its first meeting on February 7, 2018, with two subcommittees formed to develop recommendations\u2014one to explore the role of media and freedom of information in Cuba and the other to explore internet access in Cuba. According to the State Department, the task force will review the subcommittees' recommendations and prepare a final report for the Secretary of State within a year.\nCuban state media criticized the State Department's establishment of the task force, maintaining that the move \"was aimed at subverting Cuba's internal order.\" Cuba's foreign ministry issued a note of diplomatic protest to the U.S. Embassy in Havana and called upon the U.S. government to respect Cuba sovereignty.\n\n\t\t\tContinued Engagement in Some Areas\n\nIn a demonstration of continuity in U.S. policy between the Trump and Obama Administrations, the U.S. and Cuban governments have continued to engage on various bilateral issues through meetings and dialogues. The two countries have continued to hold semiannual migration talks, which, since 1995, have provided a forum to review and coordinate efforts to ensure safe, legal, and orderly migration between Cuba and the United States; talks were held in April and December 2017, and most recently in July 2018. \nThe United States and Cuba also have continued to hold Bilateral Commission meetings that began under the Obama Administration in which the two government review priorities and areas for engagement. Officials held a sixth Bilateral Commission meeting in September 2017 and a seventh meeting in June 2018. According to the State Department, at the June 2018 meeting, the two countries reviewed such areas for engagement as trafficking in persons, civil aviation safety, law enforcement matters, agriculture, maritime safety and search and rescue, certified claims, and environmental challenges. The State Department maintained that the United States reiterated the urgent need to identify the source of the \"attacks\" on U.S. diplomats and to ensure they cease, expressed continued concerns about the arbitrary detention of independent journalists and human rights defenders, and acknowledged Cuba's progress in repatriating Cubans with final orders while also emphasizing that Cuba needs to accept greater numbers of returnees. Cuba's Ministry of Foreign Affairs maintained the meeting provided an opportunity to review areas of exchange and cooperation, but it also criticized several aspects of U.S. policy, including the \"intensification\" of the U.S. embargo and what Cuba viewed as the \"political manipulation of the alleged health cases\" that became a \"pretext\" to reduce staff and therefore affect embassy operations in both countries. \nBoth countries also have continued engagement on other bilateral issues. The U.S. Coast Guard and the Cuban Border Guard participated in professional exchanges in July 2017 and January 2018 covering a variety of topics, including search and rescue. The U.S. Departments of State, Justice, and Homeland Security participated in law enforcement dialogues with Cuban counterparts in September 2017 and July 2018; the 2018 dialogue included such topics as fugitives and the return of Cuban nationals with final orders of removal. Additional bilateral meetings and exchanges have been held in 2018 on such topics as cybersecurity and cybercrime, counternarcotics efforts, and counterterrorism in January; anti-money laundering efforts and trafficking in persons in February; search and rescue in March; and agriculture and scientific cooperation related to environmental disaster in April.\nAs noted below, for more than a decade, Cuba has returned some wanted fugitives to the United States on a case-by case basin. In 2018, this included the return of a man wanted on charges related to ecoterrorism in August and the return in November of a fugitive from New Jersey wanted for murder. In February, with assistance from U.S. law enforcement, Cuba prosecuted a Cuban national for the 2015 murder of a Florida doctor. (See \" U.S. Fugitives from Justice ,\" below.)\n\n\t\t\tU.S. Response to Injuries of U.S. Personnel in Havana147\n\nOn September 29, 2017, the U.S. Department of State ordered the departure of nonemergency personnel assigned to the U.S. Embassy in Havana, as well as their families, to minimize the risk of their exposure to harm because of a series of unexplained injuries suffered by embassy personnel since November 2016. As a result, the embassy's U.S. staffing level, which numbered over 50, was reduced by about two-thirds. According to the State Department, the U.S. government personnel suffered from \"attacks of an unknown nature,\" at U.S. diplomatic residences and hotels where temporary duty staff were staying, with symptoms including \"ear complaints, hearing loss, dizziness, headache, fatigue, cognitive issues, and difficulty sleeping.\" U.S. officials maintain that they do not know the mechanism used to cause the health injuries, the source, who is responsible, or the motive behind the alleged \"attacks.\"\nThe State Department reports that 26 Americans have experienced health effects from the incidents. Twenty-four of the incidents occurred from as early as November 2016 to August 2017. In June 2018, two new cases stemming from occurrences in May 2018 were confirmed after medical evaluations, bringing the total to 26 cases.\nOn October 3, 2017, the State Department ordered the departure of 15 Cuban diplomats from the Cuban Embassy in Washington, DC. According to then-Secretary of State Rex Tillerson, the decision was made because of Cuba's failure to protect U.S. diplomats in Havana and to ensure equity in the impact on respective diplomatic operations. Previously, in May 2017, the State Department had asked two Cuban diplomats to depart the United States because some U.S. diplomats in Cuba had returned to the United States for medical reasons. State Department officials maintain that the United States would need full assurances from the Cuban government that the \"attacks\" will not continue before contemplating the return of diplomatic personnel. \nOn March 5, 2018, the State Department began a permanent staffing plan at the U.S. Embassy in Havana, operating it as an \"unaccompanied post\" without family members. The change took place because the temporary \"ordered departure\" status for the embassy had reached its maximum allowable days. According to the State Department, \"the embassy will continue to operate with the minimum personnel necessary to perform core diplomatic and consular functions, similar to the level of emergency staffing maintained during ordered departure.\"\nAlthough responsibility for injuries to U.S. personnel in Cuba is unknown, speculation by some observers has focused on such possibilities as a rogue faction of Cuba's security services or a third country, such as Russia, with the apparent motivation of wanting to disrupt U.S.-Cuban relations. Some maintain that Cuba's strong security apparatus makes it unlikely that a third country would be involved without the Cuban government's acquiescence. Others stress that there has been no evidence implicating a third country and that it would be highly unusual for a rogue Cuban security faction to operate contrary to the interests of the Cuban government.\nQuestions have revolved around what might cause such a variety of symptoms, including whether a faulty surveillance device could be responsible for some of the incidents. Since the incidents were first made public by the State Department in August 2017, numerous press reports have referred to them as being caused by some type of sonic device. Yet some scientists and experts in acoustics have cast doubt on this possibility, arguing that the laws of physics render it unlikely that the use of ultrasound, which they see as the most plausible type of acoustic employed, could be effectively used to harm personnel. They add that some of the reported symptoms individuals have encountered would not have resulted from the use of such a device. Some point to other possible scenarios, such as personnel coming into contact with toxins that damage hearing, or even the spread of anxiety or other psychogenic contributors capable of triggering symptoms. Some scientists assert that data regarding the potential effects of an ultrasound weapon on human health is currently slim. \nAn article in the Journal of the American Medical Association ( JAMA ), published February 15, 2018, reported that University of Pennsylvania physicians who evaluated individuals from the U.S. Embassy community in Havana maintained that the individuals \"appeared to have sustained injury to widespread brain networks without an associated history of head trauma.\" The study, however, found no conclusive evidence of the cause of the brain injuries. An accompanying editorial in JAMA cautioned about drawing conclusions from the study, noting that the evaluations were conducted an average of 203 days after the onset of the symptoms and that it was unclear whether individuals who developed symptoms were aware of earlier reports by others. In August 2018, JAMA published several letters that raised additional questions concerning the February 2018 study, including one that asserted mass psychogenic illness could not be discounted; the study's authors, however, pushed back against the criticism, maintaining that a complex constellation of neurological symptoms was consistent across the cohort that was studied.\nA March 2018 University of Michigan report by three computer scientists concluded that the sounds recorded in Cuba could have been caused by two eavesdropping devices placed in close proximity to each other. The study concluded that the sounds could have been inadvertently produced without malicious intent. \nIn December 2018, a group of doctors from the University of Miami and the University of Pittsburgh published a study maintaining that those diplomats exhibiting symptoms suffered from ear damage as opposed to brain injury. \nIn January 2019, a group of biologists from the University of California Berkeley and the U.K's University of Lincoln issued a study on a recording of the alleged sounds heard by some U.S. Embassy employees that had been released by the Associated Press in October 2017. The study maintains that the sound matched the echoing call of a Caribbean cricket.\nThe Canadian government announced in April 2018, that it also was changing the designation of its embassy in Havana as an \"unaccompanied post,\" meaning that diplomatic staff will not be accompanied by their family members. Since 2017, 13 Canadians reportedly experienced symptoms such as headaches, dizziness, nausea, and difficulty concentrating, with the most case confirmed in November 2018. Canadian medical specialists raised concerns about a possible new type of acquired brain injury, the cause of which is unknown, but the Canadian government maintains that there is no evidence to suggest that Canadian travelers to Cuba are at risk. \n\n\t\t\t\tAccountability Review Board and Health Incidents Task Force\n\nThe State Department convened an Accountability Review Board (ARB) in January 2018 to examine the circumstances regarding unexplained injuries in Cuba. The State Department submitted a report to Congress on August 30, 2018, and at the same time released a fact sheet on its website. The ARB's mandate, according to the State Department, was not to determine the cause of the incidents but rather to examine the State Department's response and the adequacy of security and other related procedures. The ARB found that the department's security systems and procedures were adequate and properly implemented overall but that there were significant vacancies in security staffing and some challenges with information sharing and communication. The ARB issued 30 recommendations to the State Department concerning accountability, interagency coordination, medical issues, internal communication and information sharing, risk\/benefit analysis, and diplomatic security. The State Department maintains that it accepted all of the recommendations.\nIn May 2018, the State Department announced that a U.S. government employee serving in Guangzhou, China, experienced a health incident similar to that experienced by members of the U.S. diplomatic community in Havana. Secretary of State Michael Pompeo noted the incident in testimony before the House Foreign Affairs Committee on May 23. Subsequently, on June 5, Pompeo announced the establishment of a multiagency Health Incidents Response Task Force to serve as a coordinating body for State Department and interagency activities, including identification and treatment of affected personnel and family members abroad, investigation and risk mitigation, messaging, and diplomatic outreach. \n\n\t\t\t\tVienna Convention\n\nUnder the 1961 Vienna Convention on Diplomatic Relations and the 1963 Vienna Convention on Consular Relations, nearly all countries worldwide participate in reciprocal obligations regarding the diplomatic facilities of other countries in their territory. The United States and Cuba are both party to these conventions. U.S. officials have repeatedly noted the Cuban government's obligations under the Vienna Convention to protect U.S. diplomats in Cuba. \nUnder the 1961 convention, the safety of diplomatic agents (Article 29), the private residences of diplomatic agents (Article 30), and the premises of diplomatic missions (Article 22) are protected, with the receiving state under special duty to guarantee such protection. Similarly, under the 1963 convention (Article 40), the receiving state is responsible for treating consular officers with due respect and taking \"all appropriate steps to prevent any attack on their person, freedom or dignity.\"\n\n\t\t\t\tCuba's Response\n\nThe Cuban government denies responsibility for the injuries of U.S. personnel, maintaining that it would never allow its territory to be used for any action against accredited diplomats or their families. In the aftermath of the order expelling its diplomats, Cuba's Ministry of Foreign Affairs issued a statement strongly protesting the U.S. action, asserting that it was motivated by politics and arguing that ongoing investigations have reached no conclusion regarding the incidents or the causes of the health problems. The statement noted that Cuba had permitted U.S. investigators to visit Cuba and reiterated the government's willingness to continue cooperating on the issue. \nAt a November 2, 2017, press conference in Washington, DC, Cuban Foreign Minister Rodr\u00edguez called for the U.S. government to \"stop politicizing the issue,\" maintaining that it could \"take bilateral relations further back\" with \"harmful consequences for both peoples and countries.\" Rodr\u00edguez reiterated that Cuban authorities \"preliminarily concluded there is no evidence whatsoever of the occurrence of the alleged incidents or the cause and the origin of these ailments reported by U.S. diplomats and their relatives.\" The foreign minister also maintained that U.S. cooperation on the investigation has been very limited and raised a series of questions regarding the adequacy and timeliness of information provided to Cuban experts and medical personnel.\nIn September 2018, a delegation of Cuban scientists visited the United States to have meetings with the State Department, the National Academy of Sciences, and on Capitol Hill. The director of the Cuban Neuroscience Center, Dr. Mitchell Joseph Vald\u00e9s-Sosa, maintains that there could be various reasons why the diplomats became sick (such as hypertension, stress, other preexisting conditions, and psychogenesis) but that Cuban scientists have not seen any credible evidence that some type of high-tech weapon was used. The Cuban delegation expressed disappointment that U.S. officials have not shared more medical and clinical data on the illnesses experienced by the U.S. diplomats. In November 2018, Dr. Vald\u00e9s-Sosa coauthored a letter in Science magazine with a professor from the University of Pennsylvania's Department of Bioengineering maintaining that some \"scientists have allowed speculation about the causes of these health issue to outpace the evidence\" and that \"there is insufficient evidence to guess about the cause of the sounds.\" \n\n\t\t\t\tCuba Travel Advisory\n\nThe State Department issued a travel warning in September 2017, stating that due to the drawdown in staff, the U.S. Embassy in Havana had limited ability to assist U.S. citizens in Cuba. The warning advised U.S. citizens to avoid travel to Cuba because of the risk of being subject to injury, since some of the incidents occurred at hotels frequented by U.S. citizens. In January 2018, the State Department revamped its travel advisory system to include four advisory levels: Level 1, exercise normal precautions; Level 2, exercise increased caution; Level 3, reconsider travel; and Level 4, do not travel. At the time, the advisory for Cuba was set at Level 3, recommending that travelers should reconsider travel to Cuba but indicating that if the decision to travel was made, travelers should avoid the Hotel Nacional and Hotel Capri, where some of the injuries occurred.\nOn August 23, 2018, however, the State Department eased its travel advisory for Cuba to Level 2, exercise increased caution, with a spokesman maintaining that the agency \"undertook a thorough review of the risks to private U.S. citizens in Cuba and decided a Level 2 travel advisory was appropriate.\" According to the advisory, travelers are still advised to avoid the Hotel Nacional and the Hotel Capri and to immediately move to another area if they experience any acute auditory or sensory phenomena. Travel agencies and organizations sponsoring travel to Cuba lauded the State Department's easing of the travel advisory.\n\n\t\t\t\tEffect of Staff Reduction on U.S. Embassy Havana Operations\n\nThe two-thirds staff reduction at the U.S. Embassy in Havana has had implications for bilateral relations. Most visa processing at the U.S. Embassy in Havana has been suspended. Most Cubans applying for nonimmigrant visas must go to a U.S. embassy or consulate in another country, and applications and interviews for immigrant visas are currently being handled at the U.S. Embassy in Georgetown, Guyana. \nThe suspension of nonimmigrant visa processing has made it more difficult and increased costs for Cubans visiting family in the United States and for Cuban cuentapropistas (private sector workers) traveling to the United States to bring back inputs for their businesses. The suspension also has increased the costs for Cuban musicians, dancers, and other artists who now face a decision whether to travel to a third country to apply for a nonimmigrant visa if they want to perform in the United States; as a result, some have canceled tours in the United States. In 2013, the United States had begun granting multiple entry visas, good for five years, for Cubans visiting the United States. As those visas expire, Cubans will need to travel to a third country to request a new visa if they want to visit the United States.\nIn a 1994 bilateral migration accord with Cuba, the United States committed to issue 20,000 travel documents annually. It met that commitment in FY2017, but the embassy staff reduction has negatively affected the United States' ability to meet its commitment in FY2018. The State Department acknowledged in April 2018 that it would not be able to issue 20,000 travel documents for this fiscal year. Ultimately in FY2018, according to the Department of State, the Department issued 4,060 travel documents in the categories specified under the migration accord.\nSince the staff reduction at the U.S. Embassy in Havana, information posted on the website of the U.S. Embassy in Havana has stated that the State Department and the Department of Homeland Security (DHS) are determining arrangements for continuing to process applications under the Cuban Family Reunification Parole Program (CFRP), a program administered by DHS's U.S. Citizenship and Immigration Services (USCIS). The CFRP was established in 2007 by USCIS to help the United States meet its annual obligation under the 1994 U.S.-Cuba migration accord. Staff reductions led USCIS to suspend operations at its field office in Havana in 2017 due to the drawdown in staff; USCIS permanently closed its offices in Havana on December 10, 2018. In past years, around 75% of the immigrant travel documents issued for Cuban nationals annually were issued under the CFRP. In October 2017, State Department officials indicated that they would work with DHS to ensure continued operation of the CFRP, but no plans have been announced since then. Given that a majority of immigrant travel documents issued for Cubans are from the CFRP program, it could be difficult for the United States to reach the annual 20,000 target level without the CFRP program being reactivated and without USCIS reestablishing its presence at the embassy.\nThe staff reduction at the U.S. Embassy in Havana also led to the closure of the Refugee Section which had administered the U.S. Refugees Admission Program in Cuba. The embassy is not accepting any new applications or processing refugee cases. The section was run by the State Department's Bureau of Population, Refugees and Migration in conjunction with USCIS and the Office of Refugee Resettlement of the Department of Health and Human Services. In FY2017, at least 177 Cubans were admitted to the United States as refugees, whereas in FY2018, through August 4, 2018, no Cubans were admitted as refugees.\nThe embassy staff reduction likely also has made it more difficult to cover significant economic and political developments in Cuba, including outreach to civil society and human rights activists. The Political Section used to have several officers covering economic and political issues, including human rights; due to the staff reduction, there is one U.S. official in the section.\n\n\t\tDebate on the Direction of U.S. Policy\n\nOver the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba\u2014to help bring democracy and respect for human rights to the island\u2014there have been several schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others have argued for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people and would move toward engaging Cuba in dialogue. Still others have called for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives introduced over the past decade have reflected these three policy approaches.\nDating back to 2000, there have been efforts in Congress to ease U.S. sanctions, with one or both houses at times approving amendments to appropriations measures that would have eased U.S. sanctions on Cuba. Until 2009, these provisions were stripped out of final enacted measures, in part because of presidential veto threats. In 2009, Congress took action to ease some restrictions on travel to Cuba, marking the first time that Congress had eased Cuba sanctions since the approval of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX). In light of Fidel Castro's departure as head of government in 2006 and the gradual economic changes made by Ra\u00fal Castro, some observers had called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches were advanced to contend with change in Cuba: an approach that called for maintaining the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. \nThe Obama Administration's December 2014 change of U.S. policy from one of isolation to one of engagement and movement toward the normalization of relations has highlighted divisions in Congress over Cuba policy. Some Members of Congress lauded the Administration's actions as in the best interests of the United States and a better way to support change in Cuba, whereas other Members strongly criticized the President for not obtaining concessions from Cuba to advance human rights. Some Members vowed to oppose the Administration's efforts toward normalization, whereas others have, as in the past, introduced legislation to normalize relations with Cuba by lifting the embargo in its entirety or in part by easing some aspects of it. \nThe Trump Administration's policy of rolling back some of the Obama-era changes also highlights divisions in Congress over Cuba policy, with some Members supporting the President's action because of Cuba's lack of progress on human rights and others opposing it because of the potential negative effect on the Cuban people and U.S. business interests. \nPublic opinion polls have showed a majority of Americans support normalizing relations with Cuba. Among the Cuban American community in South Florida, however, a 2018 poll by Florida International University showed an increase in those supporting a continuation of the U.S. embargo compared to a 2016 poll. In the 2018 poll, although a majority of Cuban Americans in South Florida supported diplomatic relations and unrestricted travel to Cuba by all Americans, 51% polled favored continuing the embargo and 49% opposed it. This contrasts with 2016, when 63% of Cuban Americans in South Florida favored ending the embargo and 37% opposed it.\nIn general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba\u2014through increased travel, trade, and dialogue\u2014then the seeds of reform would be planted, which would stimulate forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States. They argue that since the demise of Cuba's communist government does not appear imminent (despite more than 50 years of sanctions), the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. In addition, proponents of change argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam.\nOn the other side, opponents of lifting U.S. sanctions maintain that the two-track policy of isolating Cuba but reaching out to the Cuban people through measures of support is the best means for realizing political change in Cuba. They point out that the LIBERTAD Act sets forth the steps that Cuba must take for the United States to normalize relations. They argue that softening U.S. policy without concrete Cuban reforms boosts Cuba's communist regime, politically and economically, and facilitates its survival. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba and that sustained sanctions can work. Critics of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions.\n\n\tSelected Issues in U.S.-Cuban Relations\n\nFor many years, Congress has played an active role in U.S. policy toward Cuba through the enactment of legislative initiatives and oversight on numerous issues. These issues include U.S. economic sanctions on Cuba, such as restrictions on travel, remittances, and agricultural and medical exports; terrorism issues, including Cuba's designation as a state sponsor of international terrorism; human rights issues, including funding and oversight of U.S.-government sponsored democracy and human rights projects; funding and oversight for U.S.-government sponsored broadcasting to Cuba (Radio and TV Mart\u00ed); migration issues; bilateral antidrug cooperation; and U.S. claims for property confiscated by the Cuban government.\n\n\t\tU.S. Travel to Cuba189\n\nRestrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate Cuba's communist government for more than 50 years. Numerous changes to the restrictions have occurred over time, and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel are part of the CACR, the embargo regulations administered by the Department of the Treasury's OFAC. Under the George W. Bush Administration, enforcement of U.S. restrictions on Cuba travel increased and restrictions on travel were tightened. \nUnder the Obama Administration, Congress took legislative action in March 2009 to ease restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba ( P.L. 111-8 , Sections 620 and 621 of Division D). In April 2009, the Obama Administration went further when the President announced that he was lifting all restrictions on family travel. In January 2011, the Obama Administration made a series of changes further easing restrictions on travel. The measures increased purposeful travel to Cuba related to religious, educational, and journalistic activities, including people-to-people travel exchanges, and allowed U.S. international airports to become eligible to provide services to licensed charter flights to and from Cuba. In most respects, these new measures were similar to policies that were undertaken by the Clinton Administration in 1999 but subsequently curtailed by the George W. Bush Administration in 2003 and 2004. \nAs discussed above, President Obama announced a major shift in U.S. policy toward Cuba in December 2014 that included an easing of U.S. restrictions on travel to Cuba. As part of the change in policy, OFAC amended the CACR in 2015 to include general licenses for the 12 existing categories of travel to Cuba set forth in the regulations: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities, including people-to-people travel; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects (now including microfinancing projects); (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.\u00a0\nBefore the policy change, travelers under several of these categories had to apply for a specific license from the Department of the Treasury before traveling. Under the new regulations, both travel agents and airlines are able to provide services for travel to Cuba without the need to obtain a specific license. Authorized travelers no longer have a per diem limit for expenditures, as in the past, and can bring back goods from Cuba as accompanied baggage for personal use, including alcohol and tobacco.\nDespite the easing of travel restrictions, travel to Cuba solely for tourist activities remains prohibited. Section 910(b) of TSRA prohibits travel-related transaction for tourist activities, which are defined as any activity not expressly authorized in the 12 categories of travel in the CACR (31 C.F.R. 515.560).\nIn January 2016, the Department of the Treasury made additional changes to the travel regulations. Among the changes, authorization for travel and other transactions for transmission of informational materials now include professional media or artistic productions in Cuba (movies, television, music recordings, and creation of artworks). Authorization for travel and other transactions for professional meetings, public performances, clinics, workshops, athletic and nonathletic competitions, and exhibitions now includes permission to organize these events, not just participate in them. \nThe Department of the Treasury amended the travel regulations in March 2016 to permit travel to Cuba for individual people-to-people educational travel, but as discussed above, President Trump, as part of his partial rollback of engagement with Cuba, directed the Department of the Treasury in June 2017 to eliminate the authorization for such travel for individuals. As set forth in amended regulations issued on November 9, 2017, people-to-people educational travel is required to take place under the auspices of an organization specializing in such travel, with travelers accompanied by a representative of the organization.\nU.S. Travelers to Cuba. According to Cuban government statistics, the number of U.S. travelers increased from 91,254 in 2014 to 619,523 in 2017. This figure is in addition to thousands of Cuban Americans who visit family in Cuba each year; in 2017, almost 454,000 Cubans living outside the country visited Cuba, the majority from the United States. The number of U.S. visitors began to slow in the latter half of 2017 in the aftermath of Hurricane Irma, which struck in September, the Trump Administration's tighter restrictions on people-to-people travel and restrictions on transactions with the Cuban military (which keeps a number of hotels off limits to U.S. visitors), and the U.S. travel warning issued in September 2017 related to the unexplained health injuries to U.S. diplomatic personnel in Cuba (see discussion above on \" Cuba Travel Advisory \"). \nIn the first half of 2018, the number of U.S. visitors to Cuba, not including Cuban Americans, reportedly declined by 24% compared to the same period in 2017. By the end of 2018, however, U.S. travel to Cuba reportedly had recovered, with a growth of 1% over 2017. The recovery was spurred by a 48% increase in cruise ship arrivals (which bring in less revenue compared to land-based travelers). Another factor in the recovery in travel could be the August 2018 change in the U.S. travel advisory for Cuba from Level 3 (reconsider travel) to Level 2 (exercise increased caution) (see \" Cuba Travel Advisory ,\" above). Some U.S. schools with academic exchange programs reportedly do not allow travel to a country with a Level 3 advisory, so the easing of the advisory to Level 2 allows schools to once again include Cuba as part of their exchange programs.\nRegular Air Service. U.S. and Cuban officials signed a bilateral arrangement (in a memorandum of understanding) in February 2016 permitting regularly scheduled air flights as opposed to charter flights, which have operated between the two countries for many years. The arrangement provided an opportunity for U.S. carriers to operate up to a total of 110 daily round-trip flights between the United States and Cuba, including up to 20 daily round-trip flights to and from Havana. In June 2016, the Department of Transportation announced that six U.S. airlines were authorized to provide air service for up to 90 daily flights between five U.S. cities (Miami, Fort Lauderdale, Chicago, Philadelphia, and Minneapolis-St. Paul) and nine Cuban cities other than Havana. JetBlue became the first U.S. airline to begin regularly scheduled flights in August 2016. In August 2016, the Department of Transportation announced a final decision for eight U.S. airlines to provide up to 20 regularly scheduled round-trip flights between Havana and 10 U.S. cities (Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami, Newark, New York [JFK], Orlando, and Tampa). American Airlines became the first airline to begin regular direct flights to Havana from Miami in November 2016.\nFour U.S. airlines that had been awarded flights to Cuba\u2014Silver Airways, Frontier Airlines, Spirit Airlines, and Alaska Airlines\u2014have ended their air service to Cuba, citing competition from other airlines and low demand. In March 2018, the Department of Transportation awarded flights to Havana that had been given up (as well as a flight from Boston) to five U.S. airlines already serving Cuba\u2014American Airlines, Delta Air Lines, JetBlue, Airways, Southwest Airlines, and United Airlines. The U.S. air cargo company FedEx was supposed to begin operations to Cuba in April 2017, but the company requested and granted several extensions to begin service until it finally canceled its plans in December 2018.\nIn May 2016, the House Committee on Homeland Security, Subcommittee on Transportation Security, held a hearing on potential security risks from the resumption of regularly scheduled flights from Cuba. Some Members of Congress expressed concerns that Cuba's airport security equipment and practices were insufficient and that the Administration was rushing plans to establish regular air service to Cuba; other Members viewed such concerns as a pretext to slow down or block the Administration's efforts to normalize relations with Cuba. Officials from the Department of Homeland Security (including Customs and Border Protection and the Transportation Security Administration) testified at the hearing regarding their work to facilitate and ensure security of the increased volume of commercial air travelers from Cuba. Subsequently, in September 2016, the United States and Cuba finalized an aviation-security agreement for the deployment of U.S. In-Flight Security Officers, more commonly known as Federal Air Marshals, on board certain regularly scheduled flights to and from Cuba.\nCruise Ship Service. The Carnival cruise ship company began direct cruises to Cuba from the United States in May 2016 using smaller ships, accommodating about 700 passengers, under its cruise brand Fathom, which targeted people-to-people educational travel. The Fathom cruises stopped in May 2017, but Carnival began using a larger ship for cruises to Cuba in June 2017. Since then, numerous other cruise ship companies\u2014Royal Caribbean, Norwegian, Azamara Club Cruises, Oceania Cruises, Regent Seven Seas Cruises, Pearl Seas Cruises, Holland America Line, Viking, and Seabourn\u2014began offering cruises to Cuba from the United States. Several companies began looking to establish ferry services between the United States and Cuba in 2015, but the services still require Cuban approval, and Cuban facilities need to be developed to handle the services.\nPro\/Con Arguments. Major arguments made for lifting the Cuba travel ban altogether are that the ban abridges the rights of ordinary Americans to travel, hinders efforts to influence conditions in Cuba, and may be aiding the Cuban government by helping restrict the flow of information. In addition, supporters of lifting the ban point to the fact that Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support the Cuban government with potentially millions of dollars in hard currency; that legal provisions allowing travel to Cuba for humanitarian purposes exist and are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. \nLegislative Activity. In the 115 th Congress, six bills were introduced that would have lifted remaining restrictions on travel. H.R. 351 (Sanford) would have prohibited restrictions on travel to Cuba, directly or indirectly, or any transactions incident to such travel. S. 1287 (Flake) would have prohibited the President from restricting travel to Cuba or any transactions incident to Cuba. H.R. 572 (Serrano) would have facilitated the export of U.S. agricultural exports to Cuba and would have lifted travel restrictions. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the economic embargo on Cuba and prohibited restrictions on travel. \nIn October 2017, the House approved (by voice vote) H.R. 3328 (Katko), the Cuban Airport Security Act of 2017. The bill would have required a congressional briefing regarding certain security measures and equipment at each of Cuba's 10 international airports. The measure also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba unless the carrier had publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also have, to the extent practicable, prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. An identical bill, S. 2023 (Rubio), was introduced in the Senate on October 26, 2017.\nIn October 2018, Congress completed action on the FAA Reauthorization Act of 2018, signed into law as P.L. 115-254 ( H.R. 302 ), which includes a provision in Section 1957 (similar, although not identical, to a provision in H.R. 3328 noted above) requiring the Transportation Security Administration (TSA) to provide Congress a briefing on certain aspects of security measures at airports in Cuba that have air service to the United States. The law also requires the TSA Administrator (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. This requirement relating to public air charters to and from Cuba stems from a recommendation made by the Government Accountability Office (GAO) in a July 2018 report examining TSA's assessments of Cuban aviation security.\n\n\t\tU.S. Exports and Sanctions205\n\nU.S. commercial medical exports to Cuba have been authorized since the early 1990s pursuant to the Cuban Democracy Act of 1992 (CDA), and commercial agricultural exports have been authorized since 2001 pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), but with numerous restrictions and licensing requirements. For medical exports to Cuba, the CDA requires on-site verification that the exported item is to be used for the purpose for which it was intended and only for the use and benefit of the Cuban people. TSRA allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. \nCuba purchased almost $5.8 billion in U.S. products from 2001 to 2017, largely agricultural products. For many of those years, the United States was Cuba's largest supplier of agricultural products. U.S. exports to Cuba rose from about $7 million in 2001 to a high of $712 million in 2008, far higher than in previous years. This increase was in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. U.S. exports to Cuba declined considerably from 2009 through 2011, rose again in 2012, and fell every year through 2015, when U.S. exports amounted to just $180 million. (See Figure 3 .)\nReversing that trend, however, U.S. exports to Cuba increased to $245 million in 2016 and $283 million in 2017. In 2017, U.S. exports to Cuba increased by 15% over the previous year. In the first three quarters of 2018, through September, U.S. exports to Cuba amounted to almost $229 million, about the same amount over the same period in 2017.\nLooking at the composition of U.S. exports to Cuba from 2012 to 2017, the leading products were poultry, soybean oilcake and other solid residue, soybeans, corn, and soybean oil. Poultry has been the leading U.S. export to Cuba since 2012; in 2017, for example, it accounted for about 57% % of U.S. exports. Beyond agricultural products, other categories of products that have increased over the past several years are parts for steam turbines, pesticides, pharmaceutical products, and civilian aircraft, engines, and parts. President Obama's policy changes, as set forth in regulatory changes made to the CACR and EAR, included several measures designed to facilitate commercial exports to Cuba:\nU.S. financial institutions are permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions. U.S. private export financing is permitted for all authorized export trade to Cuba, except for agricultural goods exported pursuant to TSRA. The definition of the term cash in advance for payment for U.S. exports to Cuba was revised to specify that it means cash before transfer of title . In 2005, OFAC had clarified that payment of cash in advance meant that the payment for the goods had to be received prior to the shipment of the goods from the port at which they were loaded in the United States. The regulatory change means that payment can once again occur before an export shipment is offloaded in Cuba rather than before the shipment leaves a U.S. port. Commercial exports to Cuba of certain goods and services to empower Cuba's nascent private sector are authorized, including for certain building materials for private residential construction, goods for use by private-sector Cuban entrepreneurs, and agricultural equipment for small farmers. Licenses for certain categories of exports are included under a \"general policy of approval.\" These categories include exports for civil aviation and commercial aircraft safety; telecommunications; U.S. news bureaus; human rights organizations and nongovernmental organizations; environmental protection of U.S. and international air quality, waters, and coastlines; and agricultural inputs (such as insecticides, pesticides, and herbicides) that fall outside the scope of those exports already allowed under TSRA. Licenses for exports that will be considered on a case-by-case basis include certain items exported to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people. These items include exports for agricultural production, artistic endeavors, education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation, public transportation, wholesale and retail distribution for domestic consumption by the Cuban people, construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefits the Cuban people. Note: The Trump Administration's policy changes on Cuba, as set forth by amended Commerce Department regulations issued in November 2017, stipulate that export licenses for exports to state-owned enterprises will generally be denied to export items for use by entities or subentities on the State Department's list of restricted entities associated with the Cuban military, police, intelligence, or security services. The commercial export of certain consumer communication devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems is authorized; previously such exports were limited to donations. The export of items for telecommunications, including access to the internet, use of internet services, infrastructure creation, and upgrades, also is authorized. Companies exporting authorized goods to Cuba are authorized to have a physical presence in Cuba, such as an office, retail outlet, or warehouse. Persons subject to U.S. jurisdiction generally are authorized to enter into certain contingent contracts for transactions currently prohibited by the embargo. Certain consumer goods sold directly to eligible individuals in Cuba for their personal use generally are authorized.\nUSDA Reports. In a June 2015 report, the U.S. Department of Agriculture's (USDA's) Foreign Agricultural Service noted that \"the U.S. share of the Cuban market has slipped dramatically, from a high of 42% in FY2009 to only 16% in FY2014.\" The report contended that the decline in U.S. market share in Cuba \"is largely attributable to a decrease in bulk commodity exports from the United States in light of favorable credit terms offered by key competitors.\" It maintained that the United States had lost market share to those countries able to provide export credits to Cuba. The report concluded that lifting U.S. restrictions on travel and capital flow to Cuba and enabling USDA to conduct market development and credit guarantee programs in Cuba would help the United States recapture its market share in Cuba. \nAnother USDA report published in June 2015 by its Economic Research Service maintained that a more normal economic relationship between the United States and Cuba would allow \"U.S. agricultural exports to develop commercial ties in Cuba that approximate their business relationship in other parts of the world\" (such as the Dominican Republic) and could \"feature a much larger level of U.S. agricultural exports to Cuba.\" According to the report, increased U.S. exports could include such commodities as milk, wheat, rice, and dried beans, as well as intermediate and consumer-oriented commodities.\nU .S. International Trade Commission (U STIC ) Reports. The USITC has issued three studies since 2007 examining the effects of U.S. restrictions on trade with Cuba, with its most recent report issued in April 2016. According to the findings of its 2016 report, U.S. restrictions on trade and travel reportedly have shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. The most problematic U.S. restrictions cited are the inability to offer credit, travel to or invest in Cuba, and use funds sourced and administered by the U.S. government. Cuban nontariff measures and other factors also may limit U.S. exports to and investment in Cuba if U.S. restrictions are lifted, according to the report. These factors include Cuban government control of trade and distribution, legal limits on foreign investment and property ownership, and politically motivated decisionmaking regarding trade and investment. Absent U.S. restrictions, U.S. exports in several sectors likely would increase somewhat in the short term, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth. U.S. exports could increase further if Cuban import barriers were lowered. If U.S. restrictions were removed, U.S. agricultural and manufactured exports to Cuba could increase to almost $1.8 billion annually; if both U.S. restrictions were removed and Cuban barriers were lowered, U.S. exports could approach $2.2 billion annually.\nLegislative Activity. In the 115 th Congress, the 2018 farm bill, P.L. 115-334 ( H.R. 2 ) has a provision permitting funding for two U.S. agricultural export promotion programs. Several other introduced bills would have lifted or eased restrictions on U.S. exports to Cuba.\nIn December 2018, both houses approved the conference report ( H.Rept. 115-1072 ) to the 2018 farm bill, P.L. 115-334 ( H.R. 2 ), which retains a Senate provision that permits funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba. As stipulated, the funds cannot be used in contravention with directives set forth under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The provision originated from a Heitkamp amendment to the original Senate version of the farm bill, S. 3042 , approved during markup of the bill by the Senate Committee on Agriculture, Nutrition, and Forestry. H.R. 442 (Emmer)\/ S. 472 (Moran) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. The bills would have repealed restrictions on private financing for Cuba in TSRA but would have continued to prohibit U.S. government support for foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would have been allowed. H.R. 525 (Crawford) would have permitted U.S. government assistance for U.S. agricultural exports to Cuba as long as the recipient of the assistance was not controlled by the Cuban government; authorized the private financing by U.S. entities of sales of agricultural commodities; and authorized investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government and did not traffic in property of U.S. nationals confiscated by the Cuban government. S. 275 (Heitkamp) would have amended TSRA to allow for the private financing by U.S. entities of agricultural commodities to Cuba. H.R. 572 (Serrano), among its various provisions, had the goal of facilitating the export of U.S. agricultural and medical exports to Cuba by permanently redefining the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorizing direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; establishing an export-promotion program for U.S. agricultural exports to Cuba; and repealing the on-site verification requirement for medical exports to Cuba under the CDA. H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden) would have lifted the overall economic embargo on Cuba, including restrictions on exports to Cuba in the CDA and TSRA. S. 1286 (Klobuchar) would have repealed or amended various provisions of law restricting trade with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA.\n\n\t\tTrademark Sanction\n\nFor more than 15 years, the United States has imposed a trademark sanction specifically related to Cuba. A provision in the FY1999 omnibus appropriations measure (\u00a7211 of Division A, Title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment from Cuban nationals for trademark registrations and renewals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. U.S. officials maintain that the sanction prohibits a general license under the CACR for transactions or payments for such trademarks. The provision also prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. \nThe measure was enacted because of a dispute between the French spirits company Pernod Ricard and the Bermuda-based Bacardi Limited. Pernod Ricard entered into a joint venture in 1993 with Cubaexport, a Cuban state company, to produce and export Havana Club rum. Bacardi maintains that it holds the rights to the Havana Club name because in 1995 it entered into an agreement for the Havana Club trademark with the Arechabala family, who had originally produced the rum until its assets and property were confiscated by the Cuban government in 1960. The Arechabala family had let the trademark registration lapse in the United States in 1973, and Cubaexport successfully registered it in 1976. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. \nThe European Union initiated World Trade Organization (WTO) dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS agreement. In March 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 2003. That deadline was extended several times because no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. In July 2005, however, in an EU-U.S. understanding, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. \nThe U.S. Patent and Trademark Office (USPTO) did not process Cubaexport's 10-year renewal of the Havana Club trademark when it was due in 2006 because the Department of the Treasury's OFAC denied the company the specific license that it needed to pay the fee for renewing the trademark registration. In providing foreign policy guidance to OFAC at the time, the State Department recommended denial of the license, maintaining that doing so would be consistent with \"the U.S. approach toward non-recognition of trademark rights associated with confiscated property\" and consistent with U.S. policy to deny resources to the Cuban government to hasten a transition to democracy.\nAlmost a decade later, in January 2016, OFAC issued a specific license to Cubaexport, allowing the company to pay fees to the USPTO for the renewal of the Havana Club trademark registration for the 2006-2016 period. Subsequently, in February 2016, USPTO renewed the trademark registration for 10 additional years, until 2026.\nOFAC had requested foreign policy guidance from the State Department in November 2015 for Cubaexport's request for a specific license. According to the State Department, in evaluating the case, it took into account the \"landmark shift\" in U.S. policy toward Cuba, U.S. foreign policy with respect to its key allies in Europe, and U.S. policy with regard to trademark rights associated with confiscated property. State Department and USPTO officials maintain that the renewal of the Havana Club trademark registration does not resolve the trademark dispute. The State Department notes that federal court proceedings are pending in which Bacardi has filed suit against Cubaexport to contest the Havana Club trademark ownership in the United States and that OFAC's issuance of a license permitting USPTO to renew the trademark registration will allow the two parties to proceed toward adjudication of the case.\nLegislative Activity. In Congress, two different approaches have been advocated for a number of years to bring Section 211 into compliance with the WTO ruling. Some Members want a narrow fix in which Section 211 would be amended so that it applies to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality, instead of being limited to designated nationals, meaning Cuban nationals. Advocates of this approach argue that it would treat all holders of U.S. trademarks equally. Other Members want Section 211 repealed altogether. They argue that the law endangers more than 5,000 trademarks of more than 400 U.S. companies registered in Cuba. The House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016 on the trademark issue and on the issue of confiscated property, but this did not lead to any legislative action.\nIn the 115 th Congress, S. 259 (Nelson)\/ H.R. 1450 (Issa) would have applied the narrow fix so that the trademark sanction applied to all nationals, whereas four broader bills on Cuba sanctions, H.R. 572 (Serrano), H.R. 574 (Serrano), H.R. 2966 (Rush), and S. 1699 (Wyden), had provisions that would have repealed Section 211. \nTwo FY2018 House appropriations bills, H.R. 3267 (Commerce) and H.R. 3280 (Financial Services), had provisions that would have introduced new sanctions related to Cuba and trademarks, but neither of these were included in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). H.R. 3267 had a provision that would have prohibited funds to approve the registration or renewal, or the maintenance of the registration, of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. H.R. 3280 had a provision that would have prohibited funding to approve or otherwise allow the licensing (general or specific) of a mark, trade name, or commercial name used in connection with a business or assets that were confiscated by the Cuban government unless the original owner has expressly consented. These provisions had also been included in the House-passed version of a FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017.\nLikewise for FY2019, two House Appropriations bill, H.R. 5952 (Commerce) and H.R. 6258 \/ H.R. 6147 (Financial Services), had provisions related to Cuba and trademarks similar to those that had been included in House bills for FY2018. H.R. 5952 had a provision that would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. H.R. 6258 \/ H.R. 6147 had a provision that would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The 115 th Congress did not complete action on either appropriations measure. \n\n\t\tDemocracy and Human Rights Funding\n\nSince 1996, the United States has provided assistance\u2014through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)\u2014to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID and State Department efforts are funded largely through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY1996 to FY2018, Congress appropriated some $344 million in funding for Cuba democracy efforts. In recent years, this funding included $20 million in each fiscal year from FY2014 through FY2018. For FY2018, however, the Trump Administration, as part of its attempt to cut foreign assistance levels, did not request any democracy and human rights assistance funding for Cuba, but Congress ultimately provided $20 million. For FY2019, the Trump Administration requested $10 million to provide democracy and civil society assistance for Cuba.\nAlthough USAID received the majority of this funding for many years, the State Department began to receive a portion of the funding in FY2004 and in recent years has been allocated more funding than USAID. The State Department generally has transferred a portion of the Cuba assistance that it administers to NED. \nUSAID's Cuba program has supported a variety of U.S.-based nongovernmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping to develop civil society, and building solidarity with Cuba's human rights activists. \nNED is not a U.S. government agency but an independent nongovernmental organization that receives U.S. government funding. Its Cuba program is funded by the organization's regular appropriations by Congress as well as by funding from the State Department. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State appropriations measure, but it is now funded through the State Department, Foreign Operations and Related Programs appropriations measure. According to information provided by NED on its website, its Cuba funding from FY2014 through FY2017 amounted to $15.9 million.\nFY2017 Appropriations. For FY2017, the Obama Administration had requested $15 million in ESF for Cuba democracy and human rights programs, a 25% reduction from FY2016. According to the request, the assistance would support civil society initiatives that promote democracy, human rights, and fundamental freedoms, particularly freedoms of expression and association. The programs would \"provide humanitarian assistance to victims of political repression and their families, strengthen independent civil society, support the Cuban people's desire to freely determine their future, reduce their dependence on the Cuban state, and promote the flow of uncensored information to, from and within the island.\" \nIn the 114 th Congress, the House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), reported July 15, 2016, would have provided $30 million for democracy promotion in Cuba, double the Administration's request. The bill also would have prohibited funding for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy building authorized by the LIBERTAD Act of 1996. In contrast, the Senate version of the FY2017 foreign operations appropriations bill, S. 3117 ( S.Rept. 114-290 ), reported June 29, 2016, would have recommended fully funding the Administration's request of $15 million. However, it also would have provided that $3 million be made available for USAID to support free enterprise and private business organizations and people-to-people educational and cultural activities. \nBecause the 114 th Congress did not complete action on FY2017 appropriations, the 115 th Congress took final action in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $20 million in democracy assistance for Cuba, $5 million more than requested, and did not include any of the directives noted above in the House and Senate appropriations bills in the 114 th Congress. \nFY2018 Appropriations. For FY2018 appropriations, given the strong congressional record of appropriating such aid for many years, some Members of Congress strongly opposed the Trump Administration's proposal to cut all democracy and human rights funding for Cuba. The House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, H.R. 3362 ( H.Rept. 115-253 ), would have provided $30 million in democracy assistance for Cuba but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. These provisions were included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017.\nThe Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided $15 million for democracy programs in Cuba, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities.\nIn final action in March 2018, Congress provided $20 million for democracy programs in Cuba in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K) without any of the directives in the House and Senate appropriations bills and reports noted above.\nFY2019 Appropriations. For FY2019, the Trump Administration requested $10 million for democracy and civil society assistance in support of the Administration's Cuba policy. The House Appropriations Committee's State Department and Foreign Operations appropriations bill, H.R. 6385 , would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building and stipulated that grants exceeding $1 million, or grants to be implemented over a period of 12 months, would be awarded only to organizations with experience promoting democracy inside Cuba. The Senate Appropriations version of the bill, S. 3108 , would have provided $15 million for democracy programs in Cuba. A series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) continued FY2019 funding at FY2018 levels through December 21, 2018, but the 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. \nOversight of U.S. Democracy Assistance to Cuba. The GAO has issued three major reports since 2006 examining USAID and State Department democracy programs for Cuba. In the most recent report, issued in 2013, GAO concluded that USAID had improved its performance and financial monitoring of implementing partners' use of program funds, but found that the State Department's financial monitoring had gaps. Both agencies were reported to be taking steps to improve financial monitoring. \nIn 2014, two investigative news reports alleged significant problems with U.S. democracy promotion efforts in Cuba. In April, an Associated Press (AP) investigative report alleged that USAID, as part of its democracy promotion efforts for Cuba, had established a \"Cuban Twitter\" known as ZunZuneo, a communications network designed as a \"covert\" program \"to undermine\" Cuba's communist government built with \"secret shell companies\" and financed through foreign banks. According to the press report, the project, which was used by thousands of Cubans, lasted more than two years until it ended in 2012. USAID, which strongly contested the report, issued a fact sheet about the ZunZuneo program. It maintained that program was not \"covert\" but rather that, just as in other places where USAID is not always welcome, the agency maintained a \"discreet profile\" on the project to minimize risk to staff and partners and to work safely. Some Members of Congress strongly criticized USAID for not providing sufficient information to Congress about the program when funding was appropriated, whereas other Members staunchly defended the agency and the program.\nIn August 2014, the AP reported on another U.S.-funded democracy program for Cuba in which a USAID contractor sent about a dozen youth from several Latin American countries (Costa Rica, Peru, and Venezuela) in 2010 and 2011 to Cuba to participate in civic programs, including an HIV-prevention workshop, with the alleged goal to \"identify potential social-change actors\" in Cuba. The AP report alleged that \"the assignment was to recruit young Cubans to anti-government activism under the guise of civic programs.\" USAID responded in a statement maintaining that the AP report \"made sensational claims against aid workers for supporting civil society programs and striving to give voice to these democratic aspirations.\"\nIn December 2015, USAID's Office of Inspector General issued a report on USAID's Cuban Civil Society Support Program that examined both the ZunZuneo and HIV-prevention projects. The report cited a number of problems with USAID's management controls of the civil society program and made a number of recommendations, including that USAID conduct an agency-wide analysis to determine whether a screening policy is needed to address intelligence and subversion threats and, if so, develop and implement one.\n\n\t\tRadio and TV Mart\u00ed229\n\nU.S.-government-sponsored radio and television broadcasting to Cuba\u2014Radio and TV Mart\u00ed\u2014began in 1985 and 1990, respectively. Until October 1999, U.S.-government-funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America, Radio Free Europe\/Radio Liberty, Radio Free Asia, and the Office of Cuba Broadcasting (OCB). In August 2018, the BBG officially changed its name to the U.S. Agency for Global Media (USAGM). \nToday, OCB, which has been headquartered in Miami, FL, since 1998, manages Radio and TV Mart\u00ed and the Mart\u00ednoticiaas.com website and its social media platforms on YouTube, Google, and Facebook. According to the BBG's 2019 Congressional Budget Justification , the Mart\u00eds reach 11.1% of Cubans on a weekly basis with audio, video, and digital content delivered by radio, satellite TV, online, and on distinctly Cuban digital \"packages\" ( paquetes ). The largest audiences reportedly are for Radio Mart\u00ed and TV Mart\u00ed, with weekly audiences respectively reaching 8% and 6.8% of Cubans, while online content reaches a smaller audience of 5.3%. OCB also administers a shortwave transmitting station in Greenville, NC. Additional newer transmitters at Greenville reportedly have helped increase Radio Mart\u00ed's presence in Cuba, and the increase in the number of frequencies has made it harder for the Cuban government to interfere with the radio broadcasts.\nFunding. From FY1984 through FY2018, Congress appropriated about $882 million for broadcasting to Cuba. In recent years, funding has amounted to some $27-$29 million in each fiscal year from FY2014 to FY2018. The Trump Administration's FY2019 request is for almost $13.7 million.\nFor FY2017, the Obama Administration requested $27.1 million for the OCB, about the same amount appropriated in FY2016. The Administration also requested authority for the BBG to establish a new Spanish-language, nonfederal media organization that would receive a BBG grant and perform the functions of the current OCB. The House version of the FY2017 State Department, Foreign Operations, and Related Programs appropriations bill, H.R. 5912 ( H.Rept. 114-693 ), had a provision that would have blocked the Administration's request by prohibiting funding to establish an independent grantee organization to carry out any and all broadcasting and related programs to the Latin American and Caribbean region or otherwise substantially alter the structure of the OCB unless specifically authorized by a subsequent act of Congress. The funding prohibition pertained to the merger of the OCB and the Voice of America Latin America Division. The Senate version of the bill, S. 3117 ( S.Rept. 114-290 ), would have provided $27.4 million for the OCB, $300,000 more than the Administration's request. The report to the bill stated that the committee did not support the proposed contractor reduction of $300,000 at the OCB. \nThe 115 th Congress completed final action on FY2017 appropriations in early May 2017 through enactment of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The explanatory statement to the measure provided $28.056 million for the Office of Cuba Broadcasting, $1 million more than requested. According to the BBG, the actual amount provided for the OCB in FY2017 was $28.938 million.\nFor FY2018, the Trump Administration requested $23.656 million for the OCB, $4.4 million less than the amount Congress appropriated for FY2017. According to the BBG's request, the funding reduction would be covered by a reduction in contractor support, elimination of most vacant staff positions and reduction of other government positions through attrition, elimination of ineffective leased broadcast transmissions, and a reduction of administrative costs. The report to the House Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill ( H.Rept. 115-253 to H.R. 3362 ) would have provided $28.1 million for broadcasting to Cuba, $4.4 million above the request; this also was included in the House-passed version of the FY2018 omnibus appropriations measure, H.R. 3354 , approved in September 2017. The Senate Appropriations Committee's version of the FY2018 State Department and Foreign Operations appropriations bill, S. 1780 ( S.Rept. 115-152 ), would have provided not less than $28.6 million for broadcasting to Cuba. In final action Congress provided $28.936 million for Cuba broadcasting, $5.28 million more than requested, in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ; explanatory statement, Division K), signed into law in March 2018. \nFor FY2019, the Trump Administration requested $13.656 million for the OCB, $10 less than the Administration's FY2018 request and $15.3 million less than the amount provided in FY2017. The rationale for the proposed cut in funding for the OCB was to find efficiencies between OCB and the Voice of America's Latin American division. The House Appropriations Committee's FY2019 State Department and Foreign Operations bill, H.R. 6385 , would have provided $29.1 million for Cuba broadcasting, while the Senate Appropriations Committee's bill, S. 3108 , would have provided $29.2 million. The report to the Senate bill, S.Rept. 115-282 , would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. The 115 th Congress did not complete action on FY2019 appropriations, leaving the task to the 116 th Congress. Nevertheless, the 115 th Congress approved a series of continuing resolutions ( P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018. \nOversight Issues. Both Radio and TV Mart\u00ed have at times been the focus of controversies, including questions about adherence to broadcast standards. From 1990 through 2011, there were almost dozen government studies and audits of the OCB, including investigations by the GAO, by a 1994 congressionally established Advisory Panel on Radio and TV Mart\u00ed, by the State Department Office Inspector General, and by the combined State Department\/BBG Office Inspector General. In 2009, GAO issued a report on the issue of small audience levels for both Radio and TV Mart\u00ed as well as concerns with adherence to relevant domestic laws and international standards, including the domestic dissemination of OCB programming, inappropriate advertisements during OCB programming, and TV Mart\u00ed's interference with Cuban broadcasts. In 2010, the Senate Foreign Relations Committee majority issued a staff report that cited problems with adherence to broadcast standards, audience size, and Cuban government jamming. Among its recommendations, the report called for OCB to be moved to Washington, DC, and integrated fully into the Voice of America. A 2011 GAO report recommended that the BBG provide an analysis on the estimated costs and savings of sharing resources between OCB and the Voice of America's Latin America Division.\nConcerns About TV Mart\u00ed Program in 2018. On October 26, 2018, media reports highlighted a disturbing TV Mart\u00ed program originally aired in May 2018 (which remained on Radio and Television Mart\u00ed's website) that referred to U.S. businessman and philanthropist George Soros as \"the multimillionaire Jew of Hungarian origin\" and as a \"non-believing Jew of flexible morals.\" The program espoused a number of conspiracy theories about Soros, including that he was the architect of the 2008 financial crisis.\nSenator Jeff Flake spoke out against the TV Mart\u00ed program, which he referred to as \"taxpayer-funded anti-Semitism.\" He sent a letter to John Lansing, chief executive officer (CEO) of the USAGM, on October 29, 2018, asking for an investigation into the program, including its evolution, from initial inception to final approval; who produced the program; and what review process was in place to ensure it met VOA journalistic standards. Senator Flake also called for those approving anti-Semitic content to be removed from their positions immediately, asserting that \"lack of action on this matter will further denigrate the United States as a credible voice overseas, the repercussion of which will be severe.\"\nInitially, OCB Director Tom\u00e1s Regalado, who began his appointment in early June 2018, responded by pulling the original program and related shorter segments from the OCB's online website and acknowledging that the program \"did not have the required balance.\" USAGM's CEO Lansing took further action on October 29, 2018, by issuing a statement that the program about Soros \"is inconsistent with our professional standards and ethics.\" He stated that those deemed responsible for the production would be immediately placed on administrative leave pending an investigation into their apparent misconduct. Lansing also directed \"an immediate, full content audit to identify any patterns of unethical reporting at the network\" and asked Regalado to \"require ethics and standards refresher training for all OCB journalists. \" \nLansing wrote a letter of apology to Soros in early November 2018 in which he said that the program \"was based on extremely poor and unprofessional journalism,\" and \"was utterly offensive in its anti-Semitism and clear bias.\" Lansing also stated in the letter that he had instructed OCB Director Regalado \"to remove the offensive story from the TV Mart\u00ed website and social media\" and \"to hire a full time \"standards and practices\" editor to oversee all outgoing content with strict adherence to the highest professional standards of journalism.\" The audit of reporting at the network reportedly uncovered an earlier story about Soros that included anti-Semitic language as well as an anti-Muslim opinion piece published in September 2018, that were also removed from the website. As of mid-December 2018, press reports maintain that four OCB employees have been placed on leave and two contract staffers have been fired because of the offensive programming. \nThe TV Mart\u00ed program raises significant concerns about the OCB's adherence to broadcast standards and questions about the program's intended audience. TV Mart\u00ed's authorizing legislation, the Television Broadcasting to Cuba Act ( P.L. 101-246 , Title II, Part D, 22 U.S.C. 1465bb ) has a provision stating that television broadcasting to Cuba \"shall be in accordance with all Voice of America standards to ensure the broadcast of programs which are objective, accurate, balance, and which present a variety of views.\" \nU.S. law sets forth the following principles for VOA broadcasts: (1) VOA will serve as a consistently reliable and authoritative source of news. VOA news will be accurate, objective, and comprehensive; (2) VOA will represent America, not any single segment of American society, and will therefore present a balanced and comprehensive projection of significant American thought and institutions; and (3) VOA will present the polices of the United States clearly and effectively and also will present responsible discussion and opinion on these policies. These VOA principles and broader U.S. international broadcasting standards and principles are set forth in 22 U.S.C. 6202 ( P.L. 103-236 , Title III, Section 303, and P.L. 103-415 ).\nThe anti-Semitic program broadcast by TV Mart\u00ed prompted the Senate Foreign Relations Committee to approve an amendment to S. 3654 , the U.S. Agency for Global Media Reform Act, during committee consideration of the bill on November 28, 2018. Offered by Senator Jeff Flake, the amendment was aimed at holding USAGM accountable for the incident. The provision would have required USAGM's CEO to brief or report to the appropriate congressional committees on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to \"inform, engage, and connect people around the world in support of freedom and democracy.\" The briefing or report would have been required to include information on the employment status of the suspended employee and the \"reasons for the Agency's failure to made a formal disciplinary determination.\" The Senate Foreign Relations Committee reported the bill on November 28, 2018, but no further action was taken on the measure before the end of the 115 th Congress. \n\n\t\tMigration Issues249\n\nIn its final days in office, the Obama Administration announced another major Cuba policy shift. On January 12, 2017, the United States ended the so-called \"wet foot\/dry foot\" policy under which thousands of undocumented Cuban migrants entered the United States in recent years. (Under that policy, those Cuban migrants interdicted at sea generally were returned to Cuba whereas those reaching U.S. land were allowed entrance into the United States and generally permitted to stay.) Under the new policy, as announced by President Obama and then-Secretary of Homeland Security Jeh Johnson, Cuban nationals who attempt to enter the United States illegally and do not qualify for humanitarian relief are now subject to removal. The Cuban government also agreed to begin accepting the return of Cuban migrants who have been ordered removed. \nAt the same time, the Obama Administration announced that it was ending the special Cuban Medical Professional Parole program, a 10-year-old program allowing Cuban medical professionals in third countries to be approved for entry into the United States.\nBackground. Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift, in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. immigration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. Naval Station at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued to flee in large numbers.\nAs a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994, bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. (For information on the effect of the staff reduction at the U.S. Embassy in Havana on visa processing, see \" Effect of Staff Reduction on U.S. Embassy Havana Operations \" above.)\nIn May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. In January 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. naval station, most having been paroled into the United States.\nMaritime Interdictions. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country. Until early January 2017, those Cubans who reached the U.S. shore were allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). In short, most interdictions, even in U.S. coastal waters, resulted in a return to Cuba, whereas those Cubans who touched shore were allowed to stay in the United States. Some had criticized this so-called wet foot\/dry foot policy as encouraging Cubans to risk their lives to make it to the United States and as encouraging alien smuggling. Cuba had long opposed the policy, which it viewed as encouraging illegal, unsafe, and disorderly migration, alien smuggling, and Cubans' irregular entry into the United States from third countries.\nOver the years, the number of Cubans interdicted at sea by the U.S. Coast Guard has fluctuated annually, influenced by several factors, including the economic situations in Cuba and the United States. The number of interdictions rose from 666 in FY2002 to 2,868 in FY2007 (see Figure 4 ). In the three subsequent years, maritime interdictions declined significantly to 422 by FY2010. Major reasons for the decline were reported to include the U.S. economic downturn, more efficient coastal patrolling, and more aggressive prosecution of migrant smugglers by both the United States and Cuba. From FY2011 through FY2016, however, the number of Cubans interdicted by the Coast Guard increased each year, from 1,047 in FY2011 to 5,230 in FY2016. The increase in the flow of maritime migrants in 2015 and 2016 was driven by concerns among Cubans that the favorable treatment granted to Cuban migrants would end.\nWith the change in U.S. immigration policy toward Cuba in January 2017, the number of Cubans interdicted by the Coast Guard dropped to a trickle. For FY2017, the Coast Guard interdicted 2,109 Cubans, with the majority of these interdictions occurring before the policy change. For FY2018, as of August 14, 2018, the Coast Guard interdicted 200 Cubans at sea.\nArrival of Undocumented Cuban Migrants. According to statistics from the Department of Homeland Security, the number of undocumented Cubans entering the United States both at U.S. ports of entry and between ports of entry rose from almost 8,170 in FY2010 to 58,269 in FY2016 (see Table 1 ). Beginning around FY2013, according to the State Department, undocumented Cuban migrants began to favor land-based routes to enter the United States, especially via ports of entry from Mexico. Since that time and the change in U.S. immigration policy in early 2017, the number of undocumented Cubans entering by land increased significantly, with a majority entering through the southwestern border.\nJust as the number of Cubans interdicted by the U.S. Coast Guard at sea has dropped precipitously since the change in U.S. immigration policy toward Cuba, the number of undocumented Cuban migrants entering the United States at ports of entry and between ports of entry has fallen considerably. In FY2017, 20,955 undocumented Cubans entered the United States at and between ports of entry, with the majority of these, almost 18,000, entering before the change in U.S. immigration policy. In FY2018, as of August 21, 2018, 6,044 undocumented Cubans arrived in the United States at or between ports of entry, about a 70% decline from all of FY2017.\n\n\t\tAntidrug Cooperation\n\nCuba is not a major producer or consumer of illicit drugs, but its extensive shoreline and geographic location make it susceptible to narcotics-smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns about the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on antidrug efforts. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign.\nOver the years, there have been varying levels of U.S.-Cuban cooperation on antidrug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of almost 6 metric tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999, when U.S. and Cuban officials met in Havana to discuss ways of improving antidrug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard drug interdiction specialist at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000.\nSince the reestablishment of diplomatic relations with Cuba in 2015, U.S. antidrug cooperation has increased further, with several dialogues and exchanges on counternarcotics issues. In December 2015, U.S. and Cuban officials held talks at the headquarters of the Drug Enforcement Administration (DEA) in Washington, DC, with delegations discussing ways to stop the illegal flow of narcotics and exploring ways to cooperate on the issue. In April 2016, Cuban security officials toured the U.S. Joint Interagency Task Force South (JIATF-South) based in Key West, FL. JIATF-South has responsibility for detecting and monitoring illicit drug trafficking in the region and for facilitating international and interagency interdiction efforts. At a July 2016 dialogue in Havana with U.S. officials from the State Department, DEA, the U.S. Coast Guard, and Immigration and Customs Enforcement\/Homeland Security Investigations, Cuba and the United States signed a counternarcotics arrangement to facilitate cooperation and information sharing. Technical exchanges between the U.S. Coast Guard and Cuba's Border Guard on antidrug efforts and other areas of cooperation occur periodically. \nAccording to the State Department's 2018 International Narcotics Control Strategy Report (INCSR), issued in March 2018, Cuba has 40 bilateral agreements for antidrug cooperation with countries worldwide, including the 2016 U.S.-Cuban agreement noted above. The report also stated that Cuban authorities and the U.S. Coast Guard share tactical information related to vessels transiting through Cuban territorial waters suspected of trafficking and coordinate responses. In addition, as noted in the report, direct communications were established in July 2016 between the U.S. DEA and Cuban counterparts within the Ministry of Interior's National Anti-Drug Directorate. Since then, according to the INCSR, the DEA has received approximately 20 requests for information related to drug investigations in addition to cooperation leading to Cuba's arrest of a fugitive wanted in the United States. More broadly, the INCR reports that Cuba has provided assistance to U.S. state and federal prosecutions by providing evidence and information, and has demonstrated a willingness to cooperate on law enforcement matters. \nAs in the past, the State Department contended in the 2018 INCSR that \"enhanced communication and cooperation between the United States, international partners, and Cuba, particularly in terms of real-time information-sharing, would likely lead to increased interdictions and disruptions of illegal drug trafficking.\" As noted in the INCSR, Cuba reported maritime seizures of 2.72 metric tons (MT) of illicit drugs in 2016 (2.5 MT of marijuana and 225 kilograms of cocaine). This compares to 906 kilograms of maritime seizures in 2015. \n\n\t\tU.S. Property Claims\n\nAn issue in the process of normalizing relations is Cuba's compensation for the expropriation of thousands of properties of U.S. companies and citizens in Cuba. The Foreign Claim Settlement Commission (FCSC), an independent agency within the Department of Justice, has certified 5,913 claims for expropriated U.S. properties in Cuba valued at $1.9 billion in two different claims programs; with accrued interest, the properties' value would be some $8 billion. In 1972, the FCSC certified 5,911 claims of U.S. citizens and companies that had their property confiscated by the Cuban government through April 1967, with 30 U.S. companies accounting for almost 60% of the claims. In 2006, the FCSC certified two additional claims in a second claims program covering property confiscated after April 1967. Many of the companies that originally filed claims have been bought and sold numerous times. There are a variety of potential alternatives for restitution or compensation schemes to resolve the outstanding claims, but resolving the issue likely would entail considerable negotiation and cooperation between the two governments. \nAlthough Cuba has maintained that it would negotiate compensation for the U.S. claims, it does not recognize the FCSC valuation of the claims or accrued interest. Instead, Cuba has emphasized using declared taxable value as an appraisal basis for expropriated U.S. properties, which would amount to almost $1 billion, instead of the $1.9 billion certified by the FCSC. Moreover, Cuba generally has maintained that any negotiation should consider losses that Cuba has accrued from U.S. economic sanctions. Cuba estimates cumulative damages of the U.S. embargo at $134.5 billion in current prices as of 2018.\nSeveral provisions in U.S. law specifically address the issue of compensation for properties expropriated by the Cuban government. Section 620(a)(2) of the Foreign Assistance Act of 1961 prohibits foreign assistance, a sugar quota authorizing the importation of Cuban sugar into the United States, or any other benefit under U.S. law until the President determines that the Cuban government has taken appropriate steps to return properties expropriated by the Cuban government to U.S. citizens and entities not less than 50% owned by U.S. citizens, or to provide equitable compensation for the properties. The provision, however, authorizes the President to waive its restrictions if he deems it necessary in the interest of the United States.\nThe LIBERTAD Act includes the property claims issue as one of the many factors that the President needs to consider in determining when a transition government is in power in Cuba and when a democratically elected government is in power. These determinations are linked, respectively, to the suspension and termination of the economic embargo on Cuba. For a transition government, as set forth in Section 205(b)(2) of the law, the President shall take into account the extent to which the government has made public commitments and is making demonstrable progress in taking steps to return property taken by the Cuban government on or after January 1, 1959, to U.S. citizens (and entities that are 50% or more beneficially owned by U.S. citizens) or to provide equitable compensation for such property. A democratically elected government, as set forth in Section 206 of the law, is one that, among other conditions, has made demonstrable progress in returning such property or providing full compensation for such property, in accordance with international law standards and practice. \nSection 103 of the LIBERTAD Act also prohibits a U.S. person or entity from financing any transaction that involves confiscated property in Cuba where the claim is owned by a U.S. national. The sanction may be suspended once the President makes a determination that a transition government is in power and shall be terminated when the President makes a determination that a democratically elected government is in power.\nIn the 114 th Congress, two House hearings focused on the property claims issue. The House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing in June 2015, and the House Judiciary Committee's Subcommittee on Courts, Intellectual Property, and the Internet held a hearing in February 2016.\nSince the reestablishment of diplomatic relations with Cuba in 2015, U.S. and Cuban officials have held three meetings on claims issues. The first meeting took place in December 2015 in Havana, with talks including discussions of the FCSC-certified claims of U.S. nationals, claims related to unsatisfied U.S. court judgments against Cuba (reportedly 10 U.S. state and federal judgments totaling about $2 billion), and some claims of the U.S. government. The Cuban delegation raised the issue of claims against the United States related to the U.S. embargo. A second claims meeting was held in July 2016, in Washington, DC. According to the State Department, the talks allowed for an exchange of views on historical claims-settlement practices and processes going forward. A third claims meeting was held in Havana in January 2017. \nAs noted above, Title III of the LIBERTAD Act holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. To date, however, pursuant to provisions of the law, all Administrations have suspended the right to file law suits at six-month intervals, For the suspension, the President (since 2013, the Secretary of State) must determine that it is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba. Secretary of State Pompeo made the most recent determination in June 2018, which is effective from August 1, 2018, through January 2019. \nIn November 2018, National Security Adviser John Bolton maintained in a press interview that the Administration was exploring whether to continue to suspend Title III or to allow lawsuits to go forward. If the right to file lawsuits was not suspended, Title III would permit those U.S. nationals with claims certified by the FCSC to file suit against those trafficking in confiscated property. Significantly, Title III also would permit U.S. nationals who were not U.S. nationals at the time of the confiscation to file suit. A 1996 report to Congress by the State Department required by the LIBERTAD Act estimated that there could be some 75,000 to 200,000 claims by Cuban Americans with the value running into the tens of billions of dollars. \nWhen the LIBERTAD Act was enacted in 1996, the intent of Title III was to prevent foreign investment in properties confiscated by the Cuban government. However, since some U.S. companies have entered into transactions or investment projects with Cuban companies in recent years as a result of the U.S. engagement process with Cuba, some potentially could be susceptible to legal action if the Administration did not continue to suspend the right to file lawsuits. Lifting the suspension of the right to file lawsuits under Title III could have a significant effect on foreign companies conducting business in Cuba because of the potential risk emanating from such lawsuits. When the LIBERTAD Act was passed in 1996, several foreign governments strongly objected, and some (Canada, EU, and Mexico) enacted countermeasures to block enforcement of the U.S. sanctions. The EU could revive a WTO dispute against the LIBERTAD Act, which it suspended in 1998 when it reached an understanding on the issue with the United States that included the presumption of continued suspension of Title III.\n\n\t\tU.S. Fugitives from Justice\n\nAn issue that had been mentioned for many years in the State Department's annual terrorism report was Cuba's harboring of fugitives wanted in the United States. The most recent mention of the issue was in the 2014 terrorism report (issued in April 2015), which stated that Cuba \"does continue to harbor fugitives wanted to stand trial or to serve sentences in the United States for committing serious violations of U.S. criminal laws, and provides some of these individuals limited support, such as housing, food ration books, and medical care.\" With the resumption of diplomatic relations with Cuba, the United States have held several law enforcement dialogues in that reportedly has included the issue of fugitives from justice. \nU.S. fugitives from justice in Cuba include convicted murderers and numerous hijackers, most of whom entered Cuba in the 1970s and early 1980s. For example, Joanne Chesimard, also known as Assata Shakur, was added to the Federal Bureau of Investigation's (FBI's) Most Wanted Terrorist list in May 2013. Chesimard was part of militant group known as the Black Liberation Army. In 1977, she was convicted for the 1973 murder of a New Jersey State Police officer and sentenced to life in prison. Chesimard escaped from prison in 1979 and, according to the FBI, lived underground before fleeing to Cuba in 1984. Another fugitive, William \"Guillermo\" Morales, who was a member of the Puerto Rican militant group known as the Armed Forces of National Liberation, reportedly has been in Cuba since 1988 after being imprisoned in Mexico for several years. In 1978, both of his hands were maimed by a bomb he was making. He was convicted in New York on weapons charges in 1979 and sentenced to 10 years in prison and 5 years' probation, but he escaped from prison the same year. In addition to Chesimard and other fugitives from the past, a number of U.S. fugitives from justice wanted for Medicare and other types of insurance fraud have fled to Cuba in recent years. \nAlthough the United States and Cuba have an extradition treaty in place dating to 1905, in practice the treaty has not been utilized. Instead, for more than a decade, Cuba has returned wanted fugitives to the United States on a case-by-case basis. For example, in 2011, U.S. Marshals picked up a husband and wife in Cuba who were wanted for a 2010 murder in New Jersey, and in April 2013, Cuba returned a Florida couple who allegedly had kidnapped their own children (who were in the custody of the mother's parents) and fled to Havana. In August 2018, Cuba arrested and returned to the United States a long-sought U.S. fugitive from justice wanted in connection with ecoterrorism who had stopped in Cuba on his way to Russia. In November 2018, Cuba returned to the United States a New Jersey man wanted on murder charges. In another case demonstrating U.S.-Cuban law enforcement cooperation, Cuba successfully prosecuted a Cuban national in February 2018 who had fled to Cuba after murdering a doctor in Florida in 2015\u2014the main witness was a Palm Beach detective. \nCuba generally, however, has refused to render to U.S. justice any fugitive judged by Cuba to be \"political,\" such as Chesimard, who they believe could not receive a fair trial in the United States. Moreover, in the past Cuba has responded to U.S. extradition requests by stating that approval would be contingent upon the United States returning wanted Cuban criminals from the United States. \nWhen President Trump announced his policy toward Cuba on June 16, 2017, he called for Cuba to return to the United States U.S. fugitives from justice and specifically called for the return of Joanne Chesimard. Cuban Foreign Minister Rodr\u00edguez rejected the return of certain political refugees, such as Chesimard, who had received asylum from the Cuban government. \nIn the 115 th Congress, the explanatory statement (Division K) to the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) directed the Secretary of State to engage the government of Cuba \"to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard.\" Two resolutions also were introduced, H.Res. 664 (King) and S.Res. 391 (Menendez), that would have called for the immediate extradition or rendering to the United States of all fugitives from justice in Cuba receiving safe harbor to escape prosecution or confinement for criminal offenses committed in the United States. Another initiative, H.R. 1744 (Smith, New Jersey), would have require a report on fugitives from U.S. justice in Cuba and U.S. efforts to secure the return of such fugitives. No further action was taken on these measures. \n\n\tOutlook\n\nFirst Vice President Miguel D\u00edaz-Canel succeeded Ra\u00fal Castro as president in April 2018, but any near-term change to the government's one-party communist political system is unlikely. Cuba is now in the midst of rewriting its 1976 constitution, with a planned national referendum on February 24, 2019. Among the changes are the addition of a new appointed prime minister to oversee government operations, age and term limits on the president, and some market-oriented economic reforms, including the right to private property. However, the new constitution still would ensure the state sector's dominance over the economy and the role of the Communist Party in the political system as the only official party.\nRa\u00fal Castro is continuing as first secretary of the party until 2021, and he played a key role heading the commission rewriting the constitution. Nevertheless, the government of D\u00edaz-Canel, who is 58 years of age, brings to power a leader from a new generation and can be viewed as the culmination of generational change in Cuba's governmental institutions that began several years ago. The government of Ra\u00fal Castro began the implementation of significant economic policy changes, moving toward a more mixed economy with a stronger private sector, but its slow gradualist approach did not produce major improvements to the Cuban economy. In December 2018, President D\u00edaz-Canel backtracked on implementing regulations that likely would have shrunk the private sector, and he slowed down implementation of a controversial decree regulating artistic expression, actions that appeared to demonstrate his responsiveness to public criticism and concerns and his independence from the previous Castro government. Looking ahead, President D\u00edaz-Canel continues to faces two significant challenges\u2014moving forward with economic reforms that produce results and responding to desires for greater freedom. \nThe Obama Administration's shift in U.S. policy toward Cuba opened up engagement with the Cuban government in a variety of areas. Economic linkages with Cuba increased because of the policy changes, although to what extent they will continue to increase is uncertain given that the overall embargo and numerous other sanctions against Cuba remain in place. \nPresident Trump's partial rollback of Obama-era changes and introduction of new economic sanctions has limited opportunities for U.S. business engagement and contributed to a downturn in American travel to Cuba in the second half of 2017 and first part of 2018, although reports indicate that travel increased in the second part of the year because of a large increase in those visiting via cruise ships. The U.S. decision to downsize the diplomatic staff of the U.S. Embassy in Havana in response to unexplained injuries to U.S. diplomatic personnel in Cuba resulted in the suspension of most visa processing at the embassy and reduced other embassy operations, which has made bilateral engagement and existing areas of government-to-government cooperation more difficult. \nJust as there were diverse opinions in the 114 th Congress over U.S. policy toward Cuba, debate over Cuba policy continued in the 115 th Congress, especially with regard to U.S. economic sanctions. Most significantly, in the 2018 farm bill, P.L. 115-334 , enacted in December 2018, Congress approved a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Although any such future funding likely would be small, this was the first congressional action easing U.S. economic sanctions on Cuba in almost a decade. The human rights situation in Cuba remained a key congressional concern in the 115 th Congress and likely will remain a key concern in the future, although there are diverse views regarding the best approach to influence the Cuban government. \nAppendix A. Legislative Initiatives in the 115 th Congress\nEnacted Legislation and Approved Resolutions\nP.L. 115-31 ( H.R. 244 ). Consolidated Appropriations Act, 2017. Introduced January 4, 2017, as the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017; subsequently, the bill became the vehicle for the FY2017 appropriations measure known as the Consolidated Appropriations Act, 2017. House agreed to Senate amendments (309-118) May 3, 2017; Senate agreed to House amendment to Senate amendments (79-18) May 4, 2017. President signed into law May 5, 2017. \nDivision C (Department of Defense), Section 8127, provided that none of the funds made available in the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (State Department and Foreign Operations), Section 7007, continued a long-standing provision prohibiting direct funding for the government of Cuba (including direct loans, credits, insurance, and guarantees of the Export-Import Bank). Section 7015(f) continues to require that foreign aid for Cuba not be obligated or expended except as provided through the regular notification procedures of the Committees on Appropriations. The explanatory statement to the measure provided $20 million in democracy assistance for Cuba ($5 million more than requested) and $28.056 million for the Office of Cuba Broadcasting ($1 million more than requested). \nP.L. 115-91 ( H.R. 2810 ) . National Defense Authorization Act (NDAA) for Fiscal Year 2018. H.R. 2810 introduced June 7, 2017; reported ( H.Rept. 115-200 ) by House Committee on Armed Services July 6, 2017. S. 1519 introduced and reported ( S.Rept. 115-125 ) by the Senate Committee on Armed Services July 10, 2017. House passed H.R. 2810 , amended, July 14, 2017. Senate passed H.R. 2810 , amended, September 18, 2017. \nSection 1026 of the House-approved version H.R. 2810 would continue a provision in the FY2017 NDAA ( P.L. 114-328 , Section 1035) prohibiting funds made available for the Department of Defense (DOD) for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. Section 1034 of the Senate-approved version of H.R. 2810 would have extended the provision regarding the realignment or closure of the U.S. naval station in P.L. 114-328 from FY2017 through FY2021. \nConference report ( H.Rept. 115-404 ) filed November 9, 2017. In the conference report, the Senate receded and accepted the House language on the provision regarding the U.S. Naval Station. Section 1036 continues to prohibit funds made available for DOD for FY2018 from being used to close or abandon the U.S. Naval Station at Guantanamo Bay, Cuba, relinquish control of Guantanamo Bay to Cuba, or implement a material modification to a 1934 treaty between the United States and Cuba that constructively closes the naval station. The House agreed (356-70) to the conference report November 14, and the Senate agreed (voice vote) to it on November 16, 2017. Signed into law December 12, 2017.\nP.L. 115-141 ( H.R. 1625 ). Consolidated Appropriations Act, 2018. Originally introduced March 20, 2017, as the Targeted Rewards for the Global Eradication of Human Trafficking Act, in March 2018, the bill became the vehicle for the FY2018 omnibus appropriations measure known as the Consolidated Appropriations Act, 2018. House agreed (256-167) to an amendment to the Senate amendment March 22, 2018; Senate agreed (65-32) to the House amendment to the Senate amendment March 23, 2018. President signed into law March 23, 2018. The measure did not include policy provisions tightening sanctions or limiting funding for a U.S. diplomatic presence that had been included in several FY2018 House appropriations bills (Commerce, H.R. 3267 ; Financial Services, H.R. 3280 ; Homeland Security, H.R. 3355 ; and State Department and Foreign Operations, H.R. 3362 \u2014all of which had been incorporated into House-passed H.R. 3354 ). \nDivision C (Department of Defense), Section 8123, carries over a prior-year provision providing that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division J (Military Construction, Veterans Affairs, and Related Agencies), Section 128, provides that none of the funds made available by the act may be used to carry out the closure or realignment of the U.S. Naval Station, Guantanamo Bay, Cuba. Division K (State, Foreign Operations, and Related Programs), Section 7007, continues a long-standing provision prohibiting direct funding for the government of Cuba, including direct loans, credits, insurance, and guarantees of the Export-Import Bank or its agents. Section 7015(f) continues a long-standing provision prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The explanatory statement to H.R. 1625 , Division K, provided $28.936 million for Cuba broadcasting, $5.28 million more than requested. This compared to $28.1 million recommended by the House appropriations bill ( H.R. 3362 , H.Rept. 115-253 ) and not less than $28.6 million recommended by the Senate appropriations bill ( S. 1780 , S.Rept. 115-152 ). The explanatory statement provided $20 million for democracy programs in Cuba, compared to the Administration's zeroing out of the assistance. The House appropriations bill would have provided $30 million in democracy assistance and the Senate bill would have provided $15 million, with not less than $3 million to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. In the explanatory statement, the Secretary of State is directed to engage with foreign governments, such as the government of Cuba, not covered by Section 7067 of the act, \"to resolve cases of fugitives from justice, including persons sought by the United States Department of Justice for such crimes committed in the United States, such as Joanne Chesimard.\"\nP.L. 115-232 ( H.R. 5515 ). John S. McCain National Defense Authorization Act for Fiscal Year 2019. Introduced April 13, 2018. House passed (351-66) May 24, 2018. Senate passed (85-10) June 18, 2018, substituting the language of S. 2987 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019. As approved by the Senate, H.R. 5515 had two Cuba-related provisions: Section 1024 would extend the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; Section 1027 would require the Defense Intelligence Agency to submit a report to the appropriate congressional committees within 180 days on security cooperation between Russia and Cuba, Nicaragua, and Venezuela. Conference report ( H.Rept. 115-874 ) filed July 25, 2018; House agreed (359-54) to the conference July 26 and Senate agreed (86-10) August 1, 2018. Signed into law August 13, 2018. \nAs signed into law, Section 1032 extends the prohibition on the use of funds in FY2019 to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba. In the conference report, the conferees expressed concern about Russian military and intelligence activity in the Western Hemisphere, urged the Department of Defense to engage in dialogue and cooperation on security partners and allies in the region, and directed the Director of the Defense Intelligence Agency to submit a report to several key committees on security cooperation between the Russian Federation and Cuba, Nicaragua, and Venezuela.\nP.L. 115-244 ( H.R. 5895 ). Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019. Originally introduced as the Energy and Water Appropriations bill on May 21, 2018, the bill subsequently also became the vehicle for the Legislative Branch and Military Construction appropriations bills. House passed (235-179) June 8, 2018. Senate passed (235-179) June 25, 2018. Section 128 (Division C) of the House version and Section 127 (Division C) of the Senate version would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. Conference report, H.Rept. 115-929 , filed September 10, 2018; Senate agreed to the conference report September 12, and House agreed September 13. Signed into law September 21, 2018. In the final acted measure, Section 128 (Division C) would continue the funding prohibition for FY2019 to carry out the closure or realignment of the naval station. (Also see H.R. 5786 and S. 3024 below.)\nP.L. 115-245 ( H.R. 6157 ). Department of Defense and Labor, Health, and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019. H.R. 6157 introduced and reported by House Committee on Appropriations ( H.Rept. 115-769 ) June 20, 2018, as the Department of Defense Appropriations Act, 2019. House passed (359-49) June 28, 2018. S. 3159 introduced and reported ( S.Rept. 115-290 ) by the Senate Appropriations Committee June 28, 2018. Senate passed (85-7) H.R. 6157 on August 23, 2018, substituting the language of S. 3159 (defense) and S. 3158 , covering the Departments of Labor, Health and Human Services, and Education. Both the House and Senate versions of H.R. 6157 (Section 8115 in the House version and Section 8109 in the Senate version) had a provision to continue a prohibition against FY2019 funds being used to carry out the closure or realignment of the U.S. Naval Station, Guant\u00e1namo Bay, Cuba. Conference report, H.Rept. 115-952 , filed September 13, 2018; Senate agreed to the conference September 18, and House agreed on September 26. Signed into law September 28, 2018. In the final enacted measure, Section 8125 of Division A continues the prohibition against FY2019 funds from being used to carry out the closure or realignment of the naval station. \nP.L. 115-254 ( H.R. 302 ). FAA Reauthorization Act of 2018. Originally introduced as the Sports Medicine Licensure Clarity Act of 2017 in January 2017, the bill became the legislative vehicle for the FAA Reauthorization Act of 2018 in September 2018. As signed into law October 5, 2018, the measure includes a provision in section 1957 requiring the Administrator of the Transportation Security Administration (1) to direct all public charters to provide updated flight data to more reliably track the public charter operations of air carriers between the United States and Cuba and (2) to develop and implement a mechanism that corroborates and validates flight schedule data to more reliably track the public charter operations of air carries between the United States and Cuba. The provision also requires the TSA Administrator to provide to Congress a confidential briefing on certain aspects of security measure at airports in Cuba that have air service to the United States. \nP.L. 115-334 ( H.R. 2 ) . 2018 Farm bill, Agriculture Improvement Act of 2018. H.R. 2 introduced May 3, 2018. S. 3042 introduced June 11, 2018; reported by Senate Committee on Agriculture, Nutrition, and Forestry June 18, 2018. House passed H.R. 2 (213-211) June 21, 2018. Senate passed (86-11) June 28, 2018, substituting the language of S. 3042 , as amended. As approved by the Senate, H.R. 2 had a provision, as amended by S.Amdt. 3364 (Rubio), that would permit funding for certain U.S. export promotion programs (Market Access Program and Foreign Market Development Cooperation Program) for U.S. agricultural products in Cuba, with the caveat that funds could not be used in contravention with directives under the National Security Presidential Memorandum issued by President Trump in June 2017 that prohibits transactions with entities owned, controlled, or operated by or on behalf of military, intelligence, or security services of Cuba. The conference report ( H.Rept. 115-1072 ) to the bill, filed December 10, 2018, retained the Senate provision on Cuba and appears in Title III, Subtitle B, Section 3201(a) of the bill. Senate agreed (87-13) to the conference report December 11, 2018, and the House agreed (369-47) December 12. Signed into law December 20, 2018.\nS.Res. 224 ( Durbin). The resolution recognizes the sixth anniversary of the death of Oswaldo Pay\u00e1 Sardi\u00f1as (July 2012) and commemorates his legacy and commitment to democratic values and principles. The resolution also calls on the Cuban government to allow an impartial, third-party investigation into the circumstances of Pay\u00e1's death and to cease violating human rights, begin providing democratic freedoms to Cuban citizens, and provide amnesty for political prisoners. It urges the Inter-American Commission on Human Rights to continue reporting on human rights issues in Cuba and to request a visit to Cuba in order to investigate the circumstances surrounding the death of Oswaldo Pay\u00e1. It also urges the United States to continue to support policies and programs that promote respect for human rights and democratic principles in Cuba in a manner consistent with the aspirations of the Cuban people. Introduced July 19, 2017; reported by the Senate Foreign Relations Committee, amended, March 21, 2018. Senate agreed to the resolution by Unanimous Consent on April 11, 2018. \nAdditional Legislative Initiatives\nH.Res. 664 (King)\/ S.Res. 391 (Menendez). Similar resolutions would have called for the immediate extradition or rendering to the United States of convicted felons William Morales, Joanne Chesimard, and all other fugitives from justices who are receiving safe harbor in Cuba to escape prosecution or confinement for criminal offenses committed in the United States. H.Res. 664 introduced December 13, 2017; referred to the House Committee on Foreign Affairs. S.Res. 391 introduced February 5, 2018; referred to the Senate Committee on Foreign Relations.\nH.R. 351 (Sanford). Freedom to Travel Act of 2017. The bill would have prohibited the President from prohibiting or regulating travel to or from Cuba by U.S. citizens or legal residents. Introduced January 6, 2017; referred to House Committee on Foreign Affairs. \nH.R. 442 (Emmer)\/ S. 472 (Moran). Cuba Trade Act of 2017. Among its provisions, the initiative would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including in the Cuban Democracy Act of 1992 (CDA; P.L. 102-484 , Title XVII), the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 ( P.L. 104-114 ), and the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA; P.L. 106-387 , Title IX). It would have repealed restrictions on private financing for Cuba but would have continued to prohibit U.S. government foreign assistance or financial assistance, loans, loan guarantees, extension of credit, or other financing for export to Cuba, albeit with presidential waiver authority for national security or humanitarian reasons. The federal government would have been prohibited from expending any funds to promote trade with or develop markets in Cuba, although certain federal commodity promotion programs would be allowed. H.R. 442 introduced January 11, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Financial Services, and Agriculture. S. 472 introduced February 28, 2017; referred to the Senate Committee on Banking, Housing, and Urban Affairs. \nH.R. 498 (Cramer). Cuba Digital and Telecommunications Advancement Act of 2017, or the Cuba DATA Act. Among its provisions, the bill would have authorized the exportation of consumer communications devices to Cuba and the provision of telecommunications services to Cuba and would have repealed certain provisions of the CDA and the LIBERTAD Act. Introduced January 12, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on Energy and Commerce. \nH.R. 525 (Crawford). Cuba Agricultural Exports Act. The bill would have amended TSRA to permit U.S. government assistance for agricultural exports under TSRA, but not if the recipient would be an entity controlled by the Cuban government. The bill also would have authorized both the private financing of sales of agricultural commodities and investment for the development of an agricultural business in Cuba as long as the business was not controlled by the Cuban government or did not traffic in property of U.S. nationals confiscated by the Cuban government. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Financial Services and Agriculture. \nH.R. 572 (Serrano). Promoting American Agricultural and Medical Exports to Cuba Act of 2017. Among its provisions, the bill would have permanently redefined the term payment of cash in advance to mean that payment is received before the transfer of title and release and control of the commodity to the purchaser; authorized direct transfers between Cuban and U.S. financial institutions for products exported under the terms of TSRA; established an export promotion program for U.S. agricultural exports to Cuba; permitted nonimmigrant visas for Cuban nationals for activities related to purchasing U.S. agricultural goods; repealed a trademark sanction related to Cuba in a FY1999 omnibus appropriations measure (\u00a7211 of Division A, Title II, P.L. 105-277 ); prohibited restrictions on travel to Cuba; repealed the on-site verification requirement for medical exports to Cuba under the CDA; and established an agricultural export promotion trust fund. Introduced January 13, 2017; referred to House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Judiciary, Agriculture, and Financial Services. \nH.R. 573 (Serrano). Baseball Diplomacy Act. The bill would have waived certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committee on the Judiciary. \nH.R. 574 (Serrano). Cuba Reconciliation Act. Among its provisions, the bill would have lifted the trade embargo on Cuba by removing provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba and otherwise provide telecommunications services between the United States and Cuba; and prohibited restrictions on travel to and from Cuba. Introduced January 13, 2017; referred to the House Committee on Foreign Affairs and in addition to the Committees on Ways and Means, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Agriculture. \nH.R. 1301 (Frelinghuysen). Department of Defense Appropriations Act, 2017. Introduced March 2, 2017; referred to the House Committee on Appropriations and in addition to the Committee on the Budget. House passed (371-48) March 8, 2017. As passed, Section 8127 provides that no funds in the act may be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-31 above.)\nH.R. 1744 (Smith, New Jersey) . Walter Patterson and Werner Foerster Justice and Extradition Act. The bill would have called for a report on fugitives from U.S. justice in Cuba, U.S. efforts to secure the return of such fugitives, and other information on those cases. Introduced March 27, 2017; referred to Committee on Foreign Affairs. \nH.R. 2966 (Rush). United States-Cuba Normalization Act of 2017. The bill would have removed provisions of law restricting trade and other relations with Cuba; authorized common carriers to install and repair telecommunications equipment and facilities in Cuba, and otherwise provide telecommunications services between the United States and Cuba; prohibited restrictions on travel to and from Cuba and on transactions incident to such travel; called on the President to continue discussions with Cuba for the purpose of settling claims of U.S. nationals for the taking of property by the Cuban government and securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to the products of Cuba; and prohibited limits on remittances to Cuba. Introduced June 20, 2017; referred to House Committee on Foreign Affairs, and in addition to the Committees on Ways and Means, Energy and Commerce, the Judiciary, Agriculture, and Financial Services. \nH.R. 2998 (Dent) \/ S. 1557 (Moran) . Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018. H.R. 2998 introduced and reported ( H.Rept. 115-188 ) by the House Appropriations Committee on Appropriations June 22, 2017. S. 1557 introduced and reported ( S.Rept. 115-130 ) by the Senate Committee on Appropriations July 13, 2017. Section 128 of the House bill and Section 127 of the Senate bill would provide that none of the funds made available by this act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). As stated in the House and Senate committee reports to the respective bills, \"the provision is intended to prevent the closure or realignment of the installation out of the possession of the United States, and maintain the Naval Station's longstanding regional security and migrant operations missions.\" The bill became a part of a \"minibus\" appropriations package, H.R. 3219 , approved by the House in July 2017, and a full-year FY2018 omnibus appropriations bill, H.R. 3354 , approved by the House in September 2017. For final action on FY2018 appropriations, see P.L. 115-141 above.\nH.R. 3180 (Nunes). Intelligence Authorization Act for Fiscal Year 2018. Introduced July 11, 2017, and reported by the House Committee on Intelligence July 24, 2017 ( H.Rept. 115-251 ). House passed (380-35) July 28, 2017. As approved, Section 609 would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees \"fully and currently informed,\" about all \"intelligence activities\" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which are defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 1761 (Burr), did not include a similar provision. For additional action, see H.R. 6237 below. \nH.R. 3219 (Granger). Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, or the Make America Secure Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-219 ) July 13, 2017, by the House Committee on Appropriations as the Department of Defense Appropriations Act, 2018, the bill subsequently became the vehicle for four other appropriations measures. House approved (235-192) July 27, 2017. As approved, Section 8116 of Division A (Defense appropriations) would provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. The provision would extend the current similar provision for FY2017 set forth in P.L. 115-31 (Division C, Section 8127). Section 128 of Division C (Military Construction appropriations) also would provide that none of the funds made available by the act may be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above.\nH.R. 3267 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2018. Introduced and reported ( H.Rept. 115-231 ) July 17, 2017, by the House Committee on Appropriations. Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner has expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 1662 , did not have a comparable provision. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above.\nH.R. 3280 (Graves). Financial Services and General Government Appropriations Act, 2018. Introduced and reported ( H.Rept. 115-234 ) July 18, 2017, by the House Committee on Appropriations. Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. Also see H.R. 3354 below, and for final action on FY2018 appropriations, see P.L. 115-141 above.\nH.R. 3328 ( Katko ) \/ S. 2023 (Rubio) . Cuban Airport Security Act of 2017. Identical bills would have required, among other provisions, a briefing for the House Committee on Homeland Security, Senate Committee on Commerce, Science, and Transportation, and the Comptroller General of the United States regarding certain security measures and equipment at each of Cuba's 10 international airports. The bill also would have prohibited a U.S. air carrier from employing a Cuban national in Cuba (pursuant to 31 CFR 515.573) unless the air carrier has publicly disclosed the full text of the formal agreement between the air carrier and the Empresa Cubana de Aeropuertos y Servicios Aeronauticos or any other entity associated with the Cuban government. The bill would also, to the extent practicable, have prohibited U.S. air carriers from hiring Cuban nationals if they had been recruited, hired, or trained by entities that are owned, operated, or controlled in whole or in part by Cuba's Council of State, Council of Ministers, Communist Party, Ministry of the Revolutionary Armed Forces, Ministry of Foreign Affairs, or Ministry of the Interior. H.R. 3328 introduced July 20, 2017; reported by the Committee on Homeland Security ( H.Rept. 115-308 ) and discharged by Committees on Foreign Affairs and Transportation September 13, 2017. House passed (voice vote) October 23, 2017. S. 2023 introduced October 26, 2017; referred to the Committee on Commerce, Science, and Transportation. Also see action above on P.L. 115-254 , FAA Reauthorization Act of 2018.\nH.R. 3354 ( Calvert ). Make America Sure and Prosperous Appropriations Act, 2018. Introduced as the Department of the Interior, Environment, and Related Agencies Appropriation Act on July 21, 2017, the bill subsequently became the vehicle for the FY2018 omnibus appropriations measure covering 12 FY2018 appropriations bills. House passed (211-198) September 14, 2017. As approved by the House, the measure had numerous provisions on Cuba that were included in individual House Appropriations Committee-reported appropriations bills. For final action on FY2018 appropriations, see P.L. 115-141 above.\nDivision C (Commerce, Justice, Science). Section 536 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. (See H.R. 3267 above.) Division D (Financial Services and General Government). Section 130 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 131 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. (See H.R. 3280 above.) Division E (Homeland Security). Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. (See H.R. 3355 below.) Division G (State Department and Foreign Operations). Section 7007 would have continued to prohibit direct funding for the government of Cuba. Section 7015(f) would have continued to require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014. Section 7045(c)(2) would have provided $30 million in Economic Support Fund assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that was not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. (See H.R. 3362 below.) Division I (Defense). Section 8116 would have continued to provide that no funds made available by the act could be used to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 3219 above.) Division K (Military Construction). Section 128 would have continued to provide that none of the funds made available by this act could be used to carry out the closure or realignment or the U.S. Naval Station at Guantanamo Bay, Cuba. (See H.R. 2998 and H.R. 3219 above.)\nH.R. 3355 (Carter). Department of Homeland Security Appropriations, 2018. Introduced and reported ( H.Rept. 115-239 ) July 21, 2017, by the House Committee on Appropriations. Section 208 would have prohibited funds from being used to approve, license, facilitate, authorize, or allow the trafficking or import of property confiscated by the Cuban government. Also see H.R. 3354 above, and for final action on FY2018 appropriations see P.L. 115-141 above.\nH.R. 3362 (Rogers) \/ S. 1780 ( Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2018. H.R. 3362 introduced and reported ( H.Rept. 115-253 ) by the House Committee on Appropriations on July 24, 2017. S. 1780 introduced and reported ( S.Rept. 115-152 ) by the Senate Appropriations Committee September 7, 2017. Also see H.R. 3354 above, and for final action on FY2018 appropriations, see P.L. 115-141 above. \nBoth bills would continue two long-standing provisions: Section 7007 would prohibit direct funding for the government of Cuba, and Section 7015(f) would require notification to the Committees on Appropriations for funds for assistance to Cuba. Section 7045(c)(1) of the House bill would have prohibited funding in the act and prior appropriation measures for the establishment or operation of a U.S. diplomatic presence in Cuba beyond that which was in existence prior to December 17, 2014, including the hiring of additional staff, unless such staff were necessary for protecting the health, safety, or security of diplomatic personnel or facilities in Cuba; the prohibition would not have applied to support for democracy-building efforts for Cuba or if the President determined that Cuba had met the requirements and factors specified in Section 205 of the LIBERTAD Act of 1996 for determining when a transition government is in power in Cuba. Section 7045(c)(2) of the House bill would have provided $30 million in Economic Support Funds (ESF) assistance to promote democracy and strengthen civil society but would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building as expressly authorized in the LIBERTAD Act of 1996 and the CDA of 1992. In the Senate bill, Section 7045(c) would have provided $15 million in ESF for democracy programs in Cuba; of this, the provision would have provided that not less than $3 million be made available to USAID to support free enterprise and private business organizations in Cuba and people-to-people educational and cultural activities. The report to the House bill would have provided not less than $28.056 million for the Office of Cuba Broadcasting, whereas the report to the Senate bill would have provided $28.569 million.\nH.R. 4583 (Wilson , Joe ). Ensuring Diplomats' Safety Act. The bill would have suspended all U.S. diplomatic presence in Cuba until the conclusion of any U.S. law enforcement investigation relating to \"the attacks on 17 United States diplomats.\" Introduced December 7, 2017; referred to the House Committee on Foreign Affairs.\nH.R. 5786 (Dent ) \/ S. 3024 (Boozman). Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2019. H.R. 5786 introduced and reported ( H.Rept. 115-673 ) by the House Committee on Appropriations May 11, 2018. S. 3024 introduced and reported ( H.Rept. 115-269 ) by the Senate Appropriations Committee June 7, 2018. Section 128 of the House bill and Section 127 of the Senate bill would continue a provision prohibiting funding to carry out the closure or realignment of the U.S. Naval Station at Guantanamo Bay, Cuba. (For further action, see P.L. 115-244 above)\nH.R. 5952 (Culberson). Commerce, Justice, Science, and Related Agencies Appropriations, 2019. Introduced and reported ( H.Rept. 115-704 ) by the House Appropriations Committee May 24, 2018). Section 535 would have prohibited funds in the act from being used to approve the registration, renewal, or maintenance of the registration of a mark, trade name, or commercial name that was confiscated in Cuba unless the original owner had expressly consented. In the report to the bill, the minority expressed the view that the provision was an inappropriate rider that did not belong in the bill, which would place restrictions on the U.S. Patent and Trademark Office (USPTO's) ability to issue trademarks to Cuban nationals, even in cases in which a specific license has been issued by the Department of the Treasury's Office of Foreign Assets Control. The minority stated that the provision would meddle in foreign policy, harm diplomatic efforts with Cuba, and create a significant burden, and set an impossible standard for the USPTO. The Senate companion bill, S. 3072 , did not have a comparable provision. \nH.R. 6147 (Calvert). Interior, Environment, and Financial Services and General Government Appropriations, 2019. Originally introduced as the FY2019 Department of the Interior, Environment, and Related Agencies appropriations bill, the measure also became the House vehicle for Financial Services and General Government appropriations and incorporated the House version of H.R. 6258 as Division B; House passed (217-199) July 19, 2018. As approved by the House: Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government; Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that is substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate version of the bill, approved (92-6) August 1, 2018, also became the vehicle for Financial Services and General Government, Agriculture, and Transportation, Housing and Urban Development appropriations; it did not include the two Cuba-related provisions in the House version. Also see H.R. 6258 below. \nH.R. 6237 (Nunes). Matthew Young Pollard Intelligence Authorization for Fiscal Years 2018 and 2019. Introduced June 27, 2018; reported ( H.Rept. 115-805 ) by the House Committee on Intelligence July 3, 2018. House passed (363-54) July 12, 2018. As approved, the bill included a provision that would have expressed the sense of Congress that, pursuant to the statutory requirement for the intelligence community (IC) to keep the congressional intelligence committees \"fully and currently informed,\" about all \"intelligence activities\" of the United States, IC agencies must submit prompt written notification after becoming aware that an individual in the executive branch has disclosed certain classified information outside established intelligence channels to adversary foreign governments, which were defined in the provision as the governments of North Korea, Iran, China, Russia, and Cuba. The Senate companion bill, S. 3153 (Burr), did not include a similar provision.\nH.R. 6258 (Graves) . Financial Services and General Government Appropriations Act, 2019. Introduced and reported ( H.Rept. 115-792 ) by the House Committee on Appropriations June 28, 2018. Section 128 would have provided that no funds made available by the act could be used to approve, license, facilitate, authorize, or otherwise allow the use, purchase, trafficking, or import of property confiscated by the Cuban government. Section 129 would have provided that no funds made available by the act could be used to authorize a general license or approve a specific license with respect to a mark, trade name, or commercial name that was substantially similar to one that was used in connection with a business or assets that were confiscated by the Cuban government unless the original owner expressly consented. The Senate companion bill, S. 3107 , did not have similar provisions. Also see H.R. 6147 for additional legislative action.\nH.R. 6385 (Rogers) \/ S. 3108 (Graham) . Department of State, Foreign Operations, and Related Programs Appropriations, 2019. House Appropriations Committee introduced and reported H.R. 6385 ( H.Rept. 115-829 ) on July 16, 2018. Senate Appropriations Committee introduced and reported S. 3108 ( S.Rept. 115-282 ) June 21, 2018. Both bills would continue long-standing provisions prohibiting direct funding for the government of Cuba and prohibiting the obligation or expending of assistance for Cuba except through the regular notification procedures of the Committees on Appropriations. The House bill would have provided $30 million to promote democracy and strengthen civil society in Cuba, with, according to the report to the bill ( H.Rept. 115-829 ), not less than $8 million for the National Endowment for Democracy; the report would have prohibited the obligation of funds for business promotion, economic reform, entrepreneurship, or any other assistance that is not democracy-building and stipulate that grants exceeding $1 million or to be implemented over a period of 12 months would be awarded only to organizations with experience promoting democracy inside Cuba. In the Senate bill, Section 7045(c) would have provided $15 million for democracy programs in Cuba. With regard to Cuba broadcasting, the House report would have provided $29.1 million and the Senate report ( S.Rept. 115-282 ) would have provided $29.2 million. The report to the Senate bill would also have called for a State Department Cuba report on Internet access, the use of cell phones to access data, the impact of access to telecommunications technology on increased political and economic opportunities, and the impact of telecommunications development on human rights. \nS.Res. 511 (Rubio)\/ H.Res. 916 (Diaz-Balart). Similar but not identical resolutions would have honored Las Damas de Blanco as the recipient of the 2018 Milton Friedman Prize for Advancing Liberty. S.Res. 511 introduced May 16, 2018; referred to the Committee on Foreign Relations. H.Res. 916 introduced May 25, 2018; referred to the Committee on Foreign Affairs. \nS. 259 (Nelson)\/ H.R. 1450 (Issa). No Stolen Trademarks Honored in America Act. The initiative would have modified a 1998 prohibition (\u00a7211 of Division A, Tile II, P.L. 105-277 ) on recognition by U.S. courts of certain rights to certain marks, trade names, or commercial names. The bill would have applied a fix so that the sanction would apply to all nationals and would bring the sanction into compliance with a 2002 World Trade Organization dispute settlement ruling. S. 259 introduced February 1, 2017; referred to the Senate Committee on the Judiciary. H.R. 1450 introduced March 9, 2017; referred to House Committee on the Judiciary. \nS. 275 (Heitkamp). Agricultural Export Expansion Act of 2017. The bill would have amended TSRA to allow private financing by U.S. persons of sales of agricultural commodities to Cuba. Introduced February 2, 2017; referred to Senate Committee on Banking, Housing, and Urban Affairs. \nS. 539 (Cruz). The bill would have designated the area between the intersections of 16 th Street, Northwest and Fuller Street, Northwest, and 16 th Street, Northwest, and Euclid Street, Northwest, in Washington, DC, as \"Oswaldo Paya Way.\" Introduced March 7, 2017; referred to the Committee on Homeland Security and Governmental Affairs. \nS. 1286 (Klobuchar). Freedom to Export to Cuba Act of 2017. The bill would have repealed or amended many provisions of law restricting trade and other relations with Cuba, including certain restrictions in the CDA, the LIBERTAD Act, and TSRA. Introduced May 25, 2016; referred to the Senate Committee on Banking, Housing, and Urban Affairs.\nS. 1287 (Flake). Freedom for Americans to Travel Act of 2017. The bill would have prohibited the President from regulating travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions incident to such travel, including banking transactions. It would have provided for the President to regulate such travel or restrictions on a case-by-case basis if the President determined that such restriction was necessary to protect the national security of the United States or was necessary to protect the health or safety of U.S. citizens or legal residents resulting from traveling to or from Cuba; to implement such a restriction, the President would have been required to submit a written justification not later than seven days to several congressional committees. Introduced May 25, 2017; referred to the Committee on Foreign Relations. \nS. 1655 (Collins). Transportation, Housing, and Urban Development, and Related Agencies Appropriations Act, 2018. Introduced and reported ( S.Rept. 115-138 ) July 27, 2017. Section 119E would have allowed foreign air carriers traveling to or from Cuba to make transit stops in the United States for refueling and other technical services. \nS. 1699 (Wyden). United States-Cuba Trade Act of 2017. The bill, among its provisions, would have repealed or amended provisions of law restricting trade and other relations with Cuba; authorized common carriers to install, maintain, and repair telecommunications equipment and facilities in Cuba and provided telecommunications services between the United States and Cuba; prohibited restrictions on travel to Cuba; called for the President to take all necessary steps to advance negotiations with the Cuban government for settling property claims of U.S. nationals and for securing the protection of internationally recognized human rights; extended nondiscriminatory trade treatment to Cuba; prohibited restrictions on remittances to Cuba; and required a presidential report to Congress prior to the denial of foreign tax credit with respect to certain foreign countries. Introduced August 1, 2017; referred to the Senate Committee on Finance. \nS. 3654 (Menendez). U.S. Agency for Global Media Reform Act. Introduced November 15, 2018 and referred to the Senate Committee on Foreign Relations; reported by Senator Corker November 28, 2018, with an amendment in the nature of a substitute and without written report. As reported, Section 8(b), included a requirement for a briefing or report from the CEO of the United States Agency for Global Media on any employee of the agency or an agency grantee network who has been suspended or placed on administrative leave without a formal disciplinary determination for writing or approving content in programming inconsistent with the agency's mission to \"inform, engage, and connect people around the world in support of freedom and democracy.\" The briefing or report would have been required to include information on the employment status of the suspended employee and the \"reasons for the Agency's failure to made a formal disciplinary determination.\" The provision originated from an amendment offered by Senator Flake, adopted by Unanimous Consent, during Senate Foreign Relation Committee consideration of the bill on November 28, 2018. \nAppendix B. Links to U.S. Government Reports\nU.S. Relations with Cuba, Fact Sheet , Department of State\nDate: November 8, 2017 Full Text: https:\/\/www.state.gov\/r\/pa\/ei\/bgn\/2886.htm\nCongressional Budget Justificati on for Foreign Operations FY2019 , Appendix 2 , pp. 474-475, Department of State\nDate: March 14, 2018 Full Text: https:\/\/www.state.gov\/documents\/organization\/279517.pdf\nCountry Report s on Human Rights Practices for 2017 , Cuba , Department of State\nDate: April 20, 2018 Full Text: https:\/\/www.state.gov\/documents\/organization\/277567.pdf\nCuba web page, Department of State\nLink: https:\/\/www.state.gov\/p\/wha\/ci\/cu\/index.htm\nCuba web page, Department of Commerce, Bureau of Industry and Security\nLink: https:\/\/www.bis.doc.gov\/index.php\/policy-guidance\/country-guidance\/sanctioned-destinations\/cuba\nCuba web page, Department of Agriculture, Foreign Agricultural Service\nLink: https:\/\/www.fas.usda.gov\/regions\/cuba \nCuba Sanctions web page, Department of the Treasury, Office of Foreign Assets Control\nLink: https:\/\/www.treasury.gov\/resource-center\/sanctions\/Programs\/Pages\/cuba.aspx\nInternational R eligious Freedom Report for 2017 , Cuba , Department of State\nDate: May 29, 2018 Full Text: https:\/\/www.state.gov\/documents\/organization\/281308.pdf\nInternational Narcotics Control Strategy Report 2018 , Volume I, Drug and Chemical Control, p. 146, Department of State\nDate: March 2018 Link: http:\/\/www.state.gov\/documents\/organization\/278759.pdf\nInternational Narcotics Control Strategy Report 2018, Volume II , Money Laundering, pp. 85-87, Department of State\nDate: March 2018 Link: http:\/\/www.state.gov\/documents\/organization\/278760.pdf\nOverview of Cuban Imports of Goods and Services and Effects of U.S. Restrictions , U.S. International Trade Commission, Publication 4597\nDate: March 2016 Link: https:\/\/www.usitc.gov\/sites\/default\/files\/publications\/332\/pub4597_0.pdf\nTrafficking in Persons Report 2018 , Cuba, Department of State\nDate: June 2018\nLink: https:\/\/www.state.gov\/j\/tip\/rls\/tiprpt\/countries\/2018\/282640.htm","output":"Cuba remains a one-party authoritarian state with a poor human rights record. Current President Miguel D\u00edaz-Canel succeeded Ra\u00fal Castro in April 2018, although Castro is continuing as first secretary of Cuba's Communist Party. Over the past decade, Cuba has implemented gradual market-oriented economic policy changes, but critics maintain that it has not taken enough action to foster sustainable economic growth. Most observers do not anticipate major policy changes under D\u00edaz-Canel, at least in the short term; the president faces the enormous challenges of reforming the economy and responding to desires for greater freedom.\nU.S. Policy\nCongress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening and at times easing U.S. economic sanctions. Since the early 1960s, the centerpiece of U.S. policy has consisted of economic sanctions aimed at isolating the Cuban government. In 2014, however, the Obama Administration initiated a major policy shift, moving away from sanctions toward a policy of engagement. The policy change included the restoration of diplomatic relations (July 2015); the rescission of Cuba's designation as a state sponsor of international terrorism (May 2015); and an increase in travel, commerce, and the flow of information to Cuba implemented through regulatory changes.\nIn June 2017, President Trump unveiled a new policy toward Cuba that increased sanctions and partially rolled back some of the Obama Administration's efforts to normalize relations. The most significant changes include restrictions on transactions with companies controlled by the Cuban military and the elimination of individual people-to-people travel. In response to unexplained injuries of members of the U.S. diplomatic community at the U.S. Embassy in Havana, the State Department reduced the staff of the U.S. Embassy by about two-thirds; the reduction has affected embassy operations, especially visa processing, and made bilateral engagement more difficult.\nLegislative Activity\nIn the 115th Congress, debate over Cuba policy continued, especially with regard to economic sanctions. The 2018 farm bill, P.L. 115-334 (H.R. 2), enacted in December 2018, has a provision permitting funding for two U.S. agricultural export promotion programs in Cuba. Two FY2019 House appropriations bills, Commerce (H.R. 5952) and Financial Services (H.R. 6258 and H.R. 6147), had provisions that would have tightened economic sanctions, but final action was not completed by the end of the 115th Congress. Other bills were introduced, but not acted upon, that would have eased or lifted sanctions altogether: H.R. 351 and S. 1287 (travel); H.R. 442\/S. 472 and S. 1286 (some economic sanctions); H.R. 498 (telecommunications); H.R. 525 (agricultural exports and investment); H.R. 572 (agricultural and medical exports and travel); H.R. 574, H.R. 2966, and S. 1699 (overall embargo); and S. 275 (private financing for U.S. agricultural exports).\nCongress continued to provide funding for democracy and human rights assistance in Cuba and for U.S.-government sponsored broadcasting. For FY2017, Congress provided $20 million in democracy assistance and $28.1 million for Cuba broadcasting (P.L. 115-31). For FY2018, it provided $20 million for democracy assistance and $28.9 million for Cuba broadcasting (P.L. 115-141; explanatory statement to H.R. 1625). For FY2019, the Trump Administration requested $10 million in democracy assistance and $13.7 million for Cuba broadcasting. The House Appropriations Committee's FY2019 State Department and Foreign Operations appropriations bill, H.R. 6385, would have provided $30 million for democracy programs, whereas the Senate version, S. 3108, would have provided $15 million; both bills would have provided $29 million for broadcasting. The 115th Congress approved a series of continuing resolutions (P.L. 115-245 and P.L. 115-298 ) that continued FY2019 funding at FY2018 levels through December 21, 2018, but did not complete action on FY2019 appropriations, leaving the task to the 116th Congress.\nIn other action, several approved measures\u2014P.L. 115-232, P.L. 115-244, and P.L. 115-245\u2014have provisions extending a prohibition on FY2019 funding to close or relinquish control of the U.S. Naval Station at Guantanamo Bay, Cuba; the conference report to P.L. 115-232 also requires a report on security cooperation between Russia and Cuba. The FAA Reauthorization Act of 2018 (P.L. 115-254) requires the Transportation Security Administration to brief Congress on certain aspects of Cuban airport security and efforts to better track public air charter flights between the United States and Cuba. In April 2018, the Senate approved S.Res. 224, commemorating the legacy of Cuban democracy activist Oswaldo Pay\u00e1. For more on legislative initiatives in the 115th Congress, see Appendix A."}
{"id":"crs_RS21534","pid":"crs_RS21534_0","input":"\tIntroduction\n\nOman is located along the Arabian Sea, on the southern approaches to the Strait of Hormuz, across from Iran. Except for a brief period of Persian rule, Omanis have remained independent since expelling the Portuguese in 1650. The Al Said monarchy began in 1744, extending Omani influence into Zanzibar and other parts of East Africa until 1861. Sultan Qaboos bin Sa'id Al Said, born in November 1940, is the eighth in the line of the monarchy; he became sultan in July 1970 when, with British support, he forced his father, Sultan Said bin Taymur Al Said, to abdicate. \nThe United States has had relations with Oman from the early days since American independence. The U.S. merchant ship Ramber made a port visit to Muscat in September 1790. The United States signed a Treaty of Amity and Commerce with Oman in 1833, one of the first of its kind with an Arab state. This treaty was replaced by the Treaty of Amity, Economic Relations, and Consular Rights signed at Salalah on December 20, 1958. Oman sent an official envoy to the United States in 1840. A U.S. consulate was maintained in Muscat during 1880-1915, a U.S. embassy was opened in 1972, and the first resident U.S. Ambassador arrived in July 1974. Oman opened its embassy in Washington, DC, in 1973. Sultan Qaboos was accorded formal state visits in 1974, by President Gerald Ford, and in 1983, by President Ronald Reagan. President Bill Clinton visited Oman in March 2000. Career diplomat Marc Sievers has been Ambassador to Oman since late 2015.\n\n\tDemocratization, Human Rights, and Unrest\n\nOman remains a monarchy in which decisionmaking still is concentrated with Sultan Qaboos. Throughout his reign, Qaboos has also formally held the position of Prime Minister, as well as the positions of Foreign Minister, Defense Minister, Finance Minister, and Central Bank Governor. Other officials serve as \"Ministers of State\" for those portfolios and serve de-facto as ministers. Qaboos's government, and Omani society, reflects the diverse backgrounds of the Omani population, many of whom have long-standing family connections to parts of East Africa that Oman once controlled, and to the Indian subcontinent. \nSome senior Omanis argue that a formal position of Prime Minister is needed to organize the functions of the government and enable the Sultan to focus on larger strategic decisions. Should such a post be established, potential candidates include the deputy prime minister for cabinet affairs, Fahd bin Mahmud Al Said (who Omanis already widely refer to as \"Prime Minister\"); the secretary general of the Foreign Ministry, Sayyid Badr bin Hamad Albusaidi; Salim bin Nasir al-Ismaily, a businessman and economic adviser to the Sultan who reportedly brokered 2013 U.S.-Iran meetings; and Royal Office head General Sultan bin Mohammad al-Naamani. \nAlong with political reform issues, the question of succession has long been central to observers of Oman. Qaboos's brief marriage in the 1970s produced no children, and the sultan, who was born in November 1940, has no heir apparent. According to Omani officials, succession would be decided by a \"Ruling Family Council\" of his relatively small Al Said family (about 50 male members). If the family council cannot reach agreement within three days, it is to select the successor recommended by Qaboos in a sealed letter to be opened upon his death; there are no confirmed accounts of whom Qaboos has recommended. The succession issue has come to the fore since he underwent cancer treatment in Germany during 2014-15. Since returning to Oman, he has appeared in public only on major occasions or to meet visiting foreign leaders. \nPotential Successors . The leading contenders to succeed Qaboos include three brothers who are cousins of the Sultan and whose sister was the woman who was briefly married to Qaboos. They are Minister of Heritage and Culture Sayyid Haythim bin Tariq Al Said, whom some assess indecisive; Asad bin Tariq Al Said, a former military officer who has the title \"Representative of the Sultan\" and was appointed deputy prime minister for international relations and cooperation affairs in early 2017; and Shihab bin Tariq Al Said, the former commander of Oman's Navy. All are in their 60s. Another potential choice is Fahd bin Mahmud, above. \n\n\t\tRepresentative Institutions, Election History, and Unrest\n\nMany Omanis, U.S. officials, and international observers credit Sultan Qaboos for establishing consultative institutions and electoral processes before there was evident public pressure to do so. Under a 1996 \"Basic Law,\" Qaboos created a bicameral \"legislature\" called the Oman Council, consisting of the existing Consultative Council ( Majlis As Shura ) and an appointed State Council ( Majlis Ad Dawla ), established by the Basic Law. The Consultative Council was formed in 1991 to replace a 10-year-old all-appointed advisory council. A March 2011 decree expanded the Oman Council's powers to include questioning ministers, selecting its own leadership, and reviewing government-drafted legislation, but it still does not have the power to draft legislation or to overturn the Sultan's decrees or government regulations. As in the other GCC states, formal political parties are not allowed. But, unlike Bahrain or Kuwait, well-defined \"political societies\" (de-facto parties) that compete within the electoral process have not developed in Oman. \nThe electoral process has broadened consistently. The Consultative Council was initially chosen through a selection process in which the government had substantial influence over the body's composition, but this process was gradually altered to a full popular election. When it was formed in 1991, the body had 59 seats, and was gradually expanded to its current 85 seats. Prior to 2011, the Sultan selected the Consultative Council chairman; since then, the chairman and a deputy chairman have been elected by the Council membership. Also in 2011, Qaboos instituted elections for municipal councils. Each province with a population of more than 30,000 elects two members, whereas a province with fewer than that elects one.\nThe electorate for the Consultative Council has gradually expanded. In the 1994 and 1997 selection cycles for the council, \"notables\" in each of Oman's districts nominated three persons and Qaboos selected one of them to occupy that district's seat. The first direct elections were held in September 2000, but the electorate was limited (25% of all citizens over 21 years old). For the October 4, 2003, election, voting rights were extended to all citizens, male and female, over 21 years of age. About 195,000 Omanis voted in that election (74% turnout). The same 2 women were elected as happened in the 2000 vote (out of 15 women candidates). In the October 27, 2007, election (after changing to a four-year term), public campaigning was allowed for the first time and about 250,000 people voted (63% turnout). None of the 21 females (out of 631 candidates) won. The more recent Consultative Council elections are discussed below.\nAppointed State Council . The government considers the State Council as a counterweight to the Consultative Council, and it remains all-appointed. The Council, which had 53 members at inception, has been expanded to 84 members. By law, it cannot have more members than the Consultative Council. Appointees are usually former high-ranking government officials, military officials, tribal leaders, and other notables. \n\n\t\t\tUnrest Casts Doubt on Satisfaction with Pace of Political Reform\n\nThe expansion of the electoral process did not satisfy those Omanis, particularly those younger and well-educated, who consider the pace of liberalization too slow, or those dissatisfied with the country's economic performance and apparent lack of job opportunities. In July 2010, 50 prominent Omanis petitioned Sultan Qaboos for a \"contractual constitution\" that would provide for a fully elected legislature. In February 2011, after protests in Egypt toppled President Hosni Mubarak, protests broke out in the northern industrial town of Sohar, Oman, and later spread to the capital, Muscat. Although most protesters asserted that their protests were motivated primarily by economic factors, some echoed calls for a fully elected legislature. One person was killed in February 2011 by security forces. \nBut, many protestors carried posters lauding his rule. And, many older Omanis apparently did not support the protests, apparently comparing the existing degree of \"political space\" favorably with that during the reign of Qaboos's father, Sultan Said bin Taymur. During his father's reign, Omanis needed the sultan's approval even to wear spectacles or to import cement, for example. Some experts argue that Sultan Said kept Oman isolated in an effort to insulate it from leftist extremism that gained strength in the region during the 1960s. \nBy mid-2012, the government had calmed the unrest through a combination of reforms and punishments, including expanding the powers of the Oman Council; appointing several members of the Consultative Council as ministers; giving the office of the public prosecutor autonomy and consumers additional protections; naming an additional woman minister; ordering that additional public sector jobs be created; increasing the minimum wage; making grants to unemployed job seekers; and arresting journalists, bloggers, and other activists for \"defaming the Sultan,\" \"illegal gathering,\" or violating the country's cyber laws. Twenty-four of those arrested went on a hunger strike in February 2013 and the Sultan pardoned virtually all. Omanis who had been dismissed from public and private sector jobs for participating in unrest were reinstated. \nThe U.S. reaction to the unrest in Oman was muted, possibly because Oman is a key ally of the United States and perhaps because the unrest appeared relatively minor. \nSmall demonstrations occurred again for two weeks in January 2018. Protesters generally cited a perceived lack of job opportunities rather than a demand for political reform. In response, the government reiterated an October 2017 plan to create 25,000 jobs for Omani citizens and banned the issuance of new visas for expatriate workers in 87 private sector professions. \n\n\t\t\tRecent Elections\n\nThe October 15, 2011, Consultative Council elections went forward despite the unrest. The enhancement of the Oman Council's powers generated additional interest in the vote\u20141,330 candidates applied to run, a 70% increase from the 2007 vote. A record 77 were women. However, voter turnout (about 60%) was not higher than in past elections. The expectation of several female victors was not realized: only one was elected. Some reformists were heartened by the victory of two political activists\u2014Salim bin Abdullah Al Oufi, and Talib Al Maamari. A relatively young entrepreneur was selected speaker of the Consultative Council (Khalid al-Mawali). In the State Council appointments, the Sultan appointed 15 women, bringing the total female participation in the Oman Council to 16\u2014over 10%. The government did not permit outside election monitoring.\nIn 2012, the government also initiated elections for 11 municipal councils. Previously, only one such council, all appointed, had been established\u2014for the capital region. The elected \"councilors\" make recommendations to the government on development projects, but do not make final funding decisions. The chairman and deputy chairman of each municipal council are appointed by the government. In the December 22, 2012, municipal elections, there were 192 seats up for election. There were more than 1,600 candidates, including 48 women. About 546,000 citizens voted. Four women were elected.\n\n\t\t\t\t2015 Consultative Council Election and 2016 Municipal Elections\n\nElections to the Consultative Council (expanded by one seat, to 85) were last held on October 25, 2015. A total of 674 candidates applied to run, although 75 candidates were barred, apparently based on their participation in the 2011-2012 unrest. There were 20 female candidates. Turnout was estimated at 56% of the 612,000 eligible voters. The one woman on the Council was reelected and no other female was elected. As happened in 2011, only one woman was elected. Khalid al-Mawali was reelected Consultative Council chairman. On November 8, 2015, Qaboos appointed the 84-seat State Council, of whom 13 were women. \nOn December 25, 2016, the second municipal elections were held to choose 202 councilors\u2014an expanded number from the 2012 municipal elections. There were 731 candidates, of whom 23 were women. Turnout was about 40% of the 625,000 eligible voters, according to the government. Seven women were elected, more than were elected in 2012 but still a small percentage of the 202 seats up for vote. \nThe next Consultative Council elections are due to be held in the fall of 2019. No date has been announced. \n\n\t\tBroader Human Rights Issues4\n\nAccording to the most recent State Department report on human rights, the principal human rights problems in Oman, other than the political structure, are limits on freedom of speech, assembly, and association; torture of prisoners and detainees; censorship of Internet content; and criminalization of LGBT conduct. U.S. and other reports generally credit the government with holding accountable security personnel and other officials for abuses, including prosecuting multiple corruption cases. The law provides for an independent judiciary, but the Sultan chairs the country's highest legal body, the Supreme Judicial Council, which can review judicial decisions. An \"Oman Human Rights Commission,\" a quasi-independent but government-sanctioned body, investigates and monitors prison and detention center conditions through site visits. \nState Department funds (Middle East Partnership Initiative, Near East Regional Democracy account, and other accounts) have been used in past fiscal years to promote Omani civil society, judicial reform, election management, media independence, and women's empowerment. The U.S. Commerce Department's Commercial Law Development Program has worked to improve Oman's legislative and regulatory frameworks for business. \n\n\t\t\tFreedom of Expression, Media, and Association\n\nOmani law provides for limited freedom of speech and press, but the government generally does not respect these rights. A 2014 royal decree stipulates that citizens joining groups deemed \"harmful to national interests\" could be subject to revocation of citizenship. No revocations on those grounds have been announced. \nPress criticism of the government is tolerated, but criticism of the Sultan and, by extension, senior government officials, is not. In October 2015, Oman followed the lead of many of the other GCC states in issuing a new royal decree prohibiting disseminating information that targets \"the prestige of the State's authorities or aimed to weaken confidence in them.\" The government has prosecuted dissident bloggers and cyber-activists under that decree and other laws. In 2017, Oman permanently shuttered the Al Zaman independent daily newspaper for 2016 articles accusing senior judicial officials of corruption. \nPrivate ownership of radio and television stations is not prohibited, but there are few privately owned stations. Satellite dishes have made foreign broadcasts accessible to the public. Still, there are some legal and practical restrictions to Internet usage, and only a minority of the population has subscriptions to internet service. Many Internet sites are blocked, primarily for sexual content, but many Omanis are able to bypass restrictions by accessing the Internet by cell phone. \nOmani law provides for freedom of association for \"legitimate objectives and in a proper manner\"\u2014language that enables the government to restrict such rights in practice. A 2014 decree by the Sultan imposed a new nationality law that stipulates that citizens who join groups deemed harmful to national interests could be subject to citizenship revocation. Associations must register with the Ministry of Social Development. Registered associations for foreign nationalities include the Indian Social Group. \n\n\t\t\tTrafficking in Persons and Labor Rights\n\nOman is a destination and transit country for men and women primarily from South Asia and East Africa who are subjected to forced labor and, to a lesser extent, sex trafficking. In October 2008, President George W. Bush directed that Oman be moved from a \"Tier 3\" ranking on trafficking in persons (worst level) by the State Department Trafficking in Persons report for 2008 to \"Tier 2\/Watch List.\" The upgrade was based on Omani pledges to increase efforts to counter trafficking in persons (Presidential Determination 2009-5). Oman was rated Tier 2 in the 2009-2015 Trafficking in Persons reports, but the report for 2016 and 2017 downgraded Oman back to Tier 2: Watch List on the basis that, in the aggregate, it did not increase its anti-trafficking efforts during the reporting periods. \nThe 2018 Trafficking in Persons report upgraded Oman to Tier 2. The upgrade was based on the government's demonstrating increased efforts against trafficking by investigating, prosecuting, and convicting more suspected traffickers and standing up a specialized antitrafficking prosecutorial unit. The government also identified more victims and provided them with robust care. The government also developed, funded, and began implementing a new five-year national action plan, which included funding a full-time liaison between relevant agencies to facilitate a whole-of-government effort.\nOn broader labor rights, Omani workers have the right to form unions and to strike (except in the oil and gas industry). However, only one government-backed federation of trade unions exists\u2014the General Federation of Oman Trade Unions. The calling of a strike requires an absolute majority of workers in an enterprise. The labor laws permit collective bargaining and prohibit employers from firing or penalizing workers for union activity. Labor rights are regulated by the Ministry of Manpower. Some occupations and businesses are exempt from paying the minimum wage for citizens ($845 per month). \n\n\t\t\tReligious Freedom7\n\nOman has historically had a high degree of religious tolerance. An estimated 45%-75% (government figure) of Omanis adhere to the Ibadhi\u00a0sect, a relatively moderate school of Islam centered mostly in Oman, East Africa, and in parts of Algeria, Libya, and Tunisia. Ibadhism has been sometimes misrepresented as a Sunni sect. Ibadhi religious and political dogma generally resembles basic Sunni doctrine, although the Ibadhis are neither Sunni nor Shiite. Ibadhis believe strongly in the existence of a just Muslim society and argue that religious leaders should be chosen by community leaders for their knowledge and piety, without regard to race or lineage. A long-term rebellion led by the Imam of Oman, leader of the Ibadhi sect, ended in 1959. About 5% of Oman's population are Shiite Muslims. Oman's Shiites are allowed to resolve family and personal status cases according to Shiite jurisprudence outside the court system. \nRecent State Department religious freedom reports have noted no reports of societal abuses or discrimination based on religious affiliation, belief, or practice. Non-Muslims are free to worship at temples and churches built on land donated by the government, but there are some limitations on non-Muslims' proselytizing and on religious gatherings in other than government-approved houses of worship. \nAll religious organizations must be registered with the Ministry of Endowments and Religious Affairs (MERA). Among non-Muslim sponsors recognized by MERA are the Protestant Church of Oman; the Catholic Diocese of Oman; the al Amana Center (interdenominational Christian); the Hindu Mahajan Temple; and the Anwar al-Ghubairia Trading Co. Muscat (for the Sikh community). Buddhists have been able to worship in private spaces. Members of all religions and sects are free to maintain links with coreligionists abroad and travel outside Oman for religious purposes. To address crowded conditions in some non-Muslim places of worship, MERA has made plans to use land donated by Sultan Qaboos for construction of a new building for Orthodox Christians, with separate halls for Syrian, Coptic, and Greek Orthodox Christians. The government has also approved new worship space for Baptists. The Church of Jesus Christ of Latter Day Saints (Mormons) reportedly did not receive approval to register with MERA because it had not identified a sponsor in the Christian community, but its representatives have met with the MERA and are working toward a solution.\nThere is no indigenous Jewish population. Private media have occasionally published anti-Semitic editorial cartoons. \n\n\t\t\tAdvancement of Women\n\nSultan Qaboos has emphasized that he considers Omani women vital to national development. Women now constitute over 30% of the workforce. The first woman of ministerial rank in Oman was appointed in March 2003, and, since then, there have been several female ministers in each cabinet. Oman's ambassadors to the United States and to the United Nations are women. The number of women in Oman's elected institutions was discussed above, but campaigns by Omani women's groups failed to establish a minimum number of women elected to the Consultative Council. \nBelow the elite level, however, Omani women continue to face social discrimination, often as a result of the interpretation of Islamic law. Allegations of spousal abuse and domestic violence are fairly common, with women finding protection primarily through their families. Omani nationality can be passed on only by a male Omani parent. \n\n\tForeign Policy\/Regional Issues\n\nUnder Sultan Qaboos, Oman has pursued a foreign policy that sometimes diverges from that of Oman's GCC allies Saudi Arabia and the UAE. Oman has generally sought to mediate resolution of regional conflicts and refrain from direct military involvement in them. Oman joined the U.S.-led coalition against the Islamic State, but did not conduct any airstrikes against that group. Oman did not join the Saudi-led Arab coalition fighting the Iran-backed Houthi forces in Yemen and is one of the countries seeking to negotiate a solution to that conflict. Oman did not supply forces to the GCC's \"Peninsula Shield\" 2011 deployment to Bahrain to help the Al Khalifa regime counter the uprising there.\nOman strongly opposed the Saudi-led move in June 2017 to isolate Qatar over a number of policy disagreements. Oman's top diplomat Yusuf Alawi has visited Washington, DC, several times, most recently in late July 2018, in part to work with U.S. officials seeking to resolve the rift. Omani diplomats were hopeful that the annual GCC summit during December 5-6, 2017, would make progress on the dispute, but that meeting adjourned on December 5, 2017, after only two hours of talks. Qaboos, primarily because of his fragile health, has not attended any of the annual GCC summits since 2013. \nOman opposed a 2012 Saudi proposal for political unity among the GCC states as a signal of GCC solidarity against the Iran, even threatening to withdraw from the GCC if the plan were adopted. Other GCC leaders are similarly concerned about surrendering any of their sovereignty, and the plan has not been dropped entirely but neither has it advanced. In 2007, Oman was virtually alone within the GCC in balking at a plan to form a monetary union. Lingering border disputes also have plagued Oman-UAE relations; the two finalized their borders in 2008, nearly a decade after a tentative border settlement in 1999.\n\n\t\tIran\n\nOmani leaders assert that engagement with Iran better mitigates the potential threat from that country than confrontation\u2014a stance that has positioned Oman as a mediator in several regional conflicts in which Iran or its proxies are involved. Omani leaders have not expressed concerns about potential Iranian meddling in Oman's affairs because Oman's citizens are mostly Ibadhis (see above) and not generally receptive to either Sunni or Shiite Islamist extremist appeals. There are positive sentiments among the Omani leadership for the Shah of Iran's support for Qaboos's 1970 takeover and its provision of troops to help Oman end the leftist revolt in Oman's Dhofar Province during 1962-1975, a conflict in which 700 Iranian soldiers died.\nExemplifying Oman's policy toward Iran, Sultan Qaboos bucked U.S. and GCC criticism by visiting Tehran in August 2009 at the time of protests in Iran over alleged governmental fraud in declaring the reelection of President Mahmoud Ahmadinejad in the June 2009 election. He visited again in August 2013, after Iran's President Hassan Rouhani first took office. Rouhani visited Oman in 2014 and again in February 2017, as part of an Iranian effort to begin a political dialogue with the GCC. Following the Rouhani visit, Oman and Kuwait undertook a joint, but unsuccessful, attempt to enlist the other GCC countries in a dialogue with Iran. In July 2017, during a visit by Oman's de-facto Foreign Minister Yusuf Alawi to Tehran, Iran and Oman announced plans to strengthen their ties\u2014a statement interpreted as an Omani signal of disagreement with the Saudi-led move to isolate Qatar. Iran's Foreign Minister visited Oman and met with Sultan Qaboos in October 2017 to discuss regional issues.\nAs a further overture toward Iran, Oman did not immediately join the December 2015 Saudi assembly of a Muslim-nation \"counterterrorism coalition\" that excludes Iran and Iran's allies, although Oman finally did join that initiative in December 2016. And, Oman was the only GCC state not to downgrade relations with Iran in January 2016 in solidarity with Saudi Arabia when the Kingdom broke relations with Iran in connection with the dispute over the Saudi execution of dissident Shiite cleric Nimr Al Nimr. In February 2016, all the GCC states declared Lebanese Hezbollah a terrorist group, but Oman did not also restrict travel by its citizens to Lebanon. \nSome experts and GCC officials argue that Oman-Iran relations, particularly their security cooperation, are undermining GCC defense solidarity. In 2009, Iran and Oman agreed to cooperate against smuggling across the Gulf of Oman, which separates the two countries. On August 4, 2010, Oman signed a security pact with Iran to cooperate in patrolling the Strait of Hormuz, an agreement that reportedly committed the two to hold joint military exercises. The two countries expanded that agreement by signing a Memorandum of Understanding on military cooperation in 2013. The two countries have held joint exercises under these agreements, most recently a December 2015 joint naval exercise. \nOmani leaders have sought to ensure that the country's relations with Iran do not harm relations with the United States. In the course of his January 2019 regional trip, Secretary of State Michael Pompeo met with Sultan Qaboos to discuss regional issues, and he praised Oman for enforcing the sanctions that the Trump Administration reimposed on Iran. Still, Iran and Oman conduct significant volumes of civilian trade, in keeping with historic patterns in the Gulf region. \nA number of Iran-Oman joint ventures are active or pending. Most notably, Iran reportedly envisions the joint expansion of Oman's port of Al Duqm as providing Tehran with a major trading hub to interact with the global economy. Oman and Iran's Khodro Industrial Group are conducting a feasibility study of a t a $200 million car production plant there. China, Britain, and numerous other powers are also large investors in Oman's Al Duqm development, and in February 2018 India reportedly signed an agreement with Oman granting the Indian navy certain rights at the port. In March 2019, Oman agreed to grant the United States military access to Al Duqm port as well, as discussed further below. \nIran and Oman have jointly developed the Hengham oilfield in the Persian Gulf, a field that will eventually produce about 80 million cubic feet of natural gas per day. The two countries have also discussed potential investments to further develop Iranian offshore natural gas fields that adjoin Oman's West Bukha oil and gas field in the Strait of Hormuz. The field began producing oil and gas in 2009. During Iranian President Hassan Rouhani's 2014 visit to Oman, the two countries signed a deal to build a $1 billion undersea pipeline to bring Iranian natural gas from Iran's Hormuzegan Province to Sohar in Oman, where it will be converted to liquefied natural gas (LNG) and then exported. Several major international energy firms are reportedly involved in the project, but the reimposition of U.S. sanctions in 2018 appear to have slowed progress on the concept. \n\n\t\t\tOman, Iran, and Yemen\n\nIn neighboring Yemen, Oman and Iran's interests in some ways conflict. A GCC-wide initiative helped organize a peaceful transition from the rule of Ali Abdullah Saleh in 2011-2012. However, Saleh's successor, Abdu Rabu Mansur Al Hadi, was driven out of Sanaa in 2015 by Zaidi Shiite Houthi rebels who are increasingly supported by Iran. The Yemeni affiliate of Al Qaeda, Al Qaeda in the Arabian Peninsula (AQAP), also continues to operate there. Oman has closely patrolled the border with Yemen since 2015, has built some refugee camps near the border, and has sought to improve ties with tribes and residents just over the border to ensure that the conflict in Yemen does not spill over into Oman. \nThe current instability in Yemen builds on a long record of difficulty in Oman-Yemen relations. The former People's Democratic Republic of Yemen (PDRY), considered Marxist and pro-Soviet, supported Oman's Dhofar rebellion. Oman-PDRY relations were normalized in 1983, but the two engaged in occasional border clashes later in that decade. Relations improved after 1990, when PDRY merged with North Yemen to form the Republic of Yemen. \nAs the only GCC state that has not joined the Saudi-led Arab coalition fighting to restore the Hadi government and with its ties to Iran, Oman has become a mediator of the Yemen conflict. The U.N. Special Envoy for Yemen, Martin Griffiths, has described Oman as \"playing a pivotal role in all our efforts to help people in Yemen.\" Oman has hosted talks between U.S. diplomats and Houthi representatives, and brokered the release of several captives there, including the November 2016 release of a U.S. Marine veteran who was detained by the Houthis in April 2015. During 2015-2017, Omani mediation also secured the release in Yemen of another American, a French national, an Australian national, and an Indian priest. In late 2018, Oman attempted to secure the release of Yemen's Defense Minister, Mahmoud al-Subaihi, who has been held captive by the Houthis since 2014. In December 2018, Oman received several wounded Houthi fighters for treatment, fulfilling a Houthi condition to attend peace talks in Sweden. \nIran's interference in Yemen has brought more international scrutiny to Oman's relations with Iran. Since 2016, media reports have indicated that Iran has used Omani territory to smuggle weapons into Yemen, taking advantage of the porous and sparsely populated 179-mile border between the two countries. Smuggled materiel allegedly includes anti-ship missiles (some of which have reportedly been used to target U.S. warships), surface-to-surface short-range missiles, small arms, and explosives. Some reports indicate that Iran-made unmanned aerial vehicles (UAVs) used by Houthi forces in Yemen may have transited through Oman. Successive U.N. reports from the Panel of Experts established pursuant to resolution 2140 (2014) have identified both land routes that stretch from the Omani border to Houthi-controlled areas in the west and Omani ports with road access to Yemen as possible channels for weapons smuggling. \nOmani officials deny these allegations, and some observers assert that the allegations \"appear implausible given the long distance the weapons would have to be transported overland through territory the Houthis do not control.\" In March 2018, then-Defense Secretary James Mattis stated that the Omanis \"have security concerns that we share. I'm going there to listen ... and find out how they assess any trafficking that's going on at all. What is their assessment? What is their view of routes and that sort of thing?\" Since that visit, Omani officials have asserted that the \"file\" of Iran smuggling weaponry to the Houthis via Omani territory is \"closed,\" suggesting that Oman has stopped any such trafficking through it.\nIn May 2018, the State Department notified Congress of its intention to obligate FY2017 Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) funds for counterterrorism programming in Yemen and Oman, including the Oman Border Security Enhancement Program, a \"program focused on developing and enhancing Omani border security capabilities along the Oman-Yemen border.\" The FY2019 National Defense Authorization Act (NDAA, H.R. 5515 , P.L. 115-232 ) extends the authority to provide funds to Oman under Section 1226 of the FY2016 NDAA (22 U.S.C. 2151) to secure the border with Yemen.\n\n\t\t\tOman as a Go-Between for the United States and Iran\n\nU.S. officials have used the Oman-Iran relationship to reach out to Iranian officials when doing so has been deemed in the U.S. interest. Press reports indicate that then-Deputy Secretary of State William Burns and other U.S. officials began secretly meeting with Iranian officials in early 2013\u2014before the June 2013 election of the moderate Hassan Rouhani as Iran's president\u2014to explore the possibility of a nuclear deal. The U.S-Iran meetings accelerated after Sultan Qaboos's August 25-27, 2013, visit to Iran. In November 2014, then-Secretary of State John Kerry met with Iranian Foreign Minister Mohammad Javad Zarif in Muscat to accelerate the negotiations, followed by a meeting between the entire P5+1 and Iranian negotiators. An additional round of P5+1-Iran talks was held in Oman, and the JCPOA was finalized in July 2015. In December 2015, Oman hosted a meeting between Energy Secretary Ernest Moniz and head of Iran's Atomic Energy Organization Ali Akbar Salehi, to discuss JCPOA implementation. In November 2016, Iran exported 11 tons of heavy water to Oman, reducing Iran's stockpile below that allowed. \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. \nOman also has been an intermediary through which the United States and Iran have exchanged captives. Oman brokered a U.S. hand-over of Iranians captured during U.S.-Iran skirmishes in the Persian Gulf in 1987-1988. In 2007, Oman helped broker Iran's release of 15 sailors from close U.S. ally the United Kingdom, who Iran had captured in the Shatt al Arab waterway. U.S. State Department officials publicly confirmed that Oman helped broker the 2010-2011 releases from Iran of three U.S. hikers (Sara Shourd, Josh Fattal, and Shane Bauer), in part by paying their $500,000 per person bail to Iran. In April 2013, Omani mediation obtained the release to Iran of an Iranian scientist, Mojtaba Atarodi, imprisoned in the United States in 2011 for procuring nuclear equipment for Iran. U.S. officials also have sought Oman's help to determine the fate of retired FBI agent Robert Levinson, who disappeared on Iran's Kish Island in 2007. \nThe October 25, 2018, visit to Oman by Israeli Prime Minister Benjamin Netanyahu might have represented an Israeli effort to indirectly communicate with Iran over Syria, Lebanon, and other issues of significant dispute. If so, Israel might have been seeking to take advantage of Oman's ties to Iran in ways similar to those used by the United States, as discussed above. \n\n\t\tCooperation against the Islamic State Organization and on Syria and Iraq\n\nOman, along with the other GCC states, joined the U.S.-led coalition to counter the Islamic State in 2014. Oman offered the use of its air bases for the coalition but, unlike several GCC states, Oman did not conduct airstrikes against the group. \nIn the Syria internal conflict, possibly because of its relations with Iran, Oman has refrained from backing rebel groups against Iran's close ally, Syrian President Bashar Al Assad, and instead focused on mediation. Oman joined other Arab states in 2011 in suspending Syria's membership in the Arab League or closing Oman's embassy in Damascus. In August 2015, Oman hosted Syria's foreign minister for talks on possible political solutions to the Syria conflict, and in October 2015, Omani Minister of State for Foreign Affairs Yusuf Alawi visited Damascus to convey a U.S. message to Asad. Oman attended multilateral meetings in Vienna on the Syria conflict in late 2015, and Oman hosted Russian Foreign Minister Sergei Lavrov in February 2016 to discuss Syria.\nOn Iraq, no GCC state undertook air strikes against the Islamic State fighters there. The GCC states have tended to resist helping the Shiite-dominated government in post-Saddam Iraq. Oman opened an embassy in Iraq after the 2003 ousting of Saddam but then closed it for several years following a shooting outside it in November 2005 that wounded four, including an embassy employee. The embassy reopened in 2007 but Oman's Ambassador to Iraq, appointed in March 2012, is resident in Jordan, where he serves concurrently. Oman provided a small amount of funds for Iraq's post-Saddam reconstruction. \n\n\t\tPolicies on Other Conflicts\n\nLibya . Oman did not play an active a role in supporting the 2011 Libyan uprising that overthrew Mu'ammar Al Qadhafi. In March 2013, Oman granted asylum to Qadhafi's widow and her and Qadhafi's daughter, Aisha, and sons Mohammad and Hannibal, who had entered Oman in October 2012. Omani officials said they were granted asylum on the grounds that they not engage in any political activities.\nEgypt. The GCC has been divided on post-Mubarak Egypt. Qatar supported the 2012 election of Muslim Brotherhood leader Mohammad Morsi as the first elected post-Mubarak president, but Saudi Arabia and the UAE oppose the Brotherhood and supported the Egyptian military's ouster of Morsi in 2013. Oman criticized a post-coup crackdown on Brotherhood supporters but, in November 2017, Oman hosted a visit by Egyptian leader Abdel Fattah Al Sisi, who is supported by Saudi Arabia and the UAE. \n\n\t\tIsraeli-Palestinian Dispute and Related Issues\n\nOman was the one of the few Arab countries not to break relations with Egypt after the signing of the U.S.-brokered Egyptian-Israeli peace treaty in 1979. The GCC states participated in the multilateral peace talks established by the 1991 U.S.-sponsored Madrid peace process, and Oman hosted an April 1994 session of the multilateral working group on water that resulted in the establishment of a Middle East Desalination Research Center in Oman. Participants in the Center include Israel, the Palestinian Authority, the United States, Japan, Jordan, the Netherlands, South Korea, and Qatar. \nIn September 1994, Oman and the other GCC states renounced the secondary and tertiary Arab boycott of Israel. In December 1994, it became the first Gulf state to officially host a visit by an Israeli prime minister (Yitzhak Rabin), and it hosted then Prime Minister Shimon Peres in April 1996. In October 1995, Oman exchanged trade offices with Israel, essentially renouncing the primary boycott of Israel. However, there was no move to establish diplomatic relations. The trade offices closed following the September 2000 Palestinian uprising. In an April 2008 meeting in Qatar, de-facto Foreign Minister Alawi informed his Israeli counterpart (visiting Doha for a conference) that the Israeli trade office in Oman would remain closed until agreement was reached on a Palestinian state. Several Israeli officials reportedly visited Oman in November 2009 to attend the annual conference of the Desalination Center and to hold talks with Omani officials on the margins of the conference. Oman offered to resume trade contacts with Israel if it halted settlement construction in the West Bank\u2014a condition Israel has not met. Oman publicly supports the Palestinian Authority (PA) drive for full U.N. recognition. In February 2018, Foreign Minister Alawi visited the Al Aqsa Mosque in east Jerusalem, which required coordination with Israeli authorities. He also met Palestinian officials in Ramallah during that trip. \nOn October 25, 2018, Israel's Prime Minister Benjamin Netanyahu visited Oman and met with Sultan Qaboos. The visit, which came a few weeks after a visit to Oman by Palestinian leader Mahmoud Abbas, was announced by both countries after Netanyahu had returned to Israel. Analysts and press reports suggested that the two leaders discussed possible ways forward on the Israeli-Palestinian peace process and on indirect Israeli communication with Iran via Oman. The visit represented confirmation of the burgeoning ties between Israel and the GCC states on security and other regional issues. In early November 2018, Israel's Minister of Transportation and Minister of Intelligence Yisrael Katz visited Oman to attend an international conference during which he presented a concept for a railway between Israel, Jordan, and the Gulf states. In February 2019, White House adviser Jared Kushner, Special Representative for International Negotiations Jason Greenblatt, and the State Dept. special representative for Iran Brian Hook met with Qaboos in Muscat to discuss the administration's Middle East peace proposals and U.S. policy toward Iran.\n\n\tDefense and Security Issues\n\nSultan Qaboos, who is Sandhurst-educated, is respected by his fellow Gulf rulers as a defense strategist. He has long asserted that the United States is the security guarantor of the region. Oman's approximately 43,000-person armed force\u2014collectively called the \"Sultan of Oman's Armed Forces\"\u2014is the third largest of the GCC states and widely considered one of the best trained. However, in large part because of Oman's limited funds, it is one of the least well equipped of the GCC countries. Oman's annual defense budget is about $9 billion out of government expenditures of about $30 billion. \nSultan Qaboos has always supported close defense cooperation with the United States. In the wake of Iran's 1979 Islamic revolution, Oman signed a \"facilities access agreement\" that allows U.S. forces access to Omani military facilities on April 21, 1980. Days after the signing, the United States used Oman's Masirah Island air base to launch the failed attempt to rescue the U.S. Embassy hostages in Iran, although Omani officials assert that they were not informed of that operation in advance. Under the agreement, which was last renewed in 2010, the United States reportedly can use\u2014with advance notice and for specified purposes\u2014Oman's military airfields in Muscat (the capital), Thumrait, Masirah Island, and Musnanah. Some U.S. Air Force equipment, including lethal munitions, is reportedly stored at these bases. According to February 2018 testimony of CENTCOM commander General Joseph Votel, each year Omani military forces participate in several exercises, and Oman allows 5,000 overflights and 600 landings by U.S. military aircraft and hosts 80 port calls by U.S. naval vessels. A few hundred U.S. military personnel are stationed in Oman, mostly Air Force.\n2019 Port Access Agreement . On March 24, 2019, Oman and the United States signed a \"Strategic Framework Agreement\" that expands the U.S.-Oman facilities access agreements by allowing U.S. forces to use the ports of Al Duqm (see above) and Salalah. Al Duqm, in particular, is large enough to handle U.S. aircraft carriers, and the agreement was seen by the United States as improving the U.S. ability to counter Iran in the region. Oman reportedly views the accord as bringing in additional investment to Al Duqm. \nParticipation in Middle East Strategic Alliance . Omani leaders express willingness to join a U.S.-backed \"Middle East Strategic Alliance\" of the GCC states and Jordan and Egypt, envisioned as countering Iran. That coalition was to be formalized at a U.S.-GCC summit planned for spring 2018 but, because of the intra-GCC rift, has been repeatedly postponed. The intra-GCC rift, as well as Yemen, Iran, and other issues, was discussed during the January 2019 visit to Oman of Secretary of State Michael Pompeo, according to a State Department announcement. On January 9, 2019, Sultan Qaboos hosted meetings on the \"economic and energy pillars of the Middle East Strategic Alliance,\" according to the Secretary's readout of his meeting with Qaboos on January 15, 2019. \nOman has shown its support for major U.S. operations in the region by making its facilities available consistently. Oman's facilities contributed to U.S. major combat operations in Afghanistan (Operation Enduring Freedom, OEF) and, to a lesser extent, Iraq (Operation Iraqi Freedom, OIF). According to the Defense Department, during major combat operations of OEF (late 2001) there were about 4,300 U.S. personnel in Oman, mostly Air Force, and U.S. B-1 bombers, indicating that the Omani facilities were used extensively for strikes during OEF. The U.S. military presence in Oman fell to 3,750 during OIF (which began in March 2003) because facilities closer to Iraq were used more extensively. Oman did not contribute forces either to OEF or OIF. After 2004, Omani facilities were not used for U.S. air operations in Afghanistan or Iraq.\nBecause of his historic ties to the British military, Qaboos early on relied on seconded British officers to command Omani military services, and Oman bought British weaponry. Over the past two decades, British officers have become mostly advisory and Oman has shifted its arsenal mostly to U.S.-made major combat systems. Still, as a signal of the continuing close defense relationship, in April 2016 Britain and Oman signed a memorandum of understanding to build a base near Al Duqm port, at a cost of about $110 million, to support the stationing of British naval and other forces in Oman on a permanent basis. \n\n\t\tU.S. Arms Sales and Other Security Assistance to Oman45\n\nOman is trying to expand and modernize its arsenal primarily with purchases from the United States. However, Oman is one of the least wealthy GCC states and cannot buy U.S. arms as readily as the wealthier GCC states. Oman has received small amounts of Foreign Military Financing (FMF) that have been used to help purchase U.S. equipment, and Oman is eligible for grant U.S. excess defense articles (EDA) under Section 516 of the Foreign Assistance Act. The United States has not provided Oman with any FMF since FY2017 and none is requested for FY2020. Nonetheless, General Votel testified on February 5, 2019, that Oman \"will continue to develop an FMS (foreign military sales) portfolio that already includes over $2.7 billion in open FMS cases, though budgetary constraints may significantly slow new acquisitions in coming years.\" Some of the pending and prior FMS cases are discussed below. \nF-16s . In October 2001, Oman purchased (with its own funds) 12 U.S.-made F-16 C\/D aircraft. Along with associated weapons (Harpoon and AIM missiles), a podded reconnaissance system, and training, the sale was valued at about $825 million; deliveries were completed in 2006. In 2010, the United States approved a sale to Oman of 18 additional F-16s, with a value (including associated support) of up to $3.5 billion. Oman signed a contract with Lockheed Martin for 12 of the aircraft in December 2011, and deliveries were completed in 2016. Oman's Air Force also possesses 12 Eurofighter \"Typhoon\" fighter aircraft. Precision-Guided Munitions . Oman has bought associated weapons systems, including \"AIM\" advanced medium-range air-to-air missiles (AIM-120C-7, AIM-9X Sidewinder), 162 GBU laser-guided bombs, and other equipment. Countermeasures for Head of State Aircraft . In 2010 and 2013, the United States sold Oman equipment to protect the aircraft that Oman uses to transport Qaboos. Surface-to-Air and Air-to-Air Missiles . On October 19, 2011, DSCA notified Congress of a potential sale to Oman of AVENGER and Stinger air defense systems, asserted as helping Oman develop a layered air defense system. Missile Defense . In May 2013, then-Secretary of State John Kerry visited Oman reportedly in part to help finalize a sale to Oman of the THAAD (Theater High Altitude Area Defense system), the most sophisticated land-based missile defense system the U.S. exports. A tentative agreement by Oman to purchase the system, made by Raytheon, was announced on May 27, 2013, with an estimated value of $2.1 billion. However, a sale has not been announced. Several other GCC states have bought or are in discussions to buy the THAAD. Tanks as Excess Defense Articles . Oman received 30 U.S.-made M-60A3 tanks in September 1996 on a \"no rent\" lease basis (later receiving title outright). In 2004, it turned down a U.S. offer of EDA U.S.-made M1A1 tanks, but Oman asserts that it still requires armor to supplement the 38 British-made Challenger 2 tanks and 80 British-made Piranha armored personnel carriers it bought in the mid-1990s. Oman has also bought some Chinese-made armored personnel carriers and other gear, and it reportedly is considering buying 70 Leopard tanks from Germany with a value of $2.2 billion. Patrol Boats\/ Maritime Security . Oman has bought U.S.-made coastal patrol boats (\"Mark V\") for counternarcotics, antismuggling, and antipiracy missions, as well as aircraft munitions, night-vision goggles, upgrades to coastal surveillance systems, communications equipment, and de-mining equipment. EDA grants since 2000 have gone primarily to help Oman monitor its borders and waters and to improve interoperability with U.S. forces. Oman has bought some British-made patrol boats. The United States also has sold Oman the AGM-84 Harpoon anti-ship missile. Anti t ank Weaponry . The United States has sold Oman antitank weaponry to help it protect from ground attack and to protect critical infrastructure. In December 2015, DSCA notified a potential sale to Oman of more than 400 TOW (tube-launched, optically tracked, wire-guided) antitank systems. The sale has an estimated value of $51 million. The United States also has provided to Oman 400 \"Javelin\" antitank guided missiles. \n\n\t\t\tProfessionalizing Oman's Forces: IMET Program and Other Programs\n\nThe International Military Education and Training program (IMET) program is used to promote U.S. standards of human rights and civilian control of military and security forces, as well as to fund English language instruction, and promote interoperability with U.S. forces. About 100 Omani military students participate in the program each year, studying at 29 different U.S. military institutions. \n\n\t\tCooperation Against Terrorism\/Illicit Activity48\n\nOman cooperates with U.S. legal, intelligence, and financial efforts against various cross-border threats, particularly those posed by terrorist groups including Al Qaeda, Al Qaeda in the Arabian Peninsula (AQAP, headquartered in neighboring Yemen), and the Islamic State organization. No Omani nationals were part of the September 11, 2001, attacks and no Omanis have been publicly identified as senior members of any of those groups. According to recent State Department reports on terrorism, Oman is actively trying to prevent terrorist groups from conducting attacks and using the country for safe haven or transport. \nAs shown in the table above, the United States provides funding\u2014primarily through Nonproliferation, Antiterrorism, Demining, and Related (NADR) and other programs\u2014to help Oman counter terrorist and related activity and combat trafficking of WMD-related equipment. NADR funding falls into three categories: Export Control and Related Border Security (EXBS) funds, Anti-Terrorism Assistance (ATA) funds, and Terrorism Interdiction Program funding. These programs enhance the capabilities of the Royal Oman Police (ROP), the ROP Coast Guard, the Directorate General of Customs, the Ministry of Defense, the Ministry of Foreign Affairs, the Ministry of Transportation, the Ministry of Commerce and Industry, the Ministry of Transportation and Communication, and the Royal Army of Oman to interdict weapons of mass destruction (WMD), advanced conventional weapons, or illegal drugs at official Ports of Entry on land and at sea ports and along land and maritime borders. ATA funds are used to train the Royal Army of Oman and several Omani civilian law enforcement agencies on investigative techniques, maritime border security, cybersecurity, and to enhance their ability to detect and respond to the entry of terrorists into Oman. \nIn 2017, a 10-week EXBS training course helped the government of Oman establish a port control at the Port of Sohar. On December 13, 2018, the Administration notified Congress that up to $220,000 in FY2018 ATA funds would be provided to Oman to support training designed to enhance Oman's capabilities to reduce the flow of foreign terrorist fighters and related goods at points of entry, including through courses such as fraudulent travel document and behavioral analysis. \nIn 2005, Oman joined the U.S. \"Container Security Initiative,\" agreeing to pre-screening of U.S.-bound cargo from its port of Salalah to prevent smuggling of nuclear material, terrorists, and weapons. However, the effect of some U.S. programs on Omani performance is sometimes hindered by the lack of clear delineation between the roles and responsibilities of Oman's armed forces and law enforcement agencies. \nThere are no Omani nationals currently held in the U.S. prison for suspected terrorists in Guantanamo Bay, Cuba. During 2015-17, Oman accepted the transfer of 23 non-Omani nationals from Guantanamo Bay as part of an effort to support U.S. efforts to close the facility. \n\n\t\t\tAnti-Money Laundering and Countering Terrorism Financing (AML\/CFT)\n\nOman is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). Recent State Department terrorism reports credit Oman with transparency regarding its anti-money laundering and counterterrorist financing enforcement efforts and say that it has the lowest risk for terrorism financing or money laundering of any of the GCC countries. Oman does not permit the use of hawalas , or traditional money exchanges, in the financial services sector, and Oman has on some occasions shuttered hawala operations entirely. A 2010 Royal Decree was Oman's main legislation on anti-money laundering and combatting terrorism financing but, in 2016, Royal Decree 30\/2016 increased efforts to counter terrorism financing by requiring financial institutions to screen transactions for money laundering or terrorist financing. In 2015, Oman signed an agreement with India to improve cooperation on investigations, prosecutions, and counterterrorism efforts. In May 2017, Oman joined with the other GCC states and the United States to form a Riyadh-based \"Terrorist Finance Target Center.\" \n\n\t\t\tCountering Violent Extremism\n\nThe State Department report on terrorism for 2017, referenced earlier, characterizes Oman's initiatives to address domestic radicalization and recruitment to violence as \"unclear\" in nature and scope. Oman's government, through the Ministry of Endowments and Religious Affairs (MERA), has conducted advocacy campaigns designed to encourage tolerant and inclusive Islamic practices, including through an advocacy campaign titled \"Islam in Oman.\" The Grand Mufti of Oman, Shaykh Ahmad al-Khalili, calls on Muslims to reject terrorism in his widely broadcast weekly television program. \n\n\tEconomic and Trade Issues\n\nOman is in a difficult economic situation. It ran a budget deficit of $13 billion in 2016, and about $8 billion in 2017. Oman has addressed the shortfalls\u2014without drawing down its estimated $24 billion in sovereign wealth reserves\u2014by raising capital internationally. Since the beginning of 2017, Oman has raised over $10 billion by selling government bonds and receiving loans from Chinese and other banks. The government has cut subsidies substantially and has reduced the size of the government. \nDespite Oman's efforts to diversify its economy, oil exports still generate over 70% of government revenues and nearly 50% of its gross domestic product (GDP). Oman has a relatively small 5.5 billion barrels (maximum estimate) of proven oil reserves, enough for about 15 years at current production rates. It exports approximately 820,000 barrels of crude oil per day. In part because it is a small producer, Oman is not a member of the Organization of the Petroleum Exporting Countries (OPEC). Oman has announced a \"Vision 2020\" strategy to reduce its dependence on the oil and gas sector. Oman has in recent years expanded its liquefied natural gas (LNG) exports, for which Oman has a large market in Asia. Oman is part of the \"Dolphin project,\" operating since 2007, under which Qatar is exporting natural gas to UAE and Oman through undersea pipelines, freeing up Oman's own natural gas supplies for sale to other customers. In December 2013, Oman signed a $16 billion agreement for energy major BP to develop Oman's natural gas reserves. \nOman is trying to attract foreign investment by positioning itself as a trading hub. The key to that strategy is the $60 billion project\u2014with some investment funding coming from Iran, Kuwait, China, the United Kingdom, and the United States\u2014build up Al Duqm (see Figure 1 ) as a transportation, energy, and military hub. Oman's plans for the port include a refinery ($6 billion alone), a container port, a dry dock, and other facilities for transportation of petrochemicals. A planned transit hub would link to the other GCC states by rail and enable them to access the Indian Ocean directly, bypassing the Persian Gulf. China's investments in Al Duqm are part of its \"Belt and Road Initiative\" to build a continuous trade link between China and Europe. Its $11 billion investment in Al Duqm is to build the \"Sino-Oman Industrial City\" there. The Chinese investments in Oman help China secure its oil supplies; Oman is China's fourth-largest source of oil. \n\n\t\tU.S.-Oman Economic Relations\n\nThe United States is Oman's fourth-largest trading partner. In 2018, the United States exported about $2 billion in goods to Oman, and imported about $1.1 billion in goods from it\u2014figures roughly equal to those of 2017. The largest U.S. export categories to Oman are automobiles, aircraft (including military) and related parts, drilling and other oilfield equipment, and other machinery. Of the imports, the largest product categories are fertilizers, industrial supplies, and oil by-products such as plastics. In part because of expanded U.S. oil production, the United States imports almost no Omani oil.\nOman was admitted to the WTO in September 2000. The U.S.-Oman Free Trade Agreement was signed on January 19, 2006, and ratified by Congress ( P.L. 109-283 , signed September 26, 2006). According to the U.S. Embassy in Muscat, the FTA has led to increased partnerships between Omani and U.S. companies. General Cables and Dura-Line Middle East are two successful examples of joint ventures between American and Omani firms. These ventures are not focused on hydrocarbons, suggesting the U.S.-Oman trade relationship is not focused only on oil.\nThe United States phased out development assistance to Oman in 1996. At the height of that development assistance program in the 1980s, the United States was giving Oman about $15 million per year in Economic Support Funds (ESF) for conservation and management of Omani fisheries and water resources. On January 23, 2016, the United States and Oman signed an agreement on cooperation in science and technology. The agreement paves the way for exchanges of scientists, joint workshops, and U.S. training of Omani personnel in those fields.","output":"The Sultanate of Oman has been a strategic ally of the United States since 1980, when it became the first Persian Gulf state to sign a formal accord permitting the U.S. military to use its facilities. Oman has hosted U.S. forces during every U.S. military operation in the region since then, and it is a partner in U.S. efforts to counter regional terrorism and related threats. Oman's ties to the United States are unlikely to loosen even after its ailing leader, Sultan Qaboos bin Sa'id Al Said, leaves the scene. Qaboos underwent cancer treatment abroad during 2014-2015, and his frail appearance in public appearance fuels speculation about succession. He does continue to meet with visiting leaders, including Israeli Prime Minister Benjamin Netanyahu on October 25, 2018, the first such visit by Israeli leadership to Oman in more than 20 years.\nOman has tended to position itself as a mediator of regional conflicts, and generally avoids joining its Gulf allies of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, and Oman) in regional military interventions such as that in Yemen. Oman joined the U.S.-led coalition against the Islamic State organization, but it did not send forces to that effort, nor did it support groups fighting Syrian President Bashar Al Asad's regime. It refrained from joining a Saudi-led regional counterterrorism alliance until a year after that group was formed in December 2015, and Oman opposed the June 2017 Saudi\/UAE isolation of Qatar.\nOman also has historically asserted that engaging Iran is the optimal strategy to reduce the potential threat from that country. It was the only GCC state not to downgrade its relations with Iran in connection with a January 2016 Saudi-Iran dispute. Oman's ties to Iran have enabled it to broker agreements between the United States and Iran, including the release of U.S. citizens held by Iran as well as U.S.-Iran direct talks that later produced the July 14, 2015, nuclear agreement between Iran and the international community (Joint Comprehensive Plan of Action, JCPOA). Yet, U.S. officials credit Oman with enforcing re-imposed U.S. sanctions and with taking steps to block Iran's efforts to ship weapons across Oman's borders to Houthi rebels in Yemen.\nPrior to the 2011 wave of Middle East unrest, the United States consistently praised Sultan Qaboos for gradually opening the political process even in the absence of evident public pressure to do so. The liberalization allows Omanis a measure of representation through elections for the lower house of a legislative body, but does not significantly limit Qaboos's role as paramount decisionmaker. The public support for additional political reform, and resentment of inadequate employment opportunities produced protests in several Omani cities for much of 2011, and for two weeks in January 2018, but government commitments to create jobs helped calm the unrest. Oman has followed policies similar to the other GCC states since 2011 by increasing press censorship and arresting critics of the government who use social media.\nThe periodic economy-driven unrest demonstrates that Oman is having difficulty coping with the decline in the price of crude oil since mid-2014. Oman's economy and workforce has always been somewhat more diversified than some of the other GCC states, but Oman has only a modest financial cushion to invest in projects that can further diversify its revenue sources. The U.S.-Oman free trade agreement (FTA) was intended to facilitate Oman's access to the large U.S. economy and accelerate Oman's efforts to diversify. Oman receives small amounts of U.S. security assistance, and no economic aid."}
{"id":"crs_R42580","pid":"crs_R42580_0","input":"\tPolitical Conditions\n\nPresident Jimmy Morales, then a relative political newcomer, ran in 2015 on a platform of governing transparently and continuing to root out corruption. He is now being investigated for corruption himself. During the election campaign, as mass protests calling for then-President P\u00e9rez Molina's resignation and an end to corruption and impunity grew, so did Morales's popular appeal. Morales framed his lack of political experience as an asset. His campaign slogan was \"Neither corrupt nor a thief.\" He won Guatemala's 2015 presidential election by a landslide with 67% of the vote. \nMorales initially supported the International Commission against Impunity in Guatemala (CICIG), which Guatemala asked the United Nations (U.N.) to form in 2007 to help the government combat corruption, human rights violations, and other crimes. After he became a target of investigations, he said he would not renew their mandate, which ends in September 2019. The President tried to terminate CICIG early unilaterally. Many observers are concerned that Morales's efforts could undermine ongoing investigations by the Guatemalan attorney general's office and judicial proceedings, make political reform more difficult, and heighten instability in Guatemala. The Guatemalan Congress is also moving legislation that, if passed, would reverse progress made in holding government officials and others accountable for corruption and crimes against humanity.\nGuatemala faces many political and social challenges in addition to widespread corruption and impunity. Guatemala has some of the highest levels of violence, inequality, and poverty in the region, as well as the largest population. Indigenous people, about half of the population, experience higher rates of economic and social marginalization than nonindigenous citizens, and have for centuries. Almost half of the country's children are chronically malnourished. \nGuatemala's homicide rate decreased to 26.1 per 100,000 in 2017, which nonetheless remains one of the highest rates in the region. Guatemala has a long history of internal conflict and violence, including a 36-year civil war (1960-1996). For most of that time, the Guatemalan military held power and violently repressed and violated the human rights of its citizens, especially its majority indigenous population. Reports estimate that more than 200,000 people were killed or disappeared during the conflict, with the state bearing responsibility for 93% of human rights violations. More than 83% of the victims were identified as Mayan. In 1986, Guatemala established a civilian democratic government, but military repression and human rights violations continued. Peace accords signed in 1996 ended the conflict. The United States maintained close relations with most Guatemalan governments, including the military governments, before, during, and after the civil war. \nSince the late 1980s, Guatemala has sought to consolidate its transition from military and autocratic rule to a democracy. Democratically elected civilian governments have governed for over 30 years, but democratic institutions remain fragile due to high levels of corruption, impunity, drug trafficking, and inequitable distribution of resources. Although state institutions have investigated and arrested high-level officials, including a sitting president, for corruption, high levels of impunity in many cases continue due to intimidation of judicial officials, deliberate delays in judicial proceedings, and widespread corruption. \nThe Supreme Electoral Tribunal (TSE) investigated multiple political parties for violations of election campaign finance laws in 2014 and 2015, as part of its auditing process. As a result, the TSE dissolved two major parties, the Partido Patriota\u2014former President P\u00e9rez Molina's party\u2014and LIDER. These investigations are ongoing and may affect the 2019 elections.\nPresident Morales presented his General Government Policy for 2016-2020 in February 2016. The five pillars of this plan are zero tolerance for corruption, and modernization of the state; improvement in food security and nutrition; improvement in overall health and quality education; promotion of micro, small, and medium enterprises, and tourism and housing construction; and protection of the environment and natural resources.\nHalfway into his four-year term (2016-2020), however, Morales was being investigated for corruption and criticized for seemingly backing off his pledge of zero tolerance for corruption. In 2017, the president's brother and son were arrested on corruption charges. In August and September 2017, Guatemala's attorney general and CICIG announced they were seeking to lift the president's immunity from prosecution as they investigated alleged violations of campaign finance laws and bonuses paid to him by the military. Shortly thereafter, the president tried unsuccessfully to expel the head of CICIG, Commissioner Ivan Vel\u00e1squez. In 2018, his third year in office, he prevented Vel\u00e1squez from reentering the country. In January 2019 Morales tried unilaterally to terminate CICIG's mandate. The Constitutional Court ruled that he lacks the authority to do so. (See \" Efforts to Combat Impunity and Corruption ,\" below.) Various observers see Morales's moves against CICIG as part of an effort to impede anticorruption investigations against him, his relatives and associates. Morales will lose his immunity from prosecution when his term ends in January 2020. \nA recent opinion poll found that more than 72% of the population has little or no trust in the police, and about 65% has little to no trust in the government. Conversely, 83% of the population said they supported CICIG and the Public Ministry\u2014which is headed by the attorney general\u2014making them Guatemala's most trusted institutions.\nSo far, the judicial process, protests, and mass mobilizations in the wake of high-level government corruption scandals have remained peaceful. Nonetheless, tensions have heightened as President Morales's efforts to impede CICIG have escalated, and the Guatemalan Congress has tried to reduce criminal penalties for corruption and human rights violations. In January 2019, thousands of Guatemalans joined renewed public protests supporting CICIG and calling for the resignations of President Morales and members of Congress seen as protecting corrupt practices. (See \" Tension ,\" below.)\nContinued impunity, coupled with the state's failure to provide basic public services to large parts of the population and limited advances in reducing Guatemala's high poverty levels, could prolong tensions. Military-criminal enterprises and other powerful interests that have benefited from corruption and the status quo have fought against anticorruption and anti-impunity work since it began. They have threatened public prosecutors, the attorney general, and members of the judiciary. The promote legislation that would protect them from prosecution. Continued prosecution of corruption could provoke increasingly violent responses from those whose wealth or power are threatened. \nPowerful interests also use more subtle methods to try to weaken CICIG, the Public Ministry, and groups pushing for political reform. These include tactics such as discrediting the reputations of officials, activists, and their organizations; delays or cuts in the judicial system's budget; spurious legal actions that delay trials and drain fiscal and human resources; and attempts to change CICIG's mandate or terms. A 2016 International Commission of Jurists report maintains that the Guatemalan state has responded passively to defamation campaigns and attacks on judicial independence. The report suggests that criminal allegations are fabricated against judges, community leaders, human rights defenders, and others to demobilize their anticorruption activities and silence them. Since mid-2017, those opposed to anticorruption efforts have escalated many of these tactics.\n\n\t\t2019 Elections\n\nGuatemala is scheduled to hold national elections for president, the entire 158-seat Congress, 340 mayors, and other local posts on June 16, 2019. President Morales will not be running for reelection, since the Guatemalan constitution limits presidents to one term. If no presidential candidate wins the first round with more than 50% of the vote, the top two candidates will compete in a second round on August 11. Only a few of Guatemala's 27 parties have named a presidential candidate so far; a final list is supposed to be published on March 17. As in the last elections, corruption is a major theme for voters this year. In response to public outcry over past illegal campaign financing and other electoral crimes, Guatemala adopted electoral law reforms in 2016. Eleven of the 27 parties face charges of illicit or unreported campaign financing, and several candidates face judicial proceedings. Registered candidates have immunity from prosecution.\nFormer Attorney General Thelma Aldana (2014-2018) is the presidential candidate for the new Seed Movement party. Aldana has been internationally recognized for her anticorruption and judicial reform work. She, along with CICIG Commissioner Ivan Velasquez, was awarded the 2018 Right Livelihood Award, known as the \"Alternative Nobel Prize,\" for their \"innovative work in exposing abuse of power and prosecuting corruption, thus rebuilding people's trust in public institutions.\" The U.S. Departme nt of State awarded her its International Women of Courage Award in 2016. Aldana has reportedly said she is on the right wing politically, although more recently indicated that she would be interested in an \"inclusive platform that was open to people from the left and the right, to women, to immigrants, to young people, to indigenous people, to the private sector.\" The day that Aldana announced her candidacy, a Guatemalan judge ordered her arrest on charges including embezzlement. Aldana has denied wrongdoing, and said that many people in Guatemala are afraid of her continuing fight against corruption.\nSandra Torres, a 2015 presidential candidate and former first lady, is again running for president with the National Unity of Hope (UNE) party. Public prosecutors sought to lift Torres's immunity as a presidential candidate on February 6, over $2.5 million in illicit campaign financing in 2015. Torres said, without offering evidence, that the request was a move to benefit Aldana's campaign. As mentioned above, the TSE has been investigating illegal campaign financing of the 2015 election process since 2014, and several parties have been dissolved as a result of illegal activities. \nZury Rios, whose father was the late Guatemalan military dictator Efrain Rios Montt, intends to run for president. Officials initially said she would not be allowed to run, and then a legal judgment ruled in her favor. \nSome observers have expressed concern that President Morales's efforts to hinder CICIG before the elections could strengthen parties involved in corruption. CICIG helps Guatemalan institutions enforce campaign finance laws. Weakening these efforts could facilitate continued financing of politicians by drug cartels and other criminal organizations. \n\n\t\tPresident Jimmy Morales's Administration\n\nPresident Morales's administration achieved a few significant reforms in the first year and a half. For example, the administration developed tax reform policies covering tax collection, the tax authority administration, and the customs office structure. Since Morales and some of his inner circle became the targets of investigations, however, he has tried to terminate CICIG and fired some of his more reformist Cabinet ministers and other officials who worked closely with CICIG and the attorney general's office, replacing them with closer allies. This has raised concerns both domestically and internationally that Morales is trying to protect himself and others from corruption charges and appears to be reversing reformist policies. \nThe tax administration (SAT), under the leadership of Juan Francisco Sol\u00f3rzano for the first two years of the Morales administration, used judicial measures and intervention to increase recovery of unpaid taxes and substantially increased tax collection. Sol\u00f3rzano, a former head of the criminal investigation unit at the attorney general's office, had the endorsement of CICIG as well as the Inter-American Development Bank, World Bank, and International Monetary Fund. Under his leadership, the SAT collected $297 million in recovered taxes in 2016 compared to $5 million in 2015. Following austerity measures in 2016 that limited government spending and decreased the deficit, the Guatemalan Congress passed an expansionary budget for 2017. This was possible in part because of increased state revenues from improved tax collection. Sol\u00f3rzano also played a key role in prominent anticorruption cases. President Morales fired Sol\u00f3rzano in January 2018.\nThe interior ministry, which includes Guatemala's National Civil Police (PNC) force, oversaw a drop in the homicide rate from 27.3 homicides per 100,000 people in 2016 to 26.1 per 100,000 in 2017, the lowest rate in nine years. In February 2018, the Morales administration dismissed the three senior officials of the national police, saying it sought \"to generate more positive results to benefit citizen security and the fight against organized crime.\" A wide range of people, including human rights activists and business leaders, expressed concern at their dismissal. The country's Human Rights Ombudsman, Jord\u00e1n Rodas, said Guatemalans must be \"very alert\" to any movement that represents \"regression.\" A prominent trade association known by its acronym CACIF criticized the ouster, saying that outgoing police Director Nery Ramos had reduced crime. The U.S. Embassy in Guatemala congratulated Ramos just a few weeks before his dismissal for his team's work in reducing homicides by 10% compared to January 2017 and for the PNC's \"fight against corruption and to improve security throughout Guatemala.\"\nIn response to the high level of violence over many years, a number of municipalities asked for military troops to augment their ineffective police forces; the Guatemalan government has been using a constitutional clause to have the army \"temporarily\" support the police in combating crime. Despite efforts to develop a comprehensive, whole-of-government approach to security, the previous five administrations' actions often have been reactive and dependent on the military. The Morales administration announced a two-phase plan to remove the military from citizen security operations by the end of 2017. The new plan includes shuffling military currently involved in citizen security efforts to the country's borders to control land routes used by traffickers and gangs. This would be a significant effort to comply with provisions of the 1996 peace accord calling on the army to focus solely on external threats. The interior minister who initiated the plan, Francisco Rivas, was fired by the president in January 2018. Morales said that the plan would continue, however, and military troops would be withdrawn from the streets by March 2018. \nMorales's current Minister of the Interior, Enrique Degenhart Asturias, indicated a shift in priorities away from fighting corruption to fighting gangs. One of his first actions was to ask the Guatemalan Congress to designate criminal gangs as \"terrorist organizations.\" On August 30, 2018, the Constitutional Court ruled that the government must justify the appointment of Degenhart, and his Vice Minister, Kamilo Rivera, in response to a complaint that their actions had put the security of Guatemalans at risk. \nMorales had already faced criticism for not acting forcefully enough on his pledge to crack down on corruption, and for his links to family and friends under investigation, before he tried to expel Commissioner Vel\u00e1squez. Then-Attorney General Aldana worked closely with the commissioner of CICIG to prosecute high-level corruption and human rights violation cases. Both said that the president initially had not interfered directly in corruption cases\u2014even those involving his family. But both also expressed disappointment that he had not spoken out in support of them and their anticorruption efforts when attacked by antireform elements. They also voiced concern that Morales has publicly portrayed himself and his family as victims of the judicial system, potentially biasing the judicial process.\nInitially, President Morales's political power was limited as a result of his own inexperience and his party's weak position in the legislature. Morales's small party, the right-wing National Convergence Front-Nation (FCN-Naci\u00f3n), won 11 of 158 seats in the legislature. The Guatemalan Congress elected an opposition member to be president of the unicameral chamber. At the beginning of Morales's term, deputies defected from other parties, bringing the FCN-Naci\u00f3n's seat total to 37. People criticized Morales for allowing the deputies to join his party just before the Congress outlawed the practice. The public prosecutor received complaints alleging that bribery motivated some defections to the FCN-Naci\u00f3n. \nMorales has since formed an alliance able to pass legislation, however, and consolidated his support in the Congress. In 2017, the legislature twice voted against prosecutors' requests to lift the president's immunity for violations of campaign finance laws and bonuses paid to him by the military, blocking further investigations into the president's role in the scandals. The Congress tried to weaken anticorruption laws with a measure to reduce penalties for illegal campaign financing that the public dubbed the \"Pact of the Corrupt.\" Public outcry was so strong that Congress repealed the law two days after passing it. Nonetheless, the Congress elected a new leadership in February 2018, all of whom, according to the State Department, voted for that pact.\nIn August 2018, the newly appointed Attorney General, Maria Consuelo Porras, submitted a third request to lift the President's immunity. The Guatemalan Congress voted again to maintain the President's immunity from prosecution. Almost half of the deputies in Congress are under investigation or have legal processes pending against them for corruption or other crimes.\nMorales has also come under fire for two contracts with an Indiana lobbying firm that reportedly has ties to U.S. Vice President Mike Pence. The firm was hired to improve relations between the U.S. and Guatemalan governments outside of normal diplomatic channels. Guatemalan politicians without the authority to act in foreign affairs signed the contracts. Morales denies knowing about the contract, though one was signed on his behalf, and only he and the foreign ministry are authorized to intervene in foreign affairs. Furthermore, observers criticize his reclusiveness with the press: he has removed journalists' access to the presidential palace, and rarely holds press conferences. \nMorales's administration and the secretariat for Social Welfare came under scrutiny after a fire killed 41 girls in a state-run home in March 2017. The director of the shelter, the minister of Social Welfare, and his deputy were dismissed after the fire. Later that year a judge charged the former minister, his deputy, and five additional people (two police officers with abuse, and three senior members of social and child protection agencies with manslaughter or negligence). Trials against public officials charged in the case began in February 2019.\n\n\t\t\tLinks Between Morales's Party and the Military\n\nBefore the current controversy between Morales and CICIG, human rights and other observers expressed concern that Morales's party's ties to former military officers might put pressure on Morales's support of CICIG, as well as limit his government's investigation of military corruption and human rights violations. Before the new government was sworn in, then-Attorney General Aldana requested legal action against retired army colonel Edgar Ovalle, a key advisor to Morales and a legislator-elect with the FCN-Naci\u00f3n, for alleged civil war-era (1960-1996) human rights violations. After declining the request in 2016, Guatemala's Supreme Court lifted Ovalle's immunity in 2017. Ovalle fled, his whereabouts unknown since March 2017. \nOver a dozen other military officers have been arrested on similar charges. Many of them support the FCN-Naci\u00f3n and belong to a military veterans' association, Avemilgua, which Ovalle helped found. Avemilgua members created the FCN-Naci\u00f3n in 2004, and testified in court in defense of former dictator Efrain Rios Montt in 2013. Rios Montt, found guilty in 2013 of committing genocide and crimes against humanity during the civil war, had his conviction effectively vacated a short time later. In 2016, a retrial began. In 2017, a judge ordered Rios Montt to stand trial in a different case for the massacre of 201 people between 1982 and 1983 in Dos Erres. Rios Montt died in 2018 before the trials concluded. Morales reportedly said he did not believe genocide had been committed during the war, but that crimes against humanity had.\nThe Defense Ministry said in 2017 that it had been paying President Morales a substantial salary bonus since December 2016 (see \" Tension \" below). Two former presidents, Alfonso Portillo and Alvaro Colom, reportedly said they received no such bonus. Morales's former defense minister has been arrested in the case.\n\n\t\tEfforts to Combat Impunity and Corruption\n\nIn what many observers see as a step forward in Guatemala's democratic development, the Public Ministry's corruption and human rights abuse investigations in recent years have led to the arrest and trial of high-level government, judicial, and military officials. They have also led to a backlash against those reform efforts, threats against the attorneys general and the head of an international commission, and a political crisis involving current President Jimmy Morales. The Public Ministry, which is headed by the Attorney General, is responsible for public prosecution and law enforcement, and has worked in conjunction with CICIG to strengthen rule of law in Guatemala. President Morales appointed a new attorney general, Maria Consuelo Porras, in May 2018, when Aldana's term expired. \nSince 2007, CICIG has worked with the Public Ministry and the attorney general's office to reduce the country's rampant criminal impunity by strengthening Guatemala's capacity to investigate and prosecute crime. The government invited CICIG to assist with constitutional reforms and restructuring the judicial system. As a result of collaboration with CICIG, prosecutors have increased conviction rates in murder trials, and targeted corruption and organized crime linked to drug trafficking. The Guatemalan public widely supports CICIG. The United States, other governments, and international institutions have expressed broad support for the work of both the attorney general's office and CICIG over the years, and offered praise for their accomplishments. \nA 2018 U.S. State Department report highlights these accomplishments: \nCICIG's hundreds of investigations have resulted in charges against more than 200 current and former government officials\u2014including two recent presidents and several ministers, police chiefs, military officers, and judges. CICIG Commissioner Ivan Velasquez and [then-] AG [Thelma] Aldana forged a strong cooperative alliance to pursue many high-profile corruption cases. CICIG also builds the capacity of prosecutors, judges, and investigators working on high-profile and corruption-related cases.\nA January 2019 CICIG statement reports that the commission has supported the Public Ministry in more than 100 cases, including against former President Otto P\u00e9rez Molina and Vice President Roxana Baldetti, both of whom subsequently resigned. It also has promoted more than 34 legal reforms to strengthen transparency and judicial independence, helped identify over 60 criminal structures, and secured more than 300 convictions. A recent International Crisis Group study estimated that CICIG-backed justice reforms contributed to a 5% average annual decrease in murder rates in Guatemala from 2007 to 2017, in contrast to a 1% average annual increase in the murder rates among other countries in the region. The president-elect of El Salvador has called for a similar commission to be established in his country.\n\n\t\t\tImpeachment of a Former President, Arrest of Another\n\nPublic Ministry investigations, coupled with mass public protests, forced the resignations of the sitting president and vice president in 2015. Then-Attorney General Aldana and CICIG exposed an extensive customs fraud network, now known as the \"La Linea\" case, at the national tax agency (SAT), leading to the arrest of dozens of people, including the previous and then-directors of the SAT. After the Guatemalan Congress lifted then-President Otto P\u00e9rez Molina's immunity so he could be investigated, the attorney general's office indicted him, Vice President Roxana Baldetti, and other officials, who then resigned. The country proceeded lawfully and peacefully to form an interim government, hold scheduled lawful elections, and elect a new president, Jimmy Morales, who took office in January 2016.\nThe related corruption case implicated dozens of high-level government officials and private-sector individuals as well. The Attorney General at the time asserted that the \"La Linea\" case represented \"just a sliver of a sprawling criminal enterprise run by the state,\" which widely tolerated corruption, leading to impunity and the strengthening of criminal structures within the government. The attorney general and other observers have raised concerns about unnecessary delays in the sentencing process due to appeals and other litigation by defense teams. P\u00e9rez Molina remains in prison as his case proceeds. Baldetti was found guilty and is serving a 15\u00bd-year sentence in another case of embezzling millions of dollars from a fund for decontaminating a lake. \nFollowing the historic \"La Linea\" case, more former and current high-level officials in the executive branch, the legislature, and the judicial system have been implicated in corruption cases. Three justices of the Supreme Court of Justice (CSJ) had their immunity removed to face charges of corruption and influence trafficking. In late March 2017, authorities arrested various congressional representatives for corruption. According to Transparency International, Guatemala ranked 143 rd out of 180 countries on the organization's Corruption Perceptions Index for 2017, the second-worst score in Central America, behind Nicaragua.\nGuatemalan police arrested another former president, Alvaro Colom, in February 2018. Colom was arrested along with nine former members of his cabinet, including former Finance Minister Juan Fuentes Knight, who has chaired Oxfam International since 2015. The group faces charges related to a $35 million fraud case involving a new bus system in the capital. Colom is free on bail while under investigation. He denies the charges.\n\n\t\t\tTensions over President Morales's Dispute with CICIG34\n\nEarly in his term, President Morales had reached out to policy experts and international donors for advice on fighting corruption. In April 2016, President Morales praised CICIG and formally requested its extension until 2019\u2014which the U.N. granted. Morales said previously that before he left office, he would extend CICIG's term again, until 2021. \nIn August 2017, two days after the attorney general and CICIG announced they were seeking to lift President Morales's immunity from prosecution, however, Morales declared the head of CICIG, Iv\u00e1n Vel\u00e1squez, persona non grata and ordered him expelled from the country. One of Morales's ministers resigned rather than carry out the order, and the constitutional court\u2014Guatemala's highest court\u2014blocked the order. A Guatemalan congressional committee recommended that the president lose his immunity. Two-thirds of the 158-member legislature, or 105 deputies, are needed to remove an official's immunity. On September 11, 2017, though, the Guatemalan Congress as a whole voted to protect the president from further investigation; only 25 deputies voted to remove his immunity. About 20% of the legislators are also under investigation, with more likely to become so. The legislature fell one vote short of shelving the request permanently, however, so a member of the Congress could reintroduce the question of lifting President Morales's immunity at a later date. \nOn September 13, the Guatemalan Congress passed a \"national emergency\" bill to reduce penalties for violations of campaign finance laws, and make party accountants\u2014rather than party leaders\u2014responsible for such violations. Public outcry was such that the Congress repealed the bill two days later. Thousands of protesters demanded the resignation not only of Morales, but also of the 107 legislators who voted to weaken anticorruption laws. On September 21, the Guatemalan Congress again defeated a vote to lift the president's immunity. This time, however, the number voting to rescind his immunity had risen to 70. In 2015, public protests contributed to the legislature reversing itself and rescinding the previous president's immunity. \nAlso in September 2017, Guatemala's federal auditor's office said that it was investigating a substantial salary bonus that the Defense Ministry acknowledged paying to the president since December 2016. The monthly bonus increased Morales's salary by more than a third, reportedly making him one of the most highly paid leaders in Latin America. The Attorney General again asked that Morales's immunity be lifted, this time so that her office could investigate his bonus from the army. The Congress again voted against lifting Morales's immunity from prosecution.\nMorales was losing support within his own government. Several officials were fired or resigned rather than carry out his order to expel Commissioner Velasquez. Three Cabinet ministers resigned, saying that as a result of the political crisis, \"spaces of opportunity to carry out our work programmes have rapidly closed down.\" Initially, Morales persuaded some of those officials to stay, but in January 2018 he fired several of them and replaced them with people he considered stronger allies.\nA new civic organization was launched in February 2018, the Citizens' Front against Corruption. This group of prominent businesspeople, indigenous leaders, academics, activists, and others expressed public support for both the Attorney General and CICIG Commissioner Vel\u00e1squez.\nIn 2018 the President reversed on his earlier pledge, and said he would not renew CICIG's term. Morales made the announcement on August 13, flanked by members of the military. In what was widely seen as an act of intimidation, Guatemalan police deployed armored vehicles outside CICIG headquarters and embassies of the United States and other CICIG donors. The United States had provided the vehicles to the Guatemalan police for counternarcotics and border enforcement operations. Some Members of the U.S. Congress demanded Guatemala return the jeeps. Morales then barred CICIG Commissioner Vel\u00e1squez from reentering the country, in defiance of two Constitutional Court rulings that he lacks the authority to do so. \nIn January 2019, Morales unilaterally tried to end CICIG's mandate, and gave CICIG staff 24 hours to leave the country. The U.N., European Union, advocates for government transparency and human rights, and others expressed concerns over Morales's decision, and thousands of Guatemalan citizens protested the decision and again called on Morales to resign. The Morales administration is trying to impeach members of the Constitutional Court who have ruled in favor of CICIG. CICIG continued its work in compliance with the judicial finding from abroad, and in February most staff returned to Guatemala under contingency safety plans. Vel\u00e1squez and 11 investigators whose visas were revoked have not returned.\nThe Trump Administration expressed support for CICIG and for Commissioner Vel\u00e1squez in 2017. In 2018, however, the Administration did not join other donors in doing so again. (See \" U.S.-Guatemalan Relations \" below.)\nDespite some differences of opinion over CICIG's efforts, many in Congress are concerned that Morales's efforts to hinder or oust CICIG could undermine objectives of the U.S. Strategy for Engagement in Central America, by undermining efforts to strengthen the rule of law and heightening instability in Guatemala. Some Members support Morales's claims that CICIG has violated Guatemala's sovereignty and maintain that the United States should end its financial support of CICIG. Other Members of Congress are calling for punitive measures against the Morales administration, including suspending foreign aid and imposing Global Magnitsky sanctions on corrupt individuals. \n\n\t\t\tProsecutions for Wartime Human Rights Violations and Efforts to Stop Them\n\nAs noted above, the Guatemalan Truth Commission found that more than 200,000 people were killed or disappeared during the country's internal conflict. It also concluded that state forces and related paramilitary forces were responsible for 93% of documented human rights violations, and that the vast majority of victims were noncombatant civilians and Mayan.\nGuatemala was the first country to convict a former leader of genocide, when ex-dictator Rios Montt was found guilty in 2013, during the term of former Attorney General Claudia Paz y Paz. (His conviction was overturned, and he died before a retrial was concluded.)\nThen-Attorney General Aldana and CICIG made progress in pursuing justice for human rights violations that occurred during the civil war. In March 2016 they tried a historic case known as the \"Creompaz case\"\u2014the first prosecution for sexual violence committed during the civil war. A Guatemalan high-risk court convicted two former military commanders at the Sepur Zarco military base of murder, sexual violence, sexual and domestic slavery, and enforced disappearances. In March 2017, a judge sent to trial a former military chief of staff and four other high-ranking military officials accused of crimes against humanity, aggravated assault, sexual violence, and forced disappearance. Also in March, the Supreme Court ruled to remove immunity from FCN-Naci\u00f3n deputy Edgar Ovalle for his alleged involvement in the case. As noted previously, Ovalle, a key advisor to President Morales, has since disappeared. Another case dealing with forced disappearances allegedly committed by the Guatemalan military during the civil war took a dramatic turn in March 2016 when a judge seized and made public previously unknown documents detailing information about military counterinsurgency objectives, operations, and campaigns from 1983 to 1990. Since the Peace Accords were signed in 1996, the Guatemalan army had repeatedly denied such documents existed. \nObservers have expressed concern that Morales has failed to protect human rights. During his election campaign, U.S. embassy officials expressed concern that Morales's campaign team refused to cooperate with certain elements of Guatemalan civil society, particularly human rights advocates working on the protection of children and trafficking victims, and LGBTI (lesbian, gay, bisexual, transgender, intersex) issues. Human Rights Ombudsman Rodas recently said that the Morales administration refused to meet with indigenous leaders to discuss a surge in violence against indigenous people. The Guatemalan Union of Human Rights Defenders has reportedly documented over 200 attacks against human rights defenders in Guatemala in 2018. Twenty-six indigenous people were killed in 2018, many of them activists defending indigenous rights in land and mineral conflicts.\nProposed amnesty for crimes against humanity and reforms to penal code . Guatemalan legislators are moving a bill through their Congress that would grant amnesty to perpetrators of crimes against humanity. The bill would amend the National Reconciliation Law, which was passed after the peace accords that ended the civil war. While the original law includes amnesty for some crimes, it does not include amnesty for torture, forced disappearance, and crimes against humanity. The proposed amendment would order the release within 24 hours of people serving prison time for those crimes, including more than 30 former military officials. It would also end all current and future criminal investigations into rights abuses committed during the civil conflict. \nPassage of the amendment requires three separate votes on the bill; the legislature passed the first vote in January 2019, the second in February. The third vote was suspended on March 13, when some members of the Congress walked out and left the session without a quorum, in the face of protests from human rights advocates, victims' groups, international organizations, and foreign governments. The G13 group of donors to Central America, including the United States, issued a statement saying that providing amnesty \"would contravene Guatemala's international obligations; would harm reconciliation efforts; and could seriously erode faith in the rule of law in Guatemala.\" The Inter-American Court of Human Rights ordered Guatemala to cease discussion of the amnesty bill and to permanently shelve it. Advocates of the bill reportedly dismissed such admonitions as interference in Guatemala's internal affairs. Because the vote was suspended, amnesty proponents can still schedule the bill for a third and final vote, and say they will do so.\nThe legislature is also moving forward amendments to the penal code that could accomplish some of the same objectives of the amnesty. The bill would prevent the imprisonment of people older than 70, and limit pretrial detention to one year. Final passage of the bill, which has already passed two of the three required readings, would free many former military officers convicted of crimes against humanity, and prevent the imprisonment of others. It would also free many people convicted or charged for corruption.\n\n\t\t\tJudicial Reforms to Combat Corruption and the Backlash Against Them\n\nVarious Guatemalan and international organizations consider judicial reforms necessary to solidify progress against widespread corruption and to strengthen the judicial branch so it can continue consolidating the rule of law in Guatemala. Nonetheless, forces opposed to the reforms have emerged as well.\nAs anticorruption efforts prove successful, the circle of those feeling threatened by investigations broadens, and attacks against CICIG and the judicial system have intensified. The U.N. Office of the High Commissioner for Human Rights (OHCHR) issued a report in March 2017 saying it was \"seriously concerned\" about threats and attacks against various judicial authorities, including both Aldana and Judge Miguel Angel Galvez. The International Commission of Jurists noted concern about efforts to criminalize lawyers, as well as community leaders, human rights defenders, and public employees, such as Supreme Court justices.\nCivil society groups and elements of the government have called for further reforms to combat impunity. An April 2017 report from the International Commission of Jurists found that despite tackling historic cases, Guatemalan courts still show signs of irregularity and impunity, such as many judges' failure to condemn litigation that results in delays of trials. Many of the accused in the La Linea case still await sentencing three years after the scandal broke in late 2015, in part because of litigation filed by their own lawyers in what are widely seen as delaying tactics.\nAccording to CICIG head Iv\u00e1n Vel\u00e1squez, the work of CICIG and the attorneys general has resulted in more than 300 people either in prison, facing trial, or being charged. These include high-level officials, such as the former president and vice president, five former Cabinet ministers, three former presidents of Congress and various deputies, two former CSJ magistrates, the former president of the Instituto Guatemalteco de Seguridad Social (IGSS), two former banking superintendents, and a director of the prison service, among others. \nPresident Morales spoke before the U.N. General Assembly in September 2017. He pledged to strengthen and support CICIG, but he also said Guatemala was revising the interpretation and application of its agreement with CICIG and no institution should interfere in Guatemala's administration of justice. On the same day, three of Morales's Cabinet members resigned over the political crisis instigated by the president's effort to expel CICIG's commissioner. In February 2018, Morales sent a representative to the U.N. to express his administration's concerns about CICIG.\nMany in the U.S. Congress expressed concern over President Morales's effort to expel CICIG's commissioner. The House Foreign Affairs Committee chairman at the time issued a statement reading, \"The U.S. Congress has spoken with one voice in support of the International Commission against Impunity in Guatemala. We will continue to stand with the Guatemalan people, and especially those in poverty, who are hurt most by corruption.\" \nThe Guatemalan Congress approved changes concerning judge and magistrate selection and requirements. A recent International Commission of Jurists (ICJ) report concluded that reforming the selection process of judges and separating judicial processes from administrative processes could strengthen Guatemala's judicial system. CICIG and others launched a judicial observatory of criminal justice to analyze judiciary rulings and make recommendations to improve the justice system in other ways as well.\nThe ICJ found that the Guatemalan state has responded passively to defamation campaigns, attacks on judicial independence, and other forces trying to influence judges, prosecutors, and investigators. According to the director of the Guatemalan Institute of Comparative Studies in Criminal Sciences, the groups seeking to stop the reforms are the same elements that launched defamation campaigns on social media against CICIG head Iv\u00e1n Vel\u00e1squez in early 2017.\nShortly after then-President Perez Molina was forced to resign and was arrested on corruption charges in 2015, the Guatemalan legislature took some actions to advance various types of reform. The Guatemalan Congress passed two major reform packages in 2016, for example, that were designed to streamline legislative procedures and make political and electoral system procedures more transparent and equitable. In late 2017, the legislature passed two laws intended to improve the judicial process. One created a Judicial Career Council to relieve the Supreme Court of having to address internal human resources administrative matters, and the other created a National Bank of Genetic Data to be used in judicial processes as well as a Register of Sexual Aggressors. \nOther of its actions, however, reflect an effort to reverse or stall reform efforts. A lengthy national process produced 60 proposed amendments to the constitution and other laws to promote judicial reform. Congress did not pass an initial package of the reforms in 2016 and has not brought it up again. The most divisive proposed change was a stronger recognition and use of the indigenous justice system. Some observers express concern that the current Congress does not wish to pass the reforms due to their links to people under investigation for corruption, or because they themselves are under investigation. This latter view was reinforced by congressional actions in September 2017 preserving the president's immunity and trying to reduce penalties for violations of campaign finance laws.\nThe bill amending the penal code mentioned in the previous section would free many former government officials and businesspeople facing charges for corruption, including former President Perez Molina. Many of those people were placed in pretrial detention over concerns they would flee the country. Some of their trials have not proceeded, as noted above, in part because of motions filed by their own lawyers, in what are widely viewed as delaying tactics.\n\n\tEconomic and Social Conditions\n\nGuatemala enjoyed relatively stable economic growth in recent decades, and the World Bank named it a top performer in Latin America. As economic growth rates have slowed in more recent years, however, Guatemala has struggled to address its high poverty rates. The country has the largest economy in Central America, with a gross domestic product (GDP) of $75.62 billion and a per-capita income of $4,060 in 2017. The World Bank characterizes Guatemala as a lower-middle-income country, and it ranks 127 th out of 189 on the 2018 Human Development Index. \nGuatemala's stable growth rates have not been enough to decrease some of the highest levels of economic inequality and poverty in the region. Instead, Guatemala has backtracked. After decreasing the overall poverty rate from 56% to 51% between 2000 and 2006, the rate increased to 59% in 2014, with a rate just over 79% for indigenous people, according to a national survey. Some elements of Guatemalan society and government have tried to bring about equitable development, yet its rural and indigenous populations remain socially and economically marginalized. For rural municipalities, which constitute 44% of the country, almost 8 out of 10 people live in poverty. Demonstrating the difference in economic and social conditions, literacy rates for the nonindigenous population were 88.9% for men and 83.7% for women, but rates decreased to 77.7% for indigenous men and 57.6% for indigenous women 15 years and older.\nThe International Monetary Fund (IMF) concluded that Guatemala lags behind similar countries in terms of development outcomes. While the government has incorporated global Sustainable Development Goals into their national strategy, the IMF reports that the steps necessary to implement those policies \"remain largely unaddressed.\"\nFurthermore, extreme poverty increased and school enrollment decreased. Nonindigenous children average twice as many years of schooling as indigenous children. To improve social conditions, the World Bank calls for rapid economic growth coupled with increased public investment and pro-poor policies. According to the Economist Intelligence Unit (EIU), Guatemala's economic growth rate is expected to average out at 2.9% in 2019. EIU projects average growth from 2019 to 2023 at 3% but with a dip to 2.4% for 2020. The IMF concludes that slowed economic growth and rapid population growth will keep per-capita income growth too low to reduce poverty. A recent major economic analysis found that economic growth in Guatemala is \"largely a result of the strong inflow of family remittances from abroad.\"\nFactors that impede economic growth and development include corruption, limited government revenues, weak institutions, and weak transportation and energy infrastructure. A recent economic analysis concluded that corruption has a negative impact on economic activity across Central America. It also concluded that \n... anti-corruption measures, such as those launched by the MP and CICIG help create a favorable environment for increasing economic growth in Guatemala because they reduce the avenue for corruption and strengthen the government's effectiveness as a provider of wellbeing.\nGuatemala's persistent failure to deliver services and improve the quality of education and health care contribute to a low-skilled workforce, which also limits growth. According to the U.N. Educational, Scientific, and Cultural Organization (UNESCO), Guatemalan adults had only 3.6 years of education, on average, in 2005, and \"if Guatemala had matched the regional average, it could have more than doubled [emphasis in original] its average annual [economic] growth rate between 2005 and 2010.\" Current mean years of education is 6.4 for men and for women. \nGuatemala has the lowest tax-to-GDP ratio in the region at 12.6%, compared to 22.7% for Latin America in 2016. This is due in part to the high rate of employment in the informal economy\u2014the Instituto Nacional de Estad\u00edstica found that 71% of the population held informal employment in 2018. The percentages were even higher for women, people aged 15-24, and rural and indigenous segments of the population. Another contributing factor includes the business and elite sectors' historical resistance to paying taxes. While the tax administration improved tax collection in 2016-2017 (see \" President Jimmy Morales's Administration \"), an IMF report on Guatemala cautions that maintaining an improved rate \"will require strong and sustained political commitment,\" which previous efforts have lacked. Tax reforms in 2012, for example, gave the government tools to increase revenues through taxes, but, the same report notes, weak implementation left Guatemala \"with virtually unchanged tax-to-GDP ratio [several years] after the reform.\" The IMF has called for a tax revenue rate increase to at least 15% of GDP in order to address social, security, and infrastructure needs. \nLand conflicts, especially those involving mining, are contentious, and often violent, in Guatemala and elsewhere throughout the region. Governments often see mines as a source of revenue, potentially for poverty reduction and social programs. Indigenous populations often object to mining under current conditions, however, because they say it violates their ancestral land rights, removes them from and\/or damages their source of livelihood, and\/or excludes them from the decisionmaking process as to how mine profits should be spent. Guatemala is a signatory to the Indigenous and Tribal Peoples Convention, 1989, also known as the International Labour Organization's (ILO's) Convention 169. The treaty calls on governments to consult indigenous peoples before permitting exploitation of natural resources on their land. According to a recent report by the ILO, the Guatemalan government granted 367 mining licenses between its ratification of the convention in 1996 and 2014, and held only 60 community consultations, all of which had expressed opposition to the projects. The report found that Guatemala's Constitutional Court had found such consultations nonbinding. Guatemala has not developed regulations to govern prior consultations.\nOngoing conflicts around land use are likely to continue to delay such projects. Other types of land conflicts and evictions are related to biofuels, dams, ranching, and drug trafficking; these are also frequently violent.\nCoffee is one of Guatemala's key exports. Yet several obstacles are driving coffee farmers from the market: coffee leaf rust (a deadly fungus), extremely low coffee prices, and a drought, which has triggered increases in food prices. Smallholder farmers, with less than 7.5 acres of land, produce 80% of Central America's coffee. According to a recent NPR report, \"Some 70 percent of the farms have been affected [by the rust], and over 1.7 million coffee workers have lost their jobs. Many are leaving the coffee lands to find work elsewhere.\"\nRemittances from Guatemalans abroad boost the Guatemalan economy as they constitute over 10% of the GDP, and this percentage is forecast to grow to an average of 13.8% through 2023. Private consumption accounts for 85% of GDP. \n\n\tU.S.-Guatemalan Relations\n\nTraditionally, the United States and Guatemala have had close relations, with friction at times over human rights and civil\/military issues. According to the State Department, current U.S. policy objectives in Guatemala include addressing the underlying drivers of illegal migration; supporting the institutionalization of democracy; encouraging respect for human rights and rule of law, and the efficient functioning of CICIG; supporting broad-based economic growth and sustainable development and maintaining mutually beneficial trade and commercial relations, including ensuring that benefits of CAFTA-DR reach all sectors of Guatemalan society; cooperating to fight money laundering, corruption, narcotics trafficking, alien smuggling, trafficking in persons, and other transnational crimes; supporting Central American integration through support for resolution of border and territorial disputes; reinforcing the government's economic development and political reform plan in the Alliance for Prosperity to be self-reliant in addressing drivers of migration and illicit trafficking of goods and people; and improving Guatemala's business climate. \nIn 2017, the Trump Administration expressed support for CICIG and for Commissioner Vel\u00e1squez. In February, then-Homeland Security Secretary John Kelly met with President Morales and Commissioner Vel\u00e1squez in Guatemala, and reiterated U.S. support for the Public Ministry's and CICIG's fight against corruption. On the same day, a U.S. court indicted former Guatemalan Vice President Roxana Baldetti and former Interior Minister Mauricio Lopez Bonilla on criminal drug trafficking charges. A Guatemalan court approved a U.S. request for Baldetti's extradition in June 2017, but first she will face prosecution on four charges of corruption in Guatemalan courts. She was convicted and is serving time for one case of embezzlement there. Lopez Bonilla must first face three counts of corruption in Guatemalan courts. The United States arrested former Guatemalan presidential candidate Manu\u00e9l Baldiz\u00f3n as he entered the country in January 2018. The U.S. Embassy in Guatemala said the United States would \"return Mr. Baldiz\u00f3n to Guatemala to face justice\"; he faces charges of bribery, conspiracy and money-laundering related to helping the Odebrecht company win construction contracts in Guatemala. The Odebrecht scandal is enveloping politicians across Latin America. Baldiz\u00f3n requested asylum in the United States.\nU.S. Vice President Mike Pence, then-Secretary of State Rex Tillerson, Secretary of Commerce Wilbur Ross, then-Secretary of Homeland Security Kelly, and Secretary of the Treasury Steven Mnuchin attended meetings with President Morales, as well as his Honduran counterpart and the Salvadoran vice president, in June 2017 at the Conference on Prosperity and Security in Central America in Florida. Pence said that addressing migration to the United States requires strengthening the sending countries' economies, including through foreign assistance. Nonetheless, the Trump Administration has proposed significantly cutting aid to the region and emphasizing security over development in its budget requests. The President has sometimes threatened to cut off aid to Guatemala and the other northern triangle counties. Congress has rejected most of the Administration's proposed cuts.\nPresident Morales followed President Trump's lead in December 2017 in announcing his country would move its embassy in Israel to Jerusalem from Tel Aviv. The change has been widely criticized internationally. A nonbinding U.N. General Assembly resolution called for the United States to shelve its recognition of Jerusalem. Trump threatened to cut off aid to countries that supported the resolution. In February 2018, Trump met with Morales in Washington, thanking him for his support on Israel. According to the White House, Trump \"also underscored the importance of stopping illegal immigration to the United States from Guatemala and addressing Guatemala's underlying challenges to security and prosperity.\"\nIn 2018, the Trump Administration did not join other commission donor countries in stating support of CICIG and the Commissioner. Secretary Pompeo spoke with President Morales on September 6, 2018, expressing continued support for \"a reformed CICIG,\" but did not report mentioning either the termination of CICIG's mandate or the barring of Vel\u00e1squez.\nIn March 2019 the Administration joined other donor countries in speaking out against Guatemala's proposed amnesty bill, and suspended military aid to Guatemala over the misuse of jeeps that had been provided by the Department of Defense. \n\n\t\tU.S. Foreign Assistance\n\nThe United States has been providing assistance to Guatemala through regional initiatives: the Central American Regional Security Initiative (CARSI), for combating narcotics trafficking and preventing transnational crime; the President's Emergency Plan for AIDS Relief (PEPFAR); and Food for Peace. Currently, U.S. assistance to Guatemala is guided by the U.S. Strategy for Engagement in Central America. The various programs are integrated for a greater impact in the Western Highlands region of the country, which has the highest rates of poverty, chronic malnutrition, and out-migration in Guatemala, and in high-crime areas. According to the State Department, \"The overall objective of U.S. assistance efforts is to create effective structures and organizations sustainable by the Guatemalan government.\" While some structures, such as the attorney general's office, have greatly improved their effectiveness with U.S. and other support, other institutions remain weak.\nU.S. bilateral assistance to Guatemala complements CARSI programs and the regional Alliance for Prosperity Plan (see \" The Alliance for Prosperity and Other Regional Initiatives \" below). Economic Support and Development assistance aims to expand economic opportunities; improve governance, accountability, and transparency; strengthen the juvenile justice system; and improve living conditions in Guatemala.\nIn 2014, the Obama Administration launched the U.S. Strategy for Engagement in Central America (the Strategy), a whole-of-government approach aimed at addressing the root causes of illegal immigration from the region by improving prosperity, regional economic integration, security, and governance. The Strategy complements the Plan of the Alliance for Prosperity (AFP) in the northern triangle proposed by the presidents of El Salvador, Guatemala, and Honduras (see \" The Alliance for Prosperity and Other Regional Initiatives \" below). Congress has appropriated $2.1 billion for the Strategy for FY2016-FY2018. \nCongress placed numerous conditions on aid for Guatemala (and El Salvador and Honduras) in each of the foreign aid appropriations measures enacted since FY2016. Through the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress withheld 25% of aid to the three central governments until the Secretary of State certified that conditions relating to limiting irregular migration were met. Congress conditioned another 50% of aid until the governments addressed another 12 concerns, including combating corruption; countering gangs and organized crime; increasing government revenues; supporting programs to reduce poverty and promote equitable growth; and protecting the rights of journalists, political opposition parties, and human rights defenders to operate without interference.\nThe State Department certified that the three northern triangle governments met Congress's conditions in FY2016 and FY2017. The department certified that the three countries had met the first set of conditions in FY2018, but not the second set. The 2019 Consolidated Appropriations Act ( P.L. 116-6 ) maintained the legislative conditions enacted in prior years but combined them into a single certification requirement for 50% of assistance to the central government.\nThe Trump Administration has proposed cutting aid to Guatemala by 36% for FY2020 compared to FY2018 and emphasizing security over development. The budget request for Central America would also reduce aid, and tip the balance toward security and away from traditional development goals\u2014such as good governance, economic growth, and social welfare. \nThe Administration's proposed budget would also eliminate traditional food aid (P.L. 480, Title II), and food aid would be provided only through the International Disaster Assistance account. Some critics are concerned that reducing nonemergency food aid could increase the already high levels of malnutrition and stunting in Guatemala. In addition, a recent study by several major international organizations found that \"there is clearly a link between food insecurity and emigration from [Guatemala, El Salvador and Honduras].\"\nThe Trump Administration proposes closing down the Inter-American Foundation (IAF), an independent U.S. agency that supports grassroots development throughout Latin America, including in all three northern triangle countries, and merging it into USAID. Many IAF programs in Guatemala are in areas that have high levels of emigration to the United States; these programs aim to improve agricultural and food production; improve the livelihoods of youth, women, and indigenous people, and increase their participation in civil society and community development; and ease the transition of migrants who return to Guatemala.\nCongress rejected most of the cuts for aid to Central America proposed by the Trump Administration in its previous budgets. The FY2017 Consolidated Appropriations Act ( H.R. 244 , P.L. 115-31 ) provided just under $126 million for Guatemala as part of the $655 million for the continued implementation of the Strategy. The FY2018 Consolidated Appropriations Act ( H.R. 1625 , P.L. 115-141 ) provided less than $120 million for Guatemala as part of the $615 million for the Strategy.\nThe 116 th Congress remains invested in the U.S. Strategy for Engagement in Central America. In February 2019, it passed the FY2019 Consolidated Appropriations Act ( H.J.Res. 31 , P.L. 116-6 ), including $528 million for Central America. The act did not provide specific funding amounts for individual countries, but instead gave the Department of State the authority to allocate funding among the Central American nations. The act's conference report, however, did specify $13 million in Global Health Program aid for Guatemala and $6 million for CICIG. \nThe 116 th Congress has introduced other bills that touch on perennial concerns involving Guatemala, such as immigration, border security, and governance issues. For example, H.Res. 18 , introduced in January, would express the sense of the House that the President should redirect and target foreign assistance provided to Guatemala, El Salvador, and Honduras in a manner that addresses the driving causes of illegal immigration into the United States. S. 716 and H.R. 1630 , introduced in March 2019, would impose targeted sanctions under the Global Magnitsky Human Rights Accountability Act against Guatemalan nationals found responsible for, or complicit in, acts of corruption, laundering money, or violating human rights. \nIn March 2019 the Department of Defense announced it was suspending military aid to Guatemala's Ministry of the Interior, which it said had repeatedly used armored jeeps provided by the United States \"in an incorrect way\" since August 2018, when they were deployed outside CICIG and donor embassies when Morales announced he was not renewing CICIG's mandate.\n\n\t\tThe Alliance for Prosperity and Other Regional Initiatives\n\nIn response to increased Central American immigration in 2014, the Obama Administration and some Members pressed the northern triangle governments (Guatemala, Honduras, and El Salvador) to invest more heavily in their own development and security. Later that year, the Guatemalan, Salvadoran, and Honduran governments proposed the Plan of the Alliance for Prosperity in the northern triangle with the help of the Inter-American Development Bank. The five-year, $22 billion initiative seeks to (1) stimulate the productive sector to create economic opportunities; (2) develop human capital through improved education, job training, and social protections (health care, nutrition); (3) improve public safety and access to the legal system; and (4) strengthen institutions and improve transparency to increase public trust in the state. Some observers, including some U.S. officials, criticized the initial plan for not focusing on development and poverty-reduction efforts in the poorest regions, from which the highest numbers of people emigrate. The Guatemalan Embassy says that the government has since shifted some of its programs toward those regions. \nGuatemala, Honduras, and El Salvador launched a trinational task force to address the region's security issues in November 2016. The task force focuses on greater border protection, undertaking operations to dismantle gangs and criminal structures, taking action against human trafficking, cracking down on terrestrial drug trafficking across borders, and stopping the flow of contraband products through the northern triangle. The initiative includes increased information sharing and cooperation among the three countries' governments, as well as law enforcement and investigative agencies. \nThe governments of El Salvador, Guatemala, Honduras, and Mexico agreed on a Comprehensive Development Plan in December 2018, and met in January 2019 to begin its design. They say they intend to be the first region in the world to implement the Global Compact for Migration, which seeks to improve cooperation between countries and regions to facilitate safe, orderly, and regular international migration. Honduran Foreign Minister Maria Dolores Ag\u00fcero stated that \"[r]especting the dignity of migrant persons will be prioritized in line with international law and with special emphasis on a child's best interest and the protection of human rights, regardless of migratory status.\" Mexican Secretary of Foreign Affairs Marcelo Ebrard said the group wished to demonstrate that addressing the causes of migration is more effective than exclusion and containment measures.\n\n\t\tTrade and CAFTA-DR\n\nGuatemala and the United States have significant trade relations, and are part of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), implemented in 2006. Supporters of CAFTA-DR point to reforms it spurred in transparency, customs administration, intellectual property rights, and government regulation. Critics note that the commercial balance between the two countries previously favored Guatemala, and that Guatemala already had duty-free access under the Caribbean Basin Initiative. Since CAFTA-DR, the balance has shifted in favor of the United States. The U.S. goods trade surplus with Guatemala reached $2.9 billion in 2017, a 16% increase from 2016. From 2005 (pre-CAFTA-DR) to 2017, U.S. exports to Guatemala increased by 143%, whereas Guatemalan exports to the United States increased by only 28% during the same period. President Trump has ordered reviews of U.S. trade agreements.\nTotal U.S.-Guatemala trade in goods and services for 2017 reached $13.5 billion, and U.S. exports to Guatemala amounted to $8.5 billion. Mineral fuels, articles donated for relief, machinery, electrical machinery, and cereals accounted for the majority of U.S. exports. U.S. agricultural exports include corn, soybean meal, wheat, poultry, and cotton. U.S. imports from Guatemala amounted to about $4 billion, with bananas, plantains, knit apparel, woven apparel, coffee, silver, and gold accounting for the majority. Guatemala was the United States' 43 rd -largest trading partner in 2017. \nThe U.S. Labor Department initiated a dispute settlement process alleging that the Guatemalan government violated its CAFTA-DR labor commitments, the first labor rights complaint lodged under a U.S. free trade agreement. In 2011, the U.S. Trade Representative officially requested an arbitral panel. In 2017, the panel concluded that although it agreed that Guatemala had failed to enforce its labor laws effectively in certain cases, the United States had failed to prove that the lack of enforcement negatively affected trade, as required under CAFTA-DR. Some observers say the finding brings into question the effectiveness of labor regulations in U.S. free trade agreements. The Trump Administration may consider renegotiating CAFTA-DR.\n\n\t\tCounternarcotics Cooperation\n\nGuatemala remains a major transit country for illicit drugs, particularly cocaine, trafficked from South America to the United States. Guatemala's porous borders and lack of law enforcement presence in many areas enables minor poppy and opium production, as well as smuggling of precursor chemicals, narcotrafficking, and trafficking of weapons, people, and other contraband. Unlike former President P\u00e9rez Molina, current President Morales opposes legalization of illicit drugs. According to the State Department, in 2017 Guatemala recorded record drug seizures and arrested 106 high-profile drug traffickers. In response to increased drug consumption, Guatemala doubled its budget for domestic reduction activities. The United States provides assistance in the areas of vetted units, and a range of training, with the goal of improving the professional capabilities and integrity of Guatemala's police forces and judicial institutions. \nThe 2018 International Narcotics Control Strategy Report (INCSR) highlighted the above improvements in Guatemala's drug control and border security, but noted the following:\nCorruption levels remain high and public confidence in government institutions is low. Limited budget resources hinder the government's effectiveness. Despite Guatemala's many successes in 2017, the government needs to take additional steps to further build sustainable drug control mechanisms, including support for anti-corruption efforts, accelerated judicial processes, improved interagency cooperation, and adequate financial resources for relevant agencies and government ministries. \nCorruption within the Guatemalan government has enabled illicit drug trafficking. The U.S. Department of Justice requested the extradition of former Interior Minister Lopez Bonilla, who oversaw the Guatemalan police and prisons under the Perez Molina administration. The Justice Department reportedly said that Lopez Bonilla received money from various drug cartels, including the notorious Los Zetas, in exchange for allowing them to operate freely across Guatemala. A U.S. court also indicted former Guatemalan Vice President Roxana Baldetti on criminal drug trafficking charges. In 2017 a Guatemalan court approved their extradition to the United States, but first they must face prosecution on multiple charges of corruption in Guatemalan courts. Baldetti was convicted and is serving time for one case in Guatemala. \nThe Trump Administration suspended military aid to Guatemala intended for police counternarcotics and border security operations task forces In March 2019. The Department of Defense announced it was ending the \"transfer of equipment and training to the task forces\" because the Interior Ministry, which oversees the police, had repeatedly misused armored jeeps provided by the United States since August 2018. (See \" Tensions over President Morales's Dispute with CICIG \" above.)\n\n\t\tMigration Issues98\n\nApproximately 1.5 million U.S. residents claim Guatemalan ethnicity, and there were over 950,000 foreign-born persons from Guatemala living in the U.S. in 2017. The Pew Research Center estimates that in 2016, 575,000 of the Guatemalan foreign-born population were unauthorized (about 60%). From the 1970s to 1990s, the civil war fueled some migration. During the 2000s, migration became motivated by socioeconomic opportunities, natural disasters, social violence, and family reunification. Unlike their neighbors in the region, Honduras and El Salvador, Guatemalans have not received Temporary Protected Status (TPS), which offers immigration relief from removal under specific circumstances. \nSome Guatemalans benefit from the Deferred Action for Child Arrivals (DACA) program, which allows people without lawful immigration status who came to the United States as children and meet certain requirements to request protection from removal for two years, subject to renewal. On September 5, 2017, the Trump Administration announced plans to phase out the DACA program. President Trump later tweeted that if Congress did not pass DACA-like legislation by early 2018, he would \"revisit\" the issue. As of the date of this report, no such legislation has been passed. Due to federal court orders, DACA renewals are once again being accepted; new applications for DACA, however, are not.\nFrom FY2009 to FY2014, the number of unaccompanied migrant children (sometimes referred to as Unaccompanied Alien Children, or UAC) from Guatemala apprehended at the U.S. border rose from 1,115 to 17,057, causing concern among Congress and the executive branch. In the years since, the trend has fluctuated, as the number of unaccompanied Guatemalan minors apprehended at the border decreased to 13,589 in 2015; rose to 18,913 in FY2016; fell to 14,827 in FY2017; and rose to 22,327 in FY2018.\nTo offer a safer alternative to travelling to the United States to request asylum, the U.S. government launched the Central American Minors (CAM) Refugee\/Parole program in December 2014. The program allowed children living in El Salvador, Guatemala, and Honduras, whose parents reside legally in the United States, to apply for legal entry to the United States. In July 2016, the U.S. government expanded the CAM program to include additional family members. According to State Department data, 45 Guatemalans left for the United States under refugee status and 31 as parolees between the program's start in December 2014 and September 2017. The Trump Administration ended the CAM program in November 2017.\nAccording to the U.N. High Commissioner for Refugees, 62% of unaccompanied migrant children interviewed in 2013 did not mention serious harm as a reason for leaving Guatemala, and 84% cited hopes for family reunification, increased work or study opportunities, or helping their families as motivation for coming to the United States. \nTwo Guatemalan children, 7 and 8 years old, died while in U.S. Customs and Border Protection (CBP) custody in December 2018. CBP Commissioner Kevin McAleenan subsequently issued guidelines for the agency to conduct health inspections on all children in custody, and said he was looking for ways to reduce congestion in government holding facilities, including having nongovernment organizations provide short-term housing for immigrants seeking asylum. McAleenan also said that holding facilities had been built for single adult males, not for family groups with children, and that a different approach was needed. \"We need help from Congress. We need to budget for medical care and mental health care for children in our facilities,\" he said.\nThe U.S. Strategy for Engagement in Central America and the Central American Plan of the Alliance for Prosperity in the northern triangle were developed in large part as a response to the surge in immigration in 2014. They represent efforts to spur development and reduce illegal emigration to the United States. The Trump administration's proposed budgets have emphasized security over development, and substantial cuts in assistance to the region.\n\n\t\tIntercountry Adoption\n\nU.S. laws and policies concerning intercountry adoption are designed to ensure that all children put up for adoption are truly orphans, and have not been bought, kidnapped, or subjected to human trafficking, smuggling, or other illegal activities. Similarly, the goals of the Hague Convention on Protection of Children and Cooperation in Respect of Intercountry Adoption are to ensure transparency in adoptions to prevent human trafficking, child stealing, or child selling, and to eliminate confusion and delays caused by differences among the laws and practices of different countries. Both the United States and Guatemala are party to the convention. Because Guatemala has not yet established regulations and procedures that meet convention standards, the convention has not entered into force there.\nIn FY2007, U.S. citizens adopted 4,726 children from Guatemala, more than from any other country except China (5,453 adoptions). When the convention went into effect in the United States in 2008, adoptions from Guatemala were suspended because Guatemala was not in compliance with the convention's standards. Since then, the only cases of adoptions by U.S. citizens of Guatemalan children that have been permitted are those that were already in-process on December 31, 2007. There were about 3,000 such adoption cases pending at the time. As of 2016, all but 3 cases had been resolved. According to the U.S. State Department, the Guatemalan government's priority is to continue developing its domestic adoption processes, but it is receptive to ongoing discussions. The State Department says it continues efforts to work with Guatemala to establish intercountry adoption procedures.","output":"Guatemala, the most populous Central American country, with a population of 16.3 million, has been consolidating its transition to democracy since the 1980s. Guatemala has a long history of internal conflict, including a 36-year civil war (1960-1996) during which the Guatemalan military held power and over 200,000 people were killed or disappeared. A democratic constitution was adopted in 1985, and a democratically elected government was inaugurated in 1986.\nPresident Jimmy Morales is being investigated for corruption and has survived three efforts to remove his immunity from prosecution. Morales took office in January 2016, having campaigned on an anticorruption platform. The previous president and vice president had resigned and been arrested after being implicated in a large-scale corruption scandal.\nIn what many observers see as a step forward in Guatemala's democratic development, the Public Ministry's corruption and human rights abuse investigations in recent years have led to the arrest and trial of high-level government, judicial, and military officials. The Public Ministry is responsible for public prosecution and law enforcement, and works in conjunction with the United Nations-backed International Commission against Impunity in Guatemala (CICIG) to strengthen rule of law in Guatemala. As their anticorruption efforts prove effective, the circle of those feeling threatened by investigations broadens, and attacks against CICIG and the judicial system it supports broaden and intensify as well.\nSince Morales and some of his inner circle became the targets of investigations, he has ended CICIG's mandate, tried to terminate it early, and fired some of his more reformist officials. The Guatemalan Congress is moving legislation forward that would give amnesty to perpetrators of crimes against humanity, free some high-profile prisoners held for corruption, and limit the work of nongovernment organizations. Observers within Guatemala and abroad worry that Morales and the Congress are trying to protect themselves and others from corruption and other charges, and threatening the rule of law in doing so.\nGuatemala continues to face many other challenges, including insecurity, high rates of violence, and increasing rates of poverty and malnourishment. Guatemala remains a major transit country for cocaine and heroin trafficked from South America to the United States. Although Guatemala recorded record drug seizures in 2017, the lack of law enforcement and the collusion between corrupt officials and organized crime in many areas enable trafficking of illicit drugs, precursor chemicals, weapons, people, and other contraband. During Morales's first year, his administration improved tax collection, and the interior ministry reported a 5% drop in homicide rates. Morales has since fired many of the officials responsible for those advances and other reforms.\nGuatemala has the largest economy in Central America and in recent decades has had relatively stable economic growth. Despite that economic growth, Guatemala's economic inequality and poverty have increased, especially among the rural indigenous population. The Economist Intelligence Unit projects that the country's economic growth rate will likely peak in 2018-2019 at 3.2%, followed by a decrease until 2022. The World Bank calls for rapid economic growth coupled with increased public investment and pro-poor policies to improve social conditions.\nTraditionally, the United States and Guatemala have had close relations, with friction at times over human rights and civil\/military issues. Guatemala and the United States have significant trade and are part of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Top priorities for U.S. bilateral assistance to Guatemala include improving security, governance, and justice for citizens; improving economic growth and food security; providing access to health services; promoting better educational outcomes; and providing opportunities for out-of-school youth to reduce their desire to migrate. The U.S. Strategy for Engagement in Central America is meant to spur development and reduce illegal emigration to the United States. The Trump Administration has proposed substantially cutting funds for Guatemala, and eliminating traditional food aid and the Inter-American Foundation in its FY2018-FY2020 budget requests. Congress rejected much of those cuts in the reports to and language in the Consolidated Appropriations Acts of 2018 (P.L. 115-141), and 2019 (P.L. 116-6). Tensions between Guatemala and much of the international community have arisen over Guatemalan efforts to oust CICIG and to grant amnesty for human rights violations. The Trump Administration suspended military aid to Guatemala in March 2019 over its misuse of armored vehicles provided by the Department of Defense to combat drug trafficking.\nBills introduced in the 116th Congress regarding Guatemala address immigration, order security, corruption and other governance issues, and include H.Res. 18, H.R. 1630, and S. 716."}
{"id":"gao_GAO-18-401","pid":"gao_GAO-18-401_0","input":"\tBackground\n\n\t\tFMS Program Size and Benefits\n\nThe FMS program provides support to over 150 foreign partners, with  sales totaling $416 billion between fiscal years 2007 and 2017. Annual  sales were over $30 billion in each of these years except two, and grew  80 percent over the period to $42 billion in fiscal year 2017 (see fig. 1).  The types of equipment and services sold to foreign partners ranged from  fighter jets and integrated air and missile defense systems to combat  helmets and training on the use of equipment. According to DSCA  officials, fluctuations in annual sales are driven by changes in individual  foreign partners\u2019 needs for equipment and other goods and services from  year to year. For example, the fiscal year 2012 annual sales of $69 billion  were substantially driven by one sale to Saudi Arabia that was valued at  $29 billion.\nAccording to DOD and State officials, FMS provides multiple benefits to  foreign governments and the U.S. government. Foreign governments that  choose to use FMS rather than direct commercial sales receive greater  assurances of a reliable product, benefit from DOD\u2019s economies of scale,  improve interoperability with the U.S. military, and build a stronger  relationship with the U.S. government. DSCA anticipates strong annual  sales to continue, although using FMS is generally not the quickest or  least expensive option for foreign governments. From the U.S.  perspective, FMS expands the market for U.S. businesses and  contributes to foreign policy and national security objectives.\n\n\t\tProcess of Administrative and CAS Fee Collections and Expenditures\n\nThe administrative and CAS fee rates have varied over time, as seen in  figure 2. The administrative fee was first implemented in 1970 and was  originally set at 2 percent. Since 1970, the administrative fee rate has  been changed four times, staying within the range of 2.0 to 3.8 percent.  Since November 2012, the rate has been set at 3.5 percent. The CAS fee  was first implemented in 1981 and was originally set at 1.5 percent. In  2002, a supplementary CAS fee was created for cases managed outside  the United States (and set at an additional 0.2 percent), and in 2014 the  base CAS fee rate for all cases was decreased to 1.2 percent.\nAdministrative and CAS fee collections are held in the FMS trust fund,  which is comprised of separate accounts for each country and several  distinct accounts for fees. Each country\u2019s individual account, referred to  as a country account, holds funds that country has paid for FMS  purchases of equipment and services until the funds are expended. The  fee accounts, including the administrative and the CAS accounts, do not  separate funds by country and instead comingle funds paid for fees by all  purchasers. These accounts hold their deposits without accruing interest.  According to DOD officials, once fees are deposited into one of the fee  accounts, they are considered U.S. government funds and do not  expire. Expenses related to administrative and CAS services are paid  respectively from the related fee account.\nThe timing and calculation of collections differs between the  administrative and CAS fees, as shown in the example case of a $10  million equipment sale in figure 3. In particular, for the administrative fee,  half of the amount owed is collected with the first payment made on most  cases. The remaining administrative fees owed are timed with deliveries  on the case. For the CAS fee, nothing is collected upfront. Instead,  whenever the contractor providing goods or services on the case bills for  work on the contract, a corresponding payment of the CAS fee is moved  from the country account to the CAS account.\nAccording to DSCA data, the average length of a standard FMS case  closed in fiscal year 2017 was 9 years. The administrative and CAS  accounts need to maintain sufficient balances to pay for related  operational expenses over that time period. DOD does not track  administrative or CAS costs by case. Instead, collected funds are  comingled and expenditures from the administrative and CAS accounts  are made to DOD implementing agencies to pay for their overall FMS  work. We have previously found that DOD does not have sufficient  information on program costs to determine the amount needed to support  the FMS program.\n\n\t\tRelated Roles and Responsibilities\n\nWhile State reviews and approves FMS purchases, DSCA is responsible  for administering the FMS program for DOD, including managing the  administrative and CAS accounts and coordinating with other DOD  components. In this role, DSCA sets policies for the FMS process,  including for how implementing agencies can use administrative and CAS  account funds; monitors the administrative and CAS account balances;  and sets the administrative and CAS fee rates. DFAS provides DSCA\u2019s  accounting services for FMS and in this role is responsible for accounting,  billing, disbursing, and collecting funds for the FMS program. DFAS\u2019  accounting duties also include reconciliation and correction of errors  related to collection of fees from foreign customers and disbursement of  funds out of the administrative and CAS accounts, as governed by an  agreement with DSCA.\nCongress and DSCA both have roles in defining what expenses are  covered by the administrative fee. Congress defines in the act what  administrative expenses DSCA can charge to FMS purchasers.  Congress amended the act in 1989 to exclude salaries of the Armed  Forces of the United States and estimated costs of unfunded civilian  retirement and other benefits from the expenses that shall be recovered  by the administrative fee. Since that change, the Armed Forces salaries  and the estimated costs of unfunded civilian retirement and other benefits  are paid instead from other appropriated funds.\nWithin the parameters specified in the act, DSCA is responsible for  defining whether administrative expenses should be paid from funds  charged to the foreign partner, either from funds collected into the  administrative account or from case-specific funds held in the related  country account, or from other DOD annual appropriations. DSCA does  this by outlining the expected funding source for specific types of  administrative tasks carried out for FMS cases. For example, DSCA has  determined that functions that are a normal part of all FMS cases\u2014such  as identifying defense requirements to help write an offer letter\u2014should  be paid from the administrative account. Conversely, functions that are  requested to provide supplementary support on a case\u2014such as  conducting a site survey\u2014should be paid with case fees from the  partner\u2019s country account.\n\n\tThe FMS Administrative Account Balance Has Grown Steadily Due in Part to Insufficient Management Controls and Should Be Adequate to Pay for Additional Expenditures through 2024\n\nThe administrative account balance grew steadily over the last decade  due in part to the insufficient controls DSCA has in place to manage the  account balance. Although DSCA has set a minimum desired level for the  account and a process for regular monitoring, it has not completed timely  comprehensive reviews of the administrative fee rate. In addition, DSCA  has not adopted the best practice of establishing a method to calculate an  upper bound of a target range for the account balance. As a result,  DSCA\u2019s monitoring and rate review practices are limited in their ability to  prevent excessive growth in the account balance. Our analysis indicates  that even if the administrative fee rate were reduced to as low as 2.9  percent and administrative expenditures were to increase 15 percent  above expected growth, the administrative account balance would likely  remain sufficient to pay for projected expenditures while maintaining a  reserve balance through at least fiscal year 2024.\n\n\t\tThe Administrative Account Grew about 950 Percent between Fiscal Years 2007 and 2017\n\nThe administrative account balance grew each year from the beginning of  fiscal year 2007 through the end of fiscal year 2017\u2014from $391 million to  $4.1 billion, or 953 percent (see fig. 4). According to DSCA officials, the  account balance has grown in part due to the fact that 50 percent of the  administrative fee is usually paid when the first payment is made on a  case while funds need to be available to pay for administrative work on  the case as long as it remains open. Thus, as sales have grown on  average over recent years, the amount of these upfront collections made  on cases and the amount of expenditures that would be needed to work  on these cases have also grown. However, administrative account  collections and expenditures grew at slower rates than the overall  account balance growth. Specifically, administrative account collections  and expenditures grew 86 percent and 149 percent, respectively.\nAdministrative account collections exceeded expenditures in each fiscal  year between 2007 and 2017, contributing to the growing account  balance. As shown in figure 5, collections were at least 1.5 times  expenditures in 6 of these years, and the difference between collections  and expenditures was $324 million in fiscal year 2017. At the end of each  fiscal year, the value of collections that exceeds expenditures remains in  the administrative account and is carried over to the next fiscal year\u2019s  beginning balance, which compounds the growth from year to year.  Administrative fees are transferred from the foreign partner\u2019s country  account to the administrative account when agreements for new sales are  signed and when deliveries are made on cases. Fluctuations in  collections from year to year are due to the variations in the timing of  these events and the value of the related cases. Despite these year-to- year fluctuations, expenditures from the administrative account to pay  implementing agencies to work on FMS cases have generally increased  more steadily over time.\nAnnual growth in the administrative account balance has slowed in recent  years; however, the overall balance has continued to grow. DSCA  reduced the administrative fee rate in November 2012 from 3.8 to 3.5  percent following a review prompted by concerns that the balance  appeared excessive as it neared $2 billion. Growth in the account balance  from fiscal years 2007 to 2012 averaged $412 million a year compared  with $273 million a year in fiscal years 2013 to 2017. Therefore, the rate  reduction may have helped to decrease the annual growth in the account  balance, yet the account balance itself has continued to grow.\n\n\t\tDSCA\u2019s Management Controls for the Administrative Account Provide Some Assurance of Maintaining Sufficient Funds but Do Not Guard Against an Excessive Balance\n\nDSCA has established a minimum desired level for the administrative  account and has processes for regularly monitoring the account\u2019s  balance. DSCA also has a process for reviewing the fee rate, called a  comprehensive review, although it has not completed its most recent  comprehensive reviews as frequently as required by DSCA policy. In  addition, DSCA has not set an upper bound of a target range for the  account balance. As a result, DSCA cannot provide adequate assurance  that the account maintains an appropriate balance that is both sufficient  but not excessive.\n\n\t\t\tDSCA Has Established a Desired Minimum Level for the Administrative Account\n\nBest practices in managing federal user fees suggest that federal  agencies use a risk-based strategy to establish a target range for fee  account balances so that there are reserves sufficient to cover varying or  unpredictable revenues or expenses. This risk-based strategy should  match the level of risk identified for the program, based on past  experience and realistic risks.\nDSCA has set a minimum desired level for the administrative account,  which it calls the safety level. It considers the safety level the minimum  balance required to allow sufficient time to respond to volatility in the FMS  business environment and to complete ongoing FMS cases. Prior to fiscal  year 2013, the safety level was determined based on the assumption that  FMS business might cease and 2 years of administrative expenses would  be needed to wind down operations. An estimate of such shut-down  expenses was difficult to calculate, according to DSCA officials. DSCA  and the DOD Comptroller determined that the initial assumption for  calculating the safety level was not valid because FMS would not likely  cease operations given its integral role in U.S. government and DOD  strategies. They therefore decided to change the calculation, and in so  doing to increase the safety level to further mitigate risk and provide more  flexibility. Specifically, starting in fiscal year 2013, the safety level has  instead been defined as 18 months of funding, a period of time  considered sufficient to respond to volatility in the FMS business  environment and to complete ongoing FMS cases. According to DSCA  officials, maintaining the safety level helps to ensure that there are  sufficient funds in the account to pay for expenses throughout the life- cycle of individual cases.\nSince fiscal year 2007, the administrative account balance has been  above this safety level every year, with the balance $2.7 billion above the  safety level (of $1.4 billion) at the close of fiscal year 2017. Since the  safety level calculation was modified for fiscal year 2013, the account  balance has been between 2.4 and 3.2 times the safety level, and was 3  times the safety level at the close of fiscal year 2017 (see fig. 6).\nDSCA policy describes certain processes for account monitoring to occur  on a monthly, quarterly, and annual basis:\nMonthly reviews: On a monthly basis, DSCA officials are to review a  report from DFAS on the status of the administrative account. These  reviews focus on whether: an expected amount of expenditures were  made from the account, collections into the account are  commensurate with past and current sales, the account balance is  trending up or down, and the balance is near the safety level.  According to DSCA officials, the results of these reviews are provided  to DSCA leadership through monthly oral briefings from October  through August, and the same information is reviewed and briefed  weekly during September as the end of the fiscal year approaches.\nQuarterly reviews: On a quarterly basis, DSCA officials supplement  their monthly briefings to DSCA leadership with other information on  the FMS business environment, according to DSCA officials. Such  information could, for example, focus on changes in bilateral  relationships with key FMS customers, regional conflicts, changes in  the global economy, or the status of annual sales.\nAnnual assessments: DSCA has completed annual assessments of  the administrative account since 2006, according to DSCA officials.  These assessments involve a review of the previous year\u2019s sales,  administrative fee collections, expenditures from the administrative  account, and the administrative account balance. The health of the  account is determined by comparing the current and projected  account balances with the account\u2019s safety level, which is also  recalculated for the new fiscal year as part of the annual assessment  process. To assess the health of the account over the next year,  DSCA officials use DSCA\u2019s sales forecast and budgeted  expenditures. These assessments are based on the current fee rate  and do not include testing of any alternative fee rates. These  assessments result in a report that is shared with DSCA leadership  and the implementing agencies to keep them informed of the  account\u2019s health at a more detailed level.\n\n\t\t\tDSCA Has Not Completed Timely Comprehensive Reviews of the Administrative Fee Rate\n\nDSCA policy requires that a comprehensive review of the administrative  fee rate be completed at least every 5 years. In addition, DSCA policy  encourages more frequent comprehensive reviews in the case of certain  events, such as a period of sales consistently below the forecasted level,  which may put the account balance at risk of dropping below the safety  level. However, DSCA has completed its three most recent  comprehensive reviews of the administrative fee rate more than 6 years  apart, which is less frequently than required by DSCA policy. Specifically:\nFiscal year 2005: DSCA decided to conduct a comprehensive review  of the administrative fee rate because the account balance ($260  million) was approaching the account\u2019s safety level ($250 million). For  this review, DSCA conducted an internal study that concluded that,  with no changes to the fee rate, the administrative account would  have a negative balance in fiscal year 2009. To perform this study,  DSCA officials projected what would happen to the administrative  account balance given different administrative fee rates, while  estimating annual sales between $12.5 billion and $14.5 billion for  future years. As a result of this study, DSCA decided to increase the  fee rate from 2.5 to 3.8 percent. According to independent analysis  undertaken by the Naval Postgraduate School (NPS) in 2011 for the  next rate review, this decision addressed short-term concerns about a  possible negative account balance but did not account for the  projected long-term growth of the balance at the new fee rate.\nFiscal years 2011 to 2012: DSCA enlisted NPS to perform a  comprehensive review of the administrative fee rate in fiscal year  2011. NPS built a model to assess how various administrative fee  rates would affect the administrative account balance through fiscal  year 2015, using multiple methodologies to project future annual sales  based on historical sales data. The model was also used to estimate  what the administrative account balance would have been if various  fee rates had been in effect since fiscal year 1999. Based on this  analysis, NPS recommended that the fee rate be lowered to within the  range of 3.0 to 3.4 percent, stating that 3.0 percent would be ideal for  minimizing large variations in the account balance from year to year  while mitigating the risk of falling below the safety level or accruing an  excessive balance. However, following a 2012 internal DSCA review  of this report, DSCA leadership decided to decrease the fee rate from  3.8 percent to 3.5 percent. According to DSCA officials, this decision  was made due to uncertainty regarding future annual sales and  because DSCA officials had learned to avoid making significant rate  changes that can make foreign partners\u2019 budgeting more difficult.\nFiscal year 2018: According to DSCA officials, after performing some  preparatory work during the prior fiscal year, DSCA began another  comprehensive review of the administrative fee rate in fiscal year  2018. According to DSCA officials, this review was to be conducted  internally and involve modeling various scenarios for the  administrative account, making projections based on DSCA\u2019s fiscal  year 2018 sales forecast, recent sales data, expenditure trends, and  historical collection rates on ongoing cases. In addition to using  historical sales data to project future sales, DSCA planned to model  alternate scenarios to account for the possibility of certain high or low  sales years. In April 2018, DSCA announced that, as a result of this  review, the administrative fee will be reduced to 3.2 percent as of  June 1, 2018.\nDSCA established the policy of a 5-year period between comprehensive  rate reviews because, according to DSCA officials, foreign partners prefer  stability in the administrative fee rate to facilitate their budgeting. In  addition, 5 years between rate reviews would allow DSCA to identify  sales and expenditure patterns that could determine whether a rate  change would be needed. According to DSCA officials, the most recent  rate review was originally scheduled to be completed on time but was  delayed due to competing priorities and limited resources. However,  without timely comprehensive reviews, there is greater likelihood that  large changes would be needed in the administrative fee rate to correct  for large variations in the administrative account balance, thus hindering  DSCA\u2019s ability to provide stability in the administrative fee rate.\n\n\t\t\tDSCA Has Not Set an Upper Bound of a Target Range for the Administrative Account\n\nDSCA has not established a method to calculate an upper bound of a  target range for the administrative account balance as suggested by best  practices. Setting an upper bound could help DSCA determine when the  balance is excessive and an out-of-cycle comprehensive review of the fee  rate might be warranted. An upper bound could be based on a certain  number of months or years in expenditures and would thereby change  over time to reflect the size and needs of the FMS program. DSCA could  thus use the upper bound of a target range as another management tool  to help more closely monitor the account during its periodic reviews.  Given the lack of data on actual FMS costs per case and uncertainty  about future annual sales, such a management tool could usefully inform  future DSCA decisions based on its comprehensive rate reviews.\n\n\t\tGAO Analysis Indicates the Administrative Account Is Likely to Have Sufficient Funds for at Least 7 Years and Could Pay for Additional Expenditures\n\nWe developed a model to understand potential changes in the  administrative account balance for fiscal years 2018 through 2024 given a  range of annual sales, administrative fee rates, and annual administrative  expenditures. We found that, if no changes were made to the fee rate or  expected expenditure levels, the administrative account balance would  likely be above the projected safety level by at least $1.6 billion in fiscal  year 2024. If DSCA were to reduce the administrative fee rate as low as  2.9 percent and annual expenditures were to increase as much as 15  percent, the administrative account balance would also likely be above  the projected safety level in fiscal year 2024 by at least $25 million.\n\n\t\t\tThe Projection Model\n\nWe used cautious assumptions to model eight scenarios to assess the  likelihood of the administrative account balance remaining above a  projected safety level in fiscal years 2018 through 2024. The projected  safety level reflects DSCA\u2019s definition of the minimum balance required  for the administrative account to allow sufficient time to respond to  volatility in the FMS business environment and to complete ongoing FMS  cases. We consider our assumptions cautious because they are more  likely to lead us to underestimate the administrative account balance and  to inflate the risk of it dropping below the projected safety level (see text  box).\nCautious Assumptions Used in GAO Modeling of the Administrative Account  Balance in Future Years  Sales: We assumed a minimum of $15 billion and a maximum of $47 billion in sales  each year, using a uniform distribution that assumes an equal likelihood of any sales  value within that range each year. In reality, annual sales have increased overall  since fiscal year 2000 and have remained above $20 billion since fiscal year 2006  and above $33 billion since fiscal year 2014. Higher annual sales lead to larger  administrative fee collections. This sales range likely leads to underestimating  collections in some years.  Expenditures: We assume expenditure levels that reflect both fluctuations in sales  and overall steady annual growth in expenditures even when our annual sales  values do not increase on average. Therefore, we likely overestimate expenditures in  some years.  Safety level: We assume steady annual growth in the safety level, even though we  would expect the safety level to be lower when collections and expenditures are  lower. Since our safety level projections do not take this into account, we likely  overestimate the safety level, and therefore inflate the risk of dropping below it.\nWe developed our baseline scenario, in which we maintain the current 3.5  percent administrative fee rate and typical growth based on current trends  in expenditures. In additional scenarios, we adjusted the baseline  projections with two key levers affecting the administrative account  balance: (1) the fee rate and (2) the amount of expenditures out of the  account. Given that the administrative account balance was $2.7 billion  above the safety level as of the end of fiscal year 2017, we made  adjustments to these levers in ways that could lead to a decline in the  account balance by decreasing the fee rate, increasing expenditures, or  through a combination of the two. Below, we describe the results of the  baseline scenario and where we adjust either or both levers to the  maximum extent we considered. See appendix II for a full description of  our modeling methodology and results from four additional scenarios.\nFor each scenario, we estimated the expected range of the administrative  account balance and then assessed the likelihood of the account balance  remaining above the projected safety level. We consider 10 percent as an  acceptable risk threshold and therefore consider any outcome as  favorable if it involves a 90 percent or greater likelihood of the balance  remaining above the projected safety level.\n\n\t\t\tModel Outcomes\n\nAs shown in figure 7, our projections indicate that the administrative  account balance will remain sufficient to maintain operations through  fiscal year 2024 in all scenarios. Specifically:  In the baseline scenario, if no changes were made to the fee rate or to  annual expenditures, the estimated administrative account balance  would be between $2.5 billion and $5.7 billion in fiscal year 2024, with  a 90 percent likelihood that the balance would be above the projected  safety level by at least $1.6 billion.\nIf DSCA were to reduce the fee rate to 2.9 percent, we estimate the  administrative account balance would be between $2.1 billion and  $4.7 billion, with a 90 percent likelihood that the balance would be  above the projected safety level in fiscal year 2024 by at least $1.0  billion.\nIf annual expenditures from the administrative account were to  increase 15 percent above expected levels, we estimate the  administrative account balance would be between $1.5 billion and  $4.6 billion, with a 90 percent likelihood the balance would be above  the projected safety level in fiscal year 2024 by at least $622 million.\nIf this increase in annual expenditures were coupled with a reduction  in the administrative fee rate to 2.9 percent, we estimate the account  balance would be between $1.1 billion and $3.6 billion in fiscal year  2024, with a 90 percent likelihood the balance would be above the  projected safety level in fiscal year 2024 by at least $25 million.\nThe range of the estimated balance in each scenario gets larger from  year to year due to increasing uncertainty for longer-term projections.\nOur modeling shows that, even with a substantially reduced  administrative fee rate, the estimated administrative account balance  would likely well exceed the account\u2019s projected safety level through at  least fiscal year 2024. Even if DSCA reduced the fee rate an additional  0.3 percent lower than it plans to as of June 2018, we project the  estimated balance of the administrative account would be over $1 billion  above the account\u2019s safety level in fiscal year 2024.\n\n\t\t\tGAO Modeling Indicates the Administrative Account Balance Could Likely Be Used to Pay for Additional Expenses, Such As Those Excluded by Statute\n\nIn addition, our modeling demonstrates that administrative funds are  sufficient to cover a higher amount of expenditures for the work the U.S.  government performs for the benefit of its foreign partners, and could be  used in place of the other appropriated funds used to support some of the  associated expenses today. As enacted in 1976, the provision of the act  that authorized the collection of administrative fees required that sales  contracts include appropriate fees for administrative services to recover  the full estimated costs of the administration of sales made under the  act. Subsequently, Congress amended the act to exclude some  expenses from the administrative fee. In particular, according to a House  report and DOD testimony, to avoid raising the administrative fee at a  time when annual sales were low and the account was insolvent,  Congress, at DOD\u2019s request, amended the act in 1989 to exclude from  the administrative fee certain expenses associated with military personnel  who work on the FMS program as well as the estimated costs of  unfunded civilian retirement and other benefits.\nSince then, these expenses\u2014with one exception for fiscal year 2000\u2014 have been funded with other appropriated funds rather than with foreign  partners\u2019 administrative fees. For fiscal year 2000, Congress required  DOD to recover expenses attributable to salaries of members of the  Armed Forces and the unfunded estimated costs of civilian retirement and  other benefits by including them in the administrative fee, resulting in  $52 million in additional FMS administrative expenses, or 13.5 percent of  total FMS administrative expenses, for that year. Applying the same  percentage, these costs would approximate $119 million in fiscal year  2017; however, DOD does not track the costs of military pay or unfunded  civilian retirement and other benefits for FMS, so the current value of  these costs is unknown. Our modeling shows that, even if DSCA were to  decrease the administrative fee rate an additional 0.3 percent lower than  it plans to effective June 2018 and annual expenditures increased as high  as 15 percent above expected levels, the account balance would likely  remain sufficient through at least fiscal year 2024. By then, DSCA would  have had an opportunity to reassess the fee rate through another  comprehensive rate review. The circumstances of the administrative  account balance have changed substantially since the 1980s. Revisiting  the provisions in the act authorizing and defining the collection of  administrative expenses could allow other appropriated funds currently  used to pay for some of these expenses to be used for other authorized  purposes. Officials within DSCA and DOD\u2019s Comptroller Office have  stated they are receptive to revisiting these provisions.\n\n\tThe FMS CAS Account Balance Has Grown Substantially; Management Controls over the Balance Remain Insufficient\n\nThe CAS account balance grew substantially between fiscal years 2007  and 2015 because CAS collections exceeded expenditures in each year  and insufficient controls were in place to manage the balance. The  account balances for fiscal years 2016 and 2017 overstate available CAS  funds due to a systems issue and limited related oversight. Since fiscal  year 2014, DSCA has created some controls to help better manage this  account; however, DSCA does not plan to conduct timely comprehensive  reviews of the CAS fee rate, has inconsistently implemented internal  guidance related to calculating the minimum desired level for the account,  and has not established a method to calculate an upper bound of a target  range for the account, thus allowing the account to continue to grow.\n\n\t\tThe CAS Account Balance Grew Substantially between Fiscal Years 2007 and 2015; the Fiscal Years 2016 and 2017 Account Balances Overstate Available Funds\n\nThe CAS account balance grew every fiscal year, from $69 million at the  beginning of 2007 to $981 million at the end of 2015, or 1,329 percent  over the period (see fig. 8). As annual sales grew during this period, CAS  collections and expenditures also grew, but at slower rates than the  account balance growth\u2014at 133 percent and 187 percent, respectively.\nCAS account collections exceeded expenditures each fiscal year from  2007 through 2015, contributing to the growing account balance. As  shown in figure 9, collections were at least double expenditures in five of  these years, with a $49 million difference between collections and  expenditures in fiscal year 2015. DSCA reduced the CAS fee rate from  1.5 to 1.2 percent in 2014 due to concerns over growth in the CAS  account balance, according to DSCA officials. After the rate reduction, the  account balance continued to grow but at a slower rate. The account  balance increased 5 percent during fiscal year 2015 compared with an  average of 38 percent from fiscal years 2006 through 2014. The balance  would continue to grow if this trend continues.\nThe CAS account balance data that DFAS provided to DSCA overstated  the amount of CAS funds available by about $187 million for fiscal year  2016 and continued to be overstated for fiscal year 2017 due to a  systems issue and limited related oversight. According to Defense  Contract Management Agency (DCMA) officials, in October 2015, DCMA,  the largest recipient of CAS funds, began using a new accounting system  called the Defense Agencies Initiative. According to DCMA officials and  internal data, DCMA submitted bills for about $187 million of CAS work  for fiscal year 2016. To process its requests for this CAS funding in its  new system, DCMA used an incorrect accounting code, according to  DFAS officials. As a result, DCMA was paid for some of its fiscal year  2016 CAS bills, totaling about $89 million, from a different account,  according to DFAS officials. Consequently, this amount paid to DCMA  was not reflected in the CAS account expenditures or balance for fiscal  year 2016. Further, DCMA and DFAS data differ regarding what  additional amounts have been reimbursed to DCMA for its remaining  fiscal year 2016 and its fiscal year 2017 CAS funding and suggest that  DFAS underreported CAS expenditures to DSCA for both years.\nAlthough DSCA has financial management responsibility for the FMS  trust fund, DSCA has played a minimal role in correcting DCMA\u2019s  incorrect billings or low reimbursement levels. After DSCA officials  noticed low fiscal year 2016 CAS disbursements in December 2016,  DSCA officials asked DFAS and DCMA officials to look into the cause  and to resolve the issue. However, as of January 2018, DSCA had not  provided any specific directions to DFAS or DCMA on a process or  timeline for fixing it. DCMA began to submit vouchers totaling  approximately $89 million in November 2017 for DFAS to process to be  correctly paid out of the CAS account. According to DFAS officials, DFAS  processed corrections related to these vouchers by January 2018 so that  the approximately $89 million would be taken from the CAS account and  returned to the other account. DFAS officials believe that these  transactions resolved DCMA\u2019s billing issues since they have not received  any additional vouchers from DCMA or direction from DSCA. However,  according to DCMA officials, they continue to have difficulty getting  reimbursed for CAS work dating back to FY2016 and discrepancies  remain between related DCMA and DFAS data.\nFederal standards for internal control state that management should use  quality information that is current, complete, accurate, and provided on a  timely basis to achieve the agency\u2019s objectives and make informed  decisions. However, as a result of DCMA\u2019s difficulties in getting  reimbursed from the CAS account, the CAS account balance remains  overstated as of January 2018, hampering DSCA\u2019s ability to perform  oversight of the account.\n\n\t\tDSCA\u2019s Management Controls over the CAS Account Balance Have Been Strengthened in Recent Years but Remain Insufficient\n\nSince 2014, DSCA has put in place various management controls for the  CAS account. Nevertheless, these remain insufficient due to inconsistent  implementation of internal guidance and lack of a key control.\n\n\t\t\tDSCA Established Some Controls for Managing the CAS Account Balance\n\nFrom June to August 2013, DSCA conducted its first comprehensive  review of the CAS fee rate since the early 2000s, according to DSCA  officials. This comprehensive fee rate review was called for in DSCA\u2019s  strategic plan and was also prompted by substantial growth of the CAS  account, according to DSCA officials. To conduct this review, DSCA  officials worked with an internal support contractor to develop a model to  project future CAS account balances based on historical data on CAS  expenditures and collections, historical data and future projections for  annual sales, and future budget estimates made by CAS implementing  agencies. In this model, DSCA varied future annual sales projections and  the CAS fee rate within the range of 1.0 to 1.5 percent to determine if the  CAS account could maintain a healthy balance over the next 10 years  under different conditions. As a result, in November 2014, DSCA issued a  policy memo that specified a reduction in the CAS fee base rate from 1.5  to 1.2 percent for all cases starting after December 1, 2014. The decision  to reduce the rate to 1.2 percent was supported by their modeling  outcomes that showed that the CAS account balance would be above a  safety level set for the account even if annual sales were as low as $12  billion in each of the following 10 years.\nThe November 2014 policy memo that resulted from the 2013  comprehensive fee rate review specified three new controls for managing  the CAS account:\nPeriodic comprehensive fee rate reviews: DSCA determined that it  would conduct comprehensive rate reviews of the CAS account every  5 years.\nA safety level for the CAS account: DSCA established a safety  level, or minimum desired balance, for the CAS account at 3 years of  average annual expenses. According to DSCA officials, the basis for  the calculation of the safety level was rooted in a Federal Acquisition  Regulation requirement to complete contract closeout within 3 years  of final delivery for some types of contracts. As a result, even if no  new sales were made, the CAS account would have sufficient funds  to pay for contract management on existing cases. The CAS account  balance was 1.7 times or $371 million above the safety level in fiscal  year 2014 and 1.8 times or $420 million above the safety level in fiscal  year 2015.\nAnnual reviews of the health of the CAS account: For each year  since fiscal year 2014, DSCA has conducted an annual assessment  of the health of the CAS account. To perform this assessment, a  DSCA official reviews information such as the CAS account balance  from the end of the prior fiscal year against the account\u2019s safety level,  prior year account expenditures and collections, and information that  may be relevant to the account moving forward, such as budget  requests submitted by implementing agencies. This annual  assessment culminates in a report that is provided to and signed off  by DSCA\u2019s Director of Business Operations.\nThese practices were formalized by incorporating them into DSCA\u2019s  Manager\u2019s Internal Control Program (MICP). In addition to these  practices, MICP documentation for the CAS account also lays out a fourth  management control: monthly reviews, which are meant to ensure that  the account stays above its safety level throughout the year and that any  large variances in expected expenditures or collections are reported to  DFAS so that errors can be identified and corrected as needed.  According to DSCA\u2019s MICP Handbook, all MICP documentation should  be reviewed at least annually to ensure it is kept up to date.\n\n\t\t\tDSCA Does Not Plan to Conduct a Timely Comprehensive Review of the CAS Account Fee Rate\n\nAs mentioned above, DSCA\u2019s internal guidance indicates DSCA should  conduct comprehensive reviews of the CAS fee rate every 5 years, which  would make the next review in the summer of 2018. However, DSCA  officials do not expect to begin their next comprehensive rate review until  fiscal year 2019. DSCA officials stated that they intend to complete the  review sometime by the beginning of fiscal year 2020, to complete it  within 5 years of when the last CAS rate reduction took effect. However,  this plan extends the time between reviews by a year and a half due to  the amount of time it took for DSCA to decide on and implement the rate  reduction after the last review. More frequent comprehensive reviews  would provide timely in-depth information to decision makers to ensure  that the CAS fee rate is set appropriately. In addition, more frequent fee  rate changes would allow for smaller corrections when needed, limiting  the impact that large fee rate changes would have on customers\u2019 ability to  budget.\n\n\t\t\tDSCA Inconsistently Implemented Guidance Concerning Safety Level Calculations\n\nThe guidance in the MICP procedures specifying how to calculate the  safety level has not been consistently implemented and has not been  updated to align with current practices. Federal internal control standards  indicate that management should document the organization\u2019s internal  control responsibilities in its policies at the appropriate level of detail to  allow management to monitor the control activity effectively. These  standards also state that if there is a significant change in an entity\u2019s  process, management should review this process in a timely manner after  the change to determine that the control activities are designed and  implemented appropriately.\nFigure 10 outlines the guidance in the MICP procedures with regard to  the safety level and how this guidance was implemented from fiscal years  2014 through 2017. In particular, the MICP procedures indicate that the  safety level should be calculated based on a 3-year average of  disbursements. The procedures also allow DSCA officials to determine  whether to update the safety level in each year without providing specific  criteria for making this determination. As a result, no change to the safety  level was made in fiscal year 2015 or 2016 despite increases in CAS  expenditures. However, for the years when the safety level was  calculated, the calculation was performed differently than what is  prescribed in the MICP guidance. For example, for fiscal year 2017, the  DSCA official in charge of managing the CAS account stated the method  was modified to be based on the amount of obligation authority (or total  CAS budget) instead of the amount of disbursements. This approach was  taken because of the incomplete fiscal year 2016 disbursement data.  However, the method used was not consistent with the guidance.  Accordingly, for future years it is not clear how the safety level should be  calculated.\nAs previously stated, best practices in managing federal user fees  indicate that it is advisable for federal agencies to use a risk-based  strategy to establish a target range for fee accounts. Although DSCA  has followed this best practice and set a safety level, or minimum desired  balance for the CAS account, DSCA has not established a method to  calculate an upper bound of a target range for the CAS account balance,  which would help officials identify when the account balance becomes  excessive. DSCA\u2019s MICP procedures indicate that, as part of the annual  assessment process, DSCA officials should review account activity to  determine if an out-of-cycle comprehensive review of the CAS fee rate is  needed, specifying that this should be done either because the CAS  account balance should be higher to cover expenses or lower because  too many fees are being collected. However, in the absence of an upper  bound for the account, it is up to the judgment of DSCA officials to  determine when the account is excessive. DSCA officials told us that they  were reluctant to set an upper bound for the account due to uncertainty  regarding future sales and future CAS expenditures. Nevertheless, as  with the safety level, an upper bound could be based on a certain number  of months or years in expenditures and could be flexible and adjusted  over time. Without establishing a target range for the account balance,  DSCA officials lack a key tool to help determine the appropriate CAS fee  rate.\n\n\tConclusions\n\nFrom fiscal years 2007 to 2017, the balance of the Foreign Military Sales  administrative account grew dramatically to $4.1 billion. DSCA has set a  minimum desired level for the account balance and designed various  account monitoring practices to ensure the minimum level is not reached.  However, DSCA has not performed comprehensive reviews of the  administrative fee rate at least every five years, consistent with DSCA  policy, and has not set an upper bound that would provide a target range  for the account. These conditions limit DSCA\u2019s ability to appropriately  target the fee rate and to protect against excessive growth in the account  balance. Our analysis demonstrates that the administrative account is  likely to stay above its safety level even if the rate were reduced to as low  as 2.9 percent and expenditures from the account were raised by 15  percent, signifying there should be even more room for the account to  absorb increased expenditures now that DSCA has announced that the  rate will be reduced to 3.2 percent as of June 1, 2018. Thus, this account  should now have sufficient funds to pay for additional expenses that are  currently paid from appropriated funds, such as those excluded by  statute. Thereby, more of the costs for the work performed for the benefit  of our foreign partners could be paid through the administrative fee, rather  than having those some of those expenses paid through other  appropriated funds.\nThe CAS account has also experienced significant growth since fiscal  year 2007, although the current account balance is unknown because of  an accounting error and difficulty using a new accounting system.  Specifically, in fiscal year 2016, a different account was charged about  $89 million in DCMA\u2019s CAS billings and DCMA has had continuing  difficulty getting reimbursed for its CAS bills for fiscal years 2016 and  2017. DSCA did not become aware of this issue for over a year after it  began, and DSCA has played a minimal role in coordinating DCMA and  DFAS to fix it. Since 2014, DSCA has strengthened some management  controls over the CAS account, but they could be further enhanced if  DSCA conducted more timely comprehensive reviews, provided more  clarity on the expected calculation of the account\u2019s minimum level, and  set an upper bound of a target range for the account. In particular, such  an upper bound could allow DSCA officials to identify when the CAS  balance is excessive, as directed by DSCA\u2019s internal guidance. Adopting  such controls would enhance DSCA leadership\u2019s ability to monitor the  account\u2019s balance and make timely decisions to ensure the rate is set to  cover DOD costs but not overcharge foreign partners.\n\n\tMatter for Congressional Consideration\n\nCongress should consider redefining what can be considered an  allowable expense to be charged from the administrative account. (Matter  for Consideration 1)\n\n\tRecommendations for Executive Action\n\nWe propose making the following six recommendations to DSCA:  The Director of DSCA should take steps to ensure that comprehensive  reviews of the administrative fee rate are completed at least every 5  years. (Recommendation 1)\nThe Director of DSCA should define a method for calculating an upper  bound of a target range for the administrative account that could be used  to guide the agency\u2019s reviews of administrative account balances and  decision making in setting the fee rate. (Recommendation 2)\nThe Director of DSCA should direct DCMA and DFAS to work together to  ensure timely correction of the fiscal years 2016 and 2017 DCMA CAS  reimbursement issues. (Recommendation 3)\nThe Director of DSCA should take steps to ensure that comprehensive  reviews of the CAS fee rate are completed at least every 5 years.  (Recommendation 4)\nThe Director of DSCA should clarify internal guidance to ensure  consistency in the calculation of the CAS account\u2019s minimum (safety)  level. (Recommendation 5)\nThe Director of DSCA should define a method for calculating an upper  bound of a target range for the CAS account that could be used to guide  the agency\u2019s reviews of CAS account balances and decision making in  setting the fee rate. (Recommendation 6)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report for review and comment to DOD and  State. DSCA provided written comments on behalf of DOD, which we  reproduce in appendix III. In its comments, DSCA concurred with five of  our recommendations and partially concurred with one.\nIn commenting on our first recommendation for DSCA to take steps to  ensure that it completes timely comprehensive reviews of the  administrative fee rate, DSCA asserted that its last two reviews were  conducted in time to meet its 5-year requirement. However, as we outline  in this report, these reviews were conducted about 6 to 7 years apart.  These included a fiscal year 2005 review that led to an August 2006 rate  change, a review that began in fiscal year 2011 that led to a November  2012 rate change, and a fiscal year 2018 review that led to a June 2018  rate change. By following its own policy to complete the reviews every 5  years instead, DSCA would better be able to keep the administrative fee  rate up-to-date with program changes.\nIn partially concurring with our fourth recommendation for DSCA to take  steps to ensure that it completes timely comprehensive reviews of the  CAS fee rate, DSCA asserts that it plans to begin its next review later  than 5 years after the last one to provide more time for DCMA\u2019s billing  issues to be resolved and to inform the review with 5 years of data since  the December 2014 rate reduction. Implementing this recommendation,  including for its next review, would allow DSCA to meet its own guidance.  In addition, the process of performing a comprehensive review of the fee  rate could further provide impetus for addressing DCMA\u2019s billing issues  that have led to inaccuracies in the account balance and expenditure  information since fiscal year 2016. Finally, if DSCA were to delay data  collection until more than 5 years after the last rate reduction, that would  cause the reviews to start more than 6-1\/2 years apart. Given how long  the review process has taken in the past, an earlier start will help ensure  completion within 5 years.\nIn commenting on our fifth recommendation, DSCA noted that it updated  its internal guidance for calculating the CAS safety level in March 2018.  We plan to verify full implementation of this recommendation as part of  our routine follow up process.\nDOD also provided technical comments, which we incorporated as  appropriate.\nState did not provide any written or technical comments.\nWe are sending copies of this report to the appropriate congressional  committees, and the Secretaries of Defense and State. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  Thomas Melito at (202) 512-9601 or MelitoT@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThe Defense Security Cooperation Agency (DSCA) manages fees  collected on transfers of defense articles and services to foreign countries  that occur through the Foreign Military Sales (FMS) program. These fees  are collected into separate accounts in the FMS trust fund. This report  examines (1) the balance maintained in the administrative account in  fiscal years 2007 to 2017, the controls used to manage it, and the extent  to which the Department of Defense (DOD) has the ability to pay for FMS  administrative expenses under different scenarios; and (2) the balance  maintained in the contract administration services (CAS) account in fiscal  years 2007 to 2017 and the controls used to manage it.\nTo determine which fees to include in our review, we reviewed the  International Security Assistance and Arms Export Control Act of 1976  (the act), which is the authorizing legislation for FMS, and DOD  documents and data. We also interviewed DOD officials. We determined  that there are three primary fees charged on FMS cases: (1) the  administrative fee, (2) the CAS fee, and (3) the transportation fee. These  three fees represented 99 percent of the amount of funding held in FMS  trust fund overhead accounts as of the beginning of fiscal year 2016. We  will review the transportation account in a separate report because of the  different ways in which the collections and expenditures from the account  operate.\nTo assess the balance of the administrative account, we analyzed  administrative account collections, expenditures, and balance data for  fiscal years 2007 to 2017 maintained in the Defense Integrated Financial  System by the Defense Finance and Accounting Service (DFAS), the  DOD component that acts as the accounting service for the FMS  program. According to DFAS, the Defense Integrated Financial System  was implemented in 1980, and is used for FMS case management,  financial reporting, and customer billing. We chose to review this number  of fiscal years of data based on data availability. To understand the  structure and functioning of the administrative account and to determine  the reliability of these data, we reviewed relevant DOD documents,  including explanations of changes to the administrative fee rate over time,  and we interviewed DFAS and DSCA officials in various policy, financial,  or technical roles. We asked knowledgeable agency officials a set of  standard questions on this system, data entry procedures and checks,  and other relevant aspects of data reliability. We reviewed their  responses, examined the data ourselves, and conducted basic logic  checks. Where questions arose, we followed up with agency officials for  explanation and clarification. We did not conduct any independent testing  of these data to determine whether these were the amounts that should  have been paid into and out of the account during that period, such as  through correct payments having been made based on accurate billings.  We determined the administrative account data to be sufficiently reliable  for assessing the account balance and related trends over the period, and  for projecting future trends in the account balances, under a variety of  assumptions, using statistical modeling.\nTo assess the controls DSCA uses to manage the administrative account  balance, we reviewed relevant documents and interviewed DOD officials.  To determine what controls DSCA should be using to manage the  account, we reviewed DOD\u2019s Financial Management Regulations,  DSCA\u2019s Security Assistance Management Manual, DSCA\u2019s Managers\u2019  Internal Control Program procedures, and other internal DSCA guidance.  We also reviewed reports resulting from DSCA\u2019s implementation of its  account monitoring and comprehensive rate review processes, including  annual administrative account assessments from fiscal years 2012 to  2016, quarterly administrative account assessments from fiscal years  2015 and 2016, and reports resulting from the 2005 and 2011-2012  comprehensive fee rate reviews. We chose to review the annual and  quarterly assessments for different periods of time to review manageable  numbers of the most recent assessments conducted. We also interviewed  DSCA policy officials regarding their implementation of these processes.\nTo assess the extent to which DOD has the ability to pay for FMS  administrative expenses from the administrative account under different  conditions, we modeled eight scenarios to determine the projected  account balance in fiscal years 2018 to 2024 across a range of potential  annual sales values in each year while varying the administrative fee rate  and expenditures from the account. Appendix II provides a complete  description of our modeling methodology and the results of our analysis.\nIn addition to the modeling, we also performed legal research to  determine the extent to which Congress and DOD have a role in defining  what can be paid from the administrative account. In particular, we  reviewed sections 2761 and 2792 of the act regarding DOD\u2019s authority to  charge fees. We also reviewed DOD documentation and legislative  history to determine the conditions that led to the 1989 amendments to  the act that excluded certain costs associated with military personnel who  work on the FMS program as well as unfunded civilian retirement and  other benefits from administrative expenses. Additionally, we reviewed  DSCA\u2019s definitions of which FMS administrative services should be paid  from different funding sources, as specified in DSCA\u2019s Security  Assistance Management Manual. We also interviewed DOD officials  about the agency\u2019s role in defining administrative expenses.\nSimilar to the administrative account, to assess the balance of the CAS  account, we initially attempted to analyze CAS account collections,  expenditures, and balance data for fiscal years 2007 to 2017 maintained  by DFAS in the Defense Integrated Financial System. We chose to review  this number of fiscal years of data based on data availability. To  understand the structure and functioning of the CAS account and to  determine the reliability of these data, we reviewed relevant documents  from DOD, including those explaining changes to the CAS account fee  rate over time, and interviewed DFAS and DSCA officials in various  policy, financial, or technical roles. We asked knowledgeable agency  officials a set of standard questions on this system, data entry procedures  and checks, and other relevant aspects of data reliability. We reviewed  their responses, examined the data, and conducted logic checks. Where  questions arose, we asked agency officials to explain and clarify. We  performed additional cross-checks that compared CAS expenditures data  provided by DFAS with disbursement data from the implementing  agencies that used the CAS funds in fiscal years 2012 to 2017. We found  some discrepancies in these data that we were subsequently able to  reconcile with agency officials for fiscal years 2007 through 2015 for the  purposes of reporting overall annual expenditures from the account. We  did not conduct any independent testing of these data to determine  whether these were the amounts that should have been paid into and out  of the account during that period, such as through correct payments  having been made based on accurate billings. We determined the CAS  account data for fiscal years 2007 to 2015 to be sufficiently reliable for  assessing the account balance and related trends over the period. We did  not determine the CAS account data to be sufficiently reliable for these  purposes for fiscal years 2016 and 2017 due to a large share of CAS  billings for those fiscal years that either had been disbursed from the  incorrect account or were delayed, and were therefore not reflected in the  CAS expenditures and balance data. Accordingly, the CAS data for fiscal  years 2016 and 2017 were excluded from our analysis.\nTo assess the controls DSCA uses to manage the CAS account balance,  we reviewed relevant statutes, DOD financial management regulations,  DOD guidance, and DOD documentation of such controls, and  interviewed DSCA officials. To determine what controls DSCA should be  following to manage the account, we reviewed DSCA\u2019s Managers\u2019  Internal Control Program procedures and a related DSCA policy memo,  and interviewed DSCA policy officials. We also reviewed reports resulting  from DSCA\u2019s implementation of its account monitoring and  comprehensive rate review processes, including all of DSCA\u2019s annual  CAS account assessments completed to date (covering fiscal years 2014  to 2016) and reports showing the process used and results of the fiscal  year 2013 comprehensive review of the CAS fee rate. We also  interviewed DSCA officials regarding their implementation of these  processes.\nWe were unable to perform modeling to assess the extent to which DOD  has the ability to pay for CAS expenses from the CAS account under  different conditions due to the limited data available at the time of our  review and data reliability concerns for fiscal years 2016 and 2017.\nWe conducted this performance audit from February 2017 to May 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Methodology Used to Model Possible Changes to the Administrative Account Balance and Model Results\n\n\tMethodology\n\nTo determine whether the administrative account balance would be  sufficient to maintain Foreign Military Sales (FMS) operations if there  were a reduction in the administrative fee rate or an increase in annual  expenditures, we used a Monte Carlo simulation methodology to project  the account balance across a range of annual sales values for fiscal  years 2018 through 2024. This technique approximates the likelihood of  certain outcomes by performing multiple trial runs, called simulations,  using random variables within a specified range. The simulations capture  the volatility of sales in the projection of the future balance of the  administrative account. We determined to report projections through fiscal  year 2024 for two main reasons. First, there is increasing uncertainty for  longer-term projections. Second, by then, DSCA should have had an  opportunity to reassess the fee rate through another comprehensive rate  review, given that the current review is to be completed in fiscal year  2018 and DSCA policy requires such reviews every 5 years.\nTo construct our baseline model, we used the 3.5 percent administrative  fee rate, which was current during the period of our review. We also used  historical annual sales and appropriations data provided by the Defense  Security Cooperation Agency (DSCA) and annual administrative account  collections, expenditures, and balance data provided by the Defense  Finance and Accounting Service (DFAS). To assess the reliability of the  data provided by both DSCA and DFAS, we interviewed officials from  both agencies, performed manual error checks on the data, and reviewed  relevant documents from DOD and other sources, including DSCA\u2019s  annual assessments of the administrative account and congressional  appropriations laws dating back to fiscal year 2000. In addition, for  collections data, we cross-checked the data provided by DFAS with  reports the agency provided to DSCA on administrative fees owed on  cases implemented since fiscal year 2000 as well as checked for any  anomalies in the data. Through this process, we found errors in the way a  key variable in these reports was pulled for data on cases prior to March  2013. We did not find such errors in the data for fiscal years 2014 to  2017, which led us to only using data on the status of cases in fiscal  years 2014 to 2017 in our modeling. We did not conduct independent  testing or an audit of DSCA or DFAS data. We found these specific data  to be sufficiently reliable for use in our modeling.\nWe conducted 10,000 simulations for each year using the following  parameters:\nSales: We used annual sales data from fiscal years 2000 to 2017 and  the Monte Carlo methodology to build an annual sales distribution for  fiscal years 2018 to 2024. We chose to review this number of fiscal  years of data based on availability of reliable data. For that  distribution, we assumed a uniform distribution with a minimum  possible sales value of $15 billion and a maximum of $47 billion,  which has an equal probability of annual sales values falling anywhere  within that range. A uniform distribution was selected because, as  compared to other potential distributions (e.g., normal, triangular), it  more accurately reflected the current reality of annual sales, including  the increasing trend seen since fiscal year 2000 and the jump in sales  seen in fiscal year 2006. Although annual sales have grown steadily  over time with values of at least $27.8 billion since fiscal year 2008,  DSCA officials explained that the FMS market could shrink at any time  based on global geopolitical and economic factors. As a result, we  took a cautious approach to determining the minimum level of our  sales projections by allowing for the possibility of annual sales  dropping to $15 billion in each year. We set our maximum possible  sales value at $47 billion to reflect the second highest sales value  between fiscal years 2000 and 2017. Sales in fiscal year 2012 were  $69 billion due in large part to one large purchase made by Saudi  Arabia. We excluded this as a possible maximum value in future years  due to DSCA officials\u2019 explanation that this high value of sales was  considered an exception. We also do not take into account any time  trend effects such as inflation, technological advances, or new product  development that could increase the value of future annual sales. The  uniform distribution used in the model produces average sales of  $30.8 billion, with a standard deviation of $9.2 billion, while the  average sales from fiscal years 2006 through 2017 were $36.4 billion,  with a standard deviation of $12.1 billion.\nCollections: First, to calculate collections on ongoing cases for fiscal  years 2018 to 2024, we used administrative account collections data  from fiscal years 2010 to 2017, a schedule of the average percentage  of administrative fee collections for each year in the life of an FMS  case, and administrative fee rates from fiscal years 2010 to 2017. To  develop an average collection schedule for cases, we used a DFAS  report that shows the percentage of the administrative fee that should  have been collected in each year on each case implemented in fiscal  years 2008 to 2017. To address the inaccuracies in the data in this  report prior to March 2013, we developed a schedule of the average  rate of collections in each of the first 9 years of case implementation  by summing the pertinent amounts of the administrative fee that  should have been paid on cases divided by the total amounts of the  administrative fee owed on cases implemented in fiscal years 2008 to  2017 as of fiscal years 2014 to 2017. We excluded from the  collections schedule the large sale made to Saudi Arabia in fiscal year  2012 because that case had a reduced first-year collection rate that  skewed the first-year average. This 9-year collection schedule  accounts for about 91 percent of total expected collections on cases.\nWe then calculated expected collections for new cases in a given year  by multiplying the dollar value of sales in that year by the average  collection rate for the first year of a case and the applicable fee rate.  Finally, we added new and ongoing collections to arrive at total  collections projected for each year.\nExpenditures: We used administrative account expenditure and  collection data from fiscal years 2006 to 2017 to develop a regression  model to project administrative account collections in fiscal years  2018 to 2024. We used available data from fiscal years 2006 to 2017  to produce an estimate of the relationship between collections and  expenditures, employing a simple linear regression model where the  dependent variable was expenditures against collections, a linear time  trend, and a constant. We chose to review this number of fiscal years  of data based on availability of reliable data. We then used the  coefficients from the regression model to estimate future expenditures  against simulated collections and a time trend. As designed, to  provide a cautious estimate of future expenditures, this model  reflected an overall increasing trend in expenditures even when  annual sales simulated in future years did not increase on average.\nSafety level: The administrative account safety level is established  each year by DSCA as the minimum balance required to continue  operations and respond to potential volatility in the FMS market.  DSCA calculates the account\u2019s annual safety level as 18 months of  operational funding, as determined by the congressional obligation  limit, which has been annually set in the foreign operations  appropriation since 1992. To project the administrative account  safety level for fiscal years 2018 to 2024, we used the congressional  obligation limit for the administrative account from fiscal years 2000 to  2017, as reported by DSCA, to develop a simple regression model  where the dependent variable was the obligation limit against a linear  time trend and a constant. We chose to review this number of fiscal  years of data based on availability of reliable data. Then, based on  DOD guidance, we divided the projected obligation limit by 12 and  multiplied it by 18 to calculate the projected safety level. This  regression model projects steady growth in the obligation limit and  therefore steady growth in the safety level every year. The same  projected safety level applies to all simulations for each year so that  we can apply a consistent threshold against which to compare the  account balance, although some simulations involved lower future  sales, which could lead to lower future expenditures and hence lower  safety levels.\nFinally, using these parameters, we calculated the administrative account  balance for each year by adding the net income projected for that year  (that year\u2019s projected collections minus that year\u2019s projected  expenditures) to the previous year\u2019s account balance. All of our estimated  projections are in nominal dollars.\nBuilding upon the baseline projection, we conducted 10,000 simulations  for each year for seven additional scenarios: three in which the  administrative fee rate is reduced from the current 3.5 percent to as low  as 2.9 percent, three in which annual expenditures are increased as high  as 15 percent above expected levels, and one in which both changes  occur (see table 1). We modeled decreases of the fee rate to as low as  2.9 percent to look at the effect of a wide range of possibilities lower than  the current rate. We modeled increases in annual expenditures of up to  15 percent above typical growth because this amount is a little higher  than 1.5 times the average annual growth in expenditures between fiscal  years 2007 and 2017 (9.3 percent). As such, our model accounted for the  potential of large sustained expenditure growth. Finally, we modeled the  effects of adjusting both levers to the maximum extent through a scenario  with a 2.9 percent fee rate and a 15 percent increase above expected  annual expenditures. Using the account balance and safety level  projections for each scenario, we assessed the likelihood of the balance  dropping below the safety level in each year through fiscal year 2024.\n\n\tSummary of Results\n\n\t\tBaseline Scenario\n\nIn the baseline scenario, we projected what would happen to the  administrative account balance if the fee rate were to remain 3.5 percent  and expenditures were to remain stable based on historical data. There is  a 100 percent likelihood of the account balance remaining above the  safety level in each year in this scenario. There is a 90 percent likelihood  that the account balance would remain above the projected safety level in  fiscal year 2024 by at least $1.6 billion (see fig. 11).\nWe used the model to determine what would happen to the account  balance if the administrative fee rate were decreased to 3.3, 3.1, and 2.9  percent. We projected a 100 percent likelihood that the account balance  would remain above the projected safety level in fiscal year 2024 in each  of these scenarios. There is a 90 percent likelihood that the account  balance would remain above the projected safety level in fiscal year 2024  by at least $1.4 billion if the fee rate is decreased to 3.3 percent, by at  least $1.2 billion if decreased to 3.1 percent, and by at least $1.0 billion if  decreased to 2.9 percent (see fig. 12).\nWe used the model to determine what would happen to the account  balance if annual expenditures were to increase 5, 10, and 15 percent  above levels expected in the baseline scenario. There is more than a 99  percent likelihood that the account balance would remain above the  projected safety level in fiscal year 2024 in each of these scenarios.  There is a 90 percent likelihood that the account balance would remain  above the projected safety level by at least $1.3 billion if annual  expenditures increased 5 percent, by at least $974 million if annual  expenditures increased 10 percent, and by at least $622 million if annual  expenditures increased 15 percent (see fig. 13).\nWe used the model to determine what would happen to the account  balance if both the fee rate were decreased to 2.9 percent and annual  expenditures were to increase 15 percent above expected levels. There is  at least a 91 percent likelihood that the account balance would remain  above the projected safety level in fiscal year 2024 in this scenario. There  is a 90 percent likelihood the account balance would remain above the  projected safety level in fiscal year 2024 by at least $25 million (see fig.  14).\n\nAppendix III: Comments from the Department of Defense\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Hynek Kalkus (Assistant  Director), Heather Latta (Analyst-in-charge), Lynn Cothern, Elisabeth  Helmer, Jessica Mausner, and Moon Parks made key contributions to this  report. Martin De Alteriis, Jeff Isaacs, Christopher Keblitis, Grace Lui,  Susan Murphy, Laurel Plume, Heather Rasmussen, Chanetta Reed, and  Aldo Salerno provided technical assistance.","output":"Why GAO Did This Study\n\nThe FMS program is one of the primary ways the U.S. government supports its foreign partners, by providing them with defense equipment and services. The program charges FMS customers overhead fees to cover the U.S. government's operating costs. They include the administrative fee for costs such as civilian employee salaries and facilities, and the CAS fee for the cost of contract quality assurance, management, and audits. In 1989, Congress excluded from administrative expenses certain costs associated with military personnel who work on the FMS program as well as unfunded civilian retirement and other benefits. As of May 2018, the administrative fee rate is 3.5 percent, and the CAS fee rate is 1.2 percent.\nHouse Report 114-537 and Senate Report 114-255 included provisions that GAO review DSCA's collection and management of these fees. This report examines, for fiscal years 2007 to 2017, the balance of and controls over (1) the administrative account and (2) the CAS account. GAO analyzed Department of Defense (DOD) data and documents, modeled projections for the administrative account, and interviewed DOD officials.\n\nWhat GAO Found\n\nThe Foreign Military Sales (FMS) administrative account balance grew by over 950 percent from fiscal years 2007 to 2017\u2014from $391 million to $4.1 billion\u2014due in part to insufficient management controls, including the lack of timely rate reviews. The Defense Security Cooperation Agency (DSCA) has some controls to manage the account balance. For example, DSCA has established a method for calculating a minimum desired balance to ensure it has sufficient funds to complete FMS cases despite uncertain future sales. At the end of fiscal year 2017, the account balance was $2.7 billion above this minimum. DSCA, however, has completed rate reviews less frequently than directed by its policy. Moreover, DSCA has not adopted the best practice of setting an upper bound for the account that would, along with the minimum level, provide a target range for the account balance. By not performing timely rate reviews or setting an upper bound, DSCA has limited its ability to prevent excessive balance growth. GAO modeling indicates that, even with a planned fee rate reduction to 3.2 percent, the account balance would likely remain above its minimum level through fiscal year 2024, including if annual expenditures increased by 15 percent more than expected. As such, the account has the potential to pay for additional expenses. These could include expenses first excluded by statute in 1989 at a time when the account balance was negative and which have since been paid from other appropriated funds. DOD told GAO it is willing to revisit these exclusions.\nThe FMS contract administration services (CAS) account grew from fiscal years 2007 to 2015 from $69 million to $981 million, due in part to insufficient management controls, including not setting an upper bound. The balances for fiscal years 2016 and 2017 overstated the amount of funds available due to a systems issue and limited related oversight. Since 2014, DSCA has implemented some controls for the CAS account, such as regular reviews of the account balance, but weaknesses remain. In particular, DSCA does not plan to follow its internal guidance to conduct the next CAS fee rate review within 5 years. DSCA also has inconsistently calculated the desired minimum level for the account. Finally, DSCA has not set an upper bound for the account to help officials follow internal guidance that directs them to determine when the balance is excessive and a fee rate reduction should be considered. As a result, DSCA is limited in its ability to make timely, appropriate decisions on the fee rate.\n\nWhat GAO Recommends\n\nCongress should consider redefining what it considers an allowable expense to be charged from the administrative account. GAO is making six recommendations to help DSCA improve its controls over both accounts, including completing more timely reviews and establishing a desired range for balance levels. DOD generally concurred."}
{"id":"gao_GAO-18-605","pid":"gao_GAO-18-605_0","input":"\tBackground\n\n\t\tHH-60G Pave Hawk Inventory\n\nAccording to Air Force officials, the Air Force has 82 HH-60G helicopters  designated to meet its personnel recovery mission requirements. The  remaining 14 HH-60Gs are designated for training and, development and  testing. Figure 1 shows the Air Force\u2019s inventory of HH-60G Pave Hawk  helicopters as of May 2018.\n\n\t\tCommand Structure and Locations\n\nThe Air Combat Command is the lead command for personnel recovery  helicopters and as such has responsibility for all requirements associated  with the helicopters, and for program funding. Formal training of  helicopter aircrews takes place at Kirtland and Nellis Air Force Bases.  The formal training unit at Kirtland Air Force Base is the only integrated  unit with both active and reserve component forces, but the unit\u2019s  helicopters are assigned to the active component. All other HH-60G Pave  Hawk units consist solely of active or solely of reserve component forces.  Figure 2 shows the locations and components of the HH-60G rescue  squadrons. It also shows the numbers of helicopters at each location.\n\n\t\tHH-60G Helicopter Pilot Training\n\nIt takes several years to fully train a helicopter pilot. Pilots spend about a  year and half in their general introductory and specialized helicopter  training. For Air Force HH-60 pilots, this initial qualification training occurs  at Kirtland Air Force Base. Following that, the pilots continue their training  at their assigned operational squadrons. According to weapons school  officials, a few experienced HH-60 pilots are selected to attend the HH-60  weapons school at Nellis Air Force Base where the pilots assist in the  development of tactics, techniques, and procedures for the HH-60  community. Figure 3 shows a typical training timeline for HH-60G pilots.\n\n\tAir Force\u2019s HH-60G Helicopters Have Experienced Declines in Condition and Increases in Maintenance Challenges, Due in Part to Extensions beyond the HH-60G\u2019s Designed Service Life\n\nThe material condition of the Air Force\u2019s HH-60G fleet has declined and  maintenance challenges have increased, in part due to extensions  beyond the initially designed service life of the helicopters. In November  2017, the Air Force\u2019s HH-60Gs were about 5 percent below their desired  \u201cmission capable\u201d rate of 75 percent, which refers to the material  condition of a squadron\u2019s possessed aircraft and their abilities to conduct  their designed missions. Mission capable rates have shown some year- to-year fluctuations, without any clear trends. However, for each of the  past 5 years, the helicopters\u2019 mission capable rates have been below the  Air Force\u2019s goal, and for fiscal year 2017, 68 percent of the 96 helicopter  fleet were mission capable.\nAs the helicopters have aged, the amount of time spent conducting  maintenance on them has increased. For example, according to Air Force  officials, in fiscal year 2013 the fleet averaged about 21 maintenance  manhours for every HH-60G flight hour. However, by fiscal year 2017, the  maintenance time spent had increased to an average of more than 25  maintenance manhours for every flight hour. According to officials, the  increased time conducting maintenance is a result of an aging helicopter  that requires more intensive maintenance. Further, according to officials,  in 2007 the average amount of time required to conduct more extensive  depot-level maintenance was 233 days, but by fiscal year 2017 it was 332  days, more than a 40 percent increase. Air Force maintenance data for  fiscal years 2013-2017 show that airframes, turboshaft engines, and flight  controls (see fig. 4) were the HH-60G elements that failed most often.  According to Air Force officials, these structural and major component  failures can require time-consuming maintenance that negatively affects  availability and mission capable rates.\nAccording to Air Force flight-hour data, the average flight hours across  the HH-60G fleet have increased by nearly 20 percent from fiscal year  2013 through May 2018. Air Force officials stated that the HH-60G was  initially designed to have a service life of approximately 6,000 flight hours.  However, in May 2018, the fleet-wide average was approximately 7,100  flight hours, or about 18 percent more than their initial expected service  life. Table 1 shows that, as of May 2018, HH-60G training aircraft  averaged about 10,500 flight hours, while the primary mission and back  up aircraft averaged about 6,600 flight hours. The Air Force\u2019s two  developmental and testing aircraft had an average of 5,500 flight hours.  According to Air Force officials, this is because developmental and testing  aircraft are flown to test specific aircraft elements and not on regular  missions. As flight hours increase more maintenance is required and  maintenance challenges increase, according to Air Force officials.\n\n\tAir Force Fielding Schedule Delivers Combat Rescue Helicopters First to High Flight-Hour Squadrons\n\nAccording to Air Force officials, the Combat Rescue Helicopter fielding  schedule, which was included in the contract for the new helicopters, was  designed to ensure that helicopters with the highest flying hours are  generally replaced first. The officials told us that this is why the active  component units, which have higher flying-hour averages, would begin  receiving their new Combat Rescue Helicopters in fiscal year 2020.  Based on the current Combat Rescue Helicopter fielding schedule, the Air  Force Reserve is scheduled to receive its new helicopters beginning in  fiscal year 2026. The Air National Guard is scheduled to receive  refurbished Operational Loss Replacement helicopters in fiscal year 2019  and the new Combat Rescue Helicopters beginning in fiscal year 2027.  The last Combat Rescue Helicopters are scheduled to be fielded to all  three components in fiscal year 2029. Figure 5 shows the timeline for the  transition to the new Combat Rescue Helicopters.\nOn average, the active component helicopters had about 2,000 more  flight hours per helicopter than the reserve component helicopters, in May  2018, as shown in figure 6. Specifically, the active component helicopters  had on average 7,700 flight-hours, while the reserve component  helicopters averaged 5,800 flight hours.\nThe active component helicopters in figure 6 include the Kirtland training  helicopters, which averaged about 10,600 flight hours per helicopter.  According to Air Force officials, due in part to the high number of flight  hours per aircraft, Kirtland is one of the first squadrons scheduled to  receive the new Combat Rescue Helicopters. Specifically, Kirtland is  scheduled to begin receiving its new helicopters in fiscal year 2020.\nAmong the reserve component, the Air National Guard helicopters have  an average of about 6,200 flight hours while the Air Force Reserve  helicopters have an average of about 5,500 flight-hours per aircraft.  However, the Combat Rescue Helicopter fielding schedule shows that the  Air National Guard squadrons are last to receive the new Combat Rescue  Helicopters. According to Air Force officials, to address the later fielding  of the new Combat Rescue Helicopters to the Air National Guard,  beginning in fiscal year 2019 the Air Force is replacing all of the Air  National Guard\u2019s helicopters with refurbished Army helicopters. These  helicopters will be upgraded to the Air Force\u2019s HH-60G configuration and  will each have 3,000 or fewer flight hours. These refurbished helicopters  are commonly referred to as the Operational Loss Replacement  helicopters. According to Air Force officials the Operational Loss  Replacement helicopters are expected to increase squadron helicopter  reliability and are expected to reduce unscheduled maintenance until the  Air National Guard squadrons receive their new Combat Rescue  Helicopters.\n\n\tThe Air Force Has Identified Potential Training Challenges, but Would Likely Incur Costs If It Adjusted the Fielding Schedule for Its Combat Rescue Helicopters\n\nDue to the Air Force fielding schedule for the Combat Rescue  Helicopters, the Air Force may face a challenge in supporting formal  training for its reserve component squadrons during fiscal years 2025  through 2028. The rescue squadrons at Kirtland and Nellis Air Force  Bases conduct all formal HH-60G training, and by fiscal year 2025, are  scheduled to transition to providing formal training for the new Combat  Rescue Helicopters. Specifically, these formal training units are  scheduled to completely transition to the Combat Rescue Helicopter and  will have divested all of their legacy HH-60G aircraft, as shown in figure 7.  However, other squadrons will continue to fly the HH-60G aircraft after  fiscal year 2025. Specifically, seven rescue squadrons will fly the legacy  HH-60Gs in fiscal year 2025, and some will continue flying the HH-60Gs  until fiscal year 2028 and so will continue to need formal training to fly that  helicopter throughout that period.\nAccording to the Combat Rescue Helicopter fielding schedule shown in  figure 8, the reserve component squadrons will receive most of their  Combat Rescue Helicopters between fiscal years 2026 through 2028.  The Air National Guard squadrons will not receive their primary mission  Combat Rescue Helicopters until fiscal year 2028. This is 3 years after  the formal training units at Kirtland and Nellis will have stopped training  students on the legacy HH-60Gs.\nThe Air Force Reserve and Air National Guard did not concur with the  Combat Rescue Helicopter fielding schedule. Reserve Component  officials said they did not concur, in part, because the Air Force did not  coordinate the fielding schedule prior to the contract\u2019s approval in 2014.  However, according to Headquarters Air Force officials, the Combat  Rescue Helicopter fielding schedule was coordinated with and approved  by all components prior to the 2014 contract being approved. Further, Air  Force officials stated they plan to maintain the fielding schedule because  changing it would require the renegotiation of the contract and would  likely result in increased costs and possibly a delay in delivery of the new  helicopters. The Combat Rescue Helicopter contract was developed as a  fixed-price contract. According to Air Force officials, as part of this fixed- price contract, specific terms such as base locations and order of delivery  were predetermined.\nAccording to Air Force officials, while the Combat Rescue Helicopter  contract does allow for some variation in the quantity of helicopters  procured each year, there is no location and order variation permitted  without the renegotiation of price. According to the Air Force, any  changes outside the included variation of the number of aircraft to be  purchased in a given year (i.e. change in the order or location of the  bases) would negate the firm-fixed prices in the year where the change  occurred, and in all the remaining years of the contract. Specifically, if  changes are made to the order or location of the bases, potential contract  line items that could increase include base level spares, readiness spares  packages, support equipment, interim supply support and field support  representatives for both aircraft and training systems. According to Air  Force officials, fielding schedule changes could also put at risk the ability  to provide timely funding for the military construction projects necessary  to house new simulators at the rescue squadrons\u2019 bases. These officials  stated that the current Combat Rescue Helicopter fixed-price contract is  ahead of schedule and within budget, as of June 2018. Air Force officials  said they expect to have new helicopters by March 2020, 3 months ahead  of schedule. They also said that if changes are made to the order of  deliveries under the contract, the contract would have to be renegotiated  which would, in turn, likely slow the delivery of the new helicopters and  increase contract costs.\nAir Force officials acknowledge that based on the current fielding  schedule there is a potential training gap that will occur in fiscal years  2025 through 2028 when the formal training units will no longer have any  HH-60Gs available to train the reserve component. As of June 2018, Air  Force officials told us that the Air Force was considering a number of  options to address future training issues, including the following:\nThe Air Force would provide legacy HH-60G helicopters, for a limited  time, to the Air National Guard squadron at Kirtland Air Force Base.  This would allow the Air National Guard to continue providing initial  and requalification training on the legacy HH-60G helicopters for  several years after the active component portion of the formal training  unit at Kirtland Air Force Base has divested its legacy HH-60G  helicopters.\nThe Air Force would require personnel that have completed training  on the Combat Rescue Helicopter at Kirtland Air Force Base to then  receive additional training for the legacy platform at their home  stations if their squadrons are still flying the HH-60Gs.\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD for review and comment. DOD  told us that they had no comments on the draft report.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense and the Secretary of the Air Force.  In addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-3489 or at pendletonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix II.\n\nAppendix I: The National Commission on the Structure of the Air Force Report and Recommendation Implementation\n\nFollowing disagreements over the Air Force\u2019s proposals to reduce aircraft  and Air National Guard end strength, the National Defense Authorization  Act for Fiscal Year 2013 established the National Commission on the  Structure of the Air Force. The act required the commission to conduct a  study to determine whether, and how, the Air Force structure should be  modified to best fulfill mission requirements in a manner consistent with  available resources. In January 2014, the commission issued its final  report, which included 42 recommendations. The Air Force agreed with  41 of the 42 commission\u2019s recommendations. The recommendations  varied in size, scope, and duration, and they focused on a range of topics  from personnel policies and systems to determining the appropriate  balance between the active and reserve component. However, as we  reported in 2016 many of the recommendations were interrelated and the  Air Force grouped the recommendations into various lines of effort and  assigned senior officials responsibility for tracking the implementation of  each line of effort. The \u201cTotal Force Continuum\u201d has half (21) of the  commission\u2019s 42 recommendations. Recommendation 11 is part of this  line of effort and it states:  As the Air Force acquires new equipment, force integration plans  should adhere to the principle of proportional and concurrent fielding  across the components. This means that, in advance of full  integration, new equipment will arrive at Air Reserve Component units  simultaneously with its arrival at Active Component units in the  proportional share of each component. As the Air Force Reserve and  Active Component become fully integrated, the Air Force should  ensure that the Air National Guard receives new technology  concurrent with the integrated units. The Air Force should no longer  recapitalize by cascading equipment from the Active Component to  the Reserve Components.\nIn accordance with Section 1055 of the Carl Levin and Howard P. \u201cBuck\u201d  McKeon National Defense Authorization Act for Fiscal Year 2015, the Air Force provided the congressional defense committees with annual  responses to the commission\u2019s recommendations.\nIn its initial response, the Air Force stated that it was embracing the  commission\u2019s intent and viewed the recommendations as a holistic  approach to improving the service. With regard to recommendation 11,  the Air Force stated that it agreed in principle with the recommendation  and would make every attempt to concurrently and proportionally equip all  components to be the most capable force within today\u2019s constrained  resources.\nIn its 2017 response, the Air Force cited the Combat Rescue Helicopters  as one of the examples of how it is implementing recommendation 11.  Specifically, the Air Force reported that its future fielding of the CRH  shows the Air Force\u2019s commitment to concurrent and proportional fielding  of equipment amongst its components. Headquarters, Air Force officials  elaborated on this response in response to our request for clarification,  stating that the Air Force was replacing all its personnel recovery  helicopters\u2014for both its active and reserve component units\u2014under a  single contract and that it would not cascade any of its active component  helicopters to its reserve component units. As of August 2017, the Air  Force stated it had completed its review of recommendation 11 and it  updated its Air Force Policy Directive 10-3, Operational Utilization of the  Air Reserve Component Forces in November 2017, to better reflect the  intent of the recommendation.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Michael Ferren, Assistant  Director; Vincent Buquicchio; Mae Jones; Leigh Ann Sheffield; Mike  Silver; and Nicole Volchko made key contributions to this report.","output":"Why GAO Did This Study\n\nSince the 1980s, the Air Force has used its HH-60G Pave Hawk helicopters to conduct life-saving missions, including for personnel recovery and medical evacuations. The aging HH-60G inventory has shrunk over the years as a result of mishaps. As the inventory was declining, the Air Force began efforts to replace its fleet with the new Combat Rescue Helicopter.\nThe National Defense Authorization Act for fiscal year 2018 includes a provision for GAO to review HH-60G replacement programs. This report examines: (1) the maintenance condition and service life of the Air Force's HH-60G Pave Hawk helicopters; (2) the Air Force's schedule for fielding the new Combat Rescue Helicopter in the active and reserve components; and (3) any training challenges the Air Force has identified related to this schedule.\nGAO analyzed flight hour and availability data and contracts and fielding schedule for new and refurbished personnel recovery helicopters for the Air Force. GAO also analyzed documentation, and interviewed officials from the Air Force Headquarters, the Air Force major commands, including the Air National Guard and Air Force Reserve, and training and test and evaluation units to discuss challenges the Air Force expects to face as it fields its new helicopters.\n\nWhat GAO Found\n\nThe material condition of the Air Forces' aging HH-60G fleet has declined and maintenance challenges have increased, in part due to extensions beyond the designed service life of the helicopters. About 68 percent of the 96-helicopter fleet were mission-capable as of fiscal year 2017, below the Air Force desired mission-capable rate of 75 percent. The fleet is experiencing maintenance challenges. For example, the helicopters undergoing depot-level maintenance spent an average of 332 days undergoing such maintenance in fiscal year 2017 compared with 233 days in fiscal year 2007, more than a 40-percent increase. Air Force officials attribute these challenges to the helicopters exceeding their initially planned service life. Currently, available helicopters across the fleet average about 7,100 flight hours about 18 percent more than their initial expected service life of 6,000 hours.\nAccording to Air Force officials, the schedule for fielding the new Combat Rescue Helicopters generally prioritizes the replacement of helicopters with the highest number of flight hours; as a result, the active component is scheduled to begin receiving its new helicopters in fiscal year 2020, 6 years before the reserve component. In May 2018, the Air Force's active component HH-60Gs averaged about 2,000 more flight hours per helicopter than the reserve component. Under the fielding schedule, the Air National Guard squadrons are to receive new Combat Rescue Helicopters beginning in 2027, at the end of the fielding period. According to officials, in the meantime, to address aging helicopters in the Air National Guard, the Guard is scheduled to receive refurbished Army helicopters beginning in 2019. According to Air Force officials, these helicopters will have 3,000 or fewer flight hours and will be upgraded to the Air Force's HH-60G configuration. The Air Force officials explained that these helicopters are expected to increase reliability rates, reduce the need for unscheduled maintenance, and bridge the gap until the Air National Guard receives the new Combat Rescue Helicopters.\nDue to the Air Force fielding schedule for the Combat Rescue Helicopters, the Air Force may face a challenge in supporting formal training for reserve component squadrons in fiscal year 2025 through 2028. The training squadrons at Kirtland and Nellis Air Force Bases conduct all formal HH-60G training for both the active and reserve components. By 2025, these training squadrons are scheduled to be completely transitioned to the new Combat Rescue Helicopters. Given the fielding schedule, the training squadrons will not have any legacy HH-60Gs for formal training for the reserve component. However, some squadrons in the reserve component are scheduled to continue flying HH-60Gs until 2028 and will still need formal training. Air Force reserve component officials did not concur with the new Combat Rescue Helicopter fielding schedule. However, Air Force officials said that they plan to maintain their fielding schedule because changing it would require renegotiation of the contract, likely increase costs, and possibly delay delivery of the new helicopters. Air Force officials acknowledged this potential training issue and told GAO that the Air Force was considering options to address it; including retaining some legacy HH-60Gs at a training squadron to provide training during any gap period.\n\nWhat GAO Recommends\n\nGAO is not making any recommendations in this report. GAO requested comments from the DOD, but none were provided."}
{"id":"gao_GAO-19-14","pid":"gao_GAO-19-14_0","input":"\tBackground\n\nIn November 2002, Congress passed and the President signed the  Improper Payments Information Act of 2002 (IPIA), which was later  amended by IPERA and the Improper Payments Elimination and  Recovery Improvement Act of 2012 (IPERIA). The amended legislation  requires executive branch agencies to (1) review all programs and  activities and identify those that may be susceptible to significant  improper payments (commonly referred to as a risk assessment),   (2) publish improper payment estimates for those programs and activities  that the agency identified as being susceptible to significant improper  payments, (3) implement corrective actions to reduce improper payments  and set reduction targets, and (4) report on the results of addressing the  foregoing requirements.\nIn addition to the agencies\u2019 identifying programs and activities that are  susceptible to significant improper payments, OMB designates as high  priority the programs with the most egregious cases of improper  payments. Specifically, under a provision added to IPIA by IPERIA, OMB  is required to annually identify a list of high-priority federal programs in  need of greater oversight and review. In general, for fiscal years 2014  through 2017, OMB implemented this requirement by designating high- priority programs based on a threshold of $750 million in estimated  improper payments for a given fiscal year. OMB also plays a key role in  implementing laws related to improper payment reporting. Specifically,  OMB is directed by statute to provide guidance to federal agencies on  estimating, reporting, reducing, and recovering improper payments.\nIPERA also requires executive agencies\u2019 IGs to annually determine and  report on whether their respective agencies complied with certain IPERA- related criteria. If an agency does not meet one or more of the six IPERA  criteria for any of its programs or activities, the agency is considered  noncompliant overall. The six criteria are as follows:  1.  publish a report in the form and content required by OMB\u2014typically  an agency financial report (AFR) or a performance and accountability  report (PAR)\u2014for the most recent fiscal year, and post that report on  the agency website;  2.  conduct a program-specific risk assessment, if required, for each  program or activity that conforms with IPIA as amended;  3.  publish improper payment estimates for all programs and activities  deemed susceptible to significant improper payments under the  agency\u2019s risk assessments;  4.  publish corrective action plans for those programs and activities  assessed to be at risk for significant improper payments;  5.  publish and meet annual reduction targets for all programs and  activities assessed to be at risk for significant improper payments; and  6.  report a gross improper payment rate of less than 10 percent for  each program and activity for which an improper payment estimate  was published.\nUnder IPERA, agencies reported by their IG as not in compliance with  any of these criteria in a fiscal year are required to submit a plan to  Congress describing the actions they will take to come into compliance,  and such plans shall include measureable milestones, the designation of  senior accountable officials, and the establishment of accountability  mechanisms to achieve compliance. OMB guidance states that agencies  are required to submit these plans to Congress and OMB in the first year  of reported noncompliance.\nWhen agency programs are reported as noncompliant for consecutive  years, IPERA and OMB guidance requires agencies and OMB to take  additional actions. Specifically, an agency with a program reported as  noncompliant for 3 or more consecutive years is required to submit to  Congress within 30 days of the IG\u2019s report either (1) a reauthorization  proposal for the program or (2) the proposed statutory changes  necessary to bring the program or activity into compliance. We  previously recommended that when agencies determine that  reauthorization or statutory changes are not necessary to bring the  programs into compliance, the agencies should state so in their  notifications to Congress. Effective starting with fiscal year 2018  reporting, OMB updated its guidance to instruct agencies with programs  reported as noncompliant for 3 consecutive years to explain what the  agency is doing to achieve compliance if a reauthorization proposal or  proposed statutory change will not bring a program into compliance with  IPERA. The updated guidance also instructs agencies with programs  reported as noncompliant for 4 or more consecutive years to submit a  report to Congress and OMB (within 30 days of the IG\u2019s determination of  noncompliance) detailing the activities taken and still being pursued to  prevent and reduce improper payments.\nIf agency programs are reported as noncompliant under IPERA for 2  consecutive years, and the Director of OMB determines that additional  funding would help the agency come into compliance, the head of the  agency must obligate additional funding in the amount determined by the  Director to intensify compliance efforts. IPERA directs the agency to  exercise any reprogramming or transfer authority that the agency may  have to provide additional funding to meet the level determined by OMB  and, if necessary, submit a request to Congress for additional  reprogramming or transfer authority to meet the full level of funding  determined by OMB. Table 1 summarizes agency and OMB requirements  related to agency programs that are noncompliant under IPERA, as  reported by their IGs.\n\n\tOver Half of the CFO Act Agencies Were Reported as Noncompliant under IPERA for Fiscal Years 2016 and 2017, and Consecutive Years of Noncompliance Continue for Certain Programs\n\n\t\tOver Half of the Agencies Were Reported as Noncompliant for Fiscal Years 2016 and 2017\n\nSeven years after the initial implementation of IPERA, over half of the 24  CFO Act agencies were reported as noncompliant by their IGs for fiscal  years 2016 and 2017. Specifically, 13 agencies were reported as  noncompliant with one or more IPERA criteria for fiscal year 2016, and 14  agencies were reported as noncompliant for fiscal year 2017 (see fig. 1).  Nine of these agencies have been reported as noncompliant in one or  more programs every year since IPERA was implemented in 2011 (see  app. II for additional details on CFO Act agencies\u2019 compliance under  IPERA for fiscal years 2011 through 2017, as reported by their IGs).\nAlthough the number of agencies reported as noncompliant under IPERA  has varied slightly since fiscal year 2011, the total instances of  noncompliance for all six criteria substantially improved after fiscal year  2011, when IPERA was first implemented. As shown in figure 2, the total  instances decreased from 38 instances (for 14 noncompliant agencies)  for fiscal year 2011 to 26 instances (for 14 noncompliant agencies) for  fiscal year 2017.\nAlso, for fiscal year 2017, 7 of 14 agencies were reported as  noncompliant for only one criterion per noncompliant program. Of these, 6  agencies\u2014the Departments of Homeland Security (DHS), Education  (Education), Commerce, and Transportation; the General Services  Administration; and the Social Security Administration (SSA)\u2014were only  reported as noncompliant with the IPERA criterion that requires agencies  to publish and meet reduction targets. In addition, the Department of the  Treasury (Treasury) was only reported as noncompliant with the IPERA  criterion that requires agencies to report improper payment rates below  10 percent.\nFurthermore, the programs reported as noncompliant for fiscal year 2017  accounted for a significantly smaller portion of the total reported  estimated improper payments as compared to the noncompliant  programs for fiscal year 2015. Specifically, we previously reported that 52  noncompliant programs accounted for $132 billion (or about 96 percent)  of the $137 billion total reported estimated improper payments for fiscal  year 2015, whereas 58 noncompliant programs accounted for $80 billion  (or about 57 percent) of the $141 billion total reported estimated improper  payments for fiscal year 2017. Although improper payment estimates  associated with noncompliant programs vary from year to year, this  decrease (approximately $52 billion) was primarily due to two programs.  Specifically, the Department of Health and Human Services\u2019 (HHS)  Medicare Fee-for-Service (Parts A and B) and Medicare Part C programs  were reported as noncompliant and accounted for approximately   $43 billion and $14 billion, respectively, of estimated improper payments  for fiscal year 2015. These programs were reported as compliant for fiscal  year 2017 and accounted for approximately $36 billion and $14 billion,  respectively, or about 36 percent of the $141 billion total reported  improper payments for fiscal year 2017.\n\n\t\tCertain Programs Continue to Be Reported as Noncompliant for Consecutive Years\n\nAlmost a third (18 programs) of the 58 programs that contributed to 14  CFO Act agencies\u2019 noncompliance under IPERA, as of fiscal year 2017,  were reported as noncompliant for 3 or more consecutive years. The  number of programs noncompliant for 3 or more consecutive years has  continually increased since fiscal year 2015, as shown in figure 3.  Specifically, 12 programs (associated with 7 agencies) were reported as  noncompliant for 3 or more consecutive years, as of fiscal year 2015, and  the number increased to 14 programs (associated with 8 agencies) and  18 programs (associated with 9 agencies), as of fiscal years 2016 and  2017, respectively.\nThese programs accounted for a substantial portion of the $141 billion  total estimated improper payments for fiscal year 2017. As shown in table  2, 14 of the 18 programs that were reported as noncompliant for 3 or  more consecutive years reported improper payment estimates that  accounted for an estimated $74.4 billion (about 53 percent) of the   $141 billion, while the other 4 programs did not report improper payment  estimates for fiscal year 2017 and were reported by their respective IGs  as noncompliant with the IPERA criterion to publish improper payment  estimates. The $74.4 billion is primarily composed of estimates reported  for 2 noncompliant programs\u2014HHS\u2019s Medicaid program ($36.7 billion)  and Treasury\u2019s Earned Income Tax Credit program ($16.2 billion)\u2014 totaling $52.9 billion (or approximately 71 percent of the $74.4 billion).  Improper payments associated with these two noncompliant programs  are also a central part of two areas included in our 2017 High-Risk List,  which includes federal programs and operations that are especially  vulnerable to waste, fraud, abuse, and mismanagement, or that need  transformative change.\nEight of the 18 noncompliant programs have been reported as  noncompliant since the implementation of IPERA in fiscal year 2011, for a  total of 7 consecutive years, as shown in table 2. Reported compliance for  Treasury\u2019s Earned Income Tax Credit improved from being reported as  noncompliant with multiple IPERA criteria in fiscal year 2013 to  noncompliance with only one criterion for the last 4 years (fiscal years  2014 through 2017).\n\n\tCFO Act Agencies Did Not Always Notify Congress, and They Provided Varying Information on Programs Reported as Noncompliant for 3 or More Consecutive Years\n\nEight CFO Act agencies\u2019 programs were reported as noncompliant under  IPERA for 3 or more consecutive years, as of fiscal year 2016. Three of  these agencies did not notify Congress of their program\u2019s continued  noncompliance as required. In addition to submitting the required  notifications for their noncompliant programs, the other five agencies also  included additional information in their notifications\u2014such as measurable  milestones, designation of senior officials, and accountability  mechanisms\u2014useful for assessing their efforts to achieve compliance. In  June 2018, OMB updated its guidance to clarify agency reporting  requirements for each consecutive year a program is reported as  noncompliant. However, OMB\u2019s updated guidance did not direct agencies  to include other types of quality information in their notifications for  programs reported as noncompliant for 3 or more consecutive years that  could help Congress to more effectively assess their efforts to address  long-standing challenges and other issues affecting these programs and  to achieve compliance.\n\n\t\tCFO Act Agencies with Programs Reported as Noncompliant for 3 or More Consecutive Years Did Not Always Notify Congress\n\nOf the eight agencies with programs reported as noncompliant under  IPERA for 3 or more consecutive years as of fiscal year 2016, we found  that five agencies notified Congress of their noncompliance as required.  Specifically, the Department of Defense (DOD), Education, HHS, DHS,  and SSA notified Congress of their programs\u2019 reported noncompliance for  3 or more consecutive years as of fiscal year 2016 as required by IPERA  and OMB guidance. The remaining three agencies\u2014the U.S. Department  of Agriculture (USDA), the Department of Labor (DOL), and Treasury\u2014 did not notify Congress as required.\nAdditional information regarding the three agencies that did not submit  their required notifications to Congress is summarized below:\nUSDA: In May 2017, the USDA IG reported that four USDA Food and  Nutrition Service programs\u2014Child and Adult Care Food Program;  National School Lunch Program; School Breakfast Program; and  Special Supplemental Nutrition Program for Women, Infants, and  Children\u2014had been noncompliant for 6 consecutive years, as of fiscal  year 2016. However, USDA has not notified Congress of these  programs\u2019 continued noncompliance with IPERA as of fiscal year  2016, despite prior recommendations that we, and the USDA IG,  made to USDA to do so. USDA staff stated in May 2018 that USDA  drafted, but had not submitted, a letter to Congress regarding these  programs\u2019 noncompliance.\nDOL: In June 2017, the DOL IG reported that the Unemployment  Insurance Benefit program had been noncompliant for 6 consecutive  years, as of fiscal year 2016. In October 2016, DOL included  proposed legislation in its last notification to Congress regarding this  program, approximately 8 months prior to the DOL IG\u2019s IPERA  compliance report. However, because the requirement for agencies to  notify Congress is triggered by IG reporting of programs that are  noncompliant for 3 or more consecutive years, DOL should have also  notified Congress regarding the program\u2019s continued noncompliance  in fiscal year 2016 after the IG\u2019s report was issued in June 2017. DOL  staff stated in August 2018 that the proposed legislation included in its  October 2016 notification had not been enacted and that DOL is  currently working to develop a new report to Congress and OMB  detailing corrective actions taken to bring the program into  compliance.\nTreasury: In May 2017, the Treasury IG reported that the Earned  Income Tax Credit (EITC) program had been noncompliant for 6  consecutive years, as of fiscal year 2016. We previously reported that  Treasury submitted proposed statutory changes to Congress for this  program in August 2014 and in June 2015. As stated in the Treasury  IG\u2019s fiscal year 2016 IPERA compliance report, the proposed statutory  changes would help prevent the improper issuance of billions of  dollars in refunds as it would provide the Internal Revenue Service  (IRS) with expanded authority to systematically correct erroneous  claims that are identified when tax returns are processed and allow  IRS to deny erroneous EITC refund claims before they are paid.  Further, Treasury stated that IRS has repeatedly requested authority  to correct such errors in subsequent fiscal year budgets, including its  fiscal year 2019 budget submission. In June 2018, Treasury staff  stated that the Consolidated Appropriations Act, 2016 provided IRS  with additional tools for reducing EITC improper payments; however,  the act did not expand IRS\u2019s authority to systematically correct the  erroneous claims that are identified when tax returns are processed.\nTreasury staff also stated that the department has continued to  coordinate with OMB on required reporting for the EITC program  because of the program\u2019s complexity, and that OMB has not  requested additional actions or documentation regarding the  program\u2019s noncompliance. Although continued coordination with OMB  is important, Treasury did not notify Congress regarding the EITC  program\u2019s continued noncompliance as required.\nIn summary, despite reporting requirements in IPERA and OMB  guidance, one agency (USDA) has not notified Congress about four  programs being reported as noncompliant for 6 consecutive years, as of  fiscal year 2016. The remaining two agencies (DOL and Treasury) that  did not notify Congress of their programs\u2019 consecutive noncompliance, as  of fiscal year 2016, submitted notifications to Congress prior to their  respective IGs\u2019 fiscal year 2016 compliance results. However, IPERA  requires agencies to notify Congress when programs are reported as  noncompliant for more than 3 consecutive years and thus DOL and  Treasury should have also notified Congress about their programs\u2019 being  reported as noncompliant for 6 consecutive years, as of fiscal year 2016.\nIt is important that agencies continue to notify Congress of their programs\u2019  consecutive noncompliance each year after the third consecutive year as  the information related to their proposals or regarding their IPERA  compliance efforts included in prior years\u2019 notifications to Congress may  significantly change over time. Unless agencies continue to notify  Congress in subsequent years, Congress may lack the current and  relevant information needed to effectively assess agencies\u2019 proposals or  monitor their efforts to address problematic programs in a timely manner.  OMB updated its guidance in June 2018 to provide more clarity regarding  the notification requirements for each consecutive year a program is  reported as noncompliant. Effective implementation of this guidance may  help ensure that agencies consistently provide required information to  Congress on these programs in future years.\n\n\t\tCertain Agencies Provided Additional Quality Information on IPERA Compliance Efforts in Their Notifications to Congress\n\nWe found that the five agencies\u2014DOD, DHS, Education, HHS, and  SSA\u2014that notified Congress regarding their programs\u2019 reported  noncompliance for 3 or more consecutive years, as of fiscal year 2016,  also included additional information about their efforts to achieve IPERA  compliance. Although IPERA does not specifically require that agency  proposals for reauthorization or other statutory change provide such  information, including it could help Congress to better assess the  agencies\u2019 proposals included in these notifications and to oversee agency  efforts to address long-standing challenges and compliance issues  associated with these programs.\nIn many instances, the types of additional information provided by these  agencies are similar to information that agencies are required to provide  to Congress or OMB in other required notifications or other reports, such  as annual AFRs or PARs. For example, all improper payment estimates  reported under IPIA, as amended, must be accompanied by information  on what the agency is doing to reduce improper payments, including a  description of root causes and the steps the agency has taken to ensure  accountability. Further, IPERA and OMB guidance require agencies to  provide corrective action plans to Congress for programs reported as  noncompliant for 1 year. Such plans should include actions planned or  taken to address the program\u2019s noncompliance, measurable milestones,  a senior official designated to oversee progress, and the accountability  mechanisms in place to hold the senior official accountable.\nIn addition, GAO\u2019s Standards for Internal Control in the Federal  Government emphasizes the importance of communicating quality  information, such as significant matters related to risks, changes, or  issues affecting agencies\u2019 efforts to achieve compliance objectives, to  external parties\u2014such as legislators, oversight bodies, and the general  public. Furthermore, in our fiscal year 2017 High-Risk Update, we also  highlight the importance of these types of information when assessing  agency efforts to address issues associated with programs included on  our High-Risk List. Examples of such information include (1) action  plans that are accessible and transparent with clear milestones and  metrics, including established goals and performance measures to  address identified root causes; (2) leadership commitment of top (or  senior) officials to establish long-term priorities and goals and continued  oversight and accountability; (3) monitoring progress against goals,  assessing program performance, or reporting potential risks; and   (4) demonstrated progress, through recommendations implemented,  actions taken for improvement, and effectively addressing identified root  causes and managing high-risk issues.\nTable 3 summarizes the types of additional information described above  that the five agencies provided in their fiscal year 2016 notifications to  Congress to address programs with 3 or more consecutive years of  noncompliance. All five agencies informed Congress of (1) root causes  that directly lead to improper payments or hindered the program\u2019s ability  to achieve compliance; (2) certain risks, significant changes, or issues  affecting their efforts; and (3) their corrective actions or strategies to  achieve compliance. Three of the five agencies\u2014DOD, Education, and  DHS\u2014also included the other types of additional information described  above in their notifications, including measurable milestones, designated  senior officials to oversee progress, and accountability mechanisms  established to help achieve compliance. For example, all three agencies  designated their chief financial officers (CFO) to oversee progress toward  achieving measurable milestones and expanded their official roles and  responsibilities to hold them accountable. Education and DHS stated that  these responsibilities were added to their respective CFOs\u2019 individual  performance plans.\nAlthough OMB updated its guidance in June 2018 to clarify agency  reporting requirements related to programs reported as noncompliant for  3 or more consecutive years, the updated guidance did not direct  agencies to include other types of quality information in their notifications,  such as those described above. In addition, information related to  measurable milestones, corrective actions, risks, issues, or other items  affecting agencies\u2019 efforts may change significantly over time. With this  additional information, Congress could have more complete information to  effectively oversee agency efforts to address long-standing challenges  and other issues that have contributed to programs being reported as  noncompliant for 3 or more consecutive years.\n\n\tOMB Updated Guidance for Determining Additional Funding Needs for Programs Reported as Noncompliant for 2 Consecutive Years\n\nFifteen programs in seven agencies and 12 programs in six agencies  were reported as noncompliant for 2 consecutive years as of fiscal years  2016 and 2017, respectively. For agencies reported as noncompliant  under IPERA for 2 consecutive years for the same program, IPERA gives  the Director of OMB the authority to determine whether additional funding  would help the agencies come into compliance. If the OMB Director  determines that such funding would help, the agency is required to use  any available reprogramming or transfer authority to meet the funding  level that the OMB Director specified and, if such authorities are not  sufficient, submit a request to Congress for additional reprogramming or  transfer authority. According to OMB staff, OMB determined that no  additional funding was needed for programs reported as noncompliant for  2 consecutive years as of fiscal year 2016. As of September 2018, OMB  was in the process of making funding determinations for 12 programs that  were reported as noncompliant as of fiscal year 2017 and stated that any  determinations made would be developed in the President\u2019s Budget for  fiscal year 2020.\nThe 12 programs reported as noncompliant for 2 consecutive years, as of  fiscal year 2017, accounted for approximately $3 billion (2 percent) of the  $141 billion total improper payment estimate for that year. Of these 12  programs, more than half (or 7 of the 12) were attributable to DOD;  however, Education\u2019s Pell Grant program accounted for $2.2 billion (or 74  percent) of the $3 billion in improper payment estimates for programs  reported as noncompliant programs for 2 consecutive years, for fiscal  year 2017. In addition, as shown in table 4, the 12 programs reported as  noncompliant for 2 consecutive years, as of fiscal year 2017, were  primarily noncompliant with the IPERA criteria that required agencies to  publish information in their PAR or AFR or publish and meet reduction  targets.\nAs noted previously, IPERA gives OMB authority to determine whether  additional funding for intensified compliance efforts would help the agency  come into compliance under IPERA. Therefore, an established process  for making timely, well-informed funding determinations is an essential  part of ensuring that agencies have sufficient resources and take steps to  intensify their compliance efforts in a timely manner. In April 2018, OMB  staff stated that when making funding determinations, they primarily rely  on the IGs\u2019 recommendations in their annual IPERA compliance reports.  OMB staff also stated that for its fiscal year 2016 determinations, OMB  determined that additional funding was not needed because the IGs\u2019  recommendations did not specify that additional funding was needed to  help resolve the programs\u2019 noncompliance.\nThe IGs\u2019 annual reports provide information on agencies\u2019 IPERA  compliance and may be useful to OMB as a tool to help them make  determinations for additional funding. However, IPERA does not require  IGs to address funding levels in their annual compliance reports, and  OMB\u2019s guidance does not inform the IGs that their work might be relied  upon in this manner. We reviewed the IGs\u2019 fiscal years 2016 and 2017  IPERA compliance reports for the agencies with programs reported as  noncompliant for 2 consecutive years and found that the IGs did not make  any recommendations regarding additional funding needed to bring these  programs into compliance. In addition, as specifically stated by the IGs for  Education and USDA in their IPERA reports, OMB has the statutory  responsibility to make these funding determinations. Education IG\u2019s fiscal  year 2017 IPERA compliance report stated that \u201cIf OMB recommends that  the Department needs additional funding or should take any other actions  to become compliant with IPERA, we recommend that the Department  implement OMB\u2019s recommendations.\u201d Also, the USDA IG\u2019s fiscal year  2016 IPERA compliance report stated, \u201cFor agencies that are not  compliant for 2 consecutive years for the same program, the Director of  OMB will determine if additional funding would help these programs come  into compliance.\u201d As a result, OMB\u2019s reliance on IG recommendations as  the source of information to support additional funding determinations  may not provide sufficient information to effectively assess agencies\u2019  funding needs to address noncompliance.\nOMB staff subsequently stated that they no longer need to conduct a  detailed review of the IGs\u2019 IPERA compliance reports to identify  recommendations related to additional funding needs. Instead, OMB  Memorandum M-18-20, issued in June 2018, updated OMB Circular No.  A-123, Appendix C, and clarified that the funding determination process  will unfold as part of the annual development of the President\u2019s Budget,  as described in OMB Circular No. A-11. This updated guidance also  directs agencies to submit proposals to OMB regarding additional funding  needs that may help them address IPERA noncompliance.\nTo illustrate, under this new guidance, the IGs\u2019 fiscal year 2018 IPERA  compliance reports will be due in May 2019, and any funding needs to  address noncompliance would be incorporated in the next annual budget  preparation process, the results of which are due to be submitted to  Congress in February 2020 for the President\u2019s Budget for fiscal year  2021. Once OMB\u2019s determinations have been made and communicated  to agencies, agencies would respond by performing the required  reprogramming and making transfers under existing authority, where  available. Any requests for additional transfer authority may be  incorporated into subsequent appropriations legislation.\n\n\tConclusions\n\nEstimated improper payments reported government-wide total almost  $1.4 trillion from fiscal year 2003 through fiscal year 2017. The number of  programs reported as noncompliant under IPERA for 3 or more  consecutive years has continued to increase, from 12 programs  (associated with 7 agencies) to 18 programs (associated with 9 agencies)  as of fiscal years 2015 and 2017, respectively. Including additional useful,  up-to-date information\u2014such as measurable milestones, risks, or other  issues affecting agency efforts to achieve compliance\u2014in notifications to  Congress, which are required when programs are reported as  noncompliant for 3 or more consecutive years, could help Congress  better assess agency efforts to address long-standing challenges and  other issues associated with them. Although certain agencies included  certain types of additional information in their notifications as of fiscal year  2016, OMB guidance does not require agencies to include such  information in their notifications. As a result, Congress may lack sufficient  information to effectively oversee agency efforts and take prompt action  to help address long-standing challenges or other issues associated with  these programs.\n\n\tRecommendation for Executive Action\n\nThe Director of OMB should take steps to update OMB guidance to  specify other types of quality information that agencies with programs  noncompliant for 3 or more consecutive years should include in their  notifications to Congress, such as significant matters related to risks,  issues, root causes, measurable milestones, designated senior officials,  accountability mechanisms, and corrective actions or strategies planned  or taken by agencies to achieve compliance. (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to OMB and requested comments, and  OMB said that it had no comments. We also provided a draft of this report  to the 24 CFO Act agencies and their IGs and requested comments. We  received letters from the DHS Office of Inspector General (OIG), SSA,  and the United States Agency for International Development. These  letters are reproduced in appendixes V through VII. We also received  technical comments from DOL, the Department of Veterans Affairs, the  General Services Administration, HHS, the Department of Housing and  Urban Development, and the Treasury OIG, which we incorporated in the  report as appropriate. The remaining agencies and OIGs either did not  provide comments or notified us via email that they had no comments.\nIn its comments, SSA stated that it provided information to Congress on  measurable milestones, designated senior officials, and accountability  mechanisms in its AFR. In the report, we acknowledge that these types of  additional information are similar to information that agencies are required  to provide to Congress or OMB in other reports, such as annual AFRs.  However, our analysis was based on SSA\u2019s fiscal year 2016 notifications  to Congress for programs reported as noncompliant under IPERA, in  which this specific information was not reported. As such, we continue to  believe that OMB should take steps to update OMB guidance to help  ensure that agencies report such significant information and include it in  their notifications to Congress.\nWe are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions on matters discussed in this report,  please contact me at (202) 512-2623 or davisbh@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VIII.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives were to determine the following:  1.  The extent to which the 24 agencies listed in the Chief Financial  Officers Act of 1990, as amended (CFO Act), complied with the six  criteria listed in the Improper Payments Elimination and Recovery Act  of 2010 (IPERA), for fiscal years 2016 and 2017, and the trends  evident since 2011, as reported by their inspectors general (IG).  2.  The extent to which CFO Act agencies addressed requirements for  programs and activities reported as noncompliant with IPERA criteria  for 3 or more consecutive years, as of fiscal year 2016, and  communicated their strategies to Congress for reducing improper  payments and achieving compliance.  3.  The extent to which the Office of Management and Budget (OMB)  made determinations regarding whether additional funding would help  CFO Act programs and activities reported as noncompliant with  IPERA criteria for 2 consecutive years, as of fiscal years 2016 and  2017, come into compliance.\nAlthough the responsibility for complying with provisions of improper  payment-related statutes rests with the head of each executive agency,  we focused on the 24 agencies listed in the CFO Act because estimates  of their improper payments represent over 99 percent of the total reported  estimated improper payments for fiscal years 2016 and 2017. Our work  did not include validating or retesting the data or methodologies that the  IGs used to determine and report compliance. We corroborated all of our  findings with OMB and all 24 CFO Act agencies and IGs.\nTo address our first objective, we identified the requirements that  agencies must meet by reviewing the Improper Payments Information Act  of 2002 (IPIA), IPERA, and OMB guidance. We reviewed the CFO Act  agency IGs\u2019 IPERA compliance reports for fiscal years 2016 and 2017,  which were the most current reports available at the time of our review.\nWe summarized the overall agency and program-specific compliance  determinations with the six IPERA criteria, as reported by the IGs. For  fiscal years 2011 through 2015, we relied on and reviewed prior year  supporting documentation and analyses of CFO Act agencies\u2019 IPERA  compliance, as reported in our prior reports, in order to identify  compliance trends since 2011, as reported by the IGs. Based on these  reports, we summarized the programs and the number of consecutive  years that they were reported as noncompliant. For each IG report that  did not specifically state that the agency had programs noncompliant for  consecutive years, we compared the list of programs reported as  noncompliant for fiscal years 2016 and 2017 to the list of programs  reported as noncompliant for fiscal years 2014 and 2015 in our prior  reports. Lastly, we corroborated our findings with OMB and all 24 CFO  Act agencies and IGs.\nTo address our second objective, we determined if the agencies  responsible for programs and activities reported as noncompliant for 3 or  more consecutive years as of fiscal year 2016 had submitted the required  proposals (reauthorizations or statutory changes) to Congress by  requesting and reviewing documentation of the required submissions and  relevant notifications to Congress obtained from each applicable agency.  Further, we reviewed the content of each agency notification to evaluate  agencies\u2019 efforts to communicate quality information to Congress  concerning their strategies for achieving compliance consistent with  Standards for Internal Control in the Federal Government. Principle 15 of  these standards emphasizes the need for an entity\u2019s management to  communicate necessary quality information, such as significant matters  related to risks, changes, or issues affecting agencies\u2019 efforts, to achieve  compliance objectives, to external parties\u2014such as legislators, oversight  bodies, and the general public. To identify other types of information  useful for this purpose, we reviewed IPIA, as amended; IPERA; and OMB  guidance for information agencies are required to provide to Congress or  OMB in other notifications and reports, such as their corrective action  plans or strategies, measurable milestones, designated senior officials,  and accountability mechanisms for achieving compliance. We also  reviewed information used to assess agency efforts to address issues  associated with programs on our High-Risk List.\nTo determine the extent to which agencies\u2019 notifications to Congress  included these additional types of useful information for their applicable  program(s), we used a data collection instrument to document our  determinations regarding the additional types of quality information  included in each notification. In addition, two GAO analysts independently  reviewed each agency\u2019s notification and documented their determinations  regarding the types of information included in the notifications.  Differences between the analysts\u2019 determinations were identified and  resolved to ensure that the types of additional information were  consistently identified and categorized. We did not evaluate the  sufficiency and completeness of the agency-provided information. Lastly,  we corroborated our findings with the respective agencies and IGs.\nTo address our third objective, we identified provisions in IPIA, IPERA,  and OMB guidance that are applicable to OMB for programs reported as  noncompliant for 2 consecutive years. To determine if OMB made  additional funding determinations for agency programs and activities  reported as noncompliant for 2 consecutive years as of fiscal years 2016  and 2017, we requested relevant information and communications from  OMB and the applicable agencies and IGs. We also interviewed key OMB  staff on their process for determining additional funding needs for  noncompliant programs and activities as of fiscal years 2016 and 2017  and related results. In addition, we reviewed the applicable fiscal years  2016 and 2017 CFO Act agency IG IPERA compliance reports, which  OMB staff stated they relied on for determining whether noncompliant  programs and activities required additional funding. We also asked the  agencies whether they coordinated with OMB regarding their need for  additional funding for programs and activities reported as noncompliant  for 2 consecutive years as of fiscal years 2016 and 2017. Lastly, we  corroborated our findings with OMB and the respective agencies and IGs.\nWe conducted this performance audit from November 2017 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix II: CFO Act Agencies\u2019 Overall IPERA Compliance for Fiscal Years 2011 through 2017, as Reported or Acknowledged by Their IGs\n\nFigure 4 details the 24 Chief Financial Officers Act of 1990 (CFO Act)  agencies\u2019 overall compliance under the Improper Payments Elimination  and Recovery Act of 2010 (IPERA), as reported by their inspectors  general, for fiscal years 2011 through 2017. We previously reported on  CFO Act agencies\u2019 overall reported compliance for fiscal years 2011  through 2015.\n\nAppendix III: CFO Act Agencies and Programs Reported as Noncompliant with IPERA for Fiscal Years 2016 and 2017\n\nTables 5 and 6 detail the Chief Financial Officers Act of 1990 (CFO Act)  agencies and programs reported by their inspectors general as  noncompliant with the six criteria specified by the Improper Payments  Elimination and Recovery Act of 2010 (IPERA), for fiscal years 2016 and  2017. We previously reported on CFO Act agencies\u2019 reported compliance  with the six IPERA criteria for fiscal year 2015.\n\nAppendix IV: CFO Act Agencies with Programs Reported by Their IGs as Noncompliant for 2 or More Consecutive Years, as of Fiscal Years 2016 and 2017\n\nTable 7 details the Chief Financial Officers Act of 1990 (CFO Act)  agencies and programs reported by their inspectors general as  noncompliant under the Improper Payments Elimination and Recovery  Act of 2010 (IPERA) for 2 or more consecutive years, as of fiscal years  2016 and 2017. We previously reported on CFO Act agencies\u2019 reported  compliance for fiscal year 2015.\n\nAppendix V: Comments from the Department of Homeland Security Office of Inspector General\n\nAppendix VI: Comments from the Social Security Administration\n\nAppendix VII: Comments from the United States Agency for International Development\n\nAppendix VIII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Michelle Philpott (Assistant  Director), Matthew Valenta (Assistant Director), Vivian Ly (Auditor in  Charge), Juvy Chaney, John Craig, Caitlin Cusati, Francine DelVecchio,  Patrick Frey, Maria Hasan, Maxine Hattery, Jason Kelly, Jim Kernen,  Jason Kirwan, Sharon Kittrell, Lisa Motley, Heena Patel, Anne Rhodes- Kline, and Kailey Schoenholtz made key contributions to this report.","output":"Why GAO Did This Study\n\nGovernment-wide estimated improper payments totaled almost $1.4 trillion from fiscal year 2003 through fiscal year 2017. IPERA requires IGs to annually assess and report on whether executive branch agencies complied with the six criteria to (1) publish an agency financial report or performance accountability report, (2) conduct program-specific improper payment risk assessments, (3) publish improper payment estimates, (4) publish corrective action plans, (5) publish and meet annual improper payment reduction targets, and (6) report a gross improper payment rate of less than 10 percent.\nThis report examines the extent to which\n1. CFO Act agencies complied with IPERA criteria for fiscal years 2016 and 2017, and the trends evident since 2011, as reported by their IGs;\n2. CFO Act agencies addressed requirements for programs reported as noncompliant with IPERA criteria for 3 or more consecutive years, as of fiscal year 2016, and communicated their strategies to Congress for reducing improper payments and achieving compliance; and\n3. OMB made determinations regarding whether additional funding would help CFO Act agency programs reported as noncompliant with IPERA criteria for 2 consecutive years, as of fiscal years 2016 and 2017, come into compliance.\nGAO analyzed the IGs' fiscal years 2016 and 2017 IPERA compliance reports; reviewed prior GAO reports on agencies' IPERA compliance; reviewed agency information submitted to Congress; and made inquiries to OMB, applicable agencies, and IGs; and assessed such information based on relevant IPERA provisions and OMB and other guidance.\n\nWhat GAO Found\n\nOver half of the 24 Chief Financial Officers Act of 1990 (CFO Act) agencies were reported by their inspectors general (IG) as noncompliant with one or more criteria under the Improper Payments Elimination and Recovery Act of 2010 (IPERA) for fiscal years 2016 and 2017. Nine CFO Act agencies have been reported as noncompliant in one or more programs every year since the implementation of IPERA in fiscal year 2011, totaling 7 consecutive years of noncompliance.\nThe IGs of the 14 noncompliant agencies reported that a total of 58 programs were responsible for the identified instances of noncompliance in fiscal year 2017. Further, 18 of the 58 programs at 9 agencies were reported as noncompliant for 3 or more consecutive years. Fourteen of these 18 programs accounted for an estimated $74.4 billion of the $141 billion total estimated improper payments for fiscal year 2017; the other 4 programs did not report improper payment estimates. This sum may include estimates that are of unknown reliability. The $74.4 billion is primarily composed of estimates reported for two noncompliant programs, the Department of Health and Human Services' Medicaid program and the Department of the Treasury's (Treasury) Earned Income Tax Credit program; estimated improper payments for these two programs are also a central part of certain high-risk areas in GAO's 2017 High-Risk List.\nAgencies with any program reported as noncompliant for 3 or more consecutive years are required to notify Congress of their program's consecutive noncompliance and submit a proposal for reauthorization or statutory change to bring that program into compliance. GAO found that three agencies with one or more programs reported as noncompliant for 3 or more consecutive years, as of fiscal year 2016, did not notify Congress or submit the required proposals. The Departments of Labor and the Treasury submitted proposed legislative changes in response to their programs being previously reported as noncompliant, but did not notify Congress of the programs' continued noncompliance as of fiscal year 2016. The U.S. Department of Agriculture (USDA) has not notified Congress despite prior GAO and USDA IG recommendations to do so. To address these issues, in June 2018 the Office of Management and Budget (OMB) updated its guidance to clarify the notification requirements for each consecutive year a program is reported as noncompliant.\nGAO found that five agencies did notify Congress as required, and included additional quality information that is not specifically required, but could be useful in updating Congress on their compliance efforts. For example, all five agencies provided information on the root causes, risks, changes, or issues affecting their efforts and corrective actions or strategies to address them; three agencies provided other quality information on accountability mechanisms, designated senior officials, and measurable milestones.\nIn June 2018, OMB updated its guidance to clarify agency reporting requirements for programs reported as noncompliant for 3 or more consecutive years. However, the updated guidance does not direct agencies to include the types of quality information included in these five agencies' notifications for fiscal year 2016. GAO's Standards for Internal Control in the Federal Government emphasizes the importance of communicating quality information, such as significant matters affecting agencies' efforts to achieve compliance objectives. Such information could be useful in understanding the current challenges of these programs and is essential for assessing agency efforts to address high-risk and other issues. As a result, Congress could have more complete information to effectively oversee agency efforts to address program noncompliance for 3 or more consecutive years.\nWhen programs are reported as noncompliant for 2 consecutive years, IPERA gives OMB authority to determine whether additional funding is needed to help resolve the noncompliance. In April 2018, OMB staff stated that they determined that no additional funding was needed for the 15 programs that were reported as noncompliant for 2 consecutive years, as of fiscal year 2016, and that they primarily rely on the IGs' recommendations in their annual IPERA compliance reports when making funding determinations. OMB staff subsequently stated that they no longer need to conduct a detailed review of the IGs' IPERA compliance reports to identify recommendations related to additional funding needs. Instead, OMB updated its guidance in June 2018 to direct agencies to submit proposals to OMB regarding additional funding needs to help address IPERA noncompliance and clarified that the funding determination process will unfold as part of the annual development of the President's Budget. As of September 2018, OMB was in the process of making funding determinations for 12 programs that were reported as noncompliant as of fiscal year 2017 and stated that any determinations made would be developed in the President's Budget for fiscal year 2020.\n\nWhat GAO Recommends\n\nGAO recommends that OMB update its guidance to specify other types of quality information that agencies with programs noncompliant for 3 or more consecutive years should include in their notifications to Congress, such as significant matters related to risks, issues, root causes, measurable milestones, designated senior officials, accountability mechanisms, and corrective actions or strategies planned or taken by agencies to achieve compliance.\nGAO provided a draft of this report to OMB and requested comments, and OMB said that it had no comments. GAO also provided a draft of this report to the 24 CFO Act agencies and their IGs and requested comments. In its written comments, the Social Security Administration (SSA) stated that it provided information on measurable milestones, designated senior officials, and accountability mechanisms in its agency financial report. However, SSA did not provide this information in its notifications to Congress for programs reported as noncompliant under IPERA as of fiscal year 2016. GAO believes that OMB should take steps to update OMB's guidance to help ensure that agencies report such significant information and include it in their notifications to Congress. In addition, several agencies and IGs provided technical comments, which were incorporated in the report as appropriate."}
{"id":"gao_GAO-18-214","pid":"gao_GAO-18-214_0","input":"\tBackground\n\nRadiological material is used throughout the world for medical and  industrial purposes. Possession of this material within the United States  requires a license from NRC or from one of the 37 Agreement States to  which NRC has relinquished regulatory responsibility. NRC and  Agreement States issue two types of licenses authorizing the possession  and use of radiological materials: specific licenses and general licenses.  Specific licenses are issued for devices that typically contain larger  quantities of radiological material, such as medical equipment used to  treat cancer, cameras used for industrial radiography, and moisture and  density gauges used in construction. Devices approved for use under a  general license, by contrast, such as luminous exit signs, normally  contain relatively small quantities of radiological material. Such devices  are designed with inherent safety features, are widely available  commercially, and do not require NRC or Agreement State approval to  possess. Not all radiological material requires an NRC license for  possession. For example, there is naturally occurring radioactive material  in ceramics, fertilizers, and granite tile that does not require a license.  This report focuses on radiological material that requires specific licenses  for possession and use.\nBeyond requiring specific licenses for possession of radiological material,  NRC may also require a general or specific license to import such  material. Generally, NRC will issue an import license when the recipient  of the material is authorized to receive and possess the material being  imported.\nWhen issuing licenses for the possession of radiological material, NRC  and Agreement States take steps to ensure companies are legitimate.  Specifically, NRC and Agreement State officials are to conduct pre- licensing visits with all unknown applicants, using detailed screening  criteria. According to NRC, the purpose of the site visit is to have a face- to-face meeting with the applicant to determine whether there is a basis  for confidence that the applicant will use the radiological materials sought  as represented in the application when the applicant receives the license.  NRC has established a 14-point checklist to guide pre-licensing site visits  and has developed a list of questions and activities related to each  applicant\u2019s business operations, facility, radiation safety operations, and  personnel qualifications, to scrutinize the applicant and provide a basis for  confidence that the applicant will use the radiological material as specified  in the license.\nIn 2003, the International Atomic Energy Agency published a system\u2014 which NRC adopted in 2004\u2014that ranks quantities of individual  radionuclides into one of five categories on the basis of their potential to  harm human health. Under this system, a given radionuclide is  considered dangerous when gathered in sufficient quantity and in close  enough proximity to people to cause direct human health effects. A  category 1 quantity, if not safely managed or securely protected, is likely  to cause permanent injury to a person who handles or is otherwise in  contact with it for more than a few minutes. Being close to this amount of  unshielded material for a period of a few minutes to an hour will probably be fatal. A category 2 quantity, if not safely managed or securely  protected, can cause permanent injury to a person who handles or is  otherwise in contact with it for a short time (minutes to hours). Being close  to this amount of unshielded radioactive material for a period of hours to  days can be fatal. A category 3 quantity, if not safely managed or  securely protected, can cause permanent injury to a person who handles  or is otherwise in contact with it for some hours. Being close to this  amount of unshielded radioactive material for a period of days to weeks  can be fatal. Category 4 and 5 quantities are unlikely to cause permanent  injury.\nIn addition to categorizing radionuclides on the basis of their potential to  harm human health, NRC has identified 16 radionuclides that are  sufficiently attractive for use in a dirty bomb or for other malicious  purposes. These 16 radionuclides of concern, shown in table 1, warrant  enhanced security and protection measures\u2014such as cameras, alarms,  and other physical security measures\u2014under NRC regulations.\nRadiological material is imported into the United States by both express  consignment couriers arriving by air and air cargo carriers. Express  consignment couriers, such as FedEx, move cargo for the public under  express commercial services and provide door-to-door delivery. Air cargo  carriers transport radiological material in cargo containers on commercial  airlines. We have previously reported on the disparity in portal monitor  deployment between the express consignment and air cargo  environments. There are dozens of portal monitors in U.S. airports  servicing express couriers, but few servicing air cargo carriers.  According to CBP officials, handheld monitors are used to scan  radioactive material at airports where portal monitors are not available.\nThe CBP mission includes the border enforcement of the customs,  immigration, and agriculture laws and regulations of the United States  and enforcement on behalf of numerous federal agencies. The mission  includes enforcement of the laws relating to the importation and  exportation of merchandise into and out of the United States. In addition,  the agency\u2019s mission includes denying entry to terrorists and their  weapons and criminals and their contraband. CBP\u2019s Office of Field  Operations is responsible for passenger and cargo processing activities  related to border security, trade, immigration, and agricultural inspection  at the nation\u2019s air, sea, and land ports of entry. Prior to importing goods  into the United States, information is submitted to CBP declaring the  contents of shipments. This information includes, among other things, a  description of goods, the name of the recipient, the port of entry, and a  tariff code that classifies goods.\nCBP uses various data systems to track shipments into the United States  and identify shipments for license verification. According to CBP, the  Automated Commercial Environment is the primary system for processing  shipments entering the United States, and it enables the government to  make determinations about whether to admit goods into the country. The  data stored in the Automated Commercial Environment are also used to  ensure proper duty is collected for imported goods. CBP officials also  view Automated Commercial Environment data in CBP\u2019s Automated  Targeting System, which is a decision support tool that analyzes  shipment data to assess risk and identify potential violations. The  Automated Targeting System includes automated alerts, which notify  CBP officials when they need to take additional actions before shipments  can be released. Information about NRC and Agreement State licenses  for radiological material is included in NRC\u2019s Web-Based Licensing  System, which includes information about NRC and Agreement State  licenses for category 1 and 2 quantities of radiological material. In  addition, the Web-Based Licensing System includes up-to-date  information on all NRC and six Agreement States\u2019 specific licenses,  including licenses that authorize possession of radiological material below  the category 2 threshold. However, licenses for quantities of material  below the category 2 threshold issued by 31 Agreement States are not  kept in the system. The CBP data systems used to identify shipments for  license verification are listed in table 2.\n\n\tCBP\u2019s Policies and Procedures Require License Verification for Imported Radiological Material\n\nCBP has implemented a policy and procedures requiring CBP officials at  airports to contact experts within a centralized CBP office to verify  licenses for radiological material being shipped into the United States.  Specifically, CBP issued its \u201cRadiation Detection Standard Operating  Procedures Directive\u201d policy in March 2014, outlining when CBP officials  at ports of entry are required to contact internal experts at CBP\u2019s  Teleforensic Center who possess the technical expertise to verify that  NRC and Agreement State licenses for radiological materials are  legitimate. The function of the Teleforensic Center is to provide field  CBP officials with assistance in resolving scientific and technological  questions, including detection, isolation, and control of potential threats  that may result from the presence of chemical, biological, radiological, or  nuclear materials. The Teleforensic Center is staffed with scientists with  expertise in a range of scientific disciplines, including chemistry, biology,  explosives, radiological science, and nuclear science. The Teleforensic  Center has established a hotline to receive requests for license  verification, among other things, and the experts are available 24 hours a  day, 7 days a week.\nCBP\u2019s 2014 policy requires CBP personnel to verify the legitimacy of  NRC and Agreement State licenses for all commercial imports of  industrial and medical radionuclides that require a license from NRC or  one of the 37 Agreement States. To implement this policy, CBP has  established procedures for private-sector entities and CBP. These  procedures, which apply equally to all quantities and types of licensable  radiological material, can be broken down into three parts: submission of  paperwork, identification of material, and verification of the license by  experts in the Teleforensic Center, as outlined in figure 1.\nOnce the shipment information is entered into the Automated Commercial  Environment, CBP data systems identify which shipments of radiological  material require license verification. Specifically, CBP\u2019s Automated  Targeting System uses certain information to identify shipments requiring  license verification. Details about this information are omitted from this  report because they were deemed to be sensitive by CBP. Once  shipments are flagged as containing licensable radiological material, an  alert is sent to CBP officials at the airport informing them that the material  requires a license from NRC or an Agreement State. The alert outlines  the steps the officials need to take to verify that the license is legitimate.  Among other things, the alert explicitly states the phone number for  contacting the Teleforensic Center and includes instructions for handling  the material. According to CBP procedures, CBP officials are not allowed  to release the shipment until they receive approval from the Teleforensic  Center.\nOfficials at the Teleforensic Center primarily use NRC\u2019s Web-Based  Licensing database to verify the legitimacy of licenses granted by NRC.  However, as we\u2019ve previously reported, licenses for some radiological  material that are granted by Agreement States are not kept in that  database, requiring the center\u2019s experts to also call specific points of  contacts at Agreement States to verify these licenses. CBP officials told  us that Agreement State offices typically are not open 24 hours a day, 7  days a week, occasionally requiring CBP to hold shipments until an  official can be reached. In addition to consulting the Web-Based  Licensing database and contacting Agreement State officials to verify  licenses, experts at the Teleforensic Center can also request additional  information from CBP officials at the airports. After the experts verify that  a license is legitimate, they give approval to the CBP officials at the  airport to release the shipment. CBP officials at the airport then document  the release. CBP officials at the four airports we visited and experts at the  Teleforensic Center told us that it typically takes 30 to 90 minutes to verify  a license, but it can take longer if the experts have to consult with an  Agreement State. If a license cannot be verified, the shipment is returned  to the sender or, in the case of an illegal shipment, seized and referred to  proper law enforcement officials, as outlined in the policy.\n\n\tCBP Has Not Verified All Licenses as Required by Its Policy and Procedures\n\nCBP has not verified all licenses for radiological materials as required in  its policy and procedures. During the 21-month period we reviewed, CBP  personnel at airports across the country did not verify the legitimacy of a  significant number of shipments CBP considered as containing potentially  dangerous radiological material. CBP officials at two of the four airports  we visited may not have verified the legitimacy of licenses for many of the  shipments of radiological material imported during the 21-month period,  which was not consistent with CBP policy. After we brought this issue to  CBP\u2019s attention, it issued additional guidance. However, this guidance  was not clear and caused confusion at the two airports we visited where  actions continued to be taken that were not consistent with CBP policy.\n\n\t\tCBP Is Not Consistently Implementing Its Procedures, Potentially Leaving Many Shipments of Radiological Material Unverified\n\nCBP officials did not verify the legitimacy of licenses for many of the  shipments of radiological material imported from January 1, 2015, to  September 30, 2016. We found that during this time frame, CBP officials  stationed at airports nationwide did not make the required calls to verify  licenses for a significant number of shipments of radiological material  identified by CBP as requiring license verification\u2014leaving many licenses  unverified over this 21-month period. These shipments came through  airports across the United States and, according to CBP officials we  interviewed, arrived by both express courier and air cargo companies.\nAt two of the four airports we visited, we observed that CBP officials were  taking actions that were consistent with CBP policy. Specifically, we noted  the following:\nAt one airport, officials responsible for reviewing shipments of  imported radiological material told us that they call the Teleforensic  Center whenever they receive an alert from CBP\u2019s data system,  consistent with CBP policy. In addition, the officials said that they  send any requested information to the Teleforensic Center and wait  for approval from the center before releasing shipments.\nAt another airport, officials responsible for reviewing shipments of  imported radiological material told us that they also call the  Teleforensic Center whenever they receive an alert and only release  shipments upon receiving approval.\nHowever, at the remaining two airports we visited, officials responsible for  reviewing shipments of imported radiological material took actions that  were not consistent with CBP policy to verify the legitimacy of radiological  shipments entering the country. As a result, officials at these airports had  not verified hundreds of licenses as required under CBP\u2019s policy because  the officials misunderstood what they were required to do. In discussions  with these officials, some described taking actions that were not  consistent with the license verification requirements. Details about the  extent of verification are omitted from this report because the information  was deemed to be sensitive by CBP.\nAt one airport, CBP officials told us they typically verify licenses on- site without calling the Teleforensic Center. This airport had more than  100 shipments of licensable radiological material during the 21-month  period for which CBP provided data, but officials only made a few  calls to the Teleforensic Center to verify licenses during this time,  leaving many shipments of material unverified. Instead of calling the  Teleforensic Center as required, the CBP officials said that they  reviewed the shipment paperwork and looked for anomalies. CBP  officials said that they undertake this paperwork review regardless of  the risk of the radiological material in the shipment. For example, they  said they would use this approach to verify licenses for category 1  materials, which NRC and the International Atomic Energy Agency  classify as likely to cause permanent injury to a person who comes  into contact with them. The officials told us that they call the  Teleforensic Center only when there is something wrong with the  shipment. Officials at CBP headquarters told us that this procedure  does not comply with their verification policy and would not be  effective.\nAt the second airport, CBP officials we interviewed told us that license  verification was conducted by private-sector express couriers  overseas, negating the need for officials at the port of entry to call the  Teleforensic Center. The CBP officials at the airport believed that a  Memorandum of Understanding (MOU) between CBP and private  companies delegates responsibility to express couriers to scan  material with radiation detection equipment. These CBP airport  officials said that express couriers also verify licenses as part of this  process. However, the MOU between CBP and express couriers does  not address the verification of licenses for radiological shipments.  CBP headquarters officials we interviewed told us that the airport\u2019s  practice does not comply with the agency\u2019s verification policy and  confirmed that the Teleforensic Center is the only entity that can verify  licenses. The headquarters officials also reiterated to us that license  verification is not conducted by overseas private-sector companies.  Officials we interviewed from an express courier that ships  radiological material also told us that they do not verify licenses. This  airport made few calls to the Teleforensic Center to verify licenses  during the 21-month period, according to the data provided to us by  CBP.\n\n\t\tCBP Issued Additional Guidance, but This Guidance Did Not Initially Improve Compliance\n\nIn February 2017, we briefed CBP headquarters officials on our findings  from the site visits to the four airports. We included in our briefing a  summary of findings from our site visits and information on the number of  calls made by CBP officials to verify licenses. At this meeting, CBP  headquarters officials indicated that they would look into why calls were  not made. Subsequently, in March 2017, in response to this briefing, CBP  headquarters issued additional guidance to remind all field officials of  CBP\u2019s license verification policy. The guidance states that CBP officials  must contact the Teleforensic Center to verify the license for all  shipments of licensable radiological material. In addition, the guidance  states that shipments may not be released from the airport until experts at  the Teleforensic Center have completed verification of the license. The  guidance was issued in the form of a \u201cmuster\u201d\u2014a type of memorandum  addressed to all CBP field offices to emphasize CBP policy. Once such a  memorandum is issued, CBP relies on local officials to interpret and pass  along this information to those working directly with the shipments.  According to CBP officials, the guidance was communicated to managers  and then the managers communicated this information to front-line staff  through weekly meetings and informal discussions.\nHowever, the muster was not successful in correcting previous  misconceptions at the two airports we visited where officials\u2019 actions were  not consistent with CBP policy and the muster did not fully resolve their  noncompliance with CBP policy. In part this was because, according to  officials, they found the muster confusing. In April and May 2017, several  weeks after CBP issued the muster, we contacted officials at the four  airports we previously visited. Based on interviews with CBP officials at  the two airports where actions were not consistent with CBP policy before  the muster, we determined that they were continuing to take actions that  were not consistent with CBP policy after they received the muster. For  example, CBP officials at one of the two airports said they were  continuing to conduct license verification without the assistance of the  Teleforensic Center. Officials at this airport told us that they believed their  actions were consistent with the policy, even though they had not altered  their actions in response to the muster. Similarly, at the other airport  where actions were not consistent with the CBP policy before the muster,  officials told us again that license verification can be conducted overseas  by express couriers, citing the MOU allowing express couriers to scan  material with radiation detection equipment. When we discussed the  content of the muster with CBP officials in headquarters in June 2017,  they acknowledged the muster was confusing and stated it needed to be  further clarified. Subsequent to our June 2017 meeting with CBP officials,  they provided additional data that suggested an increase in calls to the  Teleforensic Center. In July 2017, CBP officials told us they planned to  issue additional clarifications. Subsequently, in November 2017, CBP  issued an additional muster emphasizing its policy to call the Teleforensic  Center for all shipments of licensable radiological material.\nCBP headquarters officials told us that they were unaware, until we  informed them, that selected airports were not calling the Teleforensic  Center to verify licenses and that licenses were not being verified for  some imported radiological material. This is because CBP does not have  a mechanism, such as a monitoring system, to ensure that all required  license verifications are occurring. Such a system could also conduct  checks to ensure CBP officials are following agency policy. The challenge  to creating such a system is that CBP houses the data necessary to  create it in separate systems that do not communicate with each other,  and these systems are currently run by different offices with differing  missions within CBP. Federal standards for internal control state that  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. Until CBP develops  a monitoring system to help ensure that CBP officials comply with the  license verification policy, the agency will not have reasonable assurance  that it can identify activities that are inconsistent with its policy and take  corrective action as necessary.\n\n\tCBP Policies and Procedures Are Not Effective at Ensuring Only Properly Licensed Radiological Material Is Imported\n\nCBP policies and procedures are not effective at ensuring that only  properly licensed radiological material is imported into the United States.  Specifically, CBP\u2019s procedures for identifying licensable radiological  material do not ensure that all shipments of radiological material are  identified and verified, resulting in the exclusion of a significant number of  shipments that possibly contained radioactive material during the 21- month period we reviewed. Moreover, CBP\u2019s current policy and  procedures treat all radiological shipments with the same level of scrutiny  and do not target resources based on the risk of the material. Details  about these issues are omitted from this report because the information  was deemed to be sensitive by CBP.\n\n\t\tCBP\u2019s Procedures Do Not Ensure That All Shipments of Radiological Material Are Identified and Verified\n\nCBP procedures for identifying licensable radiological material do not  effectively implement its policy to verify the license for all shipments of  licensable radiological material. We identified the following issues that  result in limitations in CBP\u2019s procedures.\nSpecifically, the data system that CBP uses to implement its procedures  does not sufficiently identify all shipments of potentially dangerous  radiological materials. To implement its procedures, the agency chose to  use an existing data system designed to process all types of imports into  the United States. This system uses general customs information to  identify the contents of shipments. Consequently, of the 44,152  shipments that could contain licensable radiological material, the system  alerted CBP officials that they were required to verify relatively few  licenses from January 1, 2015, to September 30, 2016.\nIn addition, CBP\u2019s license verification procedures do not currently target  the higher-risk radiological materials. CBP\u2019s method for identifying the  contents of shipments does not include information that describes the  quantity of radiological material. Specifically, categories 1, 2, and 3  quantities of radiological material can cause permanent injury or death to  a person in contact with them for some period of time. As a result,  according to a senior CBP official, it is safer to assume all shipments of  radiological material are dangerous until proven otherwise.\nFederal standards for internal control recommend that agencies design  control activities to achieve objectives and respond to risks. Until CBP  develops a robust system that can identify all shipments of radiological  material that pose risk, it will not have reasonable assurance that it has  the appropriate policies and procedures necessary to verify licenses for  these shipments. Furthermore, as we reported in December 2016, an  essential element of enterprise risk management is to examine risks  considering both the likelihood of the risk and the impact of the risk on the  mission, in order to help prioritize risk response. Although CBP officials  recognize that their current system and procedures have limitations and  do not allow them to fully implement the agency policy to verify all  shipments of radiological material that enter the United States, we found  that they have not developed a system nor revised their procedures to  address the issues we identified. Of particular concern is that CBP has not conducted a comprehensive assessment of (1) the information not  currently included in the automated alert to determine what additional  information would indicate shipments that may contain dangerous  material or (2) how to create a more risk-based approach that  distinguishes between higher- and lower-risk categories of radiological  materials. Until it conducts such an assessment, CBP will not know how  to adjust its current procedures to ensure that it is identifying all  shipments of potentially dangerous radiological material and targeting its  limited resources to those that pose the greatest risk.\n\n\tConclusions\n\nCBP has implemented a policy and procedures intended to ensure that  the tens of thousands of shipments of potentially dangerous radiological  material imported through U.S. airports each year are properly licensed.  However, CBP\u2019s procedures do not effectively implement CBP\u2019s policy of  ensuring that only properly licensed radiological material gains entry to  the United States. This is because CBP does not have a monitoring  system to help ensure that CBP officials at airports nationwide are  complying with the license verification policy. Until CBP develops such a  system, the agency will not have reasonable assurance that it can identify  activities that are inconsistent with its policy and take corrective action as  necessary.\nIn addition, CBP\u2019s procedures for identifying licensable radiological  material do not ensure that all shipments of radiological material are  identified and verified. This is the result of CBP\u2019s automated alert, which  currently does not include all relevant information needed to identify such  shipments. Additionally, CBP procedures do not distinguish between  high-risk categories of radiological materials and lower-risk categories;  therefore CBP cannot target its limited resources to the shipments that  pose the greatest risk. CBP has not conducted a comprehensive  assessment of the information not currently included in the automated  alert and does not know which shipments pose the greatest risk. A  comprehensive assessment could help CBP gain a better understanding  of information not currently included in the automated alert, and it could  better position the agency to make appropriate changes to its existing  system and procedures, as well as target its limited resources toward the  quantities of material that pose the greatest risk.\n\n\tRecommendations for Executive Action\n\nWe are making the following three recommendations to CBP:\nThe Commissioner of CBP should develop a monitoring system to  help ensure that CBP officials comply with license verification policies  and procedures. (Recommendation 1)\nThe Commissioner of CBP should conduct a comprehensive  assessment of information not included in the automated alert to  determine what information is needed to identify licensable  radiological material. (Recommendation 2)\nThe Commissioner of CBP should develop a system that better  identifies shipments of radiological material that pose the greatest risk  and revise CBP\u2019s policies and procedures as necessary to verify  licenses for these shipments. (Recommendation 3)\n\n\tAgency Comments\n\nWe provided a draft of this product to the Department of Homeland  Security (DHS) and NRC for review and comment. DHS provided written  comments, reproduced in appendix I, in which it concurred with our three  recommendations. DHS stated that it will take the following actions,  among others, to address our recommendations: (1) include a monitoring  process in an updated version of its policy addressing license verification,  (2) conduct a comprehensive assessment of information not included in  the automated alert to determine what information is associated with  dangerous material, and (3) develop an intelligence-driven process that  identifies shipments of radiological materials that pose the greatest threat.  In addition, DHS and NRC provided technical comments, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the Chairman of the  U.S. Nuclear Regulatory Commission, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions concerning this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page   of this report. GAO staff who made significant contributions to this report  are listed in appendix II.\n\nAppendix I: Comments from the Department of Homeland Security\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, Ned Woodward, Assistant  Director; Jeffrey Barron; Richard Burkard; Kendall Childers; Cindy Gilbert;  Cynthia Norris; Danny Royer; Jerry Sandau; Travis Schwartz; and Kiki  Theodoropoulos made key contributions to this report.","output":"Why GAO Did This Study\n\nThousands of shipments containing radiological material enter the United States each year through airports across the country. Radiological material is used in various medical and industrial applications, and possession requires a license from the Nuclear Regulatory Commission (NRC) or one of the 37 states to which NRC has relinquished licensing authority. Failure to verify the licenses could allow terrorists to acquire radiological material for a dirty bomb, which uses explosives to disperse the material.\nGAO was asked to review CBP policies and procedures related to license verification. This report examines, among other things, (1) the extent to which CBP follows its policies and procedures, and (2) the effectiveness of these policies and procedures. GAO reviewed relevant policies and procedures, analyzed CBP data related to radiological material shipments and license verification, interviewed CBP and NRC officials, and selected four airports to visit based on expected traffic of radiological shipments.\n\nWhat GAO Found\n\nU.S. Customs and Border Protection (CBP) agency officials at U.S. airports have not verified the legitimacy of all licenses for imported radiological materials as required by CBP's policy. The policy requires CBP officials, when alerted, to verify licenses by calling experts in a centralized CBP office. CBP officials at two of four airports GAO visited said they were calling as required. However, CBP officials at the other two airports did not verify many licenses from January 1, 2015, through September 30, 2016, and headquarters officials were unaware of non-compliance with CBP policy. Also, GAO found that during this time frame nationwide, CBP officials were alerted to verify licenses for a significant number of shipments of licensable radiological material for all U.S. airports, but they did not make all the required calls\u2014leaving numerous shipments potentially unverified over this 21-month period. This situation occurred because CBP does not have a monitoring system to ensure that officials make license verification calls as required. Until CBP develops a monitoring system for license verification, it will not have reasonable assurance that it can identify activities inconsistent with its policy and take corrective action.\nCBP procedures cannot effectively implement the agency's policy that its officials verify all radiological material shipments imported into the United States. The procedures are not effective for this policy in part because they rely on automated alerts that are based on some but not all relevant information that could indicate potentially dangerous radiological material. Consequently, CBP's current system and procedures cannot ensure that all such materials will be identified. Under federal internal control standards, agencies are to design control activities to achieve objectives and respond to risks. However, CBP does not have the information it needs to develop a robust system or revise its procedures because it has not conducted a comprehensive assessment of the information not included in its automated alert system. In particular, CBP has not assessed relevant information not currently included in the automated alert or how to create a more risk-based approach that distinguishes between higher- and lower-risk quantities of radiological materials. Without such an assessment, CBP may be unable to develop a system or procedures that best support its policy for verifying imported radiological materials.\nThis is a public version of a sensitive report GAO issued in September 2017. Information CBP deemed sensitive has been omitted.\n\nWhat GAO Recommends\n\nGAO recommends that CBP develop a monitoring system to help ensure that CBP officials comply with the agency's license verification policy, conduct an assessment to determine relevant information that is not included in the automated alerts, and develop a system that allows it to identify shipments of greatest risk. CBP concurred with GAO's three recommendations and outlined actions to implement those recommendations."}
{"id":"gao_GAO-18-24","pid":"gao_GAO-18-24_0","input":"\tBackground\n\nATF is one of several DOJ law-enforcement components, including the  Federal Bureau of Investigation (FBI) and the Drug Enforcement  Administration (DEA), responsible for fighting violent crime. ATF is the  lead agency charged with enforcing federal firearms laws and regulating  the firearms industry. ATF is also responsible for investigating criminals  and criminal organizations that use firearms, arson, or explosives in  violent criminal activity.\nATF investigates and combats violent crime related to firearm trafficking,  criminal possession and use of firearms, and the diversion of firearms  from legal commerce. This work includes law-enforcement operations and  intelligence gathering and analysis. For example, special agents  investigate reports of prohibited individuals acquiring or attempting to  acquire firearms from private sellers in order to avoid background checks  that would otherwise be required if purchasing through an FFL. According  to ATF officials, intelligence analysts may help agents by gathering  information from the public social-media profiles of individuals under  investigation. In addition, ATF investigates reports of individuals engaging  in the business of dealing firearms without a license, thereby  circumventing background-check, record-keeping, and other  requirements.\n\n\t\tStatutes and Regulations\n\nThe National Firearms Act of 1934 (NFA) and the Gun Control Act of  1968 (GCA) are the primary federal laws that regulate the manufacture,  sale, distribution, and possession of firearms. There are no laws that  specifically regulate firearms transactions facilitated by the Internet.  Rather, firearms transactions facilitated by the Internet are subject to the  same legal requirements and regulations as traditional firearms sales.\n\n\t\t\tNational Firearms Act of 1934, as Amended\n\nThe NFA defines the specific types of firearms and components subject to  the provisions of the act based on the firearm\u2019s function, design,  configuration, or dimensions. For example, the NFA applies to machine  guns, short-barreled rifles, short-barreled shotguns, and silencers. The  NFA requires these firearms and components to be registered with ATF.  The lawful transfer of firearms and components subject to the NFA  generally requires ATF approval, a process that involves the submission  of application forms, fingerprints, and photographs to ATF, as well as  payment of a transfer tax. Transfers outside of this ATF-approval process  are generally illegal.\n\n\t\t\tGun Control Act of 1968, as Amended\n\nThe GCA, the main federal statute applicable to firearms such as  handguns, shotguns, and rifles, requires all persons engaged in the  business of manufacturing, importing, or dealing in firearms to become an  FFL through ATF. The GCA defines a person \u201cengaged in the business\u201d  as a dealer of firearms as someone who \u201cdevotes time, attention, and  labor to dealing in firearms as a regular course of trade or business with  the principal objective of livelihood and profit through the repetitive  purchase and resale of firearms.\u201d The definition excludes individuals  who make \u201coccasional\u201d sales or purchases to enhance a personal  collection or for a hobby or who sell all or part of a personal collection of  firearms. The GCA requires that FFLs maintain records of all their gun  sales. These records are used, among other purposes, to trace a firearm  recovered by law-enforcement officials from its first sale by the  manufacturer or importer through the distribution chain to the first retail  purchaser, in order to provide law-enforcement agencies with  investigative leads.\nAs amended by the Brady Handgun Violence Prevention Act, the GCA  generally requires FFLs to contact the FBI\u2019s National Instant Criminal  Background Check System (NICS) prior to transferring a firearm to a  nonlicensed individual. During a NICS background check, the buyer  provides the FFL with appropriate identification, such as a valid driver\u2019s  license. The FFL submits descriptive data, including the buyer\u2019s name  and date of birth, to NICS, which searches three national databases  containing criminal history and other relevant records to determine  whether federal or state law prohibits the person from receiving or  possessing a firearm. The transfer may proceed if NICS informs the FFL  that it has no information indicating that the transfer would be in violation  of law, or if 3 business days have elapsed without notification that the  transfer would violate the law. The GCA prohibits individuals from  knowingly making a false statement intended to deceive FFLs with  respect to any fact material to the lawfulness of the sale, such as a  person claiming that he or she is the actual buyer of a firearm and not  acquiring the firearm on behalf of another person, when in fact he or she  is purchasing the firearm with the intent to transfer it to a prohibited  person. This type of transaction is often referred to as a \u201cstraw purchase.\u201d\nIn addition, the GCA establishes the categories of persons generally  prohibited from shipping, transporting, receiving, or possessing firearms  and ammunition. Specifically, persons are prohibited from shipping,  transporting, receiving, or possessing a firearm if they (1) have been  convicted of a felony; (2) are a fugitive from justice; (3) are an unlawful  user of or addicted to any controlled substance; (4) have been committed  to a mental institution or judged to be mentally defective; (5) are aliens  illegally or unlawfully in the United States, or certain other aliens admitted  under a nonimmigrant visa; (6) have been dishonorably discharged from  the military; (7) have renounced their U.S. citizenship; (8) are under a  qualifying domestic violence restraining order; or (9) have been convicted  of a misdemeanor crime of domestic violence. In addition, federal law  prohibits persons under felony indictment from shipping, transporting, or  receiving a firearm.\nIndividuals who are not engaged in the business of dealing in firearms  may not legally sell firearms to other unlicensed individuals under certain  circumstances. For example, a transaction between unlicensed  individuals would be illegal if the seller knows or has reasonable cause to  believe that the buyer is legally prohibited from possessing firearms or is  a resident of a different state than the seller. If the seller is not aware of  these circumstances, the seller may transfer the firearm to the buyer  without any record-keeping or background-check requirements.\nNonprohibited, nonlicensed individuals may legally purchase firearms  through an FFL or through individual private sales with residents of the  same state. Regardless of whether an FFL is involved in an Internet- facilitated firearm purchase, if a seller knows or has a reasonable cause  to believe that the prospective recipient is prohibited from possessing  firearms, the seller must not transfer the firearm. See figure 1.\nAs outlined in figure 1, the Internet can facilitate legal purchases either  through FFLs or through nonlicensed private sellers. For purchases  through an FFL, an individual orders a firearm online, and generally  completes the transaction process in person. The FFL submits the  required paperwork to ATF. A background check is processed directly by  NICS or through a state government that checks NICS. Unless denied by  the background check, the transaction is completed. If the individual is  purchasing the firearm from an FFL in another state, the original FFL will  transfer the firearm to an FFL in the state the buyer resides in to complete  the transaction. If both the buyer and seller are residents of the same  state, transfers between private nonlicensed parties facilitated by the  Internet without the involvement of an FFL may be lawful. The firearm  may be transferred in person between the buyer and the seller, or, if the  firearm is a shotgun or rifle, it may be mailed intrastate between the  individuals. The seller has no record-keeping obligations, and no NICS  background check is performed on the buyer. However, a nonlicensed  individual is usually prohibited from directly transferring a firearm to a  person who the transferor knows or had reasonable cause to believe is  residing in another state. In addition, it is usually illegal for any  nonlicensed individual to transport into or receive in the state where he  resides any firearm purchased or otherwise obtained outside that state.  Therefore, interstate transactions between two nonlicensed individuals  are likely to be illegal unless an FFL becomes a party to the transaction.  For a legal transaction between residents of different states, the seller  must send the firearm to an FFL in the buyer\u2019s state. The FFL submits  the paperwork, a background check is processed, and, unless denied by  the background check, the FFL transfers the firearm to the buyer.\n\n\t\tInternet Firearm Marketplaces\n\nPotential gun buyers can view firearm advertisements and make  purchases from the following categories of websites: major retailers,  online retailers, online auctions and marketplaces, online classified  listings, online forums and social media networks, and Dark Web  websites. According to ATF reports, major retailers and online retailers  meet the definition of firearm dealers and therefore must be FFLs in order  to operate. To see how purchases may be facilitated by various Internet  marketplaces, see figure 2.\n\n\t\tPrior Reporting on Internet Firearms Sales\n\nGAO, DOJ, and the Congressional Research Service (CRS), as well as a  gun-control advocacy group, have reported on the issue of Internet  firearm sales since the early 2000s. In 2001 we reported the results of our  undercover inquiries to private individuals who advertised firearms online.  We attempted to purchase firearms from two of these individuals. Both  individuals were willing to complete the transactions in person, though we  did not complete the sales.\nAlso in 2001, as part of a larger report on reducing gun violence, DOJ  identified issues related to firearms sales facilitated by the Internet.  Among the issues outlined in the report was the possibility prohibited  individuals may use the Internet to acquire firearms. The report also  stated that the Internet may facilitate illegal sales by individuals selling  firearms commercially without a license. The report stated that  enforcement mechanisms must be established to prevent prohibited  individuals from obtaining firearms through the Internet and to make sure  that both FFLs and nonlicensed sellers follow existing law when  conducting sales through the Internet. The report noted that ATF was  working to establish a unit to identify and respond to criminal violations  involving the Internet and other new computer technology and worked  with other federal law-enforcement agencies to establish enforcement  mechanisms to prevent prohibited individuals from obtaining firearms  through the Internet and to make sure both FFLs and nonlicensed sellers  follow existing law when conducting sales through the Internet.\nIn 2012, CRS reported on Internet firearm and ammunition sales. The  report outlined the extent to which federal law regulates the sale of  firearms via the Internet, which is not treated as legally distinct from sales  not facilitated by the Internet. CRS noted that this situation has raised  concerns about the possibility of increased violation of federal firearm  laws and about challenges that law-enforcement agencies may face when  attempting to investigate violations of these laws.\nAdditionally, a prior report by an advocacy group explored how the  Internet may facilitate firearm sales to prohibited individuals. However,  the report described how prohibited individuals may use the Internet to  find firearms for sale and then to conduct face-to-face transactions. The  report did not demonstrate how prohibited individuals may have firearms  mailed directly to them, thus circumventing the FFL purchase process, or  otherwise break the law. Representatives from the investigative  organization that performed this work stated that they did not break the  law when performing their testing.\n\n\tATF Takes Various Actions to Enforce Firearm Regulations Related to Prohibited Firearm Transactions Facilitated by the Internet\n\n\t\tATF Does Not Distinguish between In-Person Sales and Sales Facilitated by the Internet when Enforcing Firearms Statutes and Regulations\n\nAs we noted above, there are no specific statutes or regulations  pertaining to Internet firearms transactions. Hence, ATF does not  distinguish between private firearms transactions taking place in person  versus those that use the Internet to facilitate the sale. Licensed and  nonlicensed sellers use the Internet to facilitate firearm sales in a variety  of ways. Major retailers with a federal firearms license enable customers  to browse available firearms on their websites but require transactions to  be made in person at the store. Online retailers with a federal firearms  license advertise firearms online and transfer the firearm to the purchaser  through either a storefront that qualifies as an FFL or another FFL in the  buyer\u2019s state. Online auction and marketplace websites, online  classifieds, and online forums also facilitate sales between buyers and  both licensed and nonlicensed sellers. Depending on the website,  potential buyers can search for firearms nationwide or narrowed down to  city or zip code. According to ATF, searching capabilities can affect  whether transactions among nonlicensed individuals are more likely to  occur in person or through an FFL as well as the potential for illegal  activity to occur.\nA private sale between two nonlicensed individuals would have an  unlawful component if, for example, (1) the seller knows or has  reasonable cause to believe that the buyer is legally prohibited from  possessing firearms or is a resident of a different state; (2) the seller is  engaged in the business of dealing in firearms without a license; or (3) the  item is an NFA-restricted weapon. ATF officials who oversee Internet- related investigations said that it is not possible to monitor private  firearms transactions coordinated over the Internet as they take place.  Federal law does not require the seller in a private firearm transaction to  conduct a background check or otherwise process paperwork through  ATF.\n\n\t\tATF Developed an Internet Investigations Center to Help Identify Individuals Unlawfully Transferring Firearms Using the Internet\n\nAccording to ATF officials, in 2012 the agency created a national center  for Internet-related investigations, now known as the Internet  Investigations Center (Center). ATF officials noted that, as an example  of its activities, field agents who perform work involving the Internet will  coordinate with the Center to ensure they have the necessary training to  operate online in an undercover capacity. The Center has access to a  variety of tools to facilitate Internet investigations. Much of the Center\u2019s  software that is used to analyze online content for investigations is free  and open source. For example, according to ATF officials, using free  open-source software allows analysts to glean information from public  websites without violating users\u2019 privacy rights.\nATF officials stated that the Center investigates buyers and sellers who  use the Internet to facilitate illegal firearms transactions. The officials with  the Center noted that these investigations are generally reactive, meaning  that the Center initiates them after receiving a tip or a request from a field  agent. For example, in November 2014 the Center received a tip from a  person who was selling firearms on an online firearms marketplace and  was suspicious of a prospective buyer attempting to obtain a pistol  without involving an FFL. The Center identified the prospective buyer and  engaged in an undercover operation in which the individual agreed to  provide the undercover agent with components designed to turn pistols  and rifles into fully automatic firearms in exchange for a pistol and cash.  The undercover agent and the buyer met in person and completed the  transaction. ATF agents arrested the buyer at the scene, and he was later  sentenced to 33 months in prison.\nATF officials said the agency frequently receives tips about nonlicensed  sellers engaging in the business of firearms. For example, ATF  investigated a nonlicensed seller who posted more than 280 firearms for  sale on multiple online firearms marketplaces; purchased at least 54  firearms; and sold at least 51 firearms at a profit. The seller, who was also  found to have made straw purchases for other buyers, was sentenced in  August 2010 to 2 years in prison. For additional examples of ATF  enforcement actions involving sales facilitated by the Internet, please see  appendix II.\nAccording to ATF officials, the Center also performs investigative work on  the Dark Web, which requires knowledge of the Internet and investigative  techniques. For example, ATF analysts must understand virtual currency,  such as Bitcoin values. They must also know what sellers are charging for  their products, because prices on the Dark Web \u201cskyrocket\u201d due to the  criminal nature of the merchandise. In addition, the analysts learn  common terms associated with firearm culture, in order to communicate  with users engaged in criminal activity.\nATF officials with the Center also noted that investigations might involve  both the Surface Web and the Dark Web. For example, to identify an  anonymous user on the Dark Web, the Center works to establish the  user\u2019s \u201cdigital footprint\u201d on the Surface Web. In some cases, users might  conduct illegal activity on the Dark Web but might then go to the Surface  Web, such as a social-networking website with chat forums on a wide  variety of topics, and discuss their illegal activity. From there, analysts  can link the user to other social-media accounts, where the user may post  a photo showing a street sign or other characteristics to help investigators  narrow the user\u2019s location. The ATF officials with the Center noted that  posts on some websites contain meta-data, which includes geo-coding  that helps the analysts identify where posts originated.\nATF issued the Firearms and Internet Transactions Intelligence  Assessment Report in April 2016 to provide information and analysis in  the area of online firearm sales, including both legal and illegal  transactions. The report highlighted several key findings about how  firearm transactions are facilitated by the Internet. Specifically, the ATF  analysis of the online marketplaces for firearms demonstrated the ease  with which individuals can choose to circumvent the generally applicable  law in this arena. Within the report, ATF detailed a market analysis of  firearms transactions, including Surface Web and Dark Web  marketplaces. Firearms transactions that occur on the Dark Web are  more likely to be conducted in person or via the mail or common carrier,  versus through an FFL. Additionally, the report noted that it appears that  the price of a firearm increases as the transaction becomes more covert  or when parties attempt to subvert laws and regulations. According to  ATF staff, they plan to update the report when there is a significant shift in  Internet gun trafficking. The ATF officials with the Center said they have  not determined the frequency with which updated reports will be issued  but they do not plan to update it annually.\n\n\t\tATF Enforces Firearms Laws through Regulatory Inspections of Licensed Firearms Dealers to Detect Prohibited Firearms\n\nTo enforce the NFA, GCA, and related firearms regulations, ATF carries  out a variety of regulatory activities. For example, ATF monitors the  firearms industry from manufacture and importation through retail sale.  Specifically, ATF Industry Operations Investigators determine whether  FFL applicants are qualified to engage in firearms commerce through  routine inspections and regulatory oversight. Industry Operations  Investigators also routinely inspect FFLs to ensure continued compliance  with statutes and regulations. ATF officials stated that investigators  conduct compliance inspections of FFLs\u2014who must renew their licenses  every 3 years. ATF conducts these inspections at least once during the 3- year licensing period. Additionally, ATF officials stated that as part of  each inspection, officers will review all sales transactions an FFL has  made in the last 12 months and analyze the data for aberrant patterns.  Based on a review of DOJ Office of Inspector General documentation and  our own observations during an FFL inspection, we determined that,  during these inspections, ATF performs an inventory of the FFL\u2019s firearms and checks it against the  FFL\u2019s inventory to ensure that firearm transactions reconcile with the  firearm inventory;  reviews the FFL\u2019s records of background checks for purchases  processed through NICS;  checks the prior year\u2019s Firearms Transaction Record forms, which  document acquisition and disposition information that ATF uses to  trace firearms involved in crimes; and  reviews sales records to ensure that the FFL has recorded  appropriate tax information.\nWhile ATF investigators routinely monitor firearms transactions of FFLs,  the agency does not monitor private firearms transactions among  nonlicensed individuals. As noted above, private sales among  nonlicensed individuals who are residents of the same state are not  subject to record-keeping or background-check requirements, so ATF  does not have a means by which to monitor these sales as they take  place.\n\n\t\tATF Law-Enforcement Operations Investigate Firearm-Related Crimes, Including Those Facilitated by the Internet\n\nOne aspect of the enforcement work undertaken by ATF agents is to  investigate reports of individuals engaging in the business of dealing in  firearms without a license. According to agency officials with the ATF  Violent Crime Intelligence Unit, as part of these investigations, agents  gather information about a suspect\u2019s firearm transactions. On the basis of  the activity detected, agents will determine whether the extent of the sales  history is significant enough to warrant further action.\nIn fiscal years 2014\u20132016, ATF made 322 arrests for engaging in the  business of dealing in firearms without a license. These figures represent  all arrests, as ATF does not identify or track whether transactions were  facilitated by the Internet. During the same time, ATF also made 53  arrests for charges related to the unlawful interstate transfer of firearms,  204 arrests for charges related to the sale of firearms to a prohibited  person, and 12,586 arrests for charges related to the possession of a  firearm by a prohibited person. These arrests may include but are not  limited to Internet-related investigations. According to documentation  provided by ATF, 89 percent of the defendants in these arrests received a  conviction. See table 1.\n\n\tAgents Purchased Two Firearms on the Dark Web, but Covert Attempts to Illegally Purchase Firearms on the Surface Web Were Unsuccessful Agents Successfully Purchased Two Firearms on the Dark Web\n\nOur agents successfully purchased two firearms from sellers we located  on a Dark Web marketplace as a result of seven total attempts. ATF  officials stated that the Dark Web is completely anonymous and is  designed to facilitate criminal activity online. Further, an ATF report states  that most used firearms are sold via the online auctions, online  marketplaces, and on the Dark Web as compared to the Surface Web. In  the seven attempts, our agents did not disclose any information indicating  they were prohibited from possessing a firearm. In the five attempts  where we did not ultimately purchase a firearm, the prospective seller  stopped responding to our inquiries, stated the firearm was no longer for  sale, refused to use an escrow account for payment, or experienced  technical problems using the Dark Web marketplace. The first weapon  that we purchased was an AR-15 rifle, which is a semiautomatic firearm.  The serial number on the firearm was obliterated. The Dark Web seller  shipped the dismantled weapon directly to the undercover address  provided by our agent. It is unlawful for any person to possess or ship in  interstate commerce a firearm which has had the importer\u2019s or  manufacturer\u2019s serial number removed, obliterated, or altered, if the  individual had such knowledge about the serial number. Additionally,  because the firearm was shipped across state lines, the seller may not  have been a resident of the same state as our agent. We did not confirm  whether the seller notified the shipping company that the package  contained a firearm. Any of these circumstances\u2014removing a serial  number, selling to a resident of a different state, or failing to properly  notify the shipping company that the shipment contained a firearm\u2014if  proven, would likely violate federal law. A photo of the weapon can be  seen in figure 3.\nThe second weapon we purchased was an Uzi, which is an Israeli-made  semiautomatic firearm, and was advertised as a fully automatic firearm.  See photo in figure 4.\nIf the firearm meets the NFA\u2019s definition of a machine gun, the seller\u2019s  prior possession of the Uzi, and the shipment to our agent, likely violated  federal law. Generally, only machine guns that were lawfully possessed  prior to May 19, 1986, may continue to be possessed and transferred,  with ATF approval, if they are registered in accordance with the NFA.\nWe are referring information regarding our two Dark Web purchases to  applicable law-enforcement agencies to inform any ongoing investigations  for any further action they deem appropriate.\n\n\t\tAll of Our Attempts to Illegally Purchase Firearms from Private Sellers on the Surface Web Were Unsuccessful\n\nOur covert testing involving GAO agents attempting to purchase firearms  illegally on the Surface Web were unsuccessful. Specifically, private  sellers on Surface Web gun forums and in classified ads were unwilling to  sell a firearm to our agents that self-identified as being prohibited from  possessing a firearm. In our 72 attempts to purchase firearms from  private sellers on the Surface Web, 56 sellers refused to complete a  transaction once we revealed that either the shipping address was across  state lines or that we were prohibited by law from owning firearms. The  scenarios we applied to the purchases were derived from provisions in  the GCA. The five scenarios disclosed status information that would  disqualify our agents from purchasing a firearm. For example, in one  scenario we stated that we were a convicted felon; in another scenario,  we informed the seller that we had a dishonorable discharge from the  military. In these 56 attempts, 29 sellers refused because they would  not ship a firearm and 27 refused after we presented the scenario.  Furthermore, in five of these attempts, the accounts we set up on several  forums were frozen by the websites, which prevented us from using them  after we disclosed our prohibited status or requested interstate shipment  and attempted to make a purchase.\nIn the 11 remaining attempts, we encountered private sellers that  appeared to have scammed us, or attempted to scam us, after we  disclosed our prohibited status or asked to avoid using an FFL. In two of  these instances, we made a payment and never received the firearm or a  refund. In the remaining nine attempted scams, our agents determined  that the seller may not be legitimate and therefore did not complete the  purchase. For example, in one attempt, the agent conducted investigative  research on the seller and found evidence suggesting that the seller may  be involved in online fraud. As a result, the agent did not follow through  with the purchase attempt. ATF does not have jurisdiction over fraud  cases so, when it encounters such circumstances, the agency may refer  the case to the Joint Support and Operations Center or to local or state  law-enforcement agencies or may encourage the victim to file a police  report. The results of our attempts on the Surface Web are summarized in  figure 5.\n\n\tAgency Comments\n\nWe provided a draft of this report to ATF and DOJ on October 31, 2017,  for review and comment.  ATF provided technical comments, which we  incorporated as appropriate.\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 Deputy Director of  ATF and other interested parties. In addition, the report will be available  at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  Seto Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov, or Wayne  McElrath at (202) 512-2905 or mcelrathw@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix III.\n\nAppendix I: Methods for Performing GAO Covert Testing\n\n\tScope\n\nFor our covert attempts to buy firearms on the Internet, we performed  tests on both the Dark Web and the Surface Web to compare and  contrast how transactions are completed. For the tests, our agents  employed undercover identities and accessed online marketplaces where  firearms were advertised for sale. In both Dark Web and Surface Web  testing, the agents contacted sellers that posted ads online, and  attempted to complete firearm purchases. For our testing, we did not  proactively attempt to purchase firearms from Federal Firearm Licensees  (FFL), focusing our efforts on private sellers. We counted an attempt as  successful if we received a firearm. We counted an attempt as a failure if  we contacted the seller and expressed interest in purchasing the  advertised firearm and the seller refused to complete the purchase, or if  the seller failed to respond after initial contact was made. In some  instances on the Surface Web, after we contacted a seller and described  our prohibited status, we were \u201cbanned,\u201d or prohibited from accessing the  gun forum or classified ad website. Additionally, in two instances, our  agents were apparently \u201cscammed\u201d in that we remitted payment for a  firearm we did not receive, or our agents otherwise identified indicators  that the firearm would not be shipped. The results of our testing are for  illustrative purposes only and are not generalizable.\nPrior to beginning our testing, to understand how prohibited individuals  may use the Internet to purchase firearms or firearm components, we  reviewed Department of Justice (DOJ) and Bureau of Alcohol, Tobacco,  Firearms and Explosives (ATF) published reports, including adjudicated  criminal cases. We also met with third-party groups with knowledge of the  firearms industry, including state law-enforcement agencies, a purveyor of   commercial website that host online firearm classified advertisements, a  gun-control advocacy group, a firearm-industry organization, and an  academic research center, to learn about online firearm marketplaces,  criminal pathways to illegally purchase or sell firearms, and enforcement  responses.\nAdditionally, we reviewed reports by a gun-control advocacy group to  understand how prior similar work in this area was performed. We learned  through our review and our subsequent interviews with individuals who  performed this work that no federal laws were broken when this testing  was conducted. Accordingly, to demonstrate how the Internet may  facilitate illegal firearm transactions, we decided our agents would  complete the firearm purchases.\n\n\tMethodology for Dark Web Covert Testing\n\nAgents also accessed firearm advertisements on a Dark Web  marketplace and attempted to purchase firearms or firearm components  from nonlicensed private sellers. Agents focused on one Dark Web  marketplace for this stage of testing. Our agents performed a preliminary  test to assess the feasibility of purchasing a firearm on the Dark Web.  This attempt was successful, so our agents proceeded with additional  planned attempts to purchase additional firearms on the Dark Web.  Testing ended once a firearm was successfully purchased and received  by our agents, with a total of seven attempts completed. For these covert  tests, we did not disclose any information about our presumed prohibited  status. We also focused our efforts on purchasing a firearm that appeared  to be restricted by the National Firearms Act of 1934 (NFA).\n\n\tMethodology for Surface Web Covert Testing\n\nTo perform Surface Web testing, our agents accessed public gun forums  and other classified ads where private nonlicensed sellers listed firearms  for sale. These forums and classified ads were identified from our  meetings with ATF and third-party entities, and a review of available  documentation. We considered the following factors when selecting  online classified websites: hosted nationwide or regional ads, quantity of ads,  variety of firearms available, and accessibility of website.\nRecently posted ads on these sites were selected if they fell within a  designated price range, and were for transactions between private  nonlicensed individuals.\nThe purpose of our Surface Web purchase attempts was to determine  whether private sellers would knowingly sell a firearm to an individual  prohibited from possessing one, as outlined by the Gun Control Act of  1968 (GCA). Our agents used one of five scenarios based on a provision  of the GCA when attempting to purchase a firearm. The scenarios  involved overtly explaining why our agent was prohibited from possessing  a firearm. The scenarios based on the GCA covered the following: a felon avoiding a background check, an individual with a domestic-violence background or a restraining  order against him or her, an individual who unlawfully uses controlled substances (or is an an individual who was dishonorably discharged from the military, and an individual who has renounced his or her citizenship or is otherwise  an unlawful alien.\nBefore we began testing, we determined that we would run each scenario  iteratively until we successfully completed a purchase, we exhausted the  number of applicable ads, or we capped out our predetermined cap of 15  purchase attempts, with a total of 75 attempts to be made in total.  However, due to investigative decisions, we only employed 72 attempts.\nWe conducted this performance audit from July 2015 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work in accordance with the standards prescribed by the  Council of the Inspectors General on Integrity and Efficiency.\n\nAppendix II: Examples of Illegal Firearms Sales Facilitated by the Internet\n\nAs noted above, the Bureau of Alcohol, Tobacco, Firearms and  Explosives (ATF) does not track statistics on firearm enforcement actions  that involve illegal transactions facilitated by the Internet. However, ATF  officials provided several examples of closed, adjudicated cases where  the agency took enforcement action against individuals who were using  the Internet to facilitate illegal transactions. The following summaries  provide examples of the type of investigative and enforcement work ATF  agents perform:\nOne individual was indicted in February 2015 for being a felon in  possession of firearms and for possessing a machine gun. In  November 2014, ATF\u2019s Internet Investigation Center (the Center)  received a tip from the ATF Tip Line; a legitimate seller was  suspicious of a buyer who was attempting to obtain a firearm without  involving a Federal Firearm Licensee (FFL) and suggested the seller  could obliterate the serial numbers. The Center identified the  prospective buyer as a convicted felon. The individual agreed to  provide the undercover agent with a Glock auto sear\u2014which, when  attached to a firearm makes it a fully automatic weapon\u2014and firearm  components that could be used to transform an M-16 style rifle into a  machine gun. In exchange, the undercover agent would provide the  individual with a Glock pistol and $300 cash. The individual and an  undercover agent completed the transaction and the individual was  immediately arrested. The individual\u2019s criminal history included a  recent prior felony gun-possession conviction. The individual pleaded  guilty to being a felon in possession of a firearm and to the illegal  transfer or possession of a machine gun, and was sentenced to 33  months imprisonment and 36 months of supervised release.\nIn 2009, one individual was indicted on six counts of federal criminal  violations, including one count for engaging in the business of  firearms without a license. According to the indictment, from  approximately January 1, 2005, to May 8, 2008, while serving as an  FBI agent, the individual purchased multiple firearms from various  sources including private sellers, local stores, and sellers he dealt with  over the Internet. He posted at least 280 firearms for sale on a  legitimate firearm website, some of which were multiple listings of the  same item in the event that interested bidders did not meet his target  price. During this period, he purchased at least 54 firearms and sold  at least 51 firearms. He profited from all the sales, collecting more  than $118,000 in gross receipts. The individual was also indicted on  four counts of causing a firearms dealer to maintain false records,  which related to his purchasing firearms for third parties (straw  purchases). In addition, the individual was indicted on one count of  providing ATF with a false document listing the firearms he bought  and sold; agents recovered a more-extensive and more-descriptive  list. The individual was found guilty on all counts in April 2010, and  was sentenced in August 2010 to 2 years in federal prison.\nAccording to an affidavit from an ATF Special Agent, an individual  offered silencers, pistols, and rifles for sale on the Dark Web, as well  as nationwide shipping. The ATF Center \u201cproactively targeted\u201d the  individual\u2019s vendor name \u201cthrough various methods of analysis,\u201d  identified numerous Internet forum and social-media profiles  associated with the individual, and ultimately discovered his true  identity. The Center referred \u201can investigative lead\u201d and the  corresponding evidence and analysis to the respective ATF Field  Division. According to the affidavit, the Special Agent conducted a  controlled purchase through one of the Dark Web marketplaces,  reviewed U.S. Postal Service security video and observed the  individual mail the firearm, and executed arrest and search warrants.  The individual pled guilty to one count of causing a firearm silencer to  be delivered by the U.S. Postal Service without proper notification,  and was sentenced to 6 months in federal prison and 3 years of  supervised release.\nIn October 2013, an individual was indicted for illegal exportation,  shipment, and delivery of firearms and firearm components that were  sold on a Dark Web site. The man shipped a handgun concealed in a  video game system to a buyer in Sydney, Australia. Australian  Federal Police intercepted the package and alerted ATF, which began  an investigation. During the investigation, the individual shipped a  9 mm pistol with an obliterated serial number to the United Kingdom,  various assault-rifle parts to Australia, and a .22-caliber pistol with an  obliterated serial number and a weapon magazine to Sweden. Each  firearm was disassembled and concealed in a broken electronic  device. The individual pleaded guilty and was sentenced to 2 years  imprisonment and 2 years of supervised release.\nIn February 2015, an individual was indicted for dealing in firearms  without a license and selling firearms to residents of other states. The  individual sold firearms via two Dark Web sites and shipped them to  buyers in the United States and internationally. In an attempt to hide  his identity, the man placed false return-address labels on the  packages, used aliases to send the packages, and packed the  firearms so that they appeared to be computer hard drives. The  individuals agreed to sell handguns to undercover ATF agents posing  as gun buyers and then shipped the guns from Alabama to Nebraska  and New Jersey. The individual was found guilty and sentenced in  November 2015 to 51 months in prison and 36 months supervised  release.\n\nAppendix III: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Dave Bruno (Assistant Director),  Dean Campbell, Julia DiPonio, Robert Graves, and Kristen Timko made  key contributions to this report. Other contributors include Marcus Corbin,  Colin Fallon, Maria McMullen, James Murphy, Anna Maria Ortiz, Julie  Spetz, and Helina Wong.","output":"Why GAO Did This Study\n\nThe current federal legal framework governing buying and selling of firearms does not specifically address the use of the Internet to facilitate these transactions. Additionally, private transactions involving the most-common types of firearms between individuals who are not licensed to commercially sell weapons and who are residents of the same state, including transactions facilitated by the Internet, are generally not subject to federal background-check requirements.\nCongressional requesters asked that GAO assess the extent to which ATF is enforcing existing laws and investigate whether online private sellers sell firearms to people who are not allowed or eligible to possess a firearm. This report describes (1) techniques ATF uses to investigate and enforce generally applicable firearm laws in instances where the firearm or firearm-component transaction is facilitated by the Internet and (2) results of GAO's undercover attempts to buy firearms on the Dark Web and Surface Web.\nGAO analyzed documents and interviewed officials to identify actions ATF has taken to prohibit illegal firearm transactions. GAO also attempted to purchase firearms from Dark Web and Surface Web marketplaces. The results of the testing are illustrative and nongeneralizable.\n\nWhat GAO Found\n\nThe Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is responsible for investigating criminal and regulatory violations of firearms statutes and regulations that govern firearms transactions, including sales that are facilitated by the Internet. Two components of the Internet may be used to facilitate Internet firearm sales: the Surface Web and the Dark Web. The Surface Web is searchable with standard web search engines. The Dark Web contains content that has been intentionally concealed and requires specific computer software to gain access. ATF created the Internet Investigations Center (Center) to investigate buyers and sellers who use the Internet to facilitate illegal firearms transactions. The Center uses several tools to provide investigative support to ATF, which has resulted in the arrests of individuals using the Internet to facilitate illegal firearm purchases. ATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish a user's \u201cdigital footprint\u201d on the Surface Web.\nIn 2016, the Center also issued a report about Internet firearm transactions. This and other ATF reports highlighted the following about Internet-facilitated firearm transactions:\nThe relative anonymity of the Internet makes it an ideal means for prohibited individuals to obtain illegal firearms.\nThe more anonymity employed by a firearms purchaser, the greater the likelihood that the transaction violates federal law.\nFirearm transactions that occur on the Dark Web are more likely to be completed in person or via the mail or common carrier, versus through a Federal Firearm Licensee.\nGAO agents attempted to purchase firearms from Dark Web and Surface Web marketplaces. Agents made seven attempts to purchase firearms on the Dark Web. In these attempts, agents did not disclose any information about whether they were prohibited from possessing a firearm. Of these seven attempts, two on a Dark Web marketplace were successful. Specifically, GAO agents purchased and received an AR-15 rifle and an Uzi that the seller said was modified so that it would fire automatically. GAO provided referral letters to applicable law-enforcement agencies for these purchases to inform any ongoing investigations.\nTests performed on the Surface Web demonstrated that private sellers GAO contacted on gun forums and other classified ads were unwilling to sell a firearm to an individual who appeared to be prohibited from possessing a firearm. Of the 72 attempts agents made to purchase firearms on the Surface Web, 56 sellers refused to complete a transaction: 29 sellers stated they would not ship a firearm and 27 refused after the disclosure of the undercover identities' stated prohibited status. Furthermore, in 5 of these 72 attempts, the accounts GAO set up were frozen by the websites, which prevented the agents from using the forums and attempting to make a purchase.\n\nWhat GAO Recommends\n\nGAO is not making recommendations in this report. ATF provided technical comments, which GAO incorporated as appropriate."}
{"id":"gao_GAO-18-250","pid":"gao_GAO-18-250_0","input":"\tBackground\n\nThis section provides information on (1) BLM headquarters, state, and  field offices; (2) the lifecycle of oil and gas wells; (3) BLM\u2019s bonding  regulations; and (4) BLM\u2019s 2012 well review and 2013 bond adequacy  review policies.\n\n\t\tBLM Headquarters, State, and Field Offices\n\nBLM is responsible for issuing leases for private entities to develop oil  and gas resources on and under roughly 700-million acres of (1) BLM  land, (2) other federal agencies\u2019 land, and (3) private land where the  federal government owns the mineral rights. According to BLM,  approximately 32-million acres were leased for oil and gas operations at  the end of fiscal year 2015. BLM also oversees oil and gas operations on  56-million acres of Indian lands.\nBLM administers its programs through its headquarters office in  Washington, D.C.; 12 state offices; 38 district offices; and 127 field  offices. Of these, 10 state offices and 33 field offices manage oil and gas  programs, and these are located primarily in the Mountain West, the  center of much of BLM\u2019s oil and gas development. BLM headquarters  develops guidance and regulations for the agency, and the state, district,  and field offices manage and implement the agency\u2019s programs. Because  BLM has few acres of land in the eastern half of the United States, the  Eastern States State Office, in Washington, D.C., is responsible for  managing land in 31 states, and the remaining state offices generally  conform to the boundaries of one or more states. Figure 1 shows the  boundaries of the 12 BLM state offices.\n\n\t\tLifecycle of Oil and Gas Wells\n\nOnce operators obtain federal oil and gas leases and drill wells, those  wells can be actively producing, inactive, or reclaimed. An orphaned well  is a well that BLM determined has no responsible or liable party and for  which there is insufficient bond coverage for reclamation. This situation  may occur, for example, when an operator has declared bankruptcy.  Shut-in and temporarily abandoned wells are examples of types of  inactive wells that can become orphaned. Shut-in wells are physically and  mechanically capable of producing oil or gas in paying quantities or  capable of service use. For example, an operator may put a well in shut- in status if it has not been connected to a sales line or the line is too far  away and it is not economical to connect to at this time. Temporarily  abandoned wells are another type of inactive well that is not physically or  mechanically capable of producing oil or gas in paying quantities but that  may have value for a future use. Figure 2 depicts the lifecycle of oil and  gas wells overseen by BLM.\n\n\t\tBLM\u2019s Bonding Regulations\n\nThe Mineral Leasing Act of 1920, as amended, requires that federal  regulations ensure that an adequate bond is established before operators  begin preparing land for drilling to ensure complete and timely  reclamation of the land. Accordingly, BLM regulations require operators to  submit a bond to ensure compliance with all of the terms and conditions  of the lease, including, but not limited to paying royalties, plugging wells,  and reclaiming disturbed land. BLM regulations generally require  operators to have one of the following types of bond coverage:  individual lease bonds, which cover all of an operator\u2019s wells under  one lease, and the minimum amount is set at $10,000;  statewide bonds, which cover all of an operator\u2019s leases in one state,  and the minimum amount is set at $25,000; or nationwide bonds, which cover all of an operator\u2019s leases in the  United States, and the minimum amount is set at $150,000.\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 is required to pay a premium to the surety company to  maintain the bond. These premiums can vary depending on various  factors, including the amount of the bond and the assets and financial  resources of the operator. If operators fail to reclaim the land they disturb,  the surety company can either pay BLM the amount of the bond to help  offset reclamation costs, or in some circumstances, BLM may allow the  surety company to perform the required reclamation. A personal bond  must be accompanied by one of the following financial instruments:  certificates of deposit issued by a financial institution whose deposits  are federally insured, granting the Secretary of the Interior authority to  redeem it in case of default in the performance of the terms and  conditions of the lease;  cashier\u2019s checks; negotiable Treasury securities, including U.S. Treasury notes or  bonds, with conveyance to the Secretary of the Interior to sell the  security in case of default in the performance of the lease\u2019s terms and  conditions; or  irrevocable letters of credit that are issued for a specific term by a  financial institution whose deposits are federally insured and meet  certain conditions.\nIf operators fail to reclaim the land they disturb, BLM will redeem the  certificate of deposit, cash the check, sell the security, or make a demand  on the letter of credit to pay the reclamation costs.\n\n\t\tBLM\u2019s 2012 Well Review and 2013 Bond Adequacy Review Policies\n\nIn response to our previous recommendations that BLM develop a  comprehensive strategy to improve monitoring agency performance in  conducting well reviews and bond adequacy reviews, BLM issued a 2012  well review policy and a 2013 bond adequacy review policy. These  policies contain directives for conducting reviews when wells and bonds  meet certain criteria. The well review policy directs:  that field office officials evaluate every shut-in well at least once every  5 years;  that field office officials review all wells that have been inactive for 25  years or longer and that have no anticipated beneficial use by March  29, 2013;  that if field office officials determine that there are wells that are not  capable of producing oil or gas in paying quantities or have no  beneficial use, officials are to send the operator a written order  directing the operator to demonstrate that these wells are capable of  producing oil or gas in paying quantities or have a future beneficial  use, or the operator is to submit plans to reclaim the wells;  that each state office submit to BLM headquarters a consolidated  annual report recording well reviews; and  that the annual report identify the leases that were reviewed and the  wells that were reviewed on each lease, and describe what follow-up  action the field office official conducting the review performed.\nThe bond adequacy review policy directs:  that field offices perform bond adequacy reviews on all bonds at least  once every 5 years or whenever a bond review is warranted;  that field offices verify and tie all federal wells to their appropriate  bond number and enter bond information and bond adequacy review  data into AFMSS;  that field offices perform adequacy reviews on all bonds using specific  instructions and a worksheet that assigns points for three risk factors:  (1) status of wells covered by the bond (share of inactive wells, deep  wells, and wells with marginal production); (2) operator-specific  compliance history; and (3) reclamation stewardship diligence;  that if the field office official performing the review determines that the  bond amount is insufficient, the official is to take the necessary steps  to determine the appropriate bond amount and increase the bond;  that if the bond being reviewed is a statewide or nationwide bond, field  offices are to review the wells within their field office jurisdiction; and  that each BLM state office with an oil and gas program submit a semi- annual bond adequacy review report to BLM headquarters.\n\n\tBLM\u2019s Actual Reclamation Costs and Potential Oil and Gas Well Liabilities Have Likely Increased, but the Agency Does Not Systematically Track These\n\nBLM\u2019s actual costs incurred to reclaim orphaned wells and potential  liabilities have likely increased for fiscal years 2010 through 2017 based  on our analysis of available information. Precisely how the agency\u2019s  actual reclamation costs and potential liabilities have changed is unclear  because BLM does not systematically track them at an agency-wide level.  BLM headquarters officials we interviewed told us that they did not have  any information on actual costs incurred to reclaim orphaned wells and  stated that BLM\u2019s data systems were not designed to track incurred  reclamation costs. In addition, AFMSS provides a snapshot of orphaned  wells as identified at the time that the data are queried and does not  provide data for prior time periods.\nBecause BLM headquarters does not record actual reclamation costs  incurred at an agency-wide level, we requested documentation for the  reclamation costs incurred by 13 selected BLM field offices for fiscal  years 2010 through July 2017. This documentation identified about $2.1  million in reclamation costs incurred over this period, or an average of  about $267,600 per year by these 13 field offices. We estimate that total  actual reclamation costs for all field offices are likely to be higher than this  amount as other field offices may have also reclaimed orphaned wells  during this period. In January 2010, we found that, for all field offices  across the agency, BLM spent about $3.8 million from fiscal years 1988  through 2009, or an average of about $171,500 per year. Comparing  the average costs incurred by the 13 selected field offices to the data we  previously reported demonstrates that actual total reclamation costs  incurred have likely increased since 2010.\nIn addition to actual costs increasing, potential liabilities are also likely to  have increased, though BLM does not systematically track information on  potential liabilities that might result from an increase in the number of  orphaned wells. Potential liabilities include costs that the agency may  incur to reclaim wells that operators fail to reclaim. We believe these  costs have also increased because the number of known orphaned wells  on federal and Indian lands managed by BLM has increased. We  identified changes in the number of known orphaned wells since we last  reported on this matter in January 2010. In January 2010, we found that  BLM had identified and was managing 144 orphaned wells. Over half of  those 144 wells (75) were still identified in AFMSS as orphaned as of July  2017, and the total number of identified orphaned wells on federal lands  had increased from 144 to 219. Also, BLM officials from the 13 selected  field offices identified about $46.2 million in estimated potential  reclamation costs associated with orphaned wells and inactive wells that  officials deemed to be at risk of becoming orphaned.\nAlso concerning potential liabilities, our analysis of AFMSS data and  OGOR production data through September 2016 found that BLM  managed about 15,600 inactive wells, of which over 1,000 were inactive  for 25 years or more. In contrast, a document provided to us by BLM  headquarters indicates 325 wells had been inactive for 25 years or more  as of around 2017. This document summarizes data from AFMSS queries  conducted by BLM field and state offices at various times from 2013  through 2014 and queries conducted at various times from 2016 through  2017. BLM officials told us that this difference could be because AFMSS  reports sometimes return conflicting data since the reports draw from  current and historical statuses of wells from both AFMSS and OGOR. We  combined AFMSS and OGOR data to identify the number of inactive  wells because although BLM records the total number of wells on federal  lands over time\u2014a rough indicator of how potential reclamation costs  may change\u2014the agency does not systematically record more specific  types of wells that may be at higher risk of becoming orphaned, such as  inactive wells or wells that have been inactive for 25 years or more.\nMoreover, we identified inconsistencies between the data and the  document provided to us by BLM headquarters summarizing the data. For  example, BLM\u2019s summary document did not include one state office, even  though the data include that state office as having two wells that were  inactive for 25 years or more in 2014. BLM\u2019s summary document states  that there had been a reduction in the number of wells that were inactive  for 25 years or more between the times of the two data queries. However,  because BLM does not systematically track the number of inactive wells,  in particular those wells that are at high risk of becoming orphaned, the  agency does not know how its potential liabilities may be changing. These  liabilities include wells inactive for 25 years or more.\nAlthough we were unable to determine the full extent of the increase in  BLM\u2019s potential liabilities because BLM does not have the data needed  for such an analysis, other factors also suggest such an increase. For  example, there has been an increase in oil and gas development on  federal lands, and therefore, there is the potential for an increase in the  total number of wells on federal lands at risk of becoming orphaned and  needing to be reclaimed in the future. BLM\u2019s portfolio of oil and gas wells  on federal lands has changed over the years, based on overall trends in  the oil and gas industry. According to AFMSS data provided by BLM,  the total number of wells on federal lands that are capable of production  increased along with rising oil and gas prices, from about 89,600 wells in  fiscal year 2010 to peaking to about 94,800 wells in fiscal year 2014. As  oil and gas prices declined starting in 2014, the total number of wells  capable of production also declined to about 94,100 wells in fiscal year  2016.\nIn addition, declining oil and gas prices (by nearly half from 2010 through  2017) have placed financial stress on oil and gas operators, thereby  increasing bankruptcies and the risk of wells becoming orphaned. For  example, coalbed methane\u2014natural gas extracted from coal beds\u2014was  economical to produce when natural gas prices were higher and  thousands of coalbed methane wells were drilled on federal lands.  However, coalbed methane production has declined because the spread  of shale gas production has driven down natural gas prices. Officials we  interviewed in one BLM field office told us that the drop in natural gas  prices contributed to an increasing number of bankruptcies for operators  of coalbed methane wells. Our analysis of AFMSS data suggests that  there were thousands of inactive coalbed methane wells as of October  2017. To the extent that market conditions remain unfavorable for  coalbed methane production, BLM\u2019s potential future reclamation costs  may increase if any operators of these wells go bankrupt or are otherwise  unwilling or unable to pay the full costs of reclamation, leaving these wells  orphaned.\nAccording to federal internal control standards, management should use  quality information, which should be complete, to achieve the entity\u2019s  objectives. However, BLM does not systematically or comprehensively  track the agency\u2019s actual costs incurred to reclaim orphaned wells and  the information necessary to determine potential liabilities, including  indicators of potential future reclamation costs, such as the number of  inactive wells, orphaned wells, and estimates of reclamation costs for  orphaned wells. BLM headquarters officials said that they sometimes  check AFMSS to see how many orphaned wells there are, but without  doing so systematically and recording the results of these checks, it is not  possible to determine how the agency has been making progress in  managing the number of orphaned wells. EPAct 2005 requires that the  costs of reclaiming orphaned wells be recovered from persons or entities  providing a bond or other financial assurance. Without systematically and  comprehensively tracking actual reclamation costs incurred and the  information necessary to determine potential liabilities including the  numbers of orphaned wells and inactive wells over time, BLM cannot  ensure that it has sufficient bond coverage or other financial assurances  to minimize the need for taxpayers to pay for the costs of reclaiming  orphaned wells.\n\n\tThe Extent to which BLM Implemented Its Well Review Policy and Bond Adequacy Review Policy Directives Is Unclear\n\nThe extent to which BLM has implemented its well review policy and bond  adequacy review policy is unclear. Specifically, we were unable to fully  assess the extent to which BLM\u2019s field and state offices have  implemented directives included in these policies because of inconsistent  well review information, inaccurate well and bond data in AFMSS, and  inadequate monitoring of well and bond policies\u2019 implementation.\nInconsistent well review information. We were unable to fully assess  the extent to which BLM implemented some directives in the well review  policy because the well review information reported by field offices  differed across the agency. For example, officials we interviewed at the  13 selected BLM field offices had different understandings of what  specific actions constitute a well review, and therefore differed in their  understanding of which wells were to be included in the annual reports for  documenting well reviews. Specifically, officials from 11 out of 13 selected  field offices told us that a well review consisted of actions\u2014such as  reviewing a well\u2019s status, conducting a physical inspection, and providing  additional notices or letters to the well operator when a well is inactive.  Officials in 2 other field offices told us that while they conduct similar  actions, they consider the sole action of correcting data on a well\u2019s status  to constitute a well review. For example, a BLM official told us that one  reported well review was conducted on a well that had been reclaimed in  1986 but that was not noted in AFMSS. The official told us that following  this well review, they corrected the well status in AFMSS and noted that  this well should not have been on the list of wells to review. While  correcting well data helps improve the accuracy of AFMSS, when some  offices count such corrections as well reviews and others do not, this  variance results in inconsistent information in BLM\u2019s annual well review  reports.\nSuch inconsistencies in what counts as a well review may be the result of  a lack of clarity in BLM\u2019s well review policy that does not specify what  constitutes a well review. Unlike the bond adequacy review policy, which  provides instructions to field offices on how to conduct a bond adequacy  review and directs field offices to use a specific worksheet to calculate  bond adequacy, the well review policy does not contain specific  instructions on what actions field offices are to take to conduct a well  review, such as how to count reviews or report them. A January 2018  report by the Department of the Interior\u2019s Office of Inspector General  (OIG) similarly found that BLM\u2019s well review policy does not specifically  outline how to conduct and document reviews of shut-in wells (shut-in  wells, as noted earlier, are inactive wells that are physically and  mechanically capable of producing oil or gas in paying quantities or  capable of service use). Under federal standards for internal control,  management should design control activities to achieve objectives and  respond to risks; such activities include appropriate documentation of  internal control in management directives, administrative policies, or  operating manuals. Without developing and communicating specific  instructions outlining what actions constitute a well review for annual- reporting purposes, BLM cannot have reasonable assurance that its field  offices are conducting and reporting on well reviews in a consistent  manner.\nInaccurate well and bond data in AFMSS. Our ability to assess the  extent to which BLM implemented its well review and bond adequacy  review policies was impeded by inaccuracies in certain AFMSS data.  BLM officials told us that some of the data in AFMSS on wells and bonds  were not reliable. For example, BLM officials told us that there may be  discrepancies between the bonds listed in AFMSS and the bonds listed in  the Bond and Surety System, which is BLM\u2019s official database for all oil  and gas bonds. Officials told us that bonds may be missing from AFMSS  because BLM field offices are responsible for manually entering the bond  number from the Bond and Surety System into AFMSS.\nIn addition, AFMSS data we reviewed contained other inaccuracies.  Specifically, the data we reviewed contained future dates for when wells  were completed, or capable of production, when some wells last changed  statuses, and when some well reviews were reportedly conducted. BLM  officials told us that AFMSS allows users to enter future dates, which can  result in inaccurate data. Having inaccurate dates for wells\u2019 statuses and  wells\u2019 reviews is problematic because it means it is not possible to assess  whether reviews are being conducted as directed by BLM policy. For  example, BLM\u2019s well review policy directs field offices to review each  shut-in well every 5 years. BLM\u2019s performance against this directive  cannot be assessed without reliable information on when wells become  shut-in and when well reviews are conducted.\nIn written responses to our request for information, BLM officials stated  that AFMSS has some edit checks, but the accuracy of the data entered  into AFMSS is dependent on field office officials responsible for data  entry. BLM officials stated that AFMSS has some electronic safeguards,  such as certain number fields only accepting numbers. In addition,  AFMSS has dropdown menus and checkboxes to narrow the parameters  of certain data being entered. However, there are no edit checks to  prevent field offices from inputting future status dates. In addition, BLM\u2019s  data administration and management handbook establishes that data  stewards are to, among other things, establish target quality levels, data  quality plans (including audits and other quality assurance steps), and  certify the quality of the data. BLM officials stated that they have national  level AFMSS data stewards and information-technology data stewards.  However, BLM officials stated that the agency has not defined AFMSS  target quality levels and did not provide any data quality plans. Officials  stated that BLM headquarters conducts annual data reviews and will  periodically review sample well files to detect data inconsistencies and  errors. In addition, BLM officials stated that field offices are responsible  for certifying the accuracy of the data they enter into AFMSS, and BLM  headquarters is responsible for providing oversight. However, BLM  headquarters officials did not provide documentation of any data  certifications or data reviews, raising concerns over the extent of this  oversight.\nUnder federal standards for internal control, management should design  control activities, including control activities used in information  processing, to achieve objectives and respond to risks. Examples of such  control activities include:  conducting edit checks of data entered, accounting for transactions in numerical sequences, and  comparing file totals with control accounts.\nWithout taking steps to improve AFMSS data quality, such as by  conducting more edit checks and having data stewards certify the quality  of the data, BLM cannot have reasonable assurance that management  has the accurate information it needs to track whether field offices are  conducting well and bond adequacy reviews as intended.\nIn its January 2018 report, the OIG found similar issues related to the  accuracy of AFMSS data. Specifically, the OIG found that AFMSS data  were unreliable due to inaccurate well status information. The OIG also  found that BLM officials update AFMSS manually during a well review or  as needed, as opposed to automating the data, meaning that information  about the status of individual wells in AFMSS and data used for BLM\u2019s  annual well report are not timely. The OIG recommended that BLM  develop and implement a quality control process to identify inaccurate or  incomplete data in AFMSS. BLM concurred with this recommendation.\nInadequate monitoring of well and bond policies\u2019 implementation.  BLM headquarters has taken some actions to monitor the implementation  of its well and bond adequacy review policies across the agency, but its  efforts have been limited, and the agency cannot ensure that its policy  directives have been fully implemented. For example, BLM headquarters  officials told us that headquarters relies on national well review and bond  adequacy review reports to monitor the extent to which field offices are  conducting well and bond adequacy reviews. These well and bond  adequacy review reports provide some information on how BLM field  offices conducted their reviews during a given year, but the reports as  previously mentioned above have data limitations and do not consistently  record a field office\u2019s progress in meeting the policies overall. For  example, annual well review reports list the wells field offices reviewed in  a given year, but do not compare this statistic to a list of the wells that  each field office should have reviewed. Similarly, field offices\u2019 bond  adequacy review reports list the bonds that the field offices reviewed in a  given year. However, the reports do not compare the bonds reviewed to a  list of bonds each field office should have reviewed.\nIn addition, our analysis of 58 selected bonds reported as reviewed  across the 13 selected field offices found that 4 bonds\u2014about 7  percent\u2014were not reviewed, even though field offices had reported that  they had conducted the reviews. The bond adequacy review policy  directs field offices to review all bonds once every 5 years or whenever a  bond review is warranted. Therefore, the bond adequacy review reports  on their own provide insufficient information for BLM headquarters to  monitor progress about whether field offices are fully implementing the  directive.\nWe also identified discrepancies between the annual well review and  semi-annual bond adequacy review reports that state offices submitted to  BLM headquarters and the information in headquarters\u2019 national  summary, which consolidates the state office information. These  discrepancies limit the usefulness of the national summary for monitoring  the extent to which field offices are conducting well and bond adequacy  reviews as directed by the policies. For example, 3 out of 10 state offices  reported a different number of bond adequacy reviews completed in their  fiscal year 2016 state reports than what was reported in BLM\u2019s fiscal year  2016 national report. Similarly, 6 out of 9 state offices reported a  different number of completed well reviews in their fiscal year 2016 state  report than what was reported in BLM\u2019s fiscal year 2016 national report.\nSimilarly, the OIG\u2019s January 2018 report found that BLM can only report  its progress in reviewing wells that have been inactive for 25 years or  more by using field office spreadsheets, coupled with AFMSS data. The  report stated that using spreadsheets and AFMSS data have made it  difficult, however, for BLM to demonstrate proper oversight. BLM\u2019s  headquarters officials had to ask state office officials how many wells had  been reviewed and then had to summarize those results in a  spreadsheet. The OIG recommended that BLM monitor and track reviews  of shut-in wells in a management system. BLM concurred and stated that  AFMSS and an update to AFMSS that is under development were the  appropriate databases for monitoring and tracking well reviews.\nOverall, we found that BLM\u2019s current approach to monitoring the agency\u2019s  progress in implementing its well and bond adequacy review policies has  been limited. We reviewed leading practices for monitoring the  implementation of agency policies. These practices call for, among  other things: (1) periodically collecting and analyzing data on performance  indicators, (2) establishing procedures for ensuring the quality of data on  performance indicators, (3) documenting that monitoring plans were  executed, and (4) considering performance information in making  management decisions. Without taking actions to strengthen its approach  to monitoring, such as collecting and analyzing data on performance  indicators and ensuring the quality of those data, BLM\u2019s ability to assess  the extent to which field offices are reviewing all inactive wells and  determining the adequacy of all bonds is limited.\n\n\tAgency Officials and Stakeholders Identified Several Challenges BLM Faces in Managing Its Potential Oil and Gas Well Liabilities\n\nAccording to BLM officials and stakeholders we interviewed, BLM faces  several challenges in managing its potential liabilities. In particular, BLM  officials and stakeholders told us that one challenge in managing BLM\u2019s  potential liabilities was identifying and managing shut-in wells and  preventing them from becoming orphaned. Another challenge identified  was limited resources and competing priorities in reclaiming orphaned  wells. Other challenges to managing BLM\u2019s potential liabilities include  difficulties in reviewing nationwide bonds, minimum bond amounts, and  operators\u2019 unresponsiveness.\n\n\t\tBLM Faces Challenges Identifying and Managing Shut-in Wells and Preventing Them from Becoming Orphaned\n\nBLM officials from 6 of the 20 BLM offices\u2014including headquarters and  selected state and field offices\u2014and 2 of the 10 stakeholders told us that  one of the challenges that BLM faces in managing its potential liabilities is  identifying and managing shut-in wells. As previously mentioned, shut-in  wells are inactive wells that are physically and mechanically capable of  producing oil or gas in paying quantities or capable of service use. Since  shut-in wells may become orphaned and therefore involve BLM resources  to reclaim, identifying and managing them is a way for BLM to manage its  potential liabilities. BLM\u2019s 2012 well review policy directs field offices to  review all shut-in wells on federal and Indian lands every 5 years and to  ensure that shut-in wells no longer capable of production are reclaimed.  However, operators are generally not required to notify BLM when they  place a well in shut-in status. As a result, officials noted that it is difficult  for field offices to identify all shut-in wells in order to review them. Officials  from one field office told us that identifying when a well becomes shut-in  is challenging unless inspectors are able to physically find the well.\nEven when wells have been identified to BLM as shut-in, some BLM  officials at selected field offices said that they have few policy tools to  manage shut-in wells. In reviewing the well review policy, we found that it  contains certain directives for wells that are temporarily abandoned,  including that an operator is to conduct well integrity testing prior to  placing a well in temporarily abandoned status and a 30-day limit for how  long operators can place wells in temporarily abandoned status without  receiving BLM approval. However, the policy contains no similar  directives related to testing or limited time frames for placing wells in shut- in status. As a result, BLM may be unable to identify and reduce its  inventory of shut-in wells, including wells that have been in shut-in status  for an extended period of time.\nIn its January 2018 report, the OIG similarly found that the well review  policy does not provide field offices the leverage to make an operator  conduct integrity testing since the policy does not have instructions on the  method, frequency, and way to proceed with a notice or order. Without  having these test results available to them, the report found that BLM staff  cannot be certain that an inactive well is environmentally sound and  capable of production. The report recommended that BLM develop and  implement guidance or update the well review policy to require integrity  testing on inactive wells at specific periods.\nStrengthening the identification and management of shut-in wells could  be particularly helpful in managing BLM\u2019s potential liabilities because  such wells have represented a large portion of orphaned wells. According  to our analysis of AFMSS data, 138 of the 242 orphaned wells BLM  manages were in shut-in status prior to becoming orphaned. Moreover,  one of these wells had been in shut-in status since 1926. BLM\u2019s Colorado  and New Mexico state offices have taken steps to address the challenges  associated with shut-in wells becoming orphaned. For example, in  September 2016, BLM\u2019s New Mexico state office issued a policy that  directed operators to obtain BLM\u2019s approval in order to place a well in  shut-in status for more than 90 days and directed the operator to conduct  periodic testing to verify that wells that have been inactive for more than  12 consecutive months remain capable of production. Under federal  standards for internal control, management should design control  activities\u2014such as by clearly documenting internal control in  management directives, administrative policies, or operating manuals\u2014to  achieve objectives and respond to risks. Without providing greater  specificity in current policy or new supplemental guidance to all BLM field  offices on how to identify and manage shut-in wells, the agency is at an  increased risk of having unidentified shut-in wells, and wells that remain  in shut-in status for extended periods of time, leading to increased  potential liabilities if such wells become orphaned.\n\n\t\tBLM Faces Challenges Related to Limited Resources and Competing Priorities\n\nBLM officials and stakeholders told us that one of the challenges BLM  faces in managing its potential liabilities is limited resources, including  staff and funding, and competing priorities. Specifically, officials from 14  of the 20 BLM offices and 3 of the 10 stakeholders told us that BLM field  offices have limited staff and therefore prioritize other work, such as  processing drilling permits, over conducting well and bond adequacy  reviews, which are used to manage potential liabilities. BLM prioritizes  processing drilling permits over well and bond adequacy reviews in part  because the agency is required by statute to process drilling permits  within 30 days of receiving a complete application. BLM headquarters  officials told us that processing permits is the agency\u2019s highest priority  activity and that they ask field offices for monthly progress reports with  projected goals for processing permits within the next 90 days, and  compare the offices\u2019 accomplishments to agency targets. BLM  headquarters officials told us that prioritizing processing permits  increases the workload at the national, state-office, and field-office levels.\nOfficials from one BLM state office told us that other challenges to  managing its potential liabilities are staffing limitations and the time it  takes to conduct bond adequacy reviews. These state office officials told  us that bond reviews can take a long time to complete because some  bonds are associated with several hundred wells. Similarly, officials from  one field office stated that conducting bond adequacy reviews was time  consuming and that they had only one staff member dedicated to  conducting the reviews. In 2011, we found that a lack of resources and  higher agency priorities were the primary reasons for why many BLM field  office officials we interviewed had not conducted well and bond adequacy  reviews or did not know the number of reviews they had conducted.\nIn addition, officials from 6 of the 20 BLM offices and 1 stakeholder told  us that another challenge BLM faces in managing its potential liabilities is  prioritizing funding to reclaim orphaned wells. For example, an official  from one state office told us that securing funding to reclaim orphaned  wells is a challenge because BLM does not set aside funding to pay for  reclamation costs. BLM officials in one field office told us that they had  not received funding from BLM headquarters specifically for reclamation  in over 10 years, despite managing a growing number of orphaned wells.  An official from this field office told us that without dedicated funds from  BLM headquarters for this purpose, the field office was unable to reclaim  the orphaned wells. In addition, officials from another field office told us  that time frames for competing and awarding contracts to perform  reclamation work do not coincide with securing funding from BLM  headquarters, and that funding has to be obligated by the end of the fiscal  year. These officials explained that in one instance, by the time they  obtained funding for well reclamation, it was too late to issue a contract  for the work.\nEPAct 2005 requires the establishment of a program to reclaim orphaned,  abandoned, or idled oil and gas wells on federal lands. As part of this  program, BLM conducts well reviews and bond adequacy reviews. As  discussed above, about half of the orphaned wells BLM identified in 2009  were not reclaimed and remained orphaned in 2017, and BLM officials  cited funding as the issue. The Project Management Institute, Inc. has  established a standard on program management. Under the standard,  program resource management planning ensures that all required  resources are made available for managers to enable the delivery of  benefits for a program. Resource management planning involves  identifying existing resources and the need for additional resources. The  program manager analyzes the availability of each resource, in terms of  both capacity and capability, and determines how these resources will be  allocated to avoid over-commitment or inadequate support. Such  planning, through a resource management plan, forecasts the expected  resources across a program to allow the program manager to identify  potential resource shortfalls or conflicts over the use of scarce or  constrained resources. The plan is also to describe guidelines for making  program resource prioritization decisions and resolving resource conflicts.\nBased on our discussions with BLM headquarters and field office officials,  BLM does not have a resource management plan. For example, when we  discussed resources for reclaiming orphaned wells with BLM  headquarters officials, they told us that some BLM offices obtain funding  from state funds established for reclaiming orphaned wells, but not all  offices have been able to access such funds. If unable to secure funding  from the states, offices may request funding from BLM headquarters for  reclamation, and as mentioned previously, occasionally try to use  unexpended funds left at the end of a fiscal year. In its comments on the  draft report, Interior noted that BLM engages in annual work planning  processes designed to facilitate agency resource allocation decisions.  However, BLM overall does not have information on the federal resources  needed to reclaim known orphaned wells. Without developing a resource  management plan addressing resources needed for conducting well and  bond adequacy reviews and reclaiming orphaned wells, BLM cannot have  reasonable assurance that it is achieving the program\u2019s objectives.\n\n\t\tAgency Officials and Stakeholders Identified Several Additional Challenges BLM Faces in Managing Its Potential Liabilities\n\nAgency officials and stakeholders cited additional challenges including  BLM\u2019s ability to review nationwide bonds, minimum bond amounts, and  operator unresponsiveness.\nReviewing nationwide bonds. Officials from 10 of the 20 BLM offices  told us that they encountered challenges reviewing nationwide bonds  because of a lack of coordination between BLM offices. The purpose  section of the bond adequacy review policy states that field offices are to  review bonds to determine whether the bond amount appropriately  reflects the level of potential risk posed by the operator. However, the  bond adequacy review policy also states in a directive that if the bond  being reviewed is a nationwide or statewide bond, field offices are only to  review the wells within their field office. Officials from one field office told  us that without insights into an operator\u2019s activities in the jurisdictions of  other field offices, bond adequacy reviews do not cover when an operator  has been cited with an Incident of Noncompliance or the number of  inactive wells the operator may have in other jurisdictions. These field  office officials said that it is important to communicate and coordinate with  other field offices when there is a need to require an operator to secure a  larger bond. For example, to require a well operator to increase the  amount of its bond, BLM must show that the operator meets the point  system\u2019s threshold in the bond adequacy review\u2019s calculation  worksheet. Officials in one state office told us that under a nationwide or  statewide bond, an operator might not reach the agency\u2019s threshold for  requiring a bond increase based on an operator\u2019s activities in the  jurisdiction of one field office but may meet the threshold if BLM\u2019s bond  adequacy review assessed all of the operator\u2019s operations within a state  or across the nation.\nUnder federal standards for internal control, management should design  control activities to achieve objectives and respond to risks, such as by  clearly documenting internal controls, and having the documentation  appear in management directives, administrative policies, or operating  manuals. While BLM has documented its policy, the purpose of the  policy to ensure that the bond amount appropriately reflects the level of  potential risk posed by the operator conflicts with a directive of the policy  that offices are only to review wells within their own jurisdiction. Officials  told us that BLM is currently revising the bond adequacy review policy. As  the agency revises its bond adequacy review policy, BLM has the  opportunity to ensure that bond adequacy reviews reflect the overall risk  presented by operators. By having the policy ensure that the reviews of  nationwide and statewide bonds account for overall operator risk, BLM  can have better assurance that it will reduce the likelihood of using  taxpayer funds to pay to reclaim orphaned wells.\nMinimum bond amounts. Officials from 9 of the 20 BLM offices and 1  stakeholder told us that BLM faces challenges related to federal minimum  bond amounts that in their opinion are too low. For example, officials from  one BLM state office expressed concerns about operators with multiple  wells covered by the minimum bond amounts, which the officials believed  to be inadequate to cover total potential reclamation costs. Minimum bond  amounts were set in the 1950s and 1960s and have not been updated to  keep up with inflation. Specifically, the $10,000 minimum for individual  bonds was established in 1960, and the bond minimums for statewide  bonds ($25,000) and nationwide bonds ($150,000) were established in  1951. If adjusted to 2016 dollars, these amounts would be $63,613 for an  individual bond, $189,825 for a statewide bond, and $1,138,952 for a  nationwide bond. According to BLM headquarters officials, the agency  does not require that operators provide full liability bonds. These officials  told us that they believed that most operators would not be able to remain  in business if bond amounts were based on estimated total reclamation  costs.\nOperators\u2019 unresponsiveness. Officials from 8 of the 20 BLM offices  and 2 stakeholders told us that BLM faces challenges dealing with  unresponsive operators when requiring operators to increase bond  amounts or issuing Incidents of Noncompliance. For example, officials  from one BLM state office told us that operators do not always respond to  letters informing them of a requirement to secure an increase in their  bond. Officials from another BLM state office told us that the agency can  place operators on a noncompliance list prohibiting them from holding  leases or conducting operations on federal lands. However, these officials  also said that they have seen operators ask relatives to obtain leases in  order to circumvent such prohibitions. Officials from one field office told us  of one particular instance in which BLM had spent over 7 years  attempting to enforce the requirements for reclamation activities. BLM  had issued an Incident of Noncompliance, but the operator did not  respond and instead reorganized as a separate corporate entity.  Subsequently, the operator went bankrupt, requiring BLM to restart the  communications process from the beginning with the newly formed entity.  BLM officials told us that the agency has very little leverage when  companies change their name or reorganize in an attempt to evade  performing required reclamation activities. BLM headquarters officials told  us that working with operators was a delicate balance, especially when oil  and gas prices are down, and BLM field offices would benefit from  conducting periodic operator outreach to have an open dialogue with the  operators.\n\n\tConclusions\n\nBLM is responsible for overseeing oil and gas development on federal  lands and for balancing the sometimes competing priorities of  encouraging oil and gas development, while ensuring that when wells run  dry, operators return well sites to their original natural conditions. Federal  laws, regulations, and BLM\u2019s own policies call for the agency to take  various actions to manage its potential oil and gas well liabilities and  reclaim orphaned wells. However, BLM does not systematically or  comprehensively track how much the agency has spent to reclaim  orphaned wells or information, such as the number of orphaned wells and  inactive wells over time, necessary to determine the agency\u2019s potential  liabilities. Without systematically or comprehensively tracking information  on BLM\u2019s well reclamation costs and indicators of potential future costs,  its ability to monitor its progress and plan for its potential liabilities  associated with orphaned wells is limited.\nIn addition, implementation of BLM\u2019s well and bond adequacy review  policies by the field offices is hampered by officials having different  understandings of what constitutes a well review. This variance is  because BLM\u2019s well review policy does not outline specific instructions on  what actions field offices should take when conducting a well review. This  situation results in inconsistent ways of conducting well reviews and  annually reporting on them. Without developing and communicating  specific instructions outlining what actions constitute a well review for  annual-reporting purposes, BLM cannot have reasonable assurance that  its field offices are conducting and reporting on well reviews in a  consistent manner. Further, inaccuracies in certain AFMSS data, such as  the dates that wells last changed statuses, raise questions about the  quality of data BLM headquarters uses to determine the extent to which  its offices are implementing the well review and bond adequacy review  policies. BLM has not taken steps to improve AFMSS\u2019 data quality such  as through the use of additional edit checks to prevent field offices from  inputting erroneous data or having data stewards certify the quality of the  data. Without taking such steps, BLM cannot have reasonable assurance  that management has accurate information it needs to track whether field  offices are conducting well and bond adequacy reviews as intended. In  addition, BLM\u2019s approach to monitoring the implementation of its well and  bond adequacy review policies is limited because the reports the agency  uses to monitor implementation provide insufficient and at times  conflicting information. Without taking actions to strengthen its approach  to monitoring, such as collecting and analyzing data on performance  indicators and ensuring the quality of those data, BLM\u2019s ability to assess  the extent to which field offices are reviewing all inactive wells and  determining the adequacy of all bonds will continue to be limited.\nBLM officials and stakeholders identified several challenges that BLM  faces in managing its potential oil and gas well liabilities, including  identifying and managing certain inactive wells\u2014specifically wells that are  in shut-in status and that have the potential to become orphaned. This  problem is because operators are generally not required to notify BLM  when they place a well in shut-in status. Without providing greater  specificity in current policy or supplemental guidance to all field offices,  the federal government may face increased potential liabilities if shut-in  wells become orphaned. In addition, BLM faces challenges related to  limited resources and competing priorities, such as not setting aside  funding to pay for reclaiming orphaned wells. Without developing a  resource management plan addressing resources needed for conducting  well and bond adequacy reviews and reclaiming orphaned wells, BLM  cannot have reasonable assurance that it is achieving the program\u2019s  objectives. BLM also faces challenges related to conducting nationwide  and statewide bond adequacy reviews because the bond adequacy  review policy overall contains conflicting information on how field offices  are to review bonds\u2019 adequacy. BLM is currently revising the bond  adequacy review policy and has an opportunity to ensure that the reviews  of nationwide and statewide bonds reflect operators\u2019 overall risks.\n\n\tRecommendations for Executive Action\n\nWe are making the following seven recommendations to BLM:  The Director of BLM should systematically and comprehensively track the  actual costs BLM incurs when reclaiming orphaned wells and the  information, including the number of orphaned wells and inactive wells  over time, necessary to determine the agency\u2019s potential liabilities.  (Recommendation 1)\nThe Director of BLM should develop and communicate specific  instructions on what actions constitute a well review for annual-reporting  purposes. (Recommendation 2)\nThe Director of BLM should take steps to improve AFMSS data quality,  for example, by conducting more edit checks and by having data  stewards certify the quality of the data. (Recommendation 3)\nThe Director of BLM should strengthen its approach to monitoring field  offices\u2019 implementation of the well review and bond adequacy review  policies, such as by collecting and analyzing data on performance  indicators and ensuring the quality of those data. (Recommendation 4)\nThe Director of BLM should provide greater specificity in current policy or  supplemental guidance to all BLM field offices on how to identify and  manage all shut-in wells. (Recommendation 5)\nThe Director of BLM should develop a resource management plan  addressing resources needed for conducting well and bond adequacy  reviews and reclaiming orphaned wells. (Recommendation 6)\nThe Director of BLM should, in revising the bond adequacy review policy,  ensure that the reviews of nationwide and statewide bonds reflect the  overall risk presented by operators. (Recommendation 7)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Department of the Interior for  review and comment. In its comments, reproduced in appendix II, Interior  generally concurred with our recommendations. Interior stated that,  following GAO\u2019s 2011 report on potential oil and gas well liabilities, BLM  implemented comprehensive policies to better manage and minimize the  risks of idle and orphaned wells on federal and Indian lands. Interior  agreed that there are areas where BLM can improve the accuracy of its  data and further reduce the risks associated with idle and orphaned wells.\nInterior indicated that it will update and improve its existing policies and  guidance consistent with the findings and recommendations in our report.\nIn response to our sixth recommendation\u2014that BLM develop a resource  management plan addressing resources needed for conducting well and  bond adequacy reviews and reclaiming orphaned wells\u2014Interior stated  that BLM conducts annual work planning processes which facilitate  decisions regarding the allocation of agency resources and requested  additional information clarifying how our recommendation fits into or  differs from these. We expanded our description of resource management  planning and added language regarding BLM\u2019s annual work planning  processes to the report. However, we were not able to review the scope  or adequacy of BLM\u2019s annual work planning processes as they relate to  resource planning for well and bond reviews and reclaiming orphaned  wells for this report.\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 Secretary of the Interior, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http:\/\/www.gao.gov.\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 examines (1) how BLM\u2019s actual costs incurred to reclaim  orphaned wells and potential oil and gas well liabilities have changed, if at  all, for fiscal years 2010 through 2017; (2) the extent to which BLM has  implemented its 2012 well review and 2013 bond adequacy review  policies; and (3) BLM officials\u2019 and stakeholders\u2019 views on what  challenges, if any, BLM faces in managing its potential liabilities.\nTo examine how BLM\u2019s actual reclamation costs incurred and potential oil  and gas well liabilities have changed, we analyzed data in BLM\u2019s  Automated Fluid Minerals Support System (AFMSS) on oil and gas wells  on federal and Indian lands, including inactive wells\u2014which represent  potential liabilities. We reviewed documentation provided by BLM and  compared BLM\u2019s policies and procedures on recording information on  actual costs incurred to reclaim orphaned wells and potential liabilities  against the information and communication standard outlined in  Standards for Internal Control in the Federal Government. We selected  and interviewed officials from 13 BLM field offices because, according to  fiscal year 2016 data from the Department of the Interior\u2019s Office of  Natural Resources Revenue (ONRR) Oil and Gas Operations Report  (OGOR) data system we analyzed, these offices were responsible for  about 80 percent of all oil and gas wells managed by BLM. In addition,  we interviewed officials from the 6 BLM state offices associated with the  13 selected field offices (see table 1). Findings from selected offices  cannot be generalized to those we did not include in our review.\nHowever, because AFMSS does not contain information on actual costs  incurred to reclaim orphaned wells, we obtained documentation of the  actual reclamation costs that 13 selected BLM field offices incurred for  fiscal years 2010 through July 2017. To analyze these costs, we reviewed  purchase orders, invoices, and other documentation for actual  reclamation work performed. We also obtained documentation, including  spreadsheets with estimated potential reclamation costs that these 13  selected field offices faced as of July 2017. To assess the  reasonableness of estimated reclamation costs, we reviewed estimates  provided by officials from the selected field offices and compared those to  historical actual costs that we previously reported in January 2010. We  determined the overall estimated reclamation costs were sufficiently  reasonable for providing a sense of the general magnitude of potential  costs, though we did not assess the underlying inputs or assumptions  used. The information we received is not generalizable to reclamation  costs for other BLM offices that we did not review.\nWe also analyzed AFMSS data on the number of wells capable of  production on federal lands from fiscal years 2010 to 2016. The AFMSS  database provides a snapshot of the time that the data are queried, and  so does not include historical data over time. As such, to examine the  number of inactive wells on federal and Indian lands and how long these  have been inactive, we combined AFMSS data with data from the OGOR  data system through September 2016. The Department of the Interior  requires monthly OGORs from operators, which document and record the  volume of oil and gas produced from wells on federal and Indian lands.  From AFMSS, we identified the appropriate population of wells by  selecting wells only located on federal and Indian lands, and excluded  wells that were on state or private lands. Because we did not find data in  AFMSS on how long a well had been in its last recorded status to be  reliable, we analyzed production records from the OGOR data system.  We also excluded data on wells that were in statuses in which there was  no associated potential liability, such as wells pending an application for  permit to drill.\nFor each reporting date through September 2016, we aggregated data  from multiple well completions to the 10-digit unique well identifier level.  We then matched the unique well identifiers in AFMSS to those listed in  the OGOR data system to enumerate inactive wells by duration of  inactivity. For each reporting date, we designated wells with at least one  completion showing non-zero production volumes or in drilling or  monitoring status in the OGOR data system as active. We also  designated a well as active at a certain date if AFMSS data indicated any  of its completions were completed on that date. Otherwise we deemed  wells where all completions had zero production reporting on a date as  inactive for the corresponding period. In some cases, (i) no OGOR  records existed with non-zero production volumes or drilling or monitoring  well status and (ii) no AFMSS well completion date was provided, and so  we calculated inactivity by using the earliest record date for that well in  the OGOR data set. We discussed our methodology for calculating the  number of wells with BLM officials. We compared the number of inactive  wells from our analysis to those reported in BLM national and state  reports to identify data inconsistencies. In addition, we analyzed AFMSS  reports, as of July 2017, to analyze data on the number of orphaned  wells. To assess the reliability of OGOR and AFMSS data, we reviewed  agency documents, met with relevant agency officials, and performed  electronic testing by verifying, for example, missing or out-of-range data  values. We found the data for the number of inactive wells and how long  they have been inactive as well as the data for the number of wells BLM  has identified as orphaned to be sufficiently reliable for our purposes.\nTo determine the extent to which BLM has implemented its 2012 and  2013 policies for conducting well reviews and bond adequacy reviews, we  reviewed applicable laws and analyzed the well review and bond  adequacy review policies. We reviewed information contained in BLM\u2019s  well review and bond adequacy review reports for fiscal year 2016 as well  as data generated through AFMSS on bonds and wells as of October  2017. We were unable to fully assess BLM\u2019s performance against the  directives in the agency\u2019s 2012 well review and 2013 bond adequacy  review policies due to limited agency data and documentation as  discussed in the report. Specifically, we identified data accuracy and  consistency concerns with some of the data elements in the agency\u2019s well  review and bond adequacy review reports as well as some AFMSS data  on wells and bonds, which we discuss in this report. We performed  electronic testing by verifying out-of-range values, such as dates of well  reviews conducted that were listed as being in the future. We also  interviewed officials from BLM headquarters, the 13 selected field offices,  and the 6 associated BLM state offices, to obtain information on the  extent to which the selected offices implemented the 2012 and 2013  policy directives. We compared BLM\u2019s procedures detailing how field  offices are to count or report a well review as well as procedures for  maintaining data quality against the control activities standard outlined in  Standards for Internal Control in the Federal Government. We also  compared BLM\u2019s procedures for monitoring implementation of policy  directives against leading practices for monitoring agency policies.\nWe also reviewed documentation for a random, non-generalizable sample  of 62 well reviews and 58 bond adequacy reviews, as reported by the 13 selected BLM field offices, for a total of 120 reviews. A GAO statistician  selected a random sample of five well reviews for unique well numbers  and five bond reviews of unique bond numbers that the 13 selected field  offices had reviewed from the fiscal year 2016 well report and bond  adequacy report. Due to variations in field offices\u2019 reporting, some well  and bond reviews from prior fiscal years were also included in the random  selection. The Farmington field office also did not conduct any bond  adequacy reviews in fiscal year 2016, and so we included bond reviews  that the field office conducted in fiscal year 2015 in the random selection.  In addition, the Pinedale and Rawlins field offices had not conducted any  bond adequacy reviews in fiscal year 2016. As a result, we randomly  selected additional reviews from fiscal year 2015 for those field offices.  The Pinedale, Rawlins, and Colorado River Valley field offices conducted  less than 5 bond reviews in each office in that fiscal year, so we selected  and reviewed documentation in support of only those reviews they had  conducted. We assessed the documentation to determine whether or not  field offices conducted reviews and complied with selected directives of  the well review and bond adequacy review policies. Information from our  documentation reviews is not generalizable to all BLM field offices but  provides illustrative examples of the information contained in BLM well  and bond adequacy reviews.\nTo examine BLM officials\u2019 and stakeholders\u2019 views on what challenges, if  any, BLM faces in managing its potential oil and gas well liabilities, we  conducted semi-structured interviews with officials from BLM  headquarters, the 13 selected BLM field offices, and the 6 BLM state  offices associated with these 13 field offices. In addition, we interviewed  or obtained written responses from a standard set of questions from 8  representatives of stakeholder organizations. These representatives were  knowledgeable about BLM\u2019s oil and gas well management, and included  academic, environmental, industry, and state organizations (see table 2).  In addition, we spoke with knowledgeable officials from the Department of  the Interior\u2019s Office of Natural Resources Revenue (ONRR) and the  Department of the Interior\u2019s Office of Indian Energy and Economic  Development, Division of Energy and Mineral Development. To identify  knowledgeable stakeholders, we conducted a literature search, reviewed  previous GAO reports, and obtained recommendations from BLM officials  and stakeholders using a snowball technique in which an initial group of  BLM officials and stakeholders we interviewed identified additional  contacts to interview. From this list, we selected stakeholders who could  provide a range of viewpoints. We generally asked the same questions  during each interview but also discussed individual stakeholders\u2019  perspectives, as appropriate. In our interviews, we asked officials and  stakeholders what challenges, if any, BLM offices face in managing their  potential oil and gas well liability. We also asked what challenges, if any,  BLM offices face in conducting well reviews and bond adequacy reviews.  To identify the challenges identified most often in the interviews, two  analysts developed categories of challenges identified by BLM offices and  stakeholders, and each analyst independently determined whether each  BLM office and stakeholder had identified challenges that fit into these  categories. The two analysts discussed and resolved any differences in  their coding. The views of the BLM officials, stakeholders, and other  agency personnel we interviewed are not generalizable to BLM officials,  similar stakeholders, and other agency personnel who we did not  interview. Lastly, we compared how BLM identified and managed certain  inactive wells, as well as how it managed nationwide and statewide  bonds, against the control activities standard outlined in Standards for  Internal Control in the Federal Government and BLM\u2019s resource  management practices against certain requirements in the Energy Policy  Act of 2005 (EPAct 2005) and leading practices by the Project  Management Institute in The Standard for Program Management.\nWe conducted this performance audit from November 2016 to May 2018,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\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), Marie Bancroft (Analyst-in-Charge), Richard Burkard, John  Delicath, Cindy Gilbert, Shylene Mata, Celia Mendive, Dan Royer,  Barbara Timmerman, Carolyn Voltz, Jack Wang, and Jina Yu made key  contributions to this report.","output":"Why GAO Did This Study\n\nIn fiscal year 2016, private entities operated about 94,000 oil and gas wells on federal lands overseen by BLM. Once wells cease production, they can become inactive and potentially orphaned if an operator does not perform required reclamation and if an operator's bond is insufficient to cover the expenses. BLM considers oil and gas wells on federal and Indian lands and the associated leased lands as potential liabilities for the federal government because BLM may have to cover the costs of reclaiming well sites. To better manage its potential liabilities, BLM issued well and bond adequacy review policies in 2012 and 2013, respectively.\nGAO was asked to review how BLM manages its potential oil and gas well liabilities. This report examines, among other things: (1) how BLM's actual costs and potential oil and gas well liabilities have changed for fiscal years 2010 through 2017 and (2) the extent to which BLM has implemented its well and bond review policies. GAO analyzed BLM's policies and data and interviewed BLM officials and representatives from stakeholder organizations.\n\nWhat GAO Found\n\nGAO's analysis indicates that the Bureau of Land Management's (BLM) actual costs incurred and potential liabilities for reclaiming oil and gas wells have likely increased for fiscal years 2010 through 2017. However, the full extent of the increase is not known because BLM does not systematically track needed data. Based on GAO's analysis of data obtained from 13 of BLM's 33 field offices that manage oil and gas programs, the average annual reclamation cost was $267,600, an increase compared to the $171,500 annual average across all BLM offices that GAO reported in 2010. Similarly, GAO's analysis of BLM data found that the number of known orphaned wells, those that generally have no responsible or liable parties, for all field offices has increased from 144 in 2010 to 219 as of 2017. However, BLM's database that contains information on oil and gas wells on federal and Indian lands does not collect information on costs incurred or on potential liabilities that might result from an increase in the number of orphaned wells. Under federal internal control standards, management should use quality information to achieve the entity's objectives. Without systematically tracking such information, BLM does not have assurance that it has sufficient bonds or financial assurances to cover the costs of reclaiming orphaned wells.\nGAO was unable to fully assess the extent to which BLM field and state offices have implemented the agency's policies on reviewing wells and bond adequacy in part because of deficiencies in BLM's monitoring approach. For example, reports BLM headquarters used to monitor field offices' implementation of the policies have limitations. GAO identified discrepancies between the well and bond adequacy review reports that BLM state offices submitted to headquarters and the national summary consolidating states' information. Out of 10 state offices, 3 reported a different number of reviews completed in fiscal year 2016 than what BLM reported in its fiscal year 2016 national summary. Leading practices for monitoring the implementation of agency policies call for taking steps such as collecting and analyzing data on performance indicators. Without strengthening BLM's approach to monitoring, its ability to assess field offices' reviews of all inactive wells and determine the adequacy of all bonds is limited.\n\nWhat GAO Recommends\n\nGAO is making seven recommendations, including that BLM systematically track the agency's actual reclamation costs and potential liabilities and strengthen its approach to monitoring field offices' implementation of the well review and bond adequacy review policies. BLM agreed with GAO's recommendations."}
{"id":"gao_GAO-18-199","pid":"gao_GAO-18-199_0","input":"\tBackground\n\n\t\tForms and Distribution of Arsenic\n\nArsenic is a naturally occurring element that is widely distributed in the  earth\u2019s crust in two general forms\u2014organic and inorganic. It commonly  enters the body through ingestion of food or water. Most data reported for  arsenic in food describe the levels of total arsenic because analyses that  provide information about the forms of arsenic present are more difficult  to perform, and relatively few laboratories are able to perform these  analyses. Data on the levels of specific forms of arsenic, however, are  becoming increasingly important because, according to the Agency for  Toxic Substances and Disease Registry, the two forms have different  toxicities, with inorganic arsenic being considered the more toxic form.  Further, foods may have different proportions of organic and inorganic  arsenic as well as different levels of total arsenic. According to the  European Food Safety Authority, plants generally contain low levels of  both total and inorganic arsenic, but rice may contain significant levels of  total arsenic and inorganic arsenic. Levels of arsenic in groundwater, a  major source of drinking water in many parts of the world, may be high in  some areas; essentially all the arsenic in drinking water is inorganic  arsenic.\nThe form and level of arsenic in rice may vary depending on the  geographic region where rice is grown, conditions under which rice is  grown, variety of the rice, and rice milling practices. In the United  States\u2014where, according to USDA, approximately 80 percent of the rice  consumed domestically is grown\u2014rice is primarily grown in six states:  Arkansas, California, Louisiana, Mississippi, Missouri, and Texas. In  2016, the latest year for which USDA data were available, about 47  percent of the rice grown in the United States was grown in Arkansas,  and about 21 percent was grown in California.\nThe amount of arsenic rice absorbs varies by geographic region because  of differing levels of arsenic in the soil and other factors. Arsenic levels in  the soil vary both naturally and as a result of human activity. Natural  processes that contribute to arsenic levels in the soil may include bedrock  weathering, because arsenic is present in many rock-forming minerals.  Human activities that contribute to arsenic levels in the soil may include  the use of arsenic-based pesticides and animal drugs, the mining and  smelting of metal, and coal combustion. Figure 1 shows the results of a  2013 U.S. Geological Survey sampling of soils to measure the levels of  arsenic in the contiguous United States. In addition, the figure shows  the outlines of rice-growing counties based on 2016 data from USDA.\nCompared to other plants, rice absorbs more arsenic from the  environment, in part because of the physiology of rice. For example, rice  may readily absorb certain compounds of arsenic because, among other  reasons, these compounds are similar in size to compounds containing  silicon, an essential nutrient for rice. The conditions under which rice is  grown may also cause it to absorb more arsenic than other plants. For  instance, rice is often grown in flooded fields to control pests, grasses,  and diseases, among other reasons. However, flooded conditions may  promote the formation of arsenic compounds that may be easily absorbed  by the rice plant. Even under the same growing conditions, some varieties  of rice tend to have higher levels of arsenic in their grain, on average,  than others, owing to a need for longer growing periods, among other  factors. In addition, the concentrations of the two forms of arsenic may  vary within the rice grain. While organic arsenic may be distributed  throughout the rice grain, most of the inorganic arsenic is found in the  bran layer. As seen in figure 2, the process of milling rice removes the  bran layer; thus, levels of inorganic arsenic in white, or milled, rice may be  lower than those in brown, or whole grain, rice.\n\n\t\tFederal Agencies\u2019 Responsibilities for Rice\n\nA number of federal agencies are responsible for ensuring the safety and  quality of rice and for assessing the human health effects of ingestion of  arsenic in rice. Within HHS, FDA has overall responsibility for  implementing provisions of the Federal Food, Drug, and Cosmetic Act, as  amended. Specifically, FDA is responsible for determining whether food,  including rice, is deemed to be adulterated (i.e., whether it bears or  contains any poisonous or deleterious substance that may render it  injurious to health). Under its regulations, FDA may issue guidance to  establish a level of a contaminant that a food should not exceed. FDA  would consider case-by-case whether a food that contains the  contaminant is adulterated. For example, in 2013, FDA issued draft  guidance for arsenic in apple juice, on the basis of its risk assessment  that estimated the long-term cancer risk posed by inorganic arsenic.  According to FDA, its Center for Food Safety and Applied Nutrition is  responsible for regulatory and research programs that address the health  risks associated with foodborne contaminants and is aided in this role by  the Office of Regulatory Affairs, which is responsible for field-based  activities such as inspections, sampling, and testing of regulated  products. The Center for Food Safety and Applied Nutrition also conducts  industry outreach and educates consumers, among other things.\nOther agencies within HHS may also conduct research, collect data, and  provide information on the health effects of arsenic. For example, the  National Institutes of Health (NIH) sponsor research on the health effects  of ingestion of arsenic. The Centers for Disease Control and Prevention  (CDC) administer the National Health and Nutrition Examination Survey,  which, among other things, collects data about diet and exposure to  certain substances, such as arsenic. Under the Superfund Amendments  and Reauthorization Act of 1986, the Agency for Toxic Substances and  Disease Registry prepares toxicological profiles for certain hazardous  substances, including arsenic.\nAgencies within USDA conduct and sponsor research to advance food  safety and to help farmers market rice and manage the risk of growing it.  Within USDA, ARS and NIFA conduct and sponsor research, to, among  other things, maintain an adequate, nutritious, and safe supply of food to  meet human nutritional needs and requirements. NIFA also distributes  capacity grants that support research and extension programs at land- grant universities, which provide science-based information to farmers.  The Agricultural Marketing Act of 1946 authorizes the Federal Grain  Inspection Service (FGIS) to establish quality standards, including  standards for rice. FGIS also offers inspection services for rice farmers  and processors upon request. The Risk Management Agency manages  the Federal Crop Insurance Corporation, which offers crop insurance to  farmers for over 100 different crops, including rice. For the 2018 crop  year, the rice crop insurance provisions generally require that the rice be  flood-irrigated (i.e., intentionally covered with water at a uniform and  shallow depth throughout the growing season).\nOther agencies play a role in managing the risk of arsenic. EPA regulates  the presence of certain substances, such as arsenic, in drinking water  under the Safe Drinking Water Act and conducts toxicological  assessments. In 2001, EPA issued a rule limiting the level of arsenic in  drinking water to 10 parts per billion (ppb) to protect consumers from the  health effects of long-term exposure. Under its Integrated Risk  Information System program, EPA conducts assessments that provide  toxicity values\u2014such as for increased cancer risk due to lifetime ingestion  of a specified quantity of a substance. In accordance with congressional  direction, EPA submitted a plan for developing a draft assessment and  preliminary assessment materials for inorganic arsenic to NRC for review.  In 2013, NRC released an interim report, which provided guidance to EPA  and included a preliminary survey of the scientific literature. In addition,  in accordance with Executive Order 13272, the Small Business  Administration\u2019s Office of Advocacy helps agencies assess the potential  impacts of draft rules on small businesses\u2014which could include members of the rice industry\u2014small governmental jurisdictions, and small  organizations.\nEntities outside of the federal government have recently proposed or  established limits or guidance for arsenic in rice. For example, in 2017,  the Codex Alimentarius, an international standard-setting body, published  a code of practice that provides guidance for preventing and reducing  arsenic contamination in rice, as well as communicating the risk to  stakeholders. In 2014 and 2016, the Codex Alimentarius established a  standard for inorganic arsenic of 200 ppb for white rice and 350 ppb for  brown rice. In 2015, the European Commission issued a regulation  limiting inorganic arsenic in various rice-based foods, including limits of  200 ppb in white rice, 250 ppb in brown rice, and 100 ppb in rice destined  for food for infants and young children.\n\n\t\tEnterprise Risk Management\n\nEnterprise risk management allows agencies to assess threats and  opportunities that could affect the achievement of their goals. In a 2016  report, we updated our 2005 risk management framework to (1) reflect  changes to OMB\u2019s Circular A-123, which requires agencies to implement  enterprise risk management; (2) incorporate recent federal experience;  and (3) identify essential elements of federal enterprise risk  management. Beyond traditional internal controls, enterprise risk  management promotes risk management by considering its effect across the entire organization and how it may interact with other identified risks.  Additionally, it also addresses other topics such as setting strategy,  governance, communicating with stakeholders, and measuring  performance, and its principles apply at all levels of the organization and  across all functions\u2014such as those related to managing the risk of  arsenic in rice. The six essential elements of enterprise risk management  that we identified in December 2016 are as follows:\nAlign risk management process with goals and objectives.\nEnsure the process maximizes the achievement of agency mission  and results.\nIdentify risks. Assemble a comprehensive list of risks, both threats  and opportunities, that could affect the agency\u2019s ability to achieve its  goals and objectives.\nAssess risks. Examine risks, considering both the likelihood of the  risk and the impact of the risk to help prioritize risk response.\nRespond to the risks. Select risk treatment response (based on risk  appetite), including acceptance, avoidance, reduction, sharing, or  transfer.\nMonitor risks. Monitor how risks are changing and whether  responses are successful.\nCommunicate and report on risks. Communicate risks with  stakeholders and report on the status of addressing the risks.\n\n\tNRC and Recent Key Scientific Reviews Reported Evidence of Associations between Ingestion of Arsenic and Adverse Human Health Effects\n\nNRC, in its 2013 report, and recent key scientific reviews reported  evidence of associations between long-term ingestion of arsenic and  adverse human health effects. NRC identified stronger evidence of  these associations at higher arsenic levels\u2014defined by NRC as 100 ppb  or higher in drinking water\u2014than at lower levels, which are more common  in the United States. NRC reported greater uncertainty regarding the  associations with some health effects at lower levels of arsenic and noted  that research on the health effects of ingestion of lower levels of arsenic  is ongoing. Many of the studies on which NRC based its conclusions were  focused on the ingestion of arsenic from drinking water, but other studies  were based on arsenic from all sources, including dietary sources such as  rice. Further, NRC reported that evidence from CDC dietary surveys  and related academic studies suggests that food, particularly rice, may be  a significant source of inorganic arsenic, especially when arsenic levels in  drinking water are lower; however, consumption of rice and levels of  arsenic in rice vary widely, making it difficult to estimate arsenic intake  from rice. NRC reported strong evidence of causal associations\u2014that is,  a potential cause and effect\u2014between the long-term ingestion of arsenic  from water or dietary sources, such as rice, and the following five health  effects:\nSkin diseases.\nSkin lesions. Skin lesions due to arsenic ingestion predispose a  person to some skin cancers and may indicate increased  susceptibility to other cancer and noncancer diseases. Skin  lesions have a well-established dose-response relationship with  arsenic in drinking water.\nSkin cancer. Arsenic is an established skin carcinogen, according  to NRC. NRC stated that almost all published studies found  evidence of an association between arsenic ingestion and  nonmelanoma skin cancers.\nLung cancer. Arsenic from drinking water is an established lung  carcinogen in humans, according to NRC. NRC cited studies  conducted in Argentina, Chile, Japan, Taiwan, and the United States  that reported associations between high levels of arsenic ingestion  and lung cancer. NRC reviewed several studies that examined  ingestion of lower levels of arsenic, some of which found evidence of  an association, while others did not.\nCardiovascular disease. NRC stated that many studies found a  causal association between the ingestion of arsenic and  cardiovascular disease and mortality. Studies suggest that the  ingestion of lower levels of arsenic in drinking water and possibly in  food is associated with cardiovascular disease, but additional  evidence is needed to fully understand the relationship.\nBladder cancer. Arsenic is an established bladder carcinogen in  humans, according to NRC. NRC cited a 2012 assessment by the  International Agency for Research on Cancer that indicated higher  mortality from bladder cancer in populations that are exposed to high  levels of arsenic compared to those that are not based on studies in  Argentina, Chile, and Taiwan.\nNRC reported that there was moderate evidence of association between  the long-term ingestion of various levels of arsenic from water or dietary  sources such as rice, and adverse health effects, although some studies  found evidence of an association and others did not. Adverse health  effects include, for example, neurodevelopmental toxicity and pregnancy  outcomes related to infant illness, disease, or injury. NRC also reported  that there was limited evidence of an association between the long-term  ingestion of arsenic from water and dietary sources and adverse health  effects, such as liver and pancreatic cancer and renal disease.\nWe analyzed 14 scientific reviews, published since NRC\u2019s 2013 report,  from January 2015 through early June 2017, that generally have  supported NRC\u2019s conclusions that long-term ingestion of arsenic is  associated with the above-mentioned health effects. Two reviews  reporting additional evidence related to cardiovascular disease suggested  that there may be a threshold\u2014an arsenic level below which there is no  significant occurrence of cardiovascular disease. However, one of these  reviews noted that the number of studies they examined was small,  among other limitations. Regarding lung cancer, another recent review  proposed a dose-response relationship, which NRC identified as a gap in  the understanding of this adverse health effect. However, this review  noted that the studies it included did not distinguish between the risk of  lung cancer in smokers and non-smokers, which NRC reported may be a key confounding factor. The review also cited other limitations, including  the small number of studies it used to model this relationship. See  appendix II for additional information about the reviews we identified.\n\n\tFDA and USDA Have Taken Actions to Manage the Risk to Human Health from Arsenic in Rice\n\nFDA and USDA have taken actions to manage the risk to human health  from arsenic in rice, including assessing the type and prevalence of  health effects that may result from long-term ingestion. These efforts were  generally consistent with the six essential elements for managing risk,  which we have found could help agencies assess threats that could affect  the achievement of their goals. Specifically, FDA has taken actions that  were consistent with five of the six essential elements, including: (1)  aligning risk management process with goals and objectives, (2)  identifying risks, (3) assessing risks, (4) responding to the risks, and (5)  monitoring risks. However, FDA has not fully taken action on the sixth  element of communicating and reporting on risks. FDA issued a risk  assessment in 2016 for public comment and a draft guidance limiting the  levels of arsenic in infant rice cereal, but it has not updated or finalized  these key documents. USDA has taken actions consistent with five of the  six essential elements but has not taken actions to monitor the risk  because of its more limited, nonregulatory role.\n\n\t\tAligning Risk Management Process with Goals and Objectives\n\nFDA and USDA have aligned their actions to manage the risk to human  health from arsenic in rice to goals in their strategic plans. According to  FDA officials, FDA\u2019s actions align with three of the six goals identified in  the 2015\u20132018 research strategic plan for FDA\u2019s Center for Food Safety  and Applied Nutrition, including advancing diet and health research that  contributes to the development of science-based policies and  communication strategies. Regarding USDA\u2019s actions, ARS officials  stated that their research on arsenic in rice aligned with four goals in  ARS\u2019s fiscal year 2012\u20132017 strategic plan, such as protecting food from  pathogens, toxins, and chemical contamination during production,  processing, and preparation. NIFA officials stated that the research they  sponsored on arsenic in rice aligned with one of the sub-goals in NIFA\u2019s  fiscal year 2014\u20132018 strategic plan: to reduce the incidence of  foodborne illness and provide a safer food supply. FGIS officials  provided documentation showing that their actions aligned with one of the  goals in their fiscal year 2016\u20132020 strategic plan: provide the  environment for fair and competitive market practices between  agricultural producers and buyers. FDA\u2019s and USDA\u2019s actions were  consistent with the essential element of aligning risk management actions  to their strategic plans.\n\n\t\tIdentifying Risks\n\nTotal Diet Study   The Food and Drug Administration\u2019s (FDA)  Total Diet Study, which began testing for  arsenic in 1991, is an ongoing program that  monitors the levels of about 800 contaminants  and nutrients in the average U.S. diet. To  conduct the study, FDA buys, prepares, and  analyzes about 280 kinds of foods and  beverages from representative areas of the  country and estimates the average amounts  of contaminants and nutrients the entire U.S.  population, some subpopulations, and each  person consumes annually. The sampling  plan calls for purchasing each type of food  four times a year, each time in a different  region. Within each region, FDA purchases  each food product from three different stores  and combines them into a composite sample,  for a total of four estimates each year. FDA  makes results of the study, from 1991 through  2015, available to the public in electronic form  on its website.\nFDA and USDA have taken actions to identify the risk of arsenic in rice.  FDA has identified the risk of arsenic in rice through the Total Diet  Study\u2014an annual testing of contaminants and nutrients in food. As part of  conducting the Total Diet Study, FDA collects samples of certain foods,  including rice, and tests them for a variety of toxic chemicals, including  total arsenic. From 2014 through 2015, the most recent years for which  data are available, FDA tested six different categories of rice-based foods  for arsenic. FDA officials told us that they identified arsenic in rice as a  priority based, in part, on the results of the Total Diet Study, which  indicated that rice had higher levels of arsenic compared to other foods.  Some university researchers we interviewed stated that the Total Diet  Study would be more helpful if it measured inorganic arsenic or had a  more robust methodology. For example, one university researcher noted  that the number of samples in the Total Diet Study is not big enough to be  nationally representative. FDA officials told us that starting with the fiscal  year 2018 Total Diet Study, they plan to begin testing rice-based foods for  inorganic arsenic, increase the number of samples they collect, and make  other improvements to the sampling methodology.\nUSDA officials have taken actions to identify the risk of arsenic in rice  through a variety of research programs. ARS officials told us that they  have conducted research on arsenic in rice under four national programs:  (1) plant genetic resources, genomics, and genetic improvement; (2)  water availability and watershed management; (3) human nutrition; and  (4) food safety. For example, ARS researchers are examining whether  changes in soil chemistry as a result of organic or conventional  management practices affect arsenic levels in rice. NIFA officials stated  that NIFA sponsors research on arsenic in rice through formula-based  grants to universities and through competitive grants, such as those  offered through the Agriculture and Food Research Initiative.\nTo identify what research to undertake, ARS officials told us that they  typically meet with industry to identify its highest priorities. For example,  ARS officials from the Delta Water Management Research Unit in  Arkansas stated that they started researching arsenic in rice after  participating in a joint ARS-USA Rice Federation conference in 2012.  FGIS officials told us that contaminants such as arsenic may affect the  quality of a grain, such as rice, and hence its value. They stated that they  work closely with the grain industry to develop new standards and tests to  meet industry\u2019s needs.\n\n\t\tAssessing Risks\n\nFDA and USDA have taken actions to assess the risk of arsenic in rice. In  2012, FDA published its current method to detect inorganic arsenic in  rice. FDA officials told us that this method, though useful, is time- consuming and expensive, and the agency continues to develop other  methods to reduce cost and time. For example, in 2017, FDA developed  another method to detect inorganic arsenic in wine and rice that takes  less time than its current method. FDA officials told us they have an  ongoing research project on a field-deployable method based on a  commercially-available digital arsenic test kit for detecting arsenic in  drinking water called the Arsenator. In addition, FDA has been using laser  ablation, the process of removing a material from a solid using a laser  beam so that it can be measured, as a way to study arsenic distribution in  rice.\nFrom 2011 through 2014, FDA conducted targeted sampling of more than  1,400 rice-based foods\u2014including rice, rice beverages, cereals, and  snacks\u2014for inorganic arsenic. This targeted sampling and a literature  review of articles published before February 2015 informed a risk  assessment of arsenic in rice that FDA issued for public comment in April  2016. Specifically, the risk assessment used the results of the targeted  sampling to identify levels of inorganic arsenic in rice and examined  available scientific information to provide quantitative estimates of lung  and bladder cancer risk\u2014that is, the number of expected lung and  bladder cancer cases per million people that may be attributable to long- term ingestion of inorganic arsenic in rice and a qualitative assessment of  other adverse health effects. The risk assessment also analyzed  alternative approaches to reducing the risk of arsenic in rice, such as  instituting limits on the allowable level of arsenic in various rice-based  foods, limiting the amount and frequency of consumption of rice, and  cooking practices.\nFDA\u2019s actions have helped assess the risk of arsenic in rice, although  some stakeholders we interviewed have identified limitations to FDA\u2019s  actions. For example, one rice producer noted that because FDA\u2019s  current detection method is time-consuming and expensive, it is not  widely used\u2014companies only use it when tests for total arsenic reveal  that the levels exceed the limit for inorganic arsenic that their customers  request. Some stakeholders noted that the evidence FDA used to assess  the risk of the ingestion of low levels of arsenic, which may be more  relevant for rice consumption, is more uncertain.\nUSDA agencies have also taken actions to assess the risk by conducting  research to develop faster and less expensive methods to detect  inorganic arsenic in rice. In 2016, ARS developed a method using hydride  generation, which uses an acid to convert the inorganic arsenic into a gas  that can be detected by an instrument. ARS officials stated that they have  conducted research on the hydride generation method for more than 5  years and were able to further refine the method with funding from the  Rice Foundation. Stakeholders from the rice industry and a university  researcher we interviewed noted that, while the hydride generation  method is faster and cheaper than FDA\u2019s current detection method, it is  too time-consuming and expensive for commercial purposes. For  example, rice mills could not keep pace with trucks lining up to unload  rice if they use the hydride generation method. However, ARS officials  stated that researchers may use it if they need to analyze thousands of  samples and are willing to trade off some accuracy for speed and cost. In  addition, FGIS conducted some of its own development work on the  Arsenator. Agency officials said that they began research on the  Arsenator to help provide a rapid and inexpensive method of detecting  inorganic arsenic at FGIS official testing locations that could include rice  mills but have suspended their efforts because representatives of the rice  industry have told them that these tests are not necessary.\n\n\t\tResponding to the Risks\n\nFDA and USDA have taken actions to respond to the risk of arsenic in  rice. In 2016, FDA issued draft guidance, which proposed an action level,  recommending that the rice industry not exceed a level of 100 ppb  inorganic arsenic in infant rice cereal, and FDA has conducted research  on cooking methods that may reduce arsenic. In its draft guidance, FDA  stated that it used its risk assessment, among other considerations, to  identify the level of inorganic arsenic in infant rice cereal. FDA further  noted that it selected 100 ppb because of the potential for human health  risks associated with inorganic arsenic and because such a level is  achievable with the use of current good manufacturing practices\u2014 specifically, selecting sources of rice or rice-derived ingredients with lower  inorganic arsenic levels. FDA officials told us that they focused on infant  rice cereal because infants are at a higher risk of experiencing some of  the health effects of ingesting inorganic arsenic, such as  neurodevelopmental effects, and because the diet of infants is less varied  than that of adults. FDA officials noted that the proposed guidance sets a  limit for infant rice cereal that is generally consistent with the limit set by  the European Commission and that other types of rice sold in the United  States also generally meet the Codex Alimentarius standards.\nUniversity researchers and a group representing consumers we  interviewed stated that FDA\u2019s draft guidance is a good first step, but that  FDA should establish limits for arsenic in other rice products, such as rice  crackers and other foods that children eat. FDA officials noted that the  next most susceptible group would likely be toddlers and young children,  but because their diet is more diverse than that of infants, rice-based  foods make up a smaller portion of their diet. FDA requested public  comments on certain aspects of the draft guidance, such as its feasibility,  and noted that when it is finalized, it will represent FDA\u2019s current thinking  on this topic. The public comments were due to FDA in July 2016,  although FDA noted that the public may comment on its guidance at any  time. University researchers and stakeholders from the rice industry we  interviewed stated that FDA\u2019s draft guidance has become a de facto  industry standard for infant rice cereal. In 2016, FDA also published  research on the effect that cooking methods, such as cooking rice in  excess water, may have on reducing the level of arsenic in rice. FDA  officials told us that they provided advice to consumers on cooking  methods that could reduce arsenic in rice on the FDA website but said  FDA will not direct manufacturers to change the cooking instructions for  rice because the alternative methods may reduce the nutritional value of  the rice.\nWithin USDA, ARS and NIFA have sponsored published and ongoing  research that can help respond to the risk, such as research on ways to  reduce the uptake of arsenic by rice through new rice varieties, water  management practices, and soil additives, as well as research on the  genetic mechanisms underlying the uptake and transport of arsenic in the  rice plant. For example, ARS has been conducting research on rice  varieties that can improve yield and grain quality, including lower levels of  arsenic, at the Dale Bumpers National Rice Research Center in Arkansas  for more than 30 years. In 2016, university and ARS researchers  published a study showing that growing rice using a water management  practice called alternate wetting and drying could decrease the levels of  arsenic. Under this practice of growing rice, shown in figure 3 below,  fields are periodically drained and re-flooded during the growing season.\nARS officials stated that the alternate wetting and drying water  management practice has been adopted to a limited extent in Arkansas,  but pointed out that other benefits, such as reducing water use, may have  been more influential to its adoption than the lowering of arsenic levels.  They noted that there are a number of challenges that may preclude  widespread use, including inadequate water-pumping capacity and the  lack of crop insurance coverage for the practice. In addition, in 2015,  university researchers and an ARS researcher, with a grant from NIFA,  published a study on the effects of adding iron oxide to the soil on the  levels of arsenic in rice; they found that iron oxide resulted in significant  reduction of arsenic for the two varieties of rice that the study examined.\n\n\t\tMonitoring Risks\n\nFDA, which is responsible for ensuring the safety of rice and rice-based  foods, has taken actions to monitor the risk of arsenic in rice. USDA has  not done so, because of its more limited, nonregulatory role. FDA has a  compliance program designed to monitor over 1,400 products annually,  including foods that are most likely to contribute to the dietary intake of  toxic elements, among other contaminants. In fiscal years 2015 and  2016, FDA monitored the risk of arsenic by assessing the levels in rice  and rice-based foods under this compliance program, and FDA officials  told us that they plan to continue to do so in fiscal years 2017 and 2018.  FDA officials told us that they generally test the rice for total arsenic but  have recently analyzed some samples for inorganic arsenic based on  factors such as the level of total arsenic found. FDA considers whether to  conduct follow-up actions, including enforcement actions, on a case-by- case basis. As a result of its monitoring in 2016 and 2017 FDA  considered, but did not take, two enforcement actions for arsenic in infant  rice cereal. FDA officials stated that the inorganic arsenic level in one  case was close to the 100 ppb limit and within the margin of error of the  detection method, and in the second case, FDA determined during its  follow-up to the initial sample that the manufacturer destroyed the  remaining product.\nUSDA agencies have not monitored arsenic in rice. The Food Safety and  Inspection Service is USDA\u2019s regulatory agency for food safety, but  officials have told us they have not taken actions in this area because rice  is not under the agency\u2019s jurisdiction. ARS maintains a food composition  database, but it does not monitor rice for contaminants such as arsenic  because, according to ARS officials, that is not the database\u2019s purpose.  FGIS officials stated that they do not have an arsenic testing program for  rice at this time. They told us that they considered establishing a testing  program for rice intended for export at the request of the rice industry.  However, FGIS officials stated that they suspended their efforts when  industry determined that it did not need a testing program.\n\n\t\tCommunicating and Reporting on Risks\n\nFDA and USDA have taken actions to communicate and report on the risk  of arsenic in rice to the public. FDA has issued a risk assessment and  draft guidance on arsenic in infant rice cereal, but it has not updated or  finalized these documents. FDA\u2019s 2016 risk assessment report provides  information about the risk from long-term ingestion of arsenic in rice, and  its draft guidance on arsenic in infant rice cereal includes a link to an FDA  website with information for consumers, including pregnant women and  parents. FDA has requested comments and received 22 public  comments from 17 individuals and organizations on both documents. The  comments have addressed a range of issues, including the methodology  FDA used in its risk assessment; the 100 ppb limit and scope of the  agency\u2019s draft guidance; and the effectiveness of the agency\u2019s  communication to the public. However, FDA has not publicly issued  versions of the guidance or the risk assessment that address these  comments. In our prior work, we have found that sharing risk information  and incorporating feedback from internal and external stakeholders can  help organizations identify and better manage risks, as well as increase  transparency and accountability to Congress and taxpayers.\nIn the risk assessment, FDA stated that it will provide an update after  considering public comments and any newly-available information. For  example, FDA officials told us that they plan to consider newly-available  information, such as any updates to EPA\u2019s Integrated Risk Information  System assessment for inorganic arsenic, and may update the risk  assessment as a result. With regard to public comments, FDA officials  told us that they do not intend to make any changes to the approach or  findings of the risk assessment and that they are still considering whether  to make changes to the draft guidance as a result of public comments.  FDA officials stated that they are still reviewing comments and that,  before publication, the guidance would have to undergo interagency  review. FDA officials also stated that the agency is not required to provide  a response to comments in the final guidance. Further, FDA officials  stated that the agency does not need to finalize the guidance in order to  sample foods for a contaminant or to take enforcement action when  contamination may pose a health hazard.\nStakeholders we interviewed stated that updating the risk assessment  and finalizing the draft guidance would improve FDA\u2019s communication of  the risk. For example, some stakeholders we interviewed told us that the  information used in the risk assessment\u2014both regarding the health  effects of arsenic and the levels of arsenic in rice\u2014may need to be  updated to incorporate the results of more recent research. Further, two  stakeholders we interviewed\u2014one representing the rice industry and the  other representing consumers\u2014noted that it is not clear to them what  actions FDA can take based on the draft guidance. However, FDA  officials could not give us a timeline for when they plan to update the risk  assessment or finalize the guidance. By developing a timeline for  updating the risk assessment on arsenic in rice to incorporate any newly- available information, FDA could help clarify when it will take action.  Developing a timeline for finalizing the draft guidance on arsenic in infant  rice cereal could also help FDA improve the transparency of its  decisions\u2014such as by clarifying the effectiveness of the draft guidance.\nUSDA has taken actions that can help communicate and report on the  risk of arsenic in rice. ARS officials told us that they have communicated  the results of their research on arsenic in rice in a number of ways, such  as through presentations at conferences and through outreach to farmers,  including in cooperation with extension programs at universities. For  example, USDA researchers demonstrated automated irrigation systems  that can be used for the alternate wetting and drying water management  practice. In 2017, ARS researchers contributed to the development of a  bulletin in conjunction with University of Arkansas researchers that  contains recommended practices about irrigation methods that can  reduce the levels of arsenic in rice. ARS officials told us that their  communication efforts could help increase farmers\u2019 interest and adoption  of methods they have researched. They also stated that they work with  extension programs because these programs have good access to  farmers.\n\n\tFDA Coordinated Several Risk Management Actions with USDA and Other Federal Agencies to Varying Extents\n\nFDA coordinated with USDA and other federal agencies on the actions to  manage the risk of arsenic in rice for which coordination would be  expected, to varying extents. FDA coordinated with USDA and several  other federal agencies, including CDC, EPA, and NIH, on the  development of the risk assessment and draft guidance on arsenic in  infant rice cereal, but USDA raised concerns about the extent of the  coordination. FDA and USDA coordinated to a limited extent to develop  faster and less expensive methods to detect arsenic in rice.\n\n\t\tFDA Coordinated Its Risk Assessment and Draft Guidance with Several Federal Agencies, but USDA Raised Concerns about the Extent of Coordination\n\nFDA coordinated with several federal agencies on the development of the  risk assessment and draft guidance on arsenic in infant rice cereal.  According to FDA officials, in developing the risk assessment, FDA  initially coordinated with EPA on two noncancer health effects\u2014adverse  pregnancy outcomes and developmental neurotoxicology effects in young  children\u2014to ensure consistency with the work EPA was doing to update  its Integrated Risk Information System assessment for arsenic. When  FDA completed the draft of the noncancer section of its risk assessment,  the agency provided it to EPA and NIH\u2019s National Institute of  Environmental Health Sciences for review. FDA incorporated comments  from EPA and NIH in the risk assessment document, which EPA, CDC,  and NIH subsequently reviewed. From December 2014 through June  2015, the risk assessment and draft guidance underwent HHS\u2019s  clearance process. Through this process, CDC and NIH, along with  HHS\u2019s Assistant Secretary for Legislation and its Office of the Assistant  Secretary for Planning and Evaluation, reviewed the documents, and FDA  revised the risk assessment and draft guidance to address their  comments. CDC, EPA, and NIH officials told us that they were generally  satisfied with FDA\u2019s coordination efforts and the extent to which FDA  addressed their comments. For example, CDC officials said that the  agency provided FDA several rounds of comments, and by the end of the  process, all of its comments had been considered.\nOMB also chose to review FDA\u2019s risk assessment and draft guidance on  arsenic in infant rice cereal through its interagency review process.  According to FDA officials, as part of this process, which occurred from  May 2015 through March 2016, FDA coordinated with EPA again, as well  as with OMB\u2019s Office of Information and Regulatory Affairs and the U.S.  Trade Representative within the Executive Office of the President, the  Small Business Administration\u2019s Office of Advocacy, and USDA. Officials  from the Small Business Administration\u2019s Office of Advocacy said that  they were generally satisfied with the review process and characterized  the outcome as typical in that some, but not all, of their suggested  changes were accepted.\nHowever, USDA officials raised concerns about FDA involving them too  late in the coordination process and about the extent to which FDA  addressed their comments. From May 2015 through July 2015, USDA  conducted its first review of these documents and provided FDA with  comments. USDA had offered to provide FDA with feedback on versions  of the risk assessment on several occasions earlier in the process, but  FDA did not accept USDA\u2019s offers, according to a USDA official. As  discussed below, FDA chose to engage USDA later in the process.\nIn their comments, USDA officials expressed concerns regarding  uncertainties and data limitations in the risk assessment and draft  guidance on arsenic in infant rice cereal. USDA also raised questions  about whether sufficient data on the link to adverse health effects existed  to warrant the draft guidance. Furthermore, USDA stated that because  the documents focus solely on rice, instead of addressing risks to the diet  as a whole, FDA needs to share clear, consistent, and understandable  messages with the public to alleviate fear and misunderstanding related  to the risk posed by arsenic in rice. According to USDA officials, FDA did  not adequately address their comments in the revised documents,  including FDA\u2019s communication strategy. However, according to a senior  USDA official, in its response to USDA\u2019s comments, FDA maintained that,  overall, the comments it received from its external peer reviewers\u2014five  university researchers\u2014were supportive of the risk assessment and that  based on the peer review, FDA did not change its findings or conclusions.  According to this USDA official, FDA also noted that there are insufficient  data to accurately quantify the risk from arsenic in rice to pregnant  women or children but that it decided moving forward with the draft  guidance on arsenic in infant rice cereal would be prudent.\nFDA and USDA did not agree on USDA\u2019s role in developing the risk  assessment and the point at which they should begin coordinating on the  risk assessment. FDA officials told us that FDA generally considers  agencies\u2019 expertise in determining whether and when to include them in  the development of risk assessments and related documents. FDA did  not see USDA as having a role in developing the risk assessment; rather,  FDA officials told us that they reached out to USDA after the risk  assessment was drafted, when the agency began to consider how to  reduce the levels of arsenic in rice during the growing process and the  feasibility of industry meeting its draft guidance on arsenic in infant rice  cereal. The officials said that FDA met with USDA officials on numerous  occasions and invited them to attend additional meetings with various  stakeholders. However, according to a senior USDA official, USDA has  relevant scientific and technical expertise that should have played a role  in developing the risk assessment. According to this official, if FDA had  involved USDA earlier in the development process, FDA may have  addressed USDA\u2019s comments to a greater extent.\nWe have shown in prior work that agencies can facilitate their  collaborative efforts by developing a mechanism for interagency  coordination, and a key issue to consider when developing such a  mechanism is whether participating agencies have clarified their roles and  responsibilities. FDA officials stated that they were not aware of the  existence of any mechanism for coordinating risk assessments of  contaminants in food, including arsenic in rice, which among other things,  could clarify the roles and responsibilities of participating agencies. FDA  officials told us that they followed a 2002 report listing guiding principles  when developing the risk assessment, but this report, which broadly  applies to all foodborne contaminants, did not specify the process FDA  should follow to coordinate its risk assessment. However, our review of  this 2002 report shows that it recommends that FDA encourage active  participation and communication with other agencies and stakeholders  and collaboration, when appropriate, as part of its risk assessment  development process. Although FDA did reach out to USDA, those  meetings were after the completion of the risk assessment. By developing  a mechanism for working with relevant agencies to identify their roles and  responsibilities for coordinating risk assessments of contaminants in food,  including arsenic in rice, FDA could have better assurance that it fully  utilizes the expertise of all participating federal agencies.\n\n\t\tFDA and USDA Coordinated on Developing Methods to Detect Arsenic in Rice to a Limited Extent\n\nFDA and USDA\u2019s FGIS and ARS coordinated on the development of  detection methods to a limited extent. Officials from FDA and FGIS told  us that they began to coordinate in March 2016, when they discovered, in  the course of ongoing coordination in another area, that they were each  working independently on developing a faster and less expensive  detection method using the Arsenator. According to FDA officials, FDA  became aware of FGIS\u2019s interest in developing methods to detect arsenic  in rice during a Codex Alimentarius meeting that researchers from both  agencies attended. Therefore, the avoidance of potentially duplicative  effort occurred as a result of an informal discussion that occurred during  this meeting. With regard to ARS, FDA officials told us that FDA did not  coordinate with ARS on the development of the hydride generation  method but that FDA used its own validated method to provide ARS with  actual arsenic concentrations of samples to help ARS test its method.  According to ARS officials, ARS did not coordinate with FDA or FGIS  when developing its method on hydride generation. According to an FDA  official, FDA did not coordinate the development of its current method to  detect inorganic arsenic in rice, the faster method for wine and rice, or the  laser ablation method with FGIS, ARS, or any other federal agency.\nWe have shown in prior work that many of the meaningful results that the  federal government seeks to achieve, such as those related to protecting  food and agriculture, require the coordinated efforts of more than one  federal agency. ARS officials told us that from their perspective, there  was no reason to coordinate because ARS, FDA, and FGIS are trying to  meet different needs with their research. Further, ARS officials told us  that coordinating with FDA would blur the distinction between ARS\u2019s  scientific role and FDA\u2019s regulatory role and may imply that ARS has  regulatory responsibilities or expertise. However, all three agencies share  a crosscutting strategic interest in developing methods for detecting  foodborne contaminants, including arsenic in rice. The strategic plans for  ARS and FDA\u2019s Center for Food Safety and Applied Nutrition include  outcomes and strategies related to the development of detection methods  for chemical contaminants or residues. Further, FGIS\u2019s strategic plan  includes a strategy of developing innovative tests to measure grain  quality, and according to FGIS officials, they have considered testing  inorganic arsenic as part of measuring grain quality. According to FGIS  officials, once they began coordinating with FDA on the Arsenator, they  saw value in coordinating and did so for about 9 months before  suspending work on the detection method.\nWe have noted in prior work that interagency mechanisms to coordinate  programs that address crosscutting issues may reduce potentially  duplicative efforts. However, neither FDA nor USDA has such a  mechanism to coordinate the development of methods to detect arsenic  in rice or other methods to detect contaminants in food. FDA officials told  us that the agency works with USDA research agencies on food safety in  an informal manner, and USDA officials told us that they are not aware of  any mechanism for coordination and that coordination with FDA generally  occurs at the secretarial level because it cuts across a number of USDA  agencies. Recently, we also found another example in which FDA and  USDA did not coordinate in developing detection methods for other  contaminants in foods. FDA and another USDA agency\u2014the Food Safety  and Inspection Service\u2014did not coordinate in developing detection  methods for drug residues in seafood. By developing a mechanism to  coordinate their crosscutting efforts to develop faster and less expensive  methods for detecting contaminants in food, including arsenic in rice, FDA  and USDA could enhance their ability to use their resources efficiently  and avoid engaging in unnecessary and potentially duplicative efforts.\n\n\tConclusions\n\nNRC and key recent scientific reviews have indicated that long-term  ingestion of arsenic may pose a significant risk to human health, and FDA  and USDA have taken various actions to manage the risk to human  health of arsenic in rice. Their actions are generally consistent with the  essential elements we have identified for managing risk, which can help  agencies assess threats that could affect the achievement of their goals.  For example, both agencies have conducted research on arsenic  detection methods, and FDA has issued for public comment a risk  assessment on the human health effects from the long-term ingestion of  arsenic in rice. In addition, according to FDA officials, because infants are  at a higher risk of experiencing some of the health effects of ingesting  arsenic, such as neurodevelopmental effects, and the diets of infants are  less varied than that of adults, FDA issued a draft guidance regarding  arsenic in infant rice cereal. However, FDA officials have not provided a  specific timeline for updating the risk assessment in response to newly- available information or for finalizing the draft guidance for infant rice  cereal in response to public comments. Both of these documents could  help communicate to the public the risk of arsenic in rice, and updating or  finalizing them could also help FDA demonstrate its commitment to  increasing transparency and accountability by addressing public  comments and clarifying its enforcement authority, among other things.\nFDA coordinated the development and review of these key documents  with several federal agencies, and these agencies were generally  satisfied with FDA\u2019s coordination efforts. However, USDA raised concerns  about being involved too late in the process and the extent to which its  comments were addressed. By developing a mechanism for working with  relevant agencies to identify their roles and responsibilities for  coordinating risk assessments of contaminants in food, including arsenic  in rice, FDA could better ensure that it fully utilizes their expertise.  Furthermore, FDA and USDA coordinated on the development of arsenic  detection methods to a limited extent. Developing a mechanism to  coordinate their crosscutting efforts to develop methods to detect  contaminants in food, including arsenic in rice, could help FDA and USDA  manage their resources and avoid engaging in unnecessary and  potentially duplicative efforts.\n\n\tRecommendations for Executive Action\n\nWe are making a total of five recommendations, including four to FDA  and one to USDA. Specifically:\nThe Commissioner of FDA should develop a timeline for updating the  risk assessment on arsenic in rice. (Recommendation 1)\nThe Commissioner of FDA should develop a timeline for finalizing the  draft guidance on arsenic in infant rice cereal. (Recommendation 2)\nThe Commissioner of FDA should develop a mechanism for working  with relevant agencies to identify their roles and responsibilities for  coordinating risk assessments of contaminants in food, including  arsenic in rice. (Recommendation 3)\nThe Commissioner of FDA should work with USDA to develop a  mechanism to coordinate the development of methods to detect  contaminants in food, including arsenic in rice. (Recommendation 4)\nThe Secretary of Agriculture should work with FDA to develop a  mechanism to coordinate the development of methods to detect  contaminants in food, including arsenic in rice. (Recommendation 5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to EPA, HHS, OMB, and USDA for their  review and comment. HHS and USDA provided written comments, which  are summarized below and reproduced in appendix III and appendix IV,  respectively. In addition, EPA, HHS, and USDA provided technical  comments, which we incorporated as appropriate. OMB did not comment.\nIn its comments, HHS generally agreed with our findings and three of the  four recommendations directed to it and partially agreed with the other  recommendation. Specifically, HHS partially agreed with our first  recommendation for FDA to develop a timeline for updating the risk  assessment on arsenic in rice, noting that the evolving nature of science  precludes it from committing to a specific timeline. We recognize that new  scientific studies continue to add to the understanding of the risk of  arsenic. However, we continue to believe that FDA should demonstrate  its commitment to increasing transparency and accountability by  developing a timeline to update the risk assessment, potentially in  conjunction with finalizing the draft guidance on arsenic in infant rice  cereal. Such an update may state that recent scientific studies or public  comments have not resulted in a change to FDA\u2019s assessment of the risk.\nHHS generally agreed with our findings about the actions it has taken to  manage the risk from arsenic in rice and the extent of its coordination with  USDA and other agencies. HHS noted that it anticipates developing a  final guidance establishing an action level of 100 ppb of inorganic arsenic  in infant rice cereal by the end of 2018, which will be consistent with our  recommendation. HHS also noted that it will consider ways to enhance  mechanisms\u2014such as the Interagency Risk Assessment Consortium\u2014to  collaborate and coordinate in the development of risk assessments with  agencies that have regulatory responsibility or specific expertise. Further,  HHS stated that FDA agrees that a mechanism for better coordinating  with USDA on the development of methods to detect contaminants in  foods would be worthwhile. FDA will consider whether and how existing  mechanisms, such as the lnteragency Residue Control Group and the  annual meeting with USDA's ARS and the Food Safety and Inspection  Service on food safety research, could be used to improve collaboration  with USDA on method development. HHS\u2019s plans to enhance or use  existing interagency mechanisms may be responsive to our  recommendations if they focus on enhancing coordination with other  agencies that have expertise or similar goals in the areas of risk  assessments and methods to detect foodborne contaminants.\nIn its comments, USDA generally agreed with our findings and the one  recommendation we directed to it. Specifically, USDA generally agreed  with our findings about the extent to which FDA coordinated with USDA  on the development of methods to detect contaminants in food, including  arsenic in rice. It also generally agreed with our recommendation that  USDA work with FDA to develop a mechanism to do so and stated that  the USDA Office of the Chief Scientist will facilitate this effort. Further,  USDA noted that the Interagency Risk Assessment Consortium may be  an appropriate mechanism for addressing GAO\u2019s recommendations.  USDA\u2019s proposal has the potential to be responsive to our  recommendation if it focuses on enhancing coordination with FDA  regarding the development of detection methods for foodborne  contaminants.\nAs agreed with your office, unless you publicly announce the contents  earlier, we plan no further distribution of this report until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees; the Secretaries of Agriculture and Health and  Human Services; the Administrator of EPA; the Director of OMB; and  other interested parties. In addition, the report will be available at no  charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or morriss@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines (1) what the National Research Council (NRC) and  recent key scientific reviews have reported about the effects of ingestion  of arsenic on human health, (2) the extent to which the Food and Drug  Administration (FDA) and U.S. Department of Agriculture (USDA) have  managed the risk to human health from arsenic in rice, and (3) the extent  to which FDA has coordinated with USDA and other federal agencies on  actions to manage the risk. In this report, we use the term arsenic to refer  to either total arsenic or inorganic arsenic. We use the term rice to  encompass rice grain and products made with rice, such as infant rice  cereal.\nTo determine what NRC and recent key scientific reviews have reported  about the effects of ingestion of arsenic on human health, we analyzed  NRC\u2019s 2013 report on inorganic arsenic and 14 reviews of the scientific  literature published from January 2015 through early June 2017 on the  human health effects of ingestion of arsenic. We conducted a literature  search of several research databases, such as PubMed and Toxline, to  identify reviews that (1) were focused on the effects of ingestion of  arsenic on human health; (2) were peer-reviewed; (3) relied on human,  rather than animal, studies; (4) provided conclusions or summary  statements related to more than one study, rather than just listing  individual study findings; (5) included an abstract; and (6) were written in  English. We assessed the scientific and statistical credibility, reliability,  and methodological soundness of the reviews. We also contacted some  of the authors for additional methodological information. Methodological  information included, for example, criteria for selecting the studies used in  the review; meta-analyses; or meta-regression approach. It also included  limitations that the authors cited for the studies they reviewed or for any  analyses they conducted. We excluded articles for which we could not  clearly determine the methodology. We also reviewed the authors\u2019  statements regarding conflicts of interest and determined that none of the  articles should be excluded for this reason. We did not examine the  references cited by these reviews as part of our analysis. We also did not  examine the studies cited by the NRC. The studies we reviewed are listed  in appendix II.\nTo determine the extent to which FDA and USDA have managed the risk  to human health from arsenic in rice, we examined relevant provisions in  the Federal Food, Drug, and Cosmetic Act, as amended; the Federal  Agriculture Improvement and Reform Act of 1996; and other relevant  laws, regulations, and policies. We also used the essential elements for  managing risk as identified in our prior work on enterprise risk  management. These include: (1) align the risk management process with  goals and objectives, (2) identify risks, (3) assess risks, (4) respond to the  risks, (5) monitor the risks, and (6) communicate and report on the risks.  We identified information on agency actions for managing the risk from  arsenic in rice by collecting documentation and interviewing officials from  FDA and USDA and we reviewed the information in light of the  requirements, policies, and elements. We assessed FDA\u2019s and USDA\u2019s  reported actions to determine the extent to which each agency\u2019s actions  aligned with these elements. In assessing FDA\u2019s and USDA\u2019s actions  against these essential elements, we used the terms \u201cconsistent\u201d and  \u201cpartially consistent\u201d to reflect the extent to which each agency\u2019s actions  aligned with an essential element. A determination of \u201cconsistent\u201d meant  that the agency provided evidence that it had taken major actions in  alignment with that essential element. A determination of \u201cpartially  consistent\u201d meant that the agency provided evidence that it had taken  some actions in alignment with that essential element.\nWe also interviewed 17 stakeholders to obtain their views on the extent to  which FDA\u2019s and USDA\u2019s actions managed the risk, including university  researchers (academics) specializing in relevant fields such as  epidemiology and soil chemistry, representatives of a consumer  organization, and representatives of the rice industry, including rice mills  and farms. We identified stakeholders based on suggestions from agency  officials and other stakeholders; through our site visit in Arkansas\u2019 rice  agricultural research and production areas and rice mills; and based on  the stakeholders\u2019 unique perspective or qualifications, such as  membership in the NRC Committee on Inorganic Arsenic. The views we  obtained from these interviews are not generalizable to all university  researchers or consumer or rice industry organizations but they provide  illustrative examples of the views of such stakeholders. Table 1 lists  information about the 17 stakeholders we interviewed.\nTo determine the extent to which FDA has coordinated with USDA and  other federal agencies on actions to manage the risk to human health  from arsenic in rice, we identified relevant actions and examined whether  FDA developed interagency collaborative mechanisms, which we have  previously reported could help to facilitate coordination between  agencies. To identify actions for which the agencies shared similar goals  in their strategic plans or relevant expertise and for which FDA would be  expected to coordinate with USDA and other federal agencies, we  reviewed relevant provisions in the Federal Food, Drug, and Cosmetic  Act, as amended; the Federal Agriculture Improvement and Reform Act  of 1996; other relevant laws, regulations, and policies; the current  science and research strategic plan for FDA\u2019s Center for Food Science  and Applied Nutrition and current strategic plans for USDA\u2019s Agricultural  Research Service (ARS) and Federal Grain Inspection Service (FGIS);  and information about the agencies\u2019 missions from their websites. These  actions were the development of FDA\u2019s risk assessment and draft  guidance on arsenic in rice and FDA\u2019s and USDA\u2019s efforts to develop  detection methods for arsenic in rice. We interviewed FDA officials and  reviewed documentation they provided to identify the other federal  agencies and offices with which FDA coordinated the development and  review of its risk assessment and draft guidance on arsenic in infant rice  cereal and the development of methods for detecting arsenic in rice.  These agencies and offices included ARS, the Centers for Disease  Control and Prevention, the Environmental Protection Agency (EPA),  FGIS, National Institutes of Health\u2019s National Institute of Environmental  Health Sciences, the Department of Health and Human Services\u2019  Assistant Secretary for Legislation and Office of the Assistant Secretary  for Planning and Evaluation, Office of Management and Budget\u2019s (OMB)  Office of Information and Regulatory Affairs, the Small Business  Administration\u2019s Office of Advocacy, and the U.S. Trade Representative.\nTo determine the extent to which FDA coordinated its risk assessment  and draft guidance on arsenic in rice with USDA and other federal  agencies, we obtained and reviewed FDA\u2019s framework for conducting risk  assessments; reviewed agencies\u2019 comments on these documents;  interviewed FDA officials regarding FDA\u2019s efforts to coordinate with other  agencies; and interviewed officials from the Centers for Disease Control  and Prevention; EPA; the National Institutes of Health; OMB; the Small  Business Administration\u2019s Office of Advocacy; and USDA regarding the  nature of their comments, their experiences coordinating with FDA, and  the extent to which FDA addressed their comments.\nTo examine the extent to which FDA and USDA coordinated the  development of arsenic detection methods, we obtained and reviewed  documents, including those describing the detection methods that FDA,  ARS, and FGIS have developed or have under development, and we  interviewed officials from these agencies regarding their efforts to develop  these methods and coordinate their development efforts. We also  interviewed officials from these agencies to gather their views on the  effectiveness of these coordination efforts. We then examined whether  FDA had interagency collaborative mechanisms for the development of its  risk assessment and draft guidance, and its efforts with USDA to develop  arsenic detection methods. We also examined whether participating  agencies clarified their roles and responsibilities. Our prior work identified  this as a key issue for agencies to consider when implementing  coordination mechanisms. We selected this practice because it was  relevant to the challenges the agencies faced.\nWe conducted this performance audit from December 2016 to March  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix II: Recent Reviews of the Health Effects of Ingestion of Arsenic\n\nThe following list identifies recent key reviews of the health effects of  ingestion of arsenic that we analyzed.\nAmadi, C.N., Z.N. Igweze, and O.E. Orisakwe. \u201cHeavy Metals in  Miscarriages and Stillbirths in Developing Nations.\u201d Middle East Fertility  Society Journal, vol. 22, no. 2 (2017): 91-100.\nBardach, A.E., A. Ciapponi, N. Soto, M.R. Chaparro, M. Calderon, A.  Briatore, N. Cadoppi, R. Tassara, and M.I. Litter. \u201cEpidemiology of  Chronic Disease Related to Arsenic in Argentina: A Systematic Review.\u201d  The Science of the Total Environment, vol. 538, (2015): 802-16.\nKaragas, M.R., A. Gossai, B. Pierce, and H. Ahsan. \u201cDrinking Water  Arsenic Contamination, Skin Lesions, and Malignancies: A Systematic  Review of the Global Evidence.\u201d Current Environmental Health Reports,  vol. 2, no. 1 (2015): 52-68.\nKhanjani, N., A. Jafarnejad, and L. Tavakkoli. \u201cArsenic and Breast  Cancer: A Systematic Review of Epidemiologic Studies.\u201d Reviews on  Environmental Health (2017).\nLamm, S.H., H. Ferdosi, E.K. Dissen, J. Li, and J. Ahn. \u201cA Systematic  Review and Meta-Regression Analysis of Lung Cancer Risk and  Inorganic Arsenic in Drinking Water.\u201d International Journal of  Environmental Research and Public Health, vol. 12, no. 12 (2015):  15498-15515.\nMayer, J.E. and R.H. Goldman. \u201cArsenic and Skin Cancer in the USA:  The Current Evidence regarding Arsenic-Contaminated Drinking Water.\u201d  International Journal of Dermatology, vol. 55, no. 11 (2016): e585-e591.\nMilton, A.H., S. Hussain, S. Akter, M. Rahman, T.A. Mouly, and K.  Mitchell. \u201cA Review of the Effects of Chronic Arsenic Exposure on  Adverse Pregnancy Outcomes.\u201d International Journal of Environmental  Research and Public Health, vol. 14, no. 6 (2017).\nPhung, D., D. Connell, S. Rutherford, and C. Chu. \u201cCardiovascular Risk  from Water Arsenic Exposure in Vietnam: Application of Systematic  Review and Meta-Regression Analysis in Chemical Health Risk  Assessment.\u201d Chemosphere, vol. 177 (2017): 167-175.\nQuansah, R., F.A. Armah, D.K. Essumang, I. Luginaah, E. Clarke, K.  Marfoh, S.J. Cobbina, et al. \u201cAssociation of Arsenic with Adverse  Pregnancy Outcomes\/Infant Mortality: A Systematic Review and Meta- Analysis.\u201d Environmental Health Perspectives, vol. 123, no. 5 (2015):  412-21.\nRobles-Osorio, M.L., E. Sabath-Silva, and E. Sabath. \u201cArsenic-Mediated  Nephrotoxicity.\u201d Renal Failure, vol. 37, no. 4 (2015): 542-7.\nSidhu, M.S., K.P. Desai, H.N. Lynch, L.R. Rhomberg, B.D. Beck, and F.J.  Venditti. \u201cMechanisms of Action for Arsenic in Cardiovascular Toxicity and  Implications for Risk Assessment.\u201d Toxicology, vol. 331 (2015): 78-99.\nSung, T., J. Huang, and H. Guo. \u201cAssociation between Arsenic Exposure  and Diabetes: A Meta-Analysis.\u201d BioMed Research International, (2015).\nTsuji, J.S., M.R. Garry, V. Perez, and E.T. Chang. \u201cLow-Level Arsenic  Exposure and Developmental Neurotoxicity in Children: A Systematic  Review and Risk Assessment.\u201d Toxicology, vol. 337, (2015): 91-107.\nVon Stackelberg, K., E. Guzy, T. Chu, and B.C. Henn. \u201cExposure to  Mixtures of Metals and Neurodevelopmental Outcomes: A Review.\u201d Risk  Analysis, vol. 35, no. 6 (2015): 971-1016.\n\nAppendix III: Comments from the Department of Health and Human Services\n\nAppendix IV: Comments from the U.S. Department of Agriculture\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Anne K. Johnson (Assistant  Director), Ruth Solomon (Analyst in Charge), Kevin Bray, Stephen Cleary,  Ellen Fried, Juan Garay, Rebecca Parkhurst, Beverly Peterson, Anne  Rhodes-Kline, Sara Sullivan, Kiki Theodoropoulos, Sarah Veale, and  Khristi Wilkins made key contributions to this report.","output":"Why GAO Did This Study\n\nArsenic, an element in the earth's crust, can be harmful to human health and may be present in water and certain foods, such as rice. Rice may be more susceptible to arsenic contamination than other crops due to the flooded conditions in which it is typically grown. FDA and USDA work to address food safety risks. FDA's responsibilities for rice include regulatory and research programs; USDA's include research programs.\nGAO was asked to review issues related to arsenic and rice. GAO examined (1) what NRC and recent key scientific reviews have reported about the effects of ingestion of arsenic on human health, (2) the extent to which FDA and USDA have managed the risk to human health from arsenic in rice, and (3) the extent to which FDA has coordinated with USDA and other federal agencies on actions to manage the risk. GAO analyzed a 2013 NRC report on inorganic arsenic, 14 reviews of scientific studies on the human health effects of ingesting arsenic published from January 2015 to June 2017, and agency documents; interviewed agency officials; and compared good practices with actions FDA and USDA took to manage risk and that FDA took to coordinate.\n\nWhat GAO Found\n\nThe National Research Council (NRC) of the National Academy of Sciences, in 2013, and more recent key scientific reviews reported evidence of associations between long-term ingestion of arsenic and adverse human health effects, such as cardiovascular disease. Many of the studies NRC reviewed as part of its survey of the scientific literature examined the ingestion of arsenic in drinking water, but others looked at arsenic from all sources, including dietary sources such as rice. NRC stated that evidence suggests that food, particularly rice, may be a significant source of inorganic arsenic, the more toxic of the two forms of arsenic; however, consumption of rice and levels of arsenic in rice vary widely, making it difficult to estimate arsenic intake from rice. NRC identified stronger evidence for some health effects at higher levels of arsenic\u2014defined by NRC as 100 parts per billion or higher in drinking water\u2014than at lower levels, which are more common in the United States, and noted that research on the health effects of ingesting lower levels of arsenic is ongoing.\nThe Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) have taken actions to manage the risk of arsenic in rice to human health, including assessing the type and prevalence of health effects that may result from long-term ingestion of arsenic in rice. FDA also has taken action to publicly communicate and report on the risk. In 2016, FDA issued a risk assessment about the human health effects from long-term ingestion of arsenic in rice and draft guidance recommending industry not exceed a level of 100 parts per billion of inorganic arsenic in infant rice cereal. FDA noted it issued this guidance because infants face a higher risk owing to their less-varied diets. However, FDA has not updated the risk assessment, which was informed by a review of scientific studies published before February 2015, or finalized the draft guidance. In prior work, GAO has found that sharing risk information and incorporating stakeholder feedback can help organizations identify and better manage risks, as well as increase transparency and accountability to Congress and taxpayers. FDA officials stated that they may update the risk assessment based on newly-available information and consider public comments before finalizing the draft guidance. However, FDA officials could not provide a specific timeline for either. By developing such a timeline, FDA could help clarify when it will take action and improve the transparency of its decisions.\nFDA coordinated with USDA and other federal agencies on actions to manage the risk of arsenic in rice to varying extents. For example, FDA and USDA coordinated on developing arsenic detection methods for rice to a limited extent, although both agencies have crosscutting strategic goals for developing detection methods for foodborne contaminants, including arsenic. GAO has noted in prior work that developing interagency mechanisms to coordinate crosscutting issues may reduce potentially duplicative efforts. FDA and USDA officials stated that they coordinated on an informal basis but have no mechanism for coordinating more formally. By developing a coordination mechanism, FDA and USDA could enhance their ability to use their resources efficiently and avoid potentially duplicative efforts.\n\nWhat GAO Recommends\n\nGAO is making five recommendations, including that FDA develop a timeline for updating its risk assessment and finalizing its draft guidance and that FDA and USDA develop a coordination mechanism for developing methods to detect foodborne contaminants, including arsenic. FDA and USDA generally agreed with the recommendations."}
{"id":"crs_R45046","pid":"crs_R45046_0","input":"\tOverview\n\nIn March 2015, Saudi Arabia established a coalition of nations (hereinafter referred to as the Saudi-led coalition or the coalition) to engage in military operations in Yemen against the Ansar Allah\/Houthi movement and loyalists of the previous president of Yemen, the late Ali Abdullah Saleh. During 2014, the United States joined Saudi Arabia in demanding that Houthi forces reverse their campaign to occupy the Yemeni capital of Sanaa, but the rapid onset of hostilities in March 2015 forced the Obama Administration to react quickly. At the start of the Saudi-led intervention on March 25, 2015, the Administration announced that the United States would provide \"logistical and intelligence support\" to the coalition's operations without taking \"direct military action in Yemen in support of this effort.\" Soon thereafter, a joint U.S.-Saudi planning cell was established to coordinate military and intelligence support for the campaign. At the United Nations Security Council, the United States supported the passage of Resolution 2216 (April 2015), which, among other things, required member states to impose an arms embargo against the Houthi-Saleh forces and demanded that the Houthis withdraw from all areas seized during the current conflict. \nSince the March 2015 Saudi-led coalition intervention in Yemen, Congress has taken an active role in debating and overseeing U.S. policy in the Arabian Peninsula. Members have considered legislative proposals seeking to reduce Yemeni civilian casualties resulting from the coalition's operations; improve deteriorating humanitarian conditions; end restrictions on the flow of goods and humanitarian aid; combat Iranian support for the Houthis; preserve maritime security in the Bab al Mandab Strait; and\/or support continued Saudi-led coalition and U.S. efforts to counter Al Qaeda and Islamic State forces in Yemen.\nBeyond Yemen, many Members have appeared to view the conflict through the prism of a broader regional rivalry between Saudi Arabia and Iran, and the U.S. effort to limit Iran's malign regional influence. Others lawmakers have viewed the Yemen conflict as indicative of what they perceive as problems in the U.S.-Saudi relationship, a concern that deepened after the killing of Saudi journalist Jamal Khashoggi by Saudi government personnel in October 2018. Congress has considered but has not enacted proposals to curtail or condition U.S. defense sales to Saudi Arabia.\nResponding to the Saudi-led intervention in Yemen also appears to be reinvigorating some Members' interest in strengthening the role of Congress in foreign policy vis-a\u0300-vis the executive branch. Debate in Congress over Yemen has featured bipartisan statements of interest in asserting the prerogatives of the legislative branch to limit executive branch power, specifically using war powers legislation and the appropriations and authorization processes to curb U.S. military involvement in support of coalition operations. Congressional scrutiny of U.S. policy in Yemen also has led to legislative changes to global authorities, such as the Department of Defense's authority to enter into and use acquisition and cross servicing agreements with partner militaries.\n\n\tCongress, the Obama Administration, and Yemen (2015-2016)\n\n\t\t2015\n\nCongressional interest in the Yemen conflict has evolved and grown gradually and was not widespread at the outset of the coalition's March 2015 intervention in Yemen. In early to mid-2015, congressional interest in U.S. foreign policy in the Middle East centered on the Iran nuclear deal and Operation Inherent Resolve against the Islamic State in Iraq and Syria.\nSeveral months after the March 2015 intervention, the Saudi-led coalition had not achieved a conclusive victory and what modest gains had been made on the ground were offset by mounting international criticism of growing civilian casualties from coalition air strikes. In Congress, several lawmakers began to express concern about the deteriorating humanitarian situation in Yemen. \nIn late September 2015, Representative Ted W. Lieu wrote a letter to the Joint Chiefs of Staff advocating for a halt to U.S. support for the Saudi-led coalition until it instituted safeguards to prevent civilian casualties. In October 2015, 10 Members of Congress wrote a letter to President Obama urging him to \"work with our Saudi partners to limit civilian casualties to the fullest extent possible.\" In October 2015, Senator Markey stated that \"I fear that our failure to strongly advocate diplomacy in Yemen over the past two years, coupled with our failure to urge restraint in the face of the crisis last spring, may put the viability of this critical [U.S.-Saudi] partnership at risk.\" \nBy the fall of 2015, as the Obama Administration tried to balance its concern for adhering to the laws of armed conflict with its support for Gulf partners, lawmakers began to express their concern over U.S. involvement in the coalition's intervention by scrutinizing U.S. arms sales to Saudi Arabia. When the Administration informally notified Congress of a proposed sale of precision guided munitions (PGMs) to Saudi Arabia, some Senators sought to delay its formal notification. After the formal notification in November 2015, Senate Foreign Relations Committee (SFRC) leaders jointly requested that the Administration notify Congress 30 days prior to associated shipments, marking the first use of this prior notification request authority. At that time, no related joint resolutions of disapproval on proposed sales of PGMs to the kingdom were introduced, but the delay and additional notification request demonstrated congressional concern.\n\n\t\t2016\n\nBy the one-year anniversary of the Saudi-led intervention in Yemen, a more defined opposition to U.S. support for the coalition had begun to coalesce amid repeated international documentation of human rights abuses and errant coalition airstrikes. In April 2016, legislation was introduced that sought to place conditions on future proposed sale notifications, previously approved sales, or transfers of PGMs to Saudi Arabia. Proposed amendments to FY2017 defense legislation would have added some similar conditions on the use of funds to implement sales of PGMs or prohibited the transfer of cluster munitions to Saudi Arabia. The PGM amendment was not considered, but the cluster munitions amendment was narrowly defeated in a June 2016 House floor vote.\nIn the spring and summer of 2016, the United Nations held multiple rounds of peace talks in Kuwait aimed at brokering an end to the conflict. From April 2016 to August 2016, the Saudi-led coalition had largely spared Yemen's capital Sanaa from aerial strikes as part of its commitment to the cessation of hostilities. When U.N.-mediated peace talks collapsed in August 2016, the Saudi-led coalition resumed bombing and the war intensified. \nDuring the summer of 2016, the Obama Administration reduced some U.S. support for Saudi Arabia's air campaign in Yemen by withdrawing U.S. personnel assigned to a joint U.S.-Saudi planning cell. Nevertheless, overall U.S.-Saudi cooperation continued and, in August 2016, the Obama Administration notified Congress of a proposed sale of M1A2S tanks to Saudi Arabia. In response, some lawmakers wrote to request that President Obama withdraw the proposal, citing concerns about Yemen. In September 2016, joint resolutions of disapproval of the proposed tank sale were introduced in the Senate ( S.J.Res. 39 ) and House ( H.J.Res. 98 ). On September 21, 2016, the Senate voted to table a motion to discharge the SFRC from further consideration of S.J.Res. 39 (71-27, Record Vote 145). During debate over the motion, many Senators argued in favor of continued U.S. support for Saudi Arabia, with Senator Lindsey Graham remarking \"To those who want to vote today to suspend this aid to Saudi Arabia, people in Iran will cheer you on.\"\nIn the wake of an October 2016 Saudi airstrike on a funeral hall in Sanaa that killed 140 people, the Obama Administration initiated a review of U.S. security assistance to Saudi Arabia. Based on that review, it put a hold on a planned sale of precision guided munitions (PGMs) to Saudi Arabia and limited intelligence sharing, but maintained counterterrorism cooperation and refueling for coalition aircraft. \nIn the final months of the Obama Administration, U.S. Armed Forces briefly exchanged fire with forces party to the conflict. In October 2016, Houthi-Saleh forces launched anti-ship missiles at U.S. Navy vessels on patrol off the coast of Yemen. The attacks against the U.S. ships marked the first time U.S. Armed Forces had come under direct fire in the war. The Obama Administration responded to the attacks against U.S. naval vessels by directing the Armed Forces to fire cruise missiles against Houthi-Saleh radar installations. The Obama Administration described the U.S. strikes as self-defense and indicated that it did not want to deepen its direct involvement in the conflict. In August and November 2016, then-Secretary of State John Kerry made several attempts to broker a peace initiative in Oman, but his efforts were rejected by the parties themselves. \n\n\t\tAnalysis\n\nBy the end of 114 th Congress, the war in Yemen was becoming a more significant foreign policy issue for lawmakers. While a growing number of Members were becoming critical of the U.S. role in supporting the Saudi-led coalition amid a deteriorating humanitarian situation in Yemen, more lawmakers still viewed the conflict through a regional lens rather than as a localized affair. Amid significant congressional opposition to the 2015 nuclear agreement with Iran (Joint Comprehensive Plan of Action or JCPOA), some Members viewed Iran's support for the Houthi movement and the broader conflict in Yemen as an example of Iran's malign regional activities not directly addressed by the JCPOA. As the Houthis targeted Gulf state infrastructure on land and vessels at sea, their behavior was touted as evidence of Iran's growing capabilities to threaten U.S. and Gulf security.\nJust as some Members considered the Yemen conflict primarily a proxy war between the Iran-backed Houthis and the Saudi-led coalition, others viewed it as a test of long-standing U.S. commitments to supporting Saudi Arabian security. Supporters of the relationship, while acknowledging that Saudi Arabia's conduct of the war was at times problematic, argued that to curtail U.S. arms sales or other defense support to the kingdom would weaken a vital partner that was under threat from a hostile nonstate actor on its southern border. \nOthers lawmakers charged that continued U.S. support for the coalition was not improving coalition behavior but damaging the U.S. reputation for upholding commitments to international law and human rights. Legislation seeking to limit U.S. arms sales to Saudi Arabia was not enacted in the 114 th Congress, but marked the beginning of the broader congressional debate that has continued.\nAs the Trump Administration prepared to assume office, human rights organizations and aid groups were pressing Congress to become more attuned to the growing humanitarian crisis in Yemen. Though the Obama Administration had taken some steps, particularly in late 2016, to limit U.S.-coalition cooperation and restrict deliveries of PGMs to Saudi Arabia, nongovernmental groups deemed such action as insufficient. According to Human Rights Watch, \"Whatever conditionality the Obama administration thought it had created\u2014in holding up the transfer of precision munitions near the tail end of Obama's term and suspending cluster munition transfers earlier\u2014ultimately did not have meaningful impact in reining in the continued Saudi-led coalition attacks on civilians.\"\n\n\tCongress, the Trump Administration, and Yemen (2017-2018)\n\n\t\t2017\n\nFrom the beginning of his Administration, President Donald Trump has signaled strong support for the Saudi-led coalition's operations in Yemen as a bulwark against Iranian regional interference. He initiated a review of U.S. policy toward Yemen, including President Obama's October 2016 restrictions on U.S. arms sales and intelligence sharing to the coalition. On March 19, 2017, just prior to his visit to Saudi Arabia, President Trump notified Congress that he was proceeding with three proposed direct commercial sales of precision guided munitions technology deferred by the Obama Administration, subject to congressional review. \nIn May 2017, the Administration officially notified Congress of its intention to proceed with proposed sales of precision guided munitions technologies that the Obama Administration had deferred, while announcing plans to increase training for Saudi Arabia's air force on both targeting and the Law of Armed Conflict. Congress debated another resolution of disapproval ( S.J.Res. 42 ) of these proposed PGM sales in June 2017 (see below). After completing the policy review in July 2017, President Trump directed his Administration \"to focus on ending the war and avoiding a regional conflict, mitigating the humanitarian crisis, and defending Saudi Arabia's territorial integrity and commerce in the Red Sea.\"\nAs President Trump entered office, the dynamics of the conflict in Yemen were changing, and the coalition launched a new offensive along Yemen's 280-mile western coastal plain ultimately aimed at taking the strategic Houthi-held port city of Hudaydah. In early 2017, the coalition's gradual advance toward Hudaydah, coupled with an ongoing deterioration in humanitarian conditions, sparked some Members of Congress to implore the Administration to improve aid access and negotiate a cease-fire. In March 2017, several House Members wrote a letter to then-Secretary of State Rex Tillerson urging him to \"use all U.S. diplomatic tools to help open the Yemeni port of Hodeida [Hudaydah] to international humanitarian aid organizations.\" A month later, another group of House Members wrote to President Trump stating that Congress should approve any new U.S. support to the coalition amid its offensive against Hudaydah.\nOn June 13, 2017, the Senate debated another resolution ( S.J.Res. 42 ) to disapprove of three direct commercial sales of PGMs to Saudi Arabia. During Senate floor consideration over the motion to discharge the Senate Foreign Relations Committee from further consideration of S.J.Res. 42 , Members once again weighed various issues, such as the U.S.-Saudi bilateral relationship, countering Iran, and limiting U.S. involvement in the war in Yemen. Some lawmakers suggested that U.S. arms sales and military support to the coalition had enabled alleged violations of international humanitarian law, while others argued that U.S. support to the coalition improved its effectiveness and helps minimize civilian casualties. \nFor example, during floor debate, Senator Graham argued that \"If we are worried about collateral damage in Yemen, I understand the concern. Precision weapons would help that cause, not hurt it.\" Senator Murphy retorted, saying \"What we are asking for is to hold off on selling these precision-guided munitions until we get some clear promise\u2014some clear assurance\u2014from the Saudis that they are going to use these munitions only for military purposes and that they are going to start taking steps\u2014real steps, tangible steps\u2014to address the humanitarian crisis.\" On June 13, 2017, the Senate voted to reject the motion to discharge the Senate Foreign Relations Committee from further consideration (47-53, Record Vote 143), and a companion resolution was not taken up in the House ( H.J.Res. 102 ).\nRepresentative Ro Khanna introduced a concurrent resolution ( H.Con.Res. 81 ) pursuant to the War Powers Resolution ( P.L. 93-148 ) in a bid to end U.S. support for the coalition's military intervention. After consultation between House leaders and supporters of the resolution on a compromise approach, the House agreed to delay expedited consideration of the resolution until after the November 2016 election and then adopted a nonbinding alternative ( H.Res. 599 , 366-30, 1 Present, Roll no. 623). \nIn his first year in office, while President Trump sought to improve relations with Saudi Arabia, counter Iran, and increase U.S. counterterrorism activity in Yemen, his Administration also at times took strong positions on the need for members of the coalition to improve humanitarian access, pursue a settlement to the conflict, and take measures to prevent civilian casualties.\nAfter a Houthi-fired missile with alleged Iranian origins landed deep inside Saudi Arabia in November 2017, the coalition instituted a full blockade of all of Yemen's ports, including the main port of Hudaydah, exacerbating the country's humanitarian crisis. The White House issued four press statements on the conflict between November 8 and December 8, including a statement on December 6 in which President Trump called on Saudi Arabia to \"completely allow food, fuel, water, and medicine to reach the Yemeni people who desperately need it. This must be done for humanitarian reasons immediately.\"\nOn December 20, 2017, the Saudi-led coalition announced that it would end its blockade of Hudaydah port for a 30-day period and permit the delivery of four U.S.-funded cranes to Yemen to increase the port's capability to off-load commercial and humanitarian goods. The next day, the White House issued a statement welcoming \"Saudi Arabia's announcement of these humanitarian actions in the face of this major conflict.\"\n\n\t\t2018\n\nAs the Saudi-led coalition intervention entered its fourth year, some in the Senate also proposed use of the War Powers Resolution as a tool for ending U.S. support for the coalition's military intervention. On February 28, 2018, Senator Bernie Sanders introduced S.J.Res. 54 , a joint resolution to \"direct the removal of United States Armed Forces from hostilities in the Republic of Yemen that have not been authorized by Congress (except for those U.S. forces engaged in counterterrorism operations directed at al Qaeda or associated forces).\" Efforts in the Senate followed a late 2017 attempt in the House (see Table 1 below), in which a concurrent resolution directing the President to remove U.S. forces from Yemen was tabled in favor of a House-passed nonbinding resolution. \nThroughout 2018, between Congress and the Trump Administration and within Congress itself, there was disagreement as to whether U.S. forces assisting the Saudi-led coalition have been introduced into active or imminent hostilities for purposes of the War Powers Resolution. Some Members claimed that by providing support to the Saudi-led coalition, U.S. forces have been introduced into a \"situation where imminent involvement in hostilities is clearly indicated\" based on the criteria of the War Powers Resolution. The Trump Administration disagreed. In February 2018, the Acting Department of Defense General Counsel wrote to Senate leaders describing the extent of current U.S. support , and reported that \"the United States provides the KSA-led coalition defense articles and services, including air-to-air refueling; certain intelligence support; and military advice, including advice regarding compliance with the law of armed conflict and best practices for reducing the risk of civilian casualties.\" \nOn March 20, 2018, the Senate considered S.J.Res. 54 on the floor. During debate, arguments centered on a number of issues, ranging from concern over exacerbating Yemen's humanitarian crisis to reasserting the role of Congress in authorizing the use of armed force abroad. After then-Foreign Relations Committee Chairman Senator Bob Corker promised to propose new legislation and hold hearings scrutinizing U.S. policy in Yemen, a majority of Senators voted to table a motion to discharge the Foreign Relations committee from further consideration of S.J.Res. 54 . Senator Robert Menendez made remarks expressing conditional support for Senator Corker's approach, a view shared by some other Senators who voted to table the motion. \nThe Foreign Relations Committee held a hearing on Yemen a month later. In parallel testimony before Congress, U.S. defense officials stated that while the United States refueled Saudi aircraft and provided advice on targeting techniques, CENTCOM did not track coalition aircraft after they were refueled and did not provide advice on specific targets. Then-Assistant Secretary of Defense for International Security Affairs Robert S. Karem testified that \"It's correct that we do not monitor and track all of the Saudi aircraft aloft over Yemen.\" During the same hearing, U.S. officials acknowledged that pressure from Congress has altered how the Administration deals with the coalition over the Yemen conflict. Acting Assistant Secretary of State for Near Eastern Affairs David Satterfield told Senator Todd Young and the SFRC the following:\nSenator, your efforts, the efforts of your colleagues in this body and on this Committee have been exceedingly helpful in allowing the Administration to send a message from whole of government regarding the very specific concerns we have over any limitations, restrictions, constraints on the ability of both humanitarian and commercial goods specifically to include fuel to have unrestricted and expeditious entry into Yemen. And that messaging which comes from us, the Executive Branch, also comes from this body is extremely important.\nAfter the promised hearing, the Senate Foreign Relations Committee also proposed new legislation to place conditions on U.S. assistance to the coalition. In May, the committee reported S.J.Res. 58 to the Senate; it would have prohibited the obligation or expenditure of U.S. funds for in-flight refueling operations of Saudi and Saudi-led coalition aircraft that were not conducting select types of operations if certain certifications cannot be made and maintained. \nThe Senate Armed Services Committee incorporated the provisions of the SFRC-reported text of S.J.Res. 58 as Section 1266 of the version of the FY2019 National Defense Authorization Act (NDAA) that it reported to the Senate on June 5, 2018 ( S. 2987 ). The provision was modified further and passed by both the House and Senate as Section 1290 of the conference version of the FY2019 NDAA ( H.R. 5515 ). It was signed into law as P.L. 115-232 in mid-August, giving the Administration until mid-September 2018 to make certain certifications. In a statement accompanying the President's signing of P.L. 115-232 into law, President Trump objected to provisions such as Section 1290, stating the Administration's view that such provisions \"encompass only actions for which such advance certification or notification is feasible and consistent\" with \"[his] exclusive constitutional authorities as Commander in Chief and as the sole representative of the Nation in foreign affairs.\"\nAs Congress continued to question the role of the United States in supporting coalition operations in Yemen, the pace and scale of fighting on the ground increased dramatically by the summer of 2018. On June 12, 2018, the Saudi-led coalition launched \"Operation Golden Victory,\" aimed at retaking the Red Sea port city of Hudaydah. As coalition forces engaged Houthi militants in and around Hudaydah, humanitarian organizations warned that if port operation ceased, famine could become widespread throughout northern Yemen. On June 12, nine Senators wrote a letter to Secretary of State Pompeo and then-Secretary of Defense Mattis saying, \"We are concerned that pending military operations by the UAE and its Yemeni partners will exacerbate the humanitarian crisis by interrupting delivery of humanitarian aid and damaging critical infrastructure. We are also deeply concerned that these operations jeopardize prospects for a near-term political resolution to the conflict.\" \nSeveral weeks later, Senator Robert Menendez, the ranking member on the Senate Foreign Relations Committee, placed a hold on a potential U.S. sale of precision guided munitions to Saudi Arabia and the United Arab Emirates. In a June 28 letter to Secretary of State Pompeo and Secretary of Defense Mattis, Senator Menendez said, \nI am not confident that these weapons sales will be utilized strategically as effective leverage to push back on Iran's actions in Yemen, assist our partners in their own self-defense, or drive the parties toward a political settlement that saves lives and mitigates humanitarian suffering\u2026. Even worse, I am concerned that our policies are enabling perpetuation of a conflict that has resulted in the world's worst humanitarian crisis.\nOn August 9, the coalition conducted an airstrike that hit a bus in a market near Dahyan, Yemen, in the northern Sa'ada governorate adjacent to the Saudi border. The strike reportedly killed 51 people, 40 of whom were children. The coalition claims that its airstrike was a \"legitimate military operation\" and conducted in response to a Houthi missile attack on the Saudi city of Jizan a day earlier that killed a Yemeni national in the kingdom. The U.S. State Department called on the Saudi-led coalition to conduct a \"thorough and transparent investigation into the incident.\" \nSeveral Members of Congress wrote to the Administration seeking additional information regarding U.S. operations in the wake of the August 2018 coalition strike at Dahyan. Several Senators also submitted an amendment to the FY2019 Defense Department appropriations act ( H.R. 6157 ) that would have prohibited the use of funds made available by the act to support the Saudi-led coalition operations in Yemen until the Secretary of Defense certifies in writing to Congress that the coalition air campaign \"does not violate the principles of distinction and proportionality within the rules for the protection of civilians.\" The provision did not apply to support for ongoing counterterrorism operations against Al Qaeda and the Islamic State in Yemen.\nOn September 12, Secretary of State Mike Pompeo issued a certification that would allow the use of FY2019 defense funds to support in-flight refueling of coalition aircraft to continue, per the terms of Section 1290 (see discussion above) of the FY2019 National Defense Authorization Act (NDAA, P.L. 115-232 ). Some Members of Congress criticized the Administration's actions, asserting that the coalition has not met the act's specified benchmarks for avoiding civilian casualties in Yemen. \nOn September 26, several House Members introduced H.Con.Res. 138 , which sought to direct the President to remove U.S. Armed Forces from hostilities in Yemen, except for Armed Forces engaged in operations authorized under the 2001 Authorization for Use of Military Force, within 30 days unless and until a declaration of war or specific authorization for such use has been enacted into law. In response to a similar initiative in the Senate, the Administration submitted a detailed argument expressing its view that U.S. forces supporting Saudi-led coalition operations are not engaged in hostilities in Yemen.\nBy late 2018, the prospect of widespread famine in Yemen coupled with international reprobation over the killing of Jamal Khashoggi pressured the Administration and the coalition to accelerate moves toward peace talks. On October 30, then-Secretary of Defense James Mattis and Secretary of State Mike Pompeo called for all parties to reach a cease-fire and resume negotiations. On November 9, Secretary Mattis further announced that effective immediately, the coalition would use its own military capabilities\u2014rather than U.S. capabilities\u2014to conduct in-flight refueling in support of its operations in Yemen. \nThough fighting continued along several fronts, on December 13, 2018, Special Envoy of the United Nations Secretary-General for Yemen Martin Griffiths brokered a cease-fire centered on the besieged Red Sea port city of Hudaydah (Yemen's largest port). As part of the U.N.-brokered deal (known as the Stockholm Agreement), the coalition and the Houthis agreed to redeploy their forces outside Hudaydah city and port. The United Nations agreed to chair a Redeployment Coordination Committee (RCC) to monitor the cease-fire and redeployment. The international community praised the Stockholm Agreement as a first step toward broader de-escalation and a possible road map to a comprehensive peace settlement. \nAlso on December 13, 2018, the Senate amended and passed S.J.Res. 54 (56-41), which, among other things, directed the President to remove U.S. forces from hostilities in Yemen, except U.S. forces engaged in operations directed at Al Qaeda or associated forces. In the House, lawmakers twice narrowly approved rules resolutions containing provisions that made similar resolutions directing the President to remove U.S. forces from hostilities in Yemen ineligible for expedited consideration ( H.Res. 1142 and H.Res. 1176 ). On December 13, the Senate also passed S.J.Res. 69 , which, among other things, expresses the sense of the Senate that Saudi Crown Prince Mohammed bin Salman is responsible for the murder of the journalist Jamal Khashoggi and that there is no statutory authorization for United States involvement in hostilities in the Yemen civil war.\n\n\t\tAnalysis\n\nThe 115th Congress frequently debated the extent and terms of the United States' involvement in the ongoing conflict in Yemen. Lawmakers questioned the extent to which successive Administrations have adhered to existing law related to providing security assistance, including sales or transfers of defense goods and defense services, while upholding international human rights standards (e.g., 22 U.S.C. \u00a72754 or 22 U.S.C. \u00a72304). They also enacted new legislation that would condition or prohibit the use of U.S. funds for some activities related to Yemen and extend legislative oversight over the executive branch's policy toward the war in Yemen. \nWhile the House and its Rules Committee voted to make resolutions with respect to war powers and Yemen ineligible for expedited consideration, the Senate passage of S.J.Res. 54 at the conclusion of the 115 th Congress demonstrated growth in congressional opposition to U.S. involvement in the Saudi-led coalition intervention in Yemen relative to previous years. Over time, the balance of votes shifted in favor of measures that could be described as critical or restrictive of U.S. support for Saudi-led coalition operations with regard to arms sales, oversight measures, and war powers measures.\nNevertheless, after nearly four years of conflict, it remains difficult to identify the locus of congressional consensus about Yemen. Many in the House and Senate state that they seek to preserve cooperative U.S.-Saudi relations in broad terms and express concern about Iranian activities in Yemen, while also expressing support for expanded humanitarian access and efforts to bring the conflict to a close. Some lawmakers express opposition to the intervention and U.S. involvement on moral grounds, citing errant coalition airstrikes and the prospect of a looming famine. Others argue the conflict's continuation creates opportunities for Iran and Sunni Islamist extremist groups to expand their influence and operations in Yemen. Still others may have come to oppose continued U.S. support for the intervention based on factors not directly related to Yemen itself, including the opaque mechanisms used by the executive branch to support the coalition and\/or anger with the Saudi government over the killing of Jamal Khashoggi. \nIt remains to be seen whether recent congressional consideration of Yemen legislation is a harbinger of broader efforts by Members of Congress to reassert congressional prerogatives toward U.S. foreign policy writ large. Measures to enhance oversight over U.S. support to the Saudi-led coalition and U.S. strategy toward Yemen have received broad bipartisan support, while proponents of other recently considered arms sales and war powers measures have used mechanisms to ensure privileged consideration of their proposals. \nThe 116 th Congress may continue to debate U.S. support for the Saudi-led coalition and Saudi Arabia's conduct of the war in Yemen. It is uncertain whether lawmakers may also broaden the scope of their oversight activities beyond the current conflict to more fully address the root causes of Yemen's chronic instability. Even if the United States is no longer an active supporter of coalition military efforts, Yemen itself has been devastated by years of war and remains the world's worst humanitarian crisis. Experts expect Yemen to require sustained international attention and financial assistance in order to help local actors reach and sustain a political settlement. This suggests that Congress may grapple with questions about the conduct of U.S. diplomacy, the provision of U.S. security support, and the investment of U.S. assistance and defense funds for years to come.","output":"This product provides an overview of the role Congress has played in shaping U.S. policy toward the conflict in Yemen. Summary tables provide information on legislative proposals considered in the 115th and 116th Congresses. Various legislative proposals have reflected a range of congressional perspectives and priorities, including with regard to\nthe authorization of the activities of the U.S. Armed Forces related to the conflict; the extent of U.S. logistical, material, advisory, and intelligence support for the coalition led by Saudi Arabia; the approval, disapproval, or conditioning of U.S. arms sales to Saudi Arabia; the appropriation of funds for U.S. operations in support of the Saudi-led coalition; the conduct of the Saudi-led coalition's air campaign and its adherence to international humanitarian law and the laws of armed conflict; the demand for greater humanitarian access to Yemen; the call for a wider government assessment of U.S. policy toward Yemen and U.S. support to parties to the conflict; the nature and extent of U.S.-Saudi counterterrorism and border security cooperation; and the role of Iran in supplying missile technology and other weapons to the forces of the Houthi movement.\nThe 116th Congress may continue to debate U.S. support for the Saudi-led coalition and Saudi Arabia's conduct of the war in Yemen, where fighting has continued since March 2015. The war has exacerbated a humanitarian crisis in Yemen that began in 2011; presently, the World Food Program reports that 20 million Yemenis face hunger in the absence of sustained food assistance. The difficulty of accessing certain areas of Yemen has made it hard for governments and aid agencies to count the war's casualties. Data collected by the U.S. and European-funded Armed Conflict Location & Event Data Project (ACLED) suggest that 60,000 Yemenis have been killed since January 2016.\nThe Trump Administration has opposed various congressional proposals, including initiatives to reject or condition proposed U.S. arms sales or to require an end to U.S. military support to Saudi-led coalition operations in Yemen. Many in Congress have condemned the October 2018 murder of Saudi journalist Jamal Khashoggi by Saudi government personnel, and in general, the incident appears to have exacerbated existing congressional concerns about Saudi leaders and the pace, scope, and direction of change in the kingdom's policies.\nThis product includes legislative proposals considered during the 115th and 116th Congresses. It does not include references to Yemen in Iran sanctions legislation, which are covered in CRS Report RS20871, Iran Sanctions. For additional information on the war in Yemen and Saudi Arabia, please see the following CRS products.\nCRS Report R43960, Yemen: Civil War and Regional Intervention.\nCRS Report RL33533, Saudi Arabia: Background and U.S. Relations.\nCRS Insight IN10729, Yemen: Cholera Outbreak."}
{"id":"gao_GAO-19-21","pid":"gao_GAO-19-21_0","input":"\tBackground\n\nVHA policy requires that all medical facilities provide a safe, clean,  functional environment for patients, visitors, and employees. The Joint  Commission,  an organization that accredits medical centers and other  hospitals throughout the country, has developed standards that require  medical centers to undertake several actions that relate to engineering,  environmental management, and safety including: maintaining the patient environment by ensuring that a suitable  temperature is maintained, that areas are clean and appropriately  lighted, and furnishings and equipment are in good repair; managing utility systems to ensure operational reliability; and minimizing fire hazards and providing a safety system in case of fire.\nTo help ensure medical centers maintain these standards, VHA requires  medical centers to conduct regular environment of care inspections of the  facility. According to VHA officials, because of the large size of many  medical centers, most conduct environment of care inspections in a  different part of their facility every week throughout the year. In 2016, a  VHA directive formally established VHA\u2019s Comprehensive Environment of  Care Program (Environment of Care Program) and outlined management  and oversight responsibilities for the program. Environment of care  inspections are a main component of the program.\nIn addition to the environment of care inspections, VHA uses other  inspections to help execute and oversee facility operations and  maintenance functions. For example, every 3 years, VA contracts for  Facility Condition Assessments, where contractors evaluate all buildings  and major systems at a medical facility (e.g., structural, mechanical, plumbing, and others) and identifies needed repairs and replacements.  This inspection gives a graded score from A to F for VHA facilities, with  \u201cC minus\u201d as the average facility score received for overall infrastructure  conditions at VHA facilities as of 2015. This inspection focuses on major  systems, while environment of care inspections focus on day-to-day  facility conditions, including that of patient-care areas. Furthermore,  preventative maintenance inspections are usually conducted on systems,  such as boilers or heating, ventilation, and air-conditioning (HVAC)  systems, and would vary in frequency based on the manufacturer  requirements. Medical center staff also noted that facility operations and  maintenance issues may be identified by staff in the course of their day- to-day duties and reported to engineering for repair.\nVHA medical centers employ staff trained in plumbing, carpentry, grounds  maintenance, and other trades needed to maintain facilities, as well as  housekeeping staff. These employees are responsible for carrying out the  work necessary to ensure medical centers comply with safety standards,  and VHA policies and inspection requirements.\nThe majority of funding for medical centers, including funding for  operations and maintenance, is determined on the basis of past years\u2019  allocations, veteran populations served, and the types of services  provided. The budget for VA medical facilities has increased by  approximately 30 percent over the last 5 fiscal years.\n\n\tMedical Centers Rely on Environment of Care Inspections to Identify Deficiencies but May Encounter Challenges in Completing Needed Repairs\n\n\t\tEnvironment of Care Inspections\n\nThe medical center director or a designee, such as the medical center\u2019s  Environment of Care Coordinator, has the overall responsibility for  managing and leading weekly environment of care inspections at a  medical center. Each medical center should have an environment of care  committee, and the medical center director or a designee should facilitate  committee meetings to discuss the environment of care processes,  findings, trends, and any other related issues. Inspections are conducted  by an environment of care inspection team, which is made up of  representatives from various facility departments, including, among  others:\nEnvironmental Management Service\u2014which is responsible for  ensuring a state of physical and biological cleanliness, including  proper handling of waste materials\u2014and\nEngineering Service, which is responsible for utilities that allow the  physical plant to function, including basic systems such as heating  and electrical, among others.\nAccording to VHA guidance, the team is to conduct its inspections using a  VHA checklist as a guide to determine if there are any deficiencies. For  example, the checklist includes questions such as:\nAre there loose floor tiles\/carpet?\nAre ceiling tiles stained or other signs of leaks?\nAre there any electrical hazards present?\nTeam members record information on deficiencies that they identify into  an Environment of Care inspections database, which is used to document  and track the status of deficiencies.\nDuring interviews with medical center staff at all six of the medical centers  included in our review, officials told us they follow the environment of care  inspections process that VHA guidance outlines. At two of the medical  centers we visited, we accompanied inspections team on environment of  care inspections and observed staff following this process. The inspection  teams walked through the areas designated for inspection, for example  examining conditions of floors, ceilings and fire safety systems. Also, as  we discuss later in the report, VHA officials also monitor aspects of the  inspections process, such as who attends the inspection. VHA officials  told us they also collect data on performance measures related to  utilization of the environment of care checklists and environment of care  inspections process but no longer track these measures because medical  centers achieved 100 percent utilization of these measures in 2015.  Figure 1 below details the process used to identify and address  deficiencies, as outlined in VHA guidance.\nAs previously mentioned, VHA guidance considers these inspections to  be critical to all aspects of patient care in a medical facility, and officials at  all six medical centers confirmed that they rely on these inspections to  identify needed repairs. For example, officials in one medical center noted  that the frequency and thoroughness of these inspections has helped  them determine day-to-day wear and tear issues and informed their  planning processes. Medical center staff noted that condition deficiencies  identified through this process are often minor but are nonetheless  important to maintenance of a clean and safe patient environment. For  example, a damaged or stained ceiling tile identified during an inspection  could be a potential safety hazard to patients or indicate an issue with  leaking pipes. The replacement of the tile itself is a minor repair, but that  repair could be an indication of an important maintenance issue at the  medical center. As table 2 below shows, the deficiencies commonly  identified through the inspections process include items that need to be  cleaned or dusted or walls that need minor repairs.\nMedical center staff we interviewed said, in general, the most common  environment of care deficiencies can be addressed by medical center  staff, but medical centers told us they sometimes use contractors if  warranted. In most cases, a deficiency can be addressed with simple  repairs such as patching and repainting walls, replacing stained and  damaged tiles, or by cleaning. On our site visits, we saw examples of the  types of issues that medical center staff address during environment of  care inspections. In one case, we were shown a recurring deficiency at  the medical center caused by moving hospital beds. Moving beds in and  out of rooms was damaging the plaster corners of a wall near the door.  We were also shown the solution, which was a metal corner guard the  medical center had installed in some rooms, and the center was working  to install corner guards in other locations as funds became available.  Figure 2 below shows examples of deficiencies we observed during  environment of care inspections at medical centers.\nOther types of condition deficiencies that are not directly in the  environment of care, such as a broken boiler, typically would not be  identified during environment of care inspections, but rather medical  center staff said they are identified during scheduled preventive  maintenance activities, or during other facility inspections. Regardless of  how they are identified, more serious repairs often require a different  funding and approval process than day-to-day maintenance. For  example, if significant damage occurred to a medical center\u2019s roof and the  cost of repairs is greater than $25,000, it would most likely be deemed a  non-recurring maintenance project and would require approval from either  the VISN or VA\u2019s central office.\n\n\t\tChallenges in Addressing Identified Deficiencies\n\nThe buildings that VHA manages are, on average, 55 years old, and  many have substantial capital repair and improvement needs. A VA- commissioned report noted that there were significant barriers that facility  management staff faced in maintaining facilities to a high quality.  According to the report, while some of these barriers involved immediate  resource constraints such as budgets for staffing and conducting  maintenance and janitorial tasks, the root cause of many of these issues  is the general age and underlying condition of VHA facilities.\n\n\t\t\tWorkload\n\nEngineering officials at medical centers told us that the amount of work  associated with conducting weekly inspections and addressing  environment of care deficiencies is substantial. For example, according to  VHA\u2019s data for fiscal year 2017, medical centers reported conducting  about 11,000 weekly inspections, during which more than 128,000  deficiencies were identified. Most deficiencies were closed within 14  business days, as required by VHA policy, but nearly 30,000 deficiencies  across all medical centers had not been addressed within 14 days or had  been addressed through a plan for future work.\nOne significant factor contributing to the number of deficiencies and the  associated workload is the advanced age of many medical centers. A  VHA commissioned study found that the general age and underlying  condition of medical centers, including VHA buildings\u2019 being older than 50  years on average and lack of capital investment to address infrastructure  concerns, are the root causes of many barriers that facility management  staff faced in achieving their objectives of maintaining high quality  facilities, and exacerbate the workload issues at these medical centers.  This observation was echoed by medical center officials in our review. For  example at one medical center officials told us that in some cases,  correcting deficiencies found on an environment of care inspection is a  temporary solution for issues related to aging structures that need  extensive repairs and renovations. For example, a roof that needs to be  repaired due to leaks and other structural issues may result in an  increase in the number of interior ceiling tiles with water stains.  Maintenance staff must then continue to identify and replace stained  ceiling tiles, until the root cause, which is subject to a different funding  and approval process, is addressed.\nAlso, medical center staff we interviewed said the administrative  requirements associated with the environment of care program  contributed to workload challenges. Medical center staff are responsible  for entering deficiency data into the Environment of Care inspections  database, which is used to document and track results from the  environment of care inspections. The same staff can also be responsible  for reconciling the environment of care inspections database with other  systems, like the medical center\u2019s work order system and other  inspections databases. Medical center staff said that each deficiency  can result in as many as four or more separate data entry actions in the  Environment of Care inspections database and in a separate system  used to track work orders. As an example of the administrative workload  related to the inspection process, the Long Beach medical center in California, whose main building was built in 1967, reported the most  deficiencies in its VISN. According to VHA data, this medical center  reported more than 3,500 environment of care deficiencies related to  facility condition in fiscal year 2017, and medical center officials said this  resulted in as many as 12,000 or more separate data-entry actions.\nAdditionally, VHA\u2019s aging information technology systems exacerbate the  administrative workload. VA medical center officials told us that VHA\u2019s  work order system lacks interoperability with the Environment of Care  inspections database, resulting in the need to manually record information  on deficiencies in both systems. Officials we spoke with at VA medical  centers told us that this process can substantially add to post-inspection  workload and to the administrative burden associated with tracking and  closing out deficiencies. Medical center staff also noted that it can often  be the same staff member performing environment of care inspections,  conducting the work to correct deficiencies, and performing administrative  tasks.\nLimitations in VA\u2019s information technology systems, among other things,  led GAO to designate VA health care as a high-risk area. Information  technology limitations we previously identified at VA include the outdated,  inefficient nature of certain systems and a lack of system  interoperability.\n\n\t\t\tStaffing\n\nStaffing shortages have also been recognized by VA\u2019s Central Office staff  as an issue that needs to be addressed across VA facilities. For example,  officials said that in addition to the engineering staff\u2019s shortages  discussed below, there is also a known shortage at many medical centers  of qualified cleaning and janitorial staff, a shortage that can affect the  ability for medical centers to quickly address some of the environment of  care deficiencies. Additionally, we have previously reported that VA is  collaborating with the Office of Personnel Management to address  challenges with recruiting and retaining engineering positions.\nOfficials at medical centers included in our review discussed the difficulty  of recruiting and retaining employees to perform maintenance work, such  as painters, electricians, and other relevant maintenance trades. All six of  the medical centers reported vacancies during the last year in  engineering department positions that are needed to complete  maintenance and repairs, such as electricians and painters. The extent to  which these medical centers experienced vacancies, however, varied  widely. The lowest number of reported vacancies by a medical center was  two and the highest number of reported vacancies was 49. Factors cited  by medical center officials on why they had difficulty hiring and retaining  staff encompassed a range of issues, including loss of long-time staff due  to retirement, and a lack of qualified applicants for vacant positions. For  example, medical centers located in and around Los Angeles, California,  reported that their location\u2014in a high cost of living area with a competitive  private-sector jobs market\u2014affected their ability to recruit and retain  these employees. Conversely, medical centers located farther from urban  areas reported difficulty finding and retaining staff due to their relatively  rural locations and smaller overall population.\nOfficials from all six medical centers said that while they endeavor to  address all environment of care deficiencies in accordance with the  inspection requirements, these vacancies affected their ability to perform  maintenance and repair functions. For example, officials from one  medical center reported that four out of seven electrician positions at their  medical center were vacant. The officials said in addition to their rural  location, their need for engineering staff knowledgeable in a range of  electrical systems made recruitment difficult. Their facility has buildings  that are over 50 years old, as well as newer buildings, with significantly  different electrical systems. The officials noted that while all electrical  work was eventually completed, the lack of staff slowed or deferred  repairs, or required contract labor. Another medical center noted that a  shortage of relevant engineering staff meant that work orders and  preventative maintenance functions were backlogged and that they had to  utilize overtime to accomplish required functions. When faced with  changing workload demands and staffing shortages, medical centers can,  and do, utilize contractors.\n\n\tVHA Takes Steps to Help Medical Centers Comply with Inspection Requirements but Does Not Have Goals or Measures to Determine Program Effectiveness\n\nWhile VHA provides guidance and oversight to ensure medical centers  implement the environment of care inspection process, it lacks  performance goals, objectives, and measures that would enable it to  assess how well it is achieving its policy of a clean, safe, and functional  environment. We have previously found that results-oriented  organizations set performance goals to define desired program outcomes  and develop performance measures that are clearly linked to these  performance goals and outcomes. Program goals communicate what  results the agency seeks, and performance measures show the progress  the agency is making toward achieving program goals. Performance  measurement also gives managers crucial information to identify gaps in  program performance and plan any needed improvements. Without such  goals and measures in place, VHA is limited in its ability to effectively  manage the Environment of Care Program, including making effective  use of program data and addressing obstacles to improving program  performance.\n\n\t\tVHA\u2019s Oversight of the Environment of Care Program Focuses on Compliance with Inspections Requirements\n\nVHA\u2019s oversight of the Environment of Care Program focuses on ensuring  that medical centers are conducting the inspections according to VHA  requirements. To help medical centers achieve compliance with the  inspection requirements, VHA does the following: develops guidance for medical center and VISN staff on their roles  and responsibilities in conducting inspections and compliance  monitoring, and on how to use the Environment of Care inspections  database software; oversees the deployment and maintenance of the Environment of  Care inspections database software, which medical centers use to  track deficiencies and staff attendance at inspections, among other  things; and provides summary reports from inspections data on deficiencies,  closure status, and staff attendance rate at inspections to officials at  the medical center and VISN-level for program management purposes  To monitor a medical center\u2019s compliance with environment of care  requirements, VHA tracks three measures, which, according to VHA  officials, were established to ensure that medical centers were meeting  requirements related to the inspections process, such as having relevant  staff present for the inspections. Table 3 below shows the three measures  VHA currently uses along with the related performance targets.\nWe have previously reported that performance measures should focus on  outcomes to help agencies manage programs to achieve desired  results. VHA\u2019s current measures do not indicate whether desired  outcomes are being achieved or how effective inspections are but rather  whether staff are following policies related to inspections. As a result,  these measures provide program managers with little information on the  actual quality of the environment of care, such as the level of cleanliness  and safety provided. For example:\nOne performance measure is based on the requirement that medical  centers address deficiencies within 14 days, either by fixing the  problem or by preparing an action plan describing how the problem  will be fixed. However, because this requirement can be met with an  action plan, it is not a useful measure for understanding the  deficiencies that have not yet been remediated.\nSimilarly, the two performance measures on staff attendance at  inspections do not directly relate to the condition of the facility but  reflect the level of compliance with inspection requirements. We  spoke with officials at one medical center who said vacancies within  their information security office prevented them from meeting the  inspection team attendance measure. However, officials said the staff  absence did not affect the inspection team\u2019s ability to perform an  inspection and determine facility deficiencies, given that relevant  engineering staff was present.\nFurthermore, we have previously reported that VHA needs to strengthen  aspects of the environment of care inspection process to ensure more  complete and accurate data on medical center compliance with  environment of care standards, and provide better oversight of the  system.\n\n\t\tVHA Has Not Established Outcome-Oriented Performance Goals, Objectives, and Related Measures\n\nVHA has not defined program goals and objectives and related  performance measures, and is therefore limited in its ability to determine  how well program activities, including the environment of care inspection  process, are supporting the agency\u2019s broader policy of providing a clean,  safe, and functional environment. VHA\u2019s current performance measures  are not tied to specific performance goals for the Environment of Care  Program, as such goals have not yet been created. Nor do these  performance measures provide useful information on the actual condition  of facilities or desired outcomes. As a result, these metrics provide VHA  with limited information on how to better manage the program to ensure  clean, safe, and functional medical facilities that, at a minimum, meet the  Joint Commission standards. Without clearly defined and outcome- oriented goals, it will be challenging for VHA to determine what type of  evaluative information it will need to monitor the progress of the  Environment of Care Program, identify how system-wide challenges such  as staffing shortages are affecting outcomes, and improve medical center  conditions.\nVHA has stated it intends to create goals and objectives for the  Environment of Care Program, along with performance measures to  assess whether the goals and objectives are being achieved, but it has  not yet done so. The VHA directive from 2016 that created the  Environment of Care Program directed program officials to establish a  steering committee, whose responsibilities would include, among other  things, developing goals, objectives, and related performance measures  for the program. According to a VHA official, VHA formed this committee  in January 2018, following delays caused by leadership vacancies and  competing demands within the agency. In June 2018, the committee  finalized its charter, which states that the scope of the committee\u2019s  activities is to include defining goals, objectives, performance metrics,  and targets for the Environment of Care Program. VHA officials do not  have a timeline in place for when they expect to complete the steps they  defined in the charter.\n\n\tConclusions\n\nTo provide quality care for the nation\u2019s veterans, medical centers must be  clean, safe, and functional. This standard can be a challenge given the  substantial capital repair and improvement needs in many of these  facilities. The Environment of Care Program is an important part of VHA\u2019s  efforts to ensure medical centers are maintained in accordance with  accreditation requirements. However, absent clear goals, objectives, and  performance measures, and a timeline for developing them, VHA will  continue to be limited in its ability to assess how effective the program is  at ensuring a safe, clean, and functional environment. Setting outcome- oriented program goals and objectives provides structure to then  reevaluate existing performance measures or set new ones, all of which  would improve oversight, help VHA determine the effectiveness of the  program, and target areas in need of improvement.\n\n\tRecommendation for Agency Action\n\nWe are making the following recommendation to VHA:  The Undersecretary for Health should set a timeline for defining goals,  objectives, and outcome-oriented performance measures for the  Environment of Care Program. (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to VA for comment. In its written  comments, reproduced in appendix I, VA stated it concurred with our  recommendation. VA also provided technical comments, which we  incorporated as appropriate.\nAdditionally, VA provided general comments on our report. In those  general comments, VA questioned how we characterized the  Environment of Care Program in the context of Facility Condition  Assessments, the age of its buildings, and software interoperability, and  stated that responsibility for a successful Environment of Care Program  lies at the medical center. We agree it is important to have a strong  Environment of Care Program that is facilitated by leadership at the  medical center and VISN-levels. However, even with strong leadership  and a robust Environment of Care Program, underlying facility condition  issues\u2014impacted by the age of the facility\u2014can affect the kind of  deficiencies found during inspections. These challenges impacted  elements of the Environment of Care Program at all of the medical  centers in our review.\nVA also stated that the report did not adequately reflect the significance of  the environment of care committees at each medical center, and that  performance measures at the national level are measures of compliance,  not a measure of success. We have made relevant revisions in the report  to reflect the role these committees play as a part of the inspections  process. We also agree with VA that the metrics established nationally  are not a measure of success for the various medical centers\u2019  Environment of Care Programs. While the primary responsibility for the  Environment of Care Program and its inspections is at the medical center  and VISN-level, it is still important for VA to have national level  performance measures. Without them, gauging national level  performance and analyzing trends across medical centers is difficult. In  concurring with our recommendation, VA has positioned itself to create  and implement measures to support medical centers and the  Environment of Care Program.\nVA also made comments related to the non-recurring maintenance  approval and funding process, and highlighted a pilot to test a tool to  replace its current facility condition assessment. We have made revisions  to footnotes and relevant report sections as appropriate to address the  changes noted by VA to the non-recurring maintenance approval and  funding process, and added a footnote acknowledging the pilot.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Veterans Affairs, the Undersecretary of  Veterans Affairs for Health, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff members have any questions regarding this report,  please contact Andrew Von Ah at (202) 512-2834 or vonaha@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix III.\n\nAppendix I: Comments from the Department of Veterans Affairs\n\nAppendix II: Inspections Related to the Condition of Veterans Health Administration\u2019s (VHA) Facilities\n\nAppendix II: Inspections Related to the  Condition of Veterans Health Administration\u2019s  (VHA) Facilities Purpose  The Facility Condition Assessment   evaluates all buildings and major   systems at a medical facility and   identifies needed repairs and   replacements. This inspection   gives a graded score from A to F   for VHA facilities.\nFrequency  Facility Condition Assessments are   done on a rotating basis, with each  Veterans Integrated Service Network  (VISN) being evaluated every 3 years.  The information gathered during each  Facility Condition Assessment is put   into a Facility Condition Assessment  database for each facility identified by  building, system, and condition. Each  system has an associated cost for  identified repairs and replacements.  These data allow for planning and  expenditure of resources within the  VISNs. This information enables the  VISN to plan, manage, and direct   capital resources against identified   needs in a consistently managed  approach across the VA system.\nGreen Environmental Management System  ensures VHA compliance with relevant  federal, state and local environmental   statutes and regulations; increases the  efficiency of energy, water and other   resource usage; helps reduce regulated   air emissions; utilizes pollution prevention  principles; incorporates environmentally  preferable practices for the design,  construction and operation of buildings;   and ensures that VHA facilities are good  neighbors in the local communities.\nGreen Environmental Management  System inspections are done   annually.\nThe primary purpose and intent of the   Annual Workplace Evaluation is to ensure  occupational safety and health evaluations   of all worksites are completed and comply   with Occupational Safety and Health  Administration and agency requirements.   The objective is to evaluate Occupational  Safety and Health Administration   compliance, current building conditions,   work practices, and Occupational Safety   and Health Administration program  implementation throughout the facility and   at offsite campuses such as rented office  buildings, clinics, labs, etc.\nAnnual Workplace Evaluations are  required to be performed at least   once every fiscal year. The Annual  Workplace Evaluation must be   scheduled at least once during a 12- month period +\/- 3 months from the   start date of the previous Annual  Workplace Evaluation.\n\nAppendix III: GAO Contacts and Staff Acknowledgements\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Heather J. Halliwell (Assistant  Director), Betsey Ward-Jenks (Analyst-in-Charge), Dwayne Curry, and  Colleen A. Taylor made key contributions to this report. Also contributing  were Kelly Rubin, Michelle Weathers, and Crystal Wesco.","output":"Why GAO Did This Study\n\nVHA oversees one of the largest health care systems, serving approximately 9-million veterans at numerous health care facilities, including 170 medical centers. To ensure a safe environment for veterans and employees, VHA must keep its facilities clean and well maintained.\nGAO was asked to examine (1) how VHA medical centers identify maintenance and repair needs and challenges they face in addressing those needs, and (2) to what extent VHA provides oversight to ensure medical centers are providing a safe, clean, and functional environment.\nGAO reviewed VHA's procedures and standards related to facility operations and maintenance functions at medical centers and interviewed VHA's administrative office officials regarding oversight of these functions. GAO also interviewed VHA officials from three regional offices and six medical centers selected based on factors such as geographic location and veteran population served, and conducted site visits at four of these medical centers.\n\nWhat GAO Found\n\nVeterans Health Administration's (VHA) medical centers conduct regular inspections of the settings in which patients receive health care services, called the \u201cenvironment of care\u201d, to identify maintenance and repair needs. These inspections also help ensure compliance with accreditation standards requiring, among other things, that utility systems operate properly and that areas are clean and in good repair. The main three steps in the process associated with these inspections are shown below. In addition to the environment of care inspections, VHA conducts other periodic assessments of facilities' major systems, such as plumbing and air conditioning.\nVHA inspections routinely identify deficiencies reflective of an aging infrastructure\u2014VHA's buildings are on average 55 years old. This situation in turn is leading to workload and staffing challenges in addressing maintenance and repair needs. For example, according to VHA's 2017 data, medical centers reported conducting approximately 11,000 total inspections for the year that resulted in about 128,000 identified deficiencies. Most of these deficiencies were closed within 14 business days, as required by VHA. However, nearly 30,000 of them were not closed or had been addressed through a plan for future work. Medical center officials added that correcting deficiencies may only be a temporary solution for issues related to aging structures that need extensive repairs and renovations. In addition, VA headquarters and field officials said that staff vacancies are common and can affect the efficiency and speed of maintenance and repairs.\nVHA provides guidance and selected oversight to ensure medical centers implement the process for environment of care inspections. However, VHA lacks performance goals, objectives, and measures that would enable it to provide effective oversight, address challenges, and assess how well it is achieving a clean, safe, and functional environment. As part of ensuring compliance with the inspection process, VHA measures whether medical centers meet certain requirements, such as having appropriate staff present for inspections. VHA does not, however, have measures that enable it to assess how well medical centers are achieving desired outcomes. Although it has stated its intent to develop such measures, VHA has not yet committed to a time frame for doing so.\n\nWhat GAO Recommends\n\nGAO recommends that VHA set a timeline for defining goals, objectives, and outcome-oriented performance measures that can address challenges and help achieve a clean and safe care environment. VA concurred with the recommendation and provided general and technical comments, which GAO incorporated as appropriate."}
{"id":"gao_GAO-19-175","pid":"gao_GAO-19-175_0","input":"\tBackground\n\n\t\tMissions, Roles, and Responsibilities of Federal Agencies in Our Review\n\nFederal agencies carry out a variety of missions, including protecting and  defending government buildings, public lands, and natural resources, as  well as federal employees, elected officials, and visitors to federal sites.  Agencies with FLEOs are also charged with investigating civil and  criminal violations of federal laws. Inspectors General, which may also  have FLEOs, are independent and objective units within agencies that are  charged with combatting waste, fraud, and abuse within the programs  and operations of their agencies. Table 2 lists the agencies within our  review (20 agencies included in our review of spending data and 5  agency components included in our review of inventory controls) and  describes their law enforcement missions. For more information about the  data each agency provided, see appendix II.\n\n\t\tTypes of Firearms, Ammunition, and Selected Tactical Equipment\n\nFor the purposes of our review, a firearm is any weapon that is designed  to expel a projectile by the action of an explosive or that may be readily  converted to do so. Some firearms are single-shot, while others may be  semi-automatic (requires a separate pull of the trigger to fire each  cartridge) or fully automatic (can shoot automatically more than one shot,  without manual reloading, by a single function of the trigger).  Ammunition includes its component parts, such as cartridge cases,  primers, bullets, or propellant powder designed to be used in a firearm.  Ammunition can be used in multiple types of firearms, based on the size.  For example, 9mm caliber ammunition used in pistols can also be used in  certain types of fully automatic firearms. See figure 1 below for more  information about the types of firearms FLEOs may use.\nIn addition to firearms and ammunition, federal agencies may also have a  variety of tactical equipment available to their officers to support their law  enforcement roles. For example, officers engaged in counterdrug  activities may use armored vehicles for drug raids in rural areas or night- vision equipment to maintain surveillance of drug activities. Officers that  work in counterterrorism and border security may use helicopters or other  aircraft, as well as armored or tactical vehicles, to patrol or surveil  locations. See figure 2 for examples of selected tactical equipment in our  review.\n\n\t\tPurchase Data Reported in FPDS-NG and USASpending.gov\n\nFederal Procurement Data System-Next Generation (FPDS-NG) is a  comprehensive web-based tool for agencies to publicly report contract  transactions, including firearms, ammunition, and tactical equipment  purchases. The public can download FPDS-NG data on contract actions  from the USASpending.gov website, and this data set enables users to  examine spending in multiple categories across government agencies.  The contracting officer, who awards a contract or order against an  existing contract, has responsibility for accurately recording the individual  contract action information in FPDS-NG. Agencies are responsible for  developing a process for recording contract actions and monitoring  results to ensure their timely and accurate reporting in FPDS-NG, and  must submit certifications about the accuracy of contract reporting to the  General Services Administration.\nThe Federal Acquisition Regulation (FAR) and the FPDS-NG Government  User\u2019s Manual require that each transaction record include the name of  the funding agency\u2014the agency that provided the obligated funds for the  transaction. The FPDS-NG Government User\u2019s Manual also requires a  product or service code (PSC) that reflects the product or service  procured. If more than one PSC applies, the PSC that represents the  predominance of the dollars obligated should be selected. Generally,  the FAR requires that agencies report contract actions with a total  estimated value greater than $3,500 to FPDS-NG. Generally, contract  actions that do not meet the $3,500 threshold may also be reported, but  the FAR does not require agencies to do so.\n\n\tAvailable Data Show that Selected Agencies Reported Spending at Least $1.5 Billion on Firearms, Ammunition, and Tactical Equipment from Fiscal Years 2010 through 2017\n\nThe 20 federal agencies in our review reported data from their internal  record-keeping systems on the amount they spent on firearms,  ammunition, and selected tactical equipment. These agencies reported  spending at least $38.8 million on firearms, $325.9 million on ammunition,  and $1.14 billion on tactical equipment\u2014at least $1.5 billion in total\u2014from  fiscal years 2010 through 2017. For detailed information about the data  each agency provided, see appendix II.\n\n\t\tFirearms Spending\n\nThe 20 agencies in our review reported spending a total of at least $38.8  million on firearms for their FLEOs from fiscal years 2010 through 2017,  based on available spending data they provided from their internal record- keeping systems. The amount each agency reported spending on  firearms over the 8-year period ranged from $106,000, in the case of the  Social Security Administration\u2019s Office of the Inspector General (SSA  OIG) to $4 million at U.S. Customs and Border Protection (CBP). Of the  20 agencies in our review, 18 agencies also reported the number of  firearms they bought. These agencies reported buying a total of at least  44,551 firearms during this time. The quantity of firearms each of these  18 agencies reported buying over the 8-year period ranged from at least  311 at SSA OIG to at least 8,500 at the Bureau of Alcohol, Tobacco,  Firearms, and Explosives (ATF).\nAgencies buy a variety of firearms in support of their law enforcement  missions. From fiscal years 2010 through 2017, agencies reported buying  pistols, rifles and shotguns, and three of the agencies\u2014NPPD, ICE, and  U.S. Secret Service\u2014also reported buying revolvers. Seventeen  agencies reported buying semi-automatic firearms, while eight agencies  reported buying fully automatic firearms and ten agencies reported buying  single-shot firearms. See figure 3 for more information about the types  of firearms that agencies reported buying over the 8-year period.\nAgency officials told us there were several reasons why they buy  firearms, such as to update their entire firearms inventory, to replace  malfunctioning firearms, or to test new models of firearms. Agencies  typically do not update their firearms inventory often because firearms  can last many years when properly serviced and maintained. This is  reflected in agencies\u2019 spending data, which generally show periodic larger  orders of firearms and more frequent smaller orders. For example, ATF  reported buying several thousand pistols in both fiscal years 2012 and  2017, and fewer than 1,000 pistols and rifles in total in the intervening  years. Similarly, BIA reported buying several hundred firearms in 2010,  2012, and 2014, and fewer than 200 in total in the remaining 5 years of  our review. When firearms near the end of their useful life, agencies can  choose to retire or replace them. Additionally, agencies frequently  reported buying three or fewer firearms at a time, and officials from one  agency we spoke with said that they may buy a single firearm at a time in  order to test out new models for future consideration.\n\n\t\tAmmunition Spending\n\nThe 20 agencies in our review reported spending a total of at least $325.9  million on ammunition for their FLEOs from fiscal years 2010 through  2017, based on available spending data from agencies\u2019 internal record- keeping systems. The amount each agency reported spending on  ammunition over the 8-year period ranged from $309,000 (SSA OIG) to  $128 million (CBP). Of the 20 agencies in our review, 16 agencies also  reported the number of rounds of ammunition they bought. The 16  agencies reported buying a total of at least 767 million rounds of  ammunition during this time. The number of rounds of ammunition each  of these agencies reported buying over the 8-year period ranged from at  least 846,000 rounds (SSA OIG) to at least 429 million rounds (CBP).  These agencies most frequently reported buying handgun ammunition,  and .40 caliber was the most frequently reported caliber. See figure 4 for  more information about the types of ammunition that agencies reported  buying over the 8-year period.\nAgency officials we spoke with said the quantity of ammunition they buy  annually varies within each agency based on factors such as ammunition  usage in previous years, the number of officers qualifying to use a firearm  each year, the skill level of officers, the type of training conducted, and  their budget each fiscal year. Specifically, agencies require officers to  pass certain firearms qualifications standards in order to maintain their  proficiency\u2014typically quarterly for pistols, and biannually for rifles and  shotguns. Officers must qualify on each firearm they are authorized to  carry, and some agencies may have additional training requirements  throughout the year. For example, HHS Office of Inspector General (OIG)  officials said that, in addition to quarterly qualifications, officers also  complete eight additional training modules each year that cover topics  that include responding to multiple assailants, use of cover, and reactive  shooting techniques. HHS OIG officials noted that they may add  additional training if needed, and officials take this into account when  determining the type and amount of ammunition they order each year.\n\n\t\tTactical Equipment Spending\n\nOf the 20 agencies in our review, 17 provided spending data for their  tactical equipment. The 17 agencies reported spending a total of at least  $1.14 billion on tactical equipment for their FLEOs from fiscal years 2010  through 2017, based on available spending data from agencies\u2019 internal  record-keeping systems. The amount each agency reported spending on  tactical equipment over the 8-year period ranged from $10,000 (SSA  OIG) to $609 million (CBP). We cannot report the total quantities of  tactical equipment agencies bought because agencies reported quantity  data using different units of measurement. For example, when we  requested data on the number of camouflage uniforms agencies bought,  agencies used \u201c1\u201d to refer to a variety of clothing, such as a single pair of  pants or a full set of uniforms.\nA few agencies accounted for a significant portion of the total reported  spending on tactical equipment. Specifically, four agencies\u2014CBP, U.S.  Marshals Service, Federal Bureau of Investigation (FBI), and Drug  Enforcement Administration\u2014reported spending at least $755 million in  the manned aircraft category, or 66 percent of all reported tactical  equipment spending for all agencies. See figure 5 for the types of tactical  equipment agencies reported in spending data.\nThe 17 agencies that reported buying tactical equipment most frequently  reported buying aiming devices, such as sights and scopes, and  specialized image enhancement devices, such as thermal cameras or  night-vision goggles. Few agencies reported buying tactical and  weaponized vehicles, aircrafts, and vessels. See figure 6 for more  information about the types of equipment reported in each agency\u2019s  spending data.\n\n\tBIA and Forest Service Publicly- Available Data Differed Somewhat from their Internal Data, While ICE\u2019s Data Differed Substantially\n\nFor the three agencies we reviewed\u2014BIA, Forest Service, and ICE\u2014 publicly-available purchase data from USASpending.gov on firearms and  ammunition did not consistently match the internal agency data we  reviewed. Table 3 shows the total dollar value of the firearms and  ammunition obligations that each agency reported to us, alongside the  dollar value of the obligations in the publicly-available data.\nDifferences between the agency-reported values and the values shown in  the publicly-available data ranged from less than 1 percent to  approximately 700 percent of the values reported by the agencies. Of the  three agencies that we reviewed, ICE had the largest discrepancies  between the agency-reported and publicly-available values. ICE reported  to us $2,539,585 in firearms obligations and $47,965,399 in ammunition  obligations for fiscal years 2010 through 2017; however, the publicly- available data for ICE for the same time period shows $19,728,786 in  firearms obligations\u2014about eight times greater than what ICE reported to  us\u2014and $146,198,549 in ammunition obligations\u2014about three times the  amount that ICE reported to us.\nAccording to our analysis, some of the difference between the ICE- provided and publicly-available obligations in USASpending.gov results  from other DHS agencies using ICE contracts to make firearms and  ammunition purchases, and ICE not properly identifying the funding  agency for those purchases in the Federal Procurement Data System- Next Generation (FPDS-NG), the database from which USASpending.gov  draws contracting data. In these cases, agency officials told us that  under a process known as \u201cstrategic sourcing,\u201d ICE performs the  procurement functions and is reimbursed by the purchasing agency.  The Federal Acquisition Regulation (FAR) requires that the agency that  \u201cprovided the predominant amount of funding for the contract action\u201d be  recorded in FPDS-NG. The FPDS-NG Government User\u2019s Manual also  specifies that users record the agency that \u201cprovided the obligated  funds\u201d\u2014that is, the agency that purchased the item or service.\nHowever, when ICE records the transaction data in FPDS-NG, ICE lists  itself as the funding agency for firearms and ammunition transactions. For  example, in the publicly-available records, a fiscal year 2013 purchase of  pistols from the manufacturer totaling $847,960 in obligations shows ICE  as the funding agency, but the transaction description states: \u201cto  purchase pistols for FPS .\u201d As a result, ICE  appears to be the funding agency for more firearm and ammunition  transactions in the publicly-available data than in the data ICE reported to  us.\nICE officials explained that their contracting officers manually enter ICE  as the funding agency in FPDS-NG. They interpret the FPDS-NG  Government User\u2019s Manual guidance to allow designation of ICE as the  funding agency, since payment for the purchase is made from an ICE  account even when those funds are reimbursed by the agency that  actually receives the purchased product. However, the FPDS-NG  Government User\u2019s Manual specifically requires the identification of the  funding agency and distinguishes between the agency that makes the  payment and the agency that ultimately provides the funds for the  purchase. FPDS-NG guidance also clarifies that when one agency buys  on behalf of another, the agency that is requiring the purchase should be  recorded as the funding agency, not the payment office.\nBecause ICE recorded other agencies\u2019 purchases as its own in the  publicly-available data, it significantly inflated the apparent dollar value of  its firearms and ammunition purchases. As a result of ICE not accurately  recording the correct funding agency information in FPDS-NG, the public  does not have accurate information on the value of firearms and  ammunition purchases made by ICE, and the agencies that make purchases using ICE contracting services. As we have previously  reported, data need to be presented in a way that meets the needs of the  end users\u2014both policy makers and the public\u2014if USASpending.gov is to  fulfill its purpose of increasing accountability and transparency in federal  spending. Improving the accuracy of the reported funding agency can  better help the public understand and use federal data, and increase  accountability and transparency of these sensitive purchases.\nData on obligations for the publicly-available purchase records had  smaller discrepancies when compared with purchases of firearms and  ammunition reported to us by the BIA and Forest Service. The BIA\u2019s  ammunition obligations in the agency- and publicly-reported data sets  closely matched, with a discrepancy of less than 1 percent overall from  fiscal years 2010 through 2017. The Forest Service\u2019s firearms obligation  amounts in the agency- and publicly-reported data sets also closely  matched, with a discrepancy of less than 1 percent overall from fiscal  years 2010 through 2017. However, the dollar value of the Forest  Service\u2019s ammunition obligations recorded in the publicly-available data  was approximately 25 percent greater than the value of the ammunition  purchases in the data that they provided to us. Forest Service officials  explained that the publicly-reported data includes ammunition purchased  for non-law enforcement purposes\u2014such as protecting Forest Service  employees from wildlife attacks, controlling invasive species, or  euthanizing injured animals\u2014and those purchases were excluded from  the data that they provided to us because the scope of this review  focuses on purchases for FLEOs.\nThe type and amount of information recorded in the publicly-available  data also contribute to discrepancies between agency-provided and publicly-available purchase records. As a result, the publicly-available  data may comply with the data reporting requirements enumerated in the  FAR and in the FPDS-NG Government User\u2019s Manual and still differ from  the agency-provided data. Differences between publicly-available data  and agency purchase records include:\nThe product or service code (PSC) selected in the publicly-available  data may not reflect all of the items in a purchase. According to the  FPDS-NG Government User\u2019s Manual, the PSC selected for a  purchase should reflect the items that constitute \u201cthe predominance of  the dollars obligated,\u201d and only one PSC may be associated with a  purchase. Therefore, when a purchase is assigned a firearms or  ammunition PSC, but the purchase includes non-firearms or non- ammunition items as well, the total obligated amount of the purchase  will be associated only with the selected PSC in the publicly-available  data. This may result in over- or under-reporting the value of the  obligations for firearms or ammunition purchases. For example, in  fiscal year 2014, BIA purchased 103 shotguns, 220 tactical lights, and  other equipment in a single transaction. The total value of the  obligation was $145,970, of which the shotguns constituted 50.4  percent of the purchase ($73,549). Consistent with FPDS-NG  guidance, the entire purchase was categorized as \u201cGuns, through  30mm\u201d in the publicly-available data, even though almost half of the  purchase was for non-firearms items, thereby over-reporting the  obligated value of the firearms purchased\u2014in this case, effectively  doubling the apparent obligated value of the firearms purchased while  omitting the obligated value of the non-firearms items that were part of  the purchase. Conversely, a purchase categorized as \u201cOptical  Sighting and Ranging Equipment\u201d obligated for $2,971 included a line  item for $500 of ammunition. BIA included the $500 ammunition  purchase in the data provided to us, but that amount was included  under the equipment PSC in the publicly-available data in keeping  with FPDS-NG guidance. This excluded the purchase from the  publicly-available data that we reviewed and under-reported the  obligated value of ammunition purchases by BIA.\nThe available PSCs in the publicly-available data do not distinguish  between firearm parts and fully functional firearms. Several purchases  associated with firearms PSCs included descriptive information  indicating that the purchase was for firearms parts. ICE officials also  confirmed that an order described as firearm \u201cparts\u201d could include fully  functional firearms. The officials noted that whether a particular  purchase included fully functional firearms, firearms parts, or both  cannot be determined without the statement of work, and the  statement of work is not part of the publicly-available data. By  including purchases of both fully functional firearms and firearm parts  in the same category, publicly-available data may inflate the obligated  value of functional firearms purchases.\nFirearms and ammunition purchases may not be assigned a related  PSC in the publicly-available data. In cases where agencies assigned  a non-firearms or ammunition PSC to a firearms or ammunition  purchase, those purchases were excluded from the publicly-reported  data that we analyzed. For example, a Forest Service purchase of  rifles and sights which obligated $50,799 was assigned a PSC for  \u201cAssemblies Interchangeable Between Weapons In Two or More  Classes\u201d in the public data, rather than a firearms- or ammunition- specific PSC. Another Forest Service purchase for rifles which  obligated $23,457 was assigned a PSC for \u201cR&D-Defense System:  Weapons (Basic Research).\u201d\nAgencies are not required to report purchases of $3,500 or less to  FPDS-NG. Because purchases of $3,500 or less generally are not  required to be reported to FPDS-NG, these purchases may be  reported inconsistently or not at all in the publicly-available data.  Ammunition is often purchased by the selected agencies in small  quantities and may cost $3,500 or less. For example, Forest Service  officials noted that such small ammunition purchases may be made  using a purchase card, and their internal data included at least 130  such purchases.\nIn addition, the publicly-available data do not include a field for agencies  to report quantity information associated with purchases. Therefore, the  number of firearms or rounds of ammunition that an agency purchased  are not available in the publicly-available purchase data.\n\n\tHHS, EPA, and IRS Reported Varying Levels of Inventories of Firearms, Corresponding Ammunition and Limited Tactical Equipment\n\nHHS, EPA, and IRS law enforcement components, our case studies, in  total reported inventories of five types of firearms\u2014all with corresponding  types of ammunition\u2014and nine types of tactical equipment. According  to officials in all components, their inventories of these items can be  attributed to a variety of factors, including the missions and  responsibilities of their FLEOs, the number of FLEOs, and the office\u2019s  schedule for disposing of and acquiring inventory. Table 4 summarizes  the types and quantities of firearms, ammunition, and tactical equipment  reported at case study components as of November 2017. For  additional information on case study components, see appendix II.\nFirearms. The numbers and types of firearms the components in our  review reported having in their inventories varied. As of November 2017,  all components reported inventories of pistols and shotguns, five  components reported rifles, and three reported fully automatic firearms.  Officials noted that they make decisions about what to have in their  inventories based on factors such as their number of FLEOs and mission  needs. All components issued pistols to FLEOs to carry, in accordance  with their statutory authority. Officials stated that these firearms are to be  carried on duty so FLEOs are prepared for potentially dangerous  circumstances, such as serving warrants on armed individuals. Similarly,  qualified FLEOs in all components can temporarily carry rifles or shotguns  in anticipation of, or in response to, high-risk situations, such as active  shooter threats or arrests of suspects who are believed to be dangerous.\nWe found that components had more pistols per FLEO than shotguns or  rifles per FLEO, which reflects components\u2019 preferences to issue pistols  to officers as their duty weapons. For example, six components reported  having roughly a 2 to1 or 3 to 1 pistol-to-officer ratio, while EPA OIG  agents had a 5 to1 ratio. Case study components generally reported  having more pistols than FLEOs because every FLEO is assigned at least  one pistol. On the other hand, six components reported having about 1  shotgun or fewer per every two FLEOs. However, EPA Office of  Enforcement and Compliance Assurance (OECA) had a 1.4 to 1 shotgun- to-FLEO ratio. According to EPA OECA officials, their shotgun-to-agent  ratio is higher than other agencies because of two factors: 1) EPA OECA  historically had more agents, which made their shotgun-to-agent ratios  lower than when they acquired the shotguns in use today, and 2) EPA  OECA sends additional unassigned shotguns to natural disaster response  locations to pre-position them for EPA OECA agent use. Components in  the Food and Drug Administration (FDA) and IRS reported keeping a  relatively smaller number of shotguns, which they said they only deploy  for high-risk investigations. Among the five components with rifles, rifle-to- FLEO ratios ranged widely\u2014from less than 1 to 10 to 6 to 10 \u2014due to  differences in the number of FLEOs and mission needs. For example,  officials with IRS Police, which had four rifles for nine officers, stated that  they only use the rifles for continuity of operations drills and annual  qualifications.\nAmmunition. As of November 2017, case study components reported  inventories of ammunition ranging from 14,706, in the case of the IRS  Police, to approximately 5 million rounds held by IRS CI. (See table 4  for all components\u2019 inventories of ammunition.) Each law enforcement  agency independently decides how much ammunition to allocate to its  firearm-carrying personnel for training and qualification. Component  officials noted that ammunition inventories constantly fluctuate throughout  the year, based on factors such as the amount used for qualification and  training purposes, and the timing of ammunition shipments. Officials from all components stated that their ammunition inventories can quickly  change by thousands of rounds depending on training and qualification  timing. For example, according to NIH officials, between November 2017  and February 2018, officers used 5,110 rounds of rifle ammunition during  training, and subsequently NIH acquired 14,400 rounds of rifle  ammunition. To help ensure they have sufficient ammunition on hand to  support the training and operational needs of their FLEOs, components  may maintain inventories of ammunition to last for several months. The  length of time between ordering and receiving ammunition orders can be  lengthy, sometimes up to 1 year, according to officials. Therefore,  components order ammunition in large quantities to ensure there is  enough available for training and qualification purposes.\nTactical Equipment. Six case study components reported inventories of  9 of the 18 types of tactical equipment reviewed. Breaching equipment  and aiming devices were the most frequently reported kinds of tactical  equipment at these six components: four components reported breaching  equipment and four reported aiming devices in inventories. Three  components reported other equipment. EPA OIG reported inventories of  silencers and tactical lighting; however, in February 2018 EPA OIG  officials told us they began to transfer their silencers to another federal  agency because officials decided that they were no longer necessary to  meet their mission. Among the agencies in our review, NIH reported  having pyrotechnics and large-caliber launchers. NIH officials said these  items were necessary for assisting other law enforcement agencies in the  event that extreme circumstances, such as a terrorist attack or riot,  occurred in the area.\n\n\tCase Study Components\u2019 Inventory Controls Vary and Selected Offices Generally Followed Their Own Procedures\n\nHHS, IRS, and EPA case study components have inventory controls in  place for firearms, ammunition, and tactical equipment. Components  generally followed their procedures at selected locations to track and  secure FLEOs\u2019 firearms. In addition, all 12 case study components\u2019  offices that we visited were in compliance with their ammunition and  tactical equipment inventory controls. All components had some controls  governing ammunition and equipment, though the specific controls varied  by component.\n\n\t\tCase Study Components Have Controls to Track and Secure Firearms\n\nHHS, IRS, and EPA case study components have controls in place for  tracking, verifying, and securing FLEOs\u2019 firearms. Through our  observations, we found these components are generally following their  inventory and security procedures at selected locations. According to  Standards for Internal Control in the Federal Government, agencies  should design control activities to respond to risks related to vulnerable  assets. To ensure these controls operate effectively, management can  take steps such as periodically counting and comparing such assets to  control records, and establishing physical control to secure and safeguard  vulnerable assets. Other examples of these controls include security for  and limited access to assets, such as equipment that might be vulnerable  to risk of loss or unauthorized use. In addition, we have identified areas  that have been consistently recognized as important for effective  inventory management that align with these controls. These areas  include recording and tracking firearms inventory data and maintaining,  controlling, and accounting for firearms inventories, among other things.\nFirearms Tracking. At each of these components, firearms are  considered sensitive items and are tracked in electronic data systems or  using paper records. At HHS OIG, there is a separate firearms tracking  system, and other components track firearms in their overall property  management system. A barcode or serial number is used to track the  firearm through the life-cycle of the weapon\u2014which includes initial  assignment, changes in assignment (to a different agent or to storage),  and weapon disposal. According to each component\u2019s policy, every  firearm has a bar code or serial number associated with it, and each  firearm is assigned to an agent or placed in storage. When an agency  receives a firearm, the serial number or bar code is entered into the  agency\u2019s firearms inventory system and upon assignment to an agent  updated with the agent\u2019s name. Typically, firearms in storage are  assigned to the primary firearms instructor or the firearms coordinator in  the inventory system to ensure accountability. At all case study  components the primary firearms instructors and firearms coordinators  are the persons responsible for managing the firearms inventory of an  office and ensuring firearms are properly tracked\u2014these are considered  ancillary duties for these individuals, in addition to their regular  responsibilities as FLEOs. We observed demonstrations or  documentation of these tracking records at each office we visited and  found them to be generally in accordance with office policies.\nFirearms Verification. Each component has a process whereby at least  once a year officials conduct a firearms inventory to ensure that issued  and stored firearms match with records in the office\u2019s inventory tracking  system. Figure 7 describes a general process that all components we  reviewed follow to verify their firearms inventory. Five components we  examined require this annual firearms inventory process to be conducted  in person and entail the visual inspection of the serial number and  condition of the firearm. However, FDA and EPA OECA FLEOs are  permitted to send an email containing their firearm serial number, a photo  of the firearm, or both to the official conducting the inventory to virtually  verify they are in possession of their firearm. Officials stated that this  saved them the expense of FLEOs in remote locations traveling for  annual inventory checks.\nIn addition to regularly verifying inventories of their firearms, five case  study components conduct periodic checks to verify the accuracy of  firearm inventory data. During these checks, headquarters or other  inspection officials review data recorded about inventories, storage  controls, and proper maintenance of weapons. For example, IRS CI and  HHS OIG conduct regular internal reviews of firearms inventories and  records that they use to identify data errors and make recommendations  to improve data quality. We found that recent checks at the case study  components have rarely identified issues related to recorded firearms  data, and the majority of the identified issues were related to minor data  errors, such as incorrectly recorded assignments of guns to FLEOs,  locations of guns, and serial numbers. For example, in May 2017 EPA  OECA\u2019s check of one area office found two firearms listed as being in  storage were actually in service. All components with these administrative  errors corrected them as they became aware of them, according to the  audit reports and agency officials.\nHowever, during our review of EPA OIG inventory control practices for  firearms, we found that EPA OIG headquarters did not have a  management review process in place for firearms inventory, which  contributed to examples of inaccurate firearms inventory data.  Specifically, we found 6 out of the 12 EPA OIG offices reported  inventories with at least one firearm that did not match the location and  individual to which it was assigned. For example, we found that the  Special Agent in Charge at one EPA OIG\u2019s field office verified that 10  firearms were physically in the office when actually they had been  shipped to headquarters 11 months prior to the inventory date. According  to EPA OIG officials, the errors we found were largely due to EPA OIG  headquarters not updating records when agents transferred firearms from  one office to another. As a result of our review, headquarters is  implementing practices to improve future data quality. Specifically, EPA  OIG officials said they reconciled their inventory data and had field offices  with inaccurate inventories prepare memos to reflect their actual  inventories. EPA OIG also updated firearms procedures to include  headquarters increased oversight of firearms audits and inspections. In  practice, EPA OIG officials stated that this will entail an annual reconciling  of inventory memos sent by field offices with inventory data records  maintained at EPA OIG headquarters. Thus, EPA OIG can more reliably  track the location and agents responsible for firearms, ensuring proper  weapons control procedures and accountability.\nFirearms Storage. All case study components had policies in place that  required secure storage of firearms. All seven components\u2019 policies  specify that this must include a locked container, such as a file cabinet or  desk safe for issued firearms or a firearm vault or safe for unissued  firearms. In all 12 of the components\u2019 offices we visited, we observed  unissued firearms stored in a designated room that was kept locked with  limited access. Specifically, we observed firearms storage rooms secured  by keycard access, alarms, cameras, and other security devices. At all of  the components\u2019 offices we visited, only FLEOs with a need to enter the  rooms had authorization to do so. For example, only FLEOs in  management roles and firearms instructors had access to the firearms  storage room at the IRS CI and HHS OIG offices we visited, according to  officials at each.\nIn the secure firearms storage rooms at all of the locations we visited, we  observed firearms that were further protected by cabinets, cages, safes,  vaults, or combinations of these devices. We also observed some  instances of firearms being stored securely in safes outside of the  designated firearms storage room. For example, two EPA OIG and OECA  offices we visited had spare shotguns and related equipment in biometric  safes in offices to be used in response to active shooter threats. Qualified  FLEOs in these two offices can use their fingerprints to open the safes  and respond to such threats.\nBased on our observations, the offices we visited for the six components  were in compliance with their firearms storage policies. However, we  found the IRS Police office in Martinsburg to be out of compliance with  policy that limits access to stored firearms to the armorer and chief of  security and its policy that restricts storage in locked cabinets to five  firearms. Based on our finding, IRS Police officials said they will update  their policy to reflect its current practice of allowing all IRS Police officers  access to stored firearms to respond to active shooter threats and  acquired an additional safe to store firearms in June 2018. For each of  the components we examined in our review, there were no instances of  firearms being lost or stolen from any office, according to component data  and officials.\n\n\t\tCase Study Components Vary in Their Controls Over Ammunition and Tactical Equipment\n\nAll 12 offices for case study components that we visited were in  compliance with their ammunition and tactical equipment inventory  controls and procedures. All components had policies to treat ammunition  and equipment as items with some level of control, though the specific  controls varied by component.\nAmmunition. At the components\u2019 offices we visited, we observed various  methods for tracking ammunition inventories, such as electronic logs,  physical logs, or visual inspection. In general, case study components\u2019  policies require ammunition tracking through an ammunition log updated  as ammunition is used, a regular inventory, or both. Components track  ammunition to ensure they have enough on hand for training and  qualifications, according to component officials. Some components,  such as EPA OIG, maintain tight controls over their ammunition use by  tracking ammunition use by lot number and the number of bullets used by  each gun in physical logs. EPA OIG officials stated that they used this  level of precision for three reasons: to track how many bullets are fired  through each firearm for maintenance purposes, to quickly identify  ammunition in inventory that may be affected by recalls, and to have a  high degree of accountability. HHS OIG tracks ammunition using an  electronic log, which they said they update whenever ammunition is  removed for training and qualifications. IRS CI currently limits access to  ammunition and entrusts use of force coordinators with independently  managing their ammunition inventory to meet the training needs of their  area of responsibility. One IRS CI use of force coordinator said that she  relies on her experience and judgment to keep track of ammunition use at  her field office without formally recording it. IRS CI is the only component  in our review that does not have a documented policy to track ammunition  or conduct a regular inventory; however, IRS CI officials indicated they  are in the process of establishing a nationwide policy to track ammunition  and conduct a regular ammunition inventory. Officials at two case study  component offices said they provide their FLEOs extra boxes of  ammunition to use for practice at a firing range outside of work hours. In  general, four of the seven case study components did not track the real- time amount of ammunition they had on hand; rather, component officials  said they had a general sense of the amount of ammunition in order to  know if they had enough for training and qualifications, and when they  would need to reorder ammunition.\nAll case study components\u2019 policies require secure storage of  ammunition. In all 12 of the components\u2019 offices we visited, we observed  that ammunition was stored in their firearms storage rooms, and all  offices took the additional step of securing the ammunition further in  locked safes. For example, IRS CI requires ammunition storage in a  security cabinet or a security room, preferably separately from firearms.  Both of the IRS CI offices that we observed stored ammunition separately  from firearms and with limited access. In the offices for two components,  NIH and HHS OIG, we observed ammunition secured in a separate room  from the firearms.\nTactical equipment. Case study components do not control the tactical  equipment in their inventory in the same ways that they control firearms  and ammunition. Case study components that possessed aiming,  breaching, and tactical lighting equipment did not have policies guiding  their storage because they do not generally consider them to be as  dangerous as a firearm or valuable enough to be tracked. However,  components that possessed silencers, large-caliber launchers,  pyrotechnics, or other items did have policies to control these items.  Specifically, IRS CI policy requires the electronic tracking and inventory of  night-vision equipment, optical equipment, and vehicles. NIH policy  directs that large-caliber gas launchers be stored in the armory and  pyrotechnics be stored in their bunker with ammunition. IRS CI, NIH, and  EPA OIG all tracked this equipment during their annual inventory  verification. Case study components did not report any instances of loss  or theft of the tactical equipment in their inventories.\nStorage of tactical equipment varied and corresponded with case study  components\u2019 use of items. For example, we observed silencers and  aiming devices stored on or near firearms at EPA OIG and NIH because  they are accessories that attach to firearms. We observed breaching  equipment to be stored either in the firearms storage room, vehicles, or  elsewhere in the offices we visited. For example, at EPA OIG\u2019s  headquarters office, breaching equipment was stored in the firearms  room because officials stated that they were only likely to use breaching  equipment as part of a planned operation. However, officials at the FDA  and NIH offices we visited said that their breaching equipment was stored  in vehicles so it could be more readily accessible if they needed to use it.\n\n\tConclusions\n\nAccurate reporting of firearms and ammunition is critical for accountability  and transparency of these sensitive purchases. While reporting such  purchases with precision is difficult, the execution of this responsibility  impacts the public\u2019s access to information about which agencies  purchase what types of firearms and ammunition, and the amount that  they spent on those purchases. However, ICE did not properly identify the  funding agency in FPDS-NG for purchases where other DHS agencies  used ICE contracts to procure firearms and ammunition. This inflated its  publicly-available data to show a significantly higher obligated dollar value  of purchases than it actually purchased. Because ICE does not accurately  report the agency that funded the purchase to FPDS-NG, the public does  not have accurate information on how much ICE and the agencies that  make purchases using ICE procurement services have obligated for  firearms and ammunition. Data need to be presented in a way that meets  the needs of the end users\u2014both policymakers and the public\u2014if  USASpending.gov is to fulfill its purpose of increasing accountability and  transparency in federal spending. Improving the accuracy of the reported  funding agency can better help the public understand and use federal  purchase data, and increase accountability and transparency for these  sensitive purchases.\n\n\tRecommendation for Executive Action\n\nTo improve the accuracy of publicly-available purchase information, the  Director of ICE should update ICE\u2019s contracting process to include the  name of the appropriate funding agency in data entered into FPDS-NG  for firearms and ammunition purchases. (Recommendation 1)\n\n\tAgency Comments\n\nWe provided a draft of the sensitive product to DHS, DOI, DOJ, EPA,  HHS, SSA OIG, Treasury, USDA, and VA for review and comment.  Agencies provided technical comments, which we incorporated as  appropriate. DHS also provided written comments on the sensitive report,  which are reproduced in full in appendix III. In its written comments, DHS  concurred with our recommendation and described the actions ICE plans  to take in response.\nWe are sending copies of this report to interested congressional  committees, the Secretaries of the Department of the Interior, the  Department of Homeland Security, the Department of Agriculture, the  Department of Justice, the U.S. Department of Veterans Affairs, the  Social Security Administration, the Department of the Treasury, the  Environmental Protection Agency, and the U.S. Department of Health and  Human Services. In addition, the report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-8777 or goodwing@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report provides additional information on our objectives, scope, and  methodology. Specifically, our objectives were to examine the following  questions:  1.  What do available data show about spending on firearms,  ammunition, and selected tactical equipment made by federal  agencies with 250 or more federal law enforcement officers from fiscal  years 2010 through 2017?  2.  To what extent have selected agencies accurately reported purchases  of firearms and ammunition in publicly-available data on  USASpending.gov?  3.  What types and quantities of firearms, ammunition, and selected  tactical equipment do the Department of Health and Human Services  (HHS), Environmental Protection Agency (EPA), and Internal  Revenue Service (IRS) have documented to be in their inventory  systems, as of November 2017?  4.  What inventory controls and procedures are in place at HHS, EPA,  and IRS, and to what extent do these agencies follow these  procedures at selected locations?\nThis report is the public version of a sensitive report that we issued in  October 2018. HHS, IRS and the Transportation Security Administration  (TSA) deemed some of the information in our October report to be  sensitive, which must be protected from public disclosure. Therefore, this  report omits sensitive information about the number of FLEOs at the TSA,  an illustration of how HHS\u2019s National Institutes of Health Police secures  its firearms, and the number and types of some firearms, ammunition,  and tactical equipment in NIH\u2019s and IRS\u2019s inventory. Although the  information provided in this report is more limited, the report addresses  the same objectives as the sensitive report and uses the same  methodology.\nTo address our first question, we obtained available spending data on  firearms, ammunition, and certain tactical equipment from 20 agencies  from the departments named in the Chief Financial Officers Act that  employed 250 or more federal law enforcement officers (FLEOs) at any  point from fiscal years 2010 through 2017. Specifically, we identified  applicable agencies by reviewing Office of Personnel Management  employment data and contacting agency officials to verify the  employment of 250 or more FLEOs during the timeframe we reviewed.  We excluded military branches from our review, such as all Department of  Defense (DOD) branches and the U.S. Coast Guard, which is part of the  Department of Homeland Security (DHS). Table 5 shows the 20  agencies, within eight departments, included in our scope for this  question.\nBecause there was no definitive list of what is considered tactical  equipment, we developed a list of equipment to include in our review. To  do so, we reviewed the National Firearms Act List, the Law Enforcement  Equipment Working Group Recommendations, the DOD\u2019s list of  Controlled Property, and the Special Weapons and Tactics Gear used by  the New York, Los Angeles and Houston police departments. We then  selected and categorized the tactical equipment that appeared in two or  more of these lists to include in our review. The 18 categories of tactical  equipment we created were: (1) silencers, (2) explosive devices, (3)  large-caliber weapons (>.50 caliber, excluding shotguns), (4) armored  vehicles, (5) weaponized aircraft, vessels, or vehicles, (6) camouflage  uniforms, (7) manned aircraft, (8) unmanned aerial vehicles, (9) tactical  vehicles, (10) command and control vehicles, (11) pyrotechnics and  specialized munitions, (12) breaching apparatus, (13) riot batons, (14) riot  helmets, (15) riot shields, (16) tactical lighting (excludes basic flashlights),  (17) specialized image enhancement devices (such as thermal imaging  devices and night vision gear), and (18) aiming devices (such as scopes  and tripods). To more closely describe the types of equipment frequently  reported in the large-caliber weapons and breaching apparatus  categories, we refer to them in the report as large-caliber launchers and  breaching equipment, respectively.\nTo collect data from the 20 agencies within the scope of our review for  this objective, we developed a data collection instrument that requested  spending data of firearms, ammunition, and selected tactical equipment  from agencies\u2019 internal record-keeping systems from fiscal years 2010  through 2017. For this objective, we requested the types of information  that agencies reported using the data collection instrument: the date of  each purchase; descriptive information on what was bought, including the  caliber or gauge of firearms and ammunition; the quantity of items bought;  the amount spent and whether those amounts were estimates; the type of  record-keeping system used by the agency and any limitations associated  with it or challenges compiling the information we requested; descriptions  of changes or updates to the system that may have affected the data; and  the contracting office(s) that were responsible for buying these items for  the agency. We asked agencies not to include data on any items they  received without spending funds, so agencies may have received more  firearms, ammunition, or equipment in their inventories than what they  reported in their spending data. For example, agencies may have  received these items through interagency transfers, which may have no  cost to receiving agencies.\nFor the first objective, we analyzed the data agencies reported in the  \u201camount spent\u201d column, and we use the terms \u201cspending\u201d and \u201cspent\u201d to  refer to these data. In cases where agencies only reported the amount  they obligated for a purchase on the data collection instrument, we  confirmed with agencies that those amounts reflected the amount they  spent on the purchase and that we could use those amounts in our  analysis. We pre-tested the instrument with Veterans Health  Administration and U.S. Immigration and Customs Enforcement (ICE),  whose officials provided feedback on the feasibility of providing the  requested data. Based on the feedback we received from the pre-test, we  revised and finalized the instrument and requested that the 20 agencies  provide spending data on firearms, ammunition, and tactical equipment  from fiscal years 2010 through 2017 from their internal record-keeping  systems.\nTo assess the reliability of the spending data, we conducted tests for  missing data and obvious errors, reviewed relevant documentation,  interviewed agency officials about their spending records and data  reporting practices, and followed up with agency officials as needed. We  re-categorized agency data that appeared to be miscoded. For example,  we received data on specialized munitions and large-caliber launchers  that agencies categorized as ammunition and firearms, respectively.  Based on the descriptive data that agencies had provided, we re- categorized those items. We also adjusted the data to ensure consistency  in their format, such as consistent entry of dates and use of categories of  tactical equipment. Agencies in our review submitted a range of detail  about their firearms when reporting their data, and we could not  determine to what extent firearms were fully automatic. Some firearms  have selector switches that allow the user to switch between semiautomatic and fully-automatic capabilities, while others are limited to  shooting three-round bursts with each pull of the trigger. As such, we  reported all firearms that are capable of firing multiple rounds with the  single pull of the trigger as fully-automatic firearms. We also combined  ammunition intended for use in machine guns with rifle ammunition  because machine guns shoot rifle-caliber ammunition, and we did not  have confidence that every agency accurately distinguished which rifle- caliber ammunition was intended for use in machine guns and what was  reserved for rifles.\nWe found the data sufficiently reliable for the purpose of reporting the  minimum thresholds of total amounts agencies spent and the numbers of  firearms and rounds of ammunition they purchased during fiscal years  2010 through 2017. However, we found the data were not reliable for  reporting the number of tactical equipment items purchased or reporting  further comparative analysis. Agency officials reported various challenges  in compiling the data we requested and we identified some data  limitations, as described in table 6.\nTo address our second question, we selected three agencies\u2014the  Bureau of Indian Affairs (BIA), the U.S. Forest Service, and the U.S.  Immigration and Customs Enforcement (ICE)\u2014to assess the extent to  which their purchases of firearms and ammunition were accurately  reflected in publicly-available data. We requested that agencies report  internal purchase data for firearms and ammunition that included, among  other things, the amount obligated for these items, a unique transaction  identifier (called the Procurement Instrument Identifier), and the product  or service code for firearms and ammunition purchases from fiscal years  2010 through 2017. We compared the amounts these three agencies  obligated for firearms and ammunition purchases, as reported to us in  their data collection instruments, with the obligation data that are publicly- available data on USASpending.gov for those three agencies. We  obtained publicly-available data from USASpending.gov, which includes  purchase data from the Federal Procurement Data System-Next  Generation (FPDS-NG), using product or service codes (PSC) that identify contracts for firearms or ammunition purchases. We also  reviewed our related work and Inspector General reports on the quality of  USASpending.gov data. We obtained records for purchases made in  fiscal years 2010 through 2017. We did not include equipment purchases  because the publicly-available data lack product or service codes that  would allow us to reliably identify those records.\nTo select the three agencies for inclusion in this analysis, we started with  the 20 agencies with at least 250 FLEOs in our scope. From those, we  selected agencies that provided us with records of their firearms and  ammunition purchases and that USASpending.gov listed as the funding  agency for one or more firearms or ammunition purchase (12 agencies).  From those, we selected three agencies based on the total dollar value of  purchases reported in USASpending: one small (BIA), one medium  (Forest Service), and one large (ICE), based on natural breaks in dollar  values and not selecting multiple agencies from the same department.\nWe then compared obligations data provided to us by each of the three  agencies against obligations in the publicly-available purchase records  using the Procurement Instrument Identifier to match records across  agency-provided and publicly-available purchase data. We additionally  corroborated these obligations by comparing fields related to the date of  purchase, purchase value, and vendor. We reviewed a portion of  purchase records to compare and interviewed agency officials about  differences in the publicly-available and agency-provided data.\nFor firearms, we included the following PSCs:\n1005 - Guns, through 30mm\n1010 - Guns, over 30mm up to 75mm\n1015 - Guns, 75mm through 125mm\n1020 - Guns, over 125mm through 150mm\n1025 - Guns, over 150mm through 200mm\n1030 - Guns, over 200mm through 300mm\n1035 - Guns, over 300mm  We excluded several weapons PSCs from our analysis that described  weapons other than firearms, such as 1040 \u2013 Chemical Weapons and  Equipment. Any excluded PSC, particularly 1095 \u2013 Miscellaneous  Weapons, may have been used as the PSC to categorize a purchase that  included firearms and those purchases would be excluded from the  publicly-available records that we examined.\nSimilarly, for ammunition, we included records associated with the  following PSCs:\n1305 \u2013 Ammunition, through 30mm\n1310 \u2013 Ammunition, over 30mm up to 75mm\n1315 \u2013 Ammunition, 75mm through 125mm\n1320 \u2013 Ammunition, over 125mm  Like firearms, we excluded records that were associated with non- firearms ammunition, such as 1336 \u2013 Guided Missile Warheads and  Explosive Components. Any excluded PSC, particularly 1395 -  Miscellaneous Ammunition, may have been used as the PSC to  categorize a purchase that included firearms ammunition and those  purchases would be excluded from the publicly-available records that we  examined.\nTo address our third and fourth questions, we reviewed inventory  information and controls for case study federal law enforcement  components within U.S. Department of Health and Human Services  (HHS), Environmental Protection Agency (EPA), and Internal Revenue  Service (IRS). These components are as follows: EPA Office of Inspector  General (OIG), Office of Enforcement and Compliance Assurance  (OECA); Food and Drug Administration (FDA), National Institutes of  Health (NIH), HHS OIG, and IRS. Within IRS, two offices employ FLEOs:  Criminal Investigation (CI) and Police Officer Section (Police).  Accordingly, we can draw conclusions only about these components.\nWe obtained and analyzed inventory data and other available  documentation provided by these components regarding their current  inventory as of November 2017 of firearms, ammunition, and tactical  equipment. This included firearms in storage as well as those in FLEO  possession. To assess the reliability of the inventory data, we reviewed  components\u2019 documentation related to data management, especially  policies to ensure that items are properly entered and removed from the  system. In addition, we reviewed components\u2019 recent purchases to verify  that purchases were inventoried and reviewed their purchase data for any  limitations that may affect their quality. We reviewed components\u2019  acquisitions through DOD\u2019s excess property program, known as the Law  Enforcement Support Office (LESO) or 1033 program, to ensure these  items were inventoried. We did not conduct physical inventories during  site visits, and therefore did not actually count components\u2019 physical  inventories.\nTo examine these components\u2019 firearms, ammunition, and tactical  equipment inventory controls, we reviewed their policies describing  storage protocols and inventory control procedures, and we interviewed  components\u2019 officials to better understand these policies and procedures  in practice. We also compared these policies with applicable Standards  for Internal Control in the Federal Government and key areas that we  have identified as important for effective inventory management. We  reviewed internal and external inspection and Inspector General reports  related to the controls over firearms, ammunition, and tactical equipment  at these components to identify any reported deficiencies and actions  taken or planned to address those deficiencies.\nWe also conducted site visits to components\u2019 offices selected based on a  variety of factors, including the number of agencies with component  offices in each city we visited, data discrepancies at field offices, and  reports of loss or theft at these offices. The IRS Police facility we visited in  Martinsburg, West Virginia is the only location for this component. In all,  we visited 12 offices. During site visits, we observed officials  demonstrating inventory inspection, inventory data entry, and access and  other security controls. In addition, we interviewed officials responsible for  maintaining and inventorying firearms, ammunition, and certain tactical  equipment. The observations and information we obtained from the  offices visited cannot be generalized to other locations for these  components, but provide insights about the components\u2019 controls for  firearms, ammunition, and tactical equipment.\nWe conducted this performance audit from June 2017 to October 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We subsequently worked with  the agencies addressed in this report from October 2018 to December  2018 to prepare this public version of the original sensitive report for  release. This public version was also prepared in accordance with these  standards.\n\nAppendix II: Spending on Firearms, Ammunition, and Tactical Equipment by Agency\n\nThis appendix summarizes agency-provided spending data for the 20  agencies with 250 or more federal law enforcement officers and the 5  additional agency components that were included in our review. This  appendix also identifies the challenges that agency officials identified in  collecting the requested data and the limitations we identified while  analyzing their data. To compile this information, we asked the agencies  to provide data on their spending on firearms, ammunition, and selected  tactical equipment from fiscal years 2010 through 2017. We reviewed the  spending data provided by agencies to assess their accuracy and  completeness, and followed up with agency officials as needed. Some  agencies reported limited access to spending records because of their  storage format or physical location, and we asked agencies to report the  data that were accessible to them within the timeframe of this review. We  found the data sufficiently reliable for the purpose of reporting the  minimum thresholds of total amounts agencies spent and the numbers of  firearms and rounds of ammunition they bought during the 8-year period  in our scope. However, we found that data were not reliable for reporting  the number of tactical equipment items purchased or for comparing the  data across and within agencies. For more information on the  methodology we used to collect these data and the challenges agencies  faced compiling these data, see appendix I.\nOfficials also provided information about the missions of their agencies or  components, and the roles and responsibilities of their law enforcement  officers. We included inventory data as of November 2017 for the agency  components that were included in our review of inventory controls.\n\n\tU.S. Forest Service\n\nProtects the public, employees, natural  resources, and property under the jurisdiction of  the Forest Service by enforcing the applicable  laws and regulations that affect the National  Forest System.\nOfficers are responsible for conducting  enforcement and investigations of criminal and  civil offenses that affect the management of the  National Forest System.  Officers engage in  public safety patrol operations, investigations of  significant criminal offenses, community policing  programs, natural disaster response, and law  enforcement services at large group events,  among other things.\nAgency stores purchase records for six years,  which limited access to older data. Ammunition  purchases and record-keeping are mostly  decentralized among field offices, and officials  could not provide the level of detail requested for  all purchases. Upgrades to the record-keeping  system may have compromised data from  previous systems.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\nNo known limitations.\n\n\t\tAmmunition spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of Health and Human Services\n\n\tFood and Drug Administration (FDA)\n\nFDA\u2019s Office of Criminal Investigations protects  public health and furthers the FDA\u2019s mission by  investigating suspected criminal violations of the  Federal Food, Drug, and Cosmetic Act and other  related laws.\nNo known challenges.\nOfficers conduct investigations related to criminal  violations of the Food Drug and Cosmetic Act,  which include conducting search and seizure  warrants, transporting prisoners following arrest,  conducting undercover operations, and other  hazardous duties as necessary.\n\n\t\tFirearms spending data\n\n\t\t\tValues by year\n\nDollars (in thousands)\n\n\t\tAmmunition spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tTactical equipment spending data\n\n\t\tInventory as of November 2017\n\n\t\t\tU.S. Department of Health and Human Services\n\n\tNational Institutes of Health (NIH)\n\nProtects our country\u2019s scientific research and  the NIH research community, ensures that the  mission of NIH is not impeded by personal  attacks, loss of assets, criminal activity or acts of  terrorism.\nOfficers with the Division of Police are  responsible for protecting property, employees  and visitors; screening visitors entering NIH  facilities; monitoring onsite equipment, cameras  and alarms; operating the visitor badging system  on and off campus; safeguarding selected  buildings; patrolling areas of the NIH; providing  traffic enforcement; conducting intelligence  gathering and reporting; providing dignitary  protection; and preparing warrants and arresting  suspects.\nNo known challenges.\n\n\t\tFirearms spending data\n\n\t\t\tValues by year\n\nDollars (in thousands)\n\n\t\tAmmunition spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tTactical equipment spending data\n\n\t\t\tType by year\n\nNo known limitations.\n\n\t\tInventory as of November 2017\n\nNIH determined inventory information to be sensitive.\nU.S. Department of Health and Human Services (HHS)\n\n\tOffice of Inspector General (OIG)\n\nNo known challenges.\nSpecial agents conduct criminal investigations  related to fraud, waste, and abuse within HHS\u2019  hundreds of programs, which can involve  surveillance, undercover operations, search  warrants, and arrest warrants.\n\n\t\tU.S. Customs and Border Protection (CBP)\n\nSafeguards America\u2019s borders, protects the  public from dangerous people and materials, and  enables legitimate trade and travel.\nOfficers are responsible for preventing terrorists  and weapons from entering the country, enforcing  laws at ports of entry, and preventing the illegal  trafficking of people, narcotics and contraband.\nRecord-keeping system was implemented in  2016. Prior records required manual review.  Records of purchases made at local field offices  may be unavailable.\n\n\t\t\tU.S. Immigration and Customs Enforcement (ICE)\n\nEnforces federal laws governing border control,  customs, trade and immigration to promote  homeland security and public safety. responsible for conducting investigations to  protect critical infrastructure industries that are  vulnerable to sabotage, attack or exploitation.\nSome purchases are decentralized among field  offices. Hard copy records required manual  review and were difficult to access. Older  records stored at field offices may not have been  available.\n\n\t\t\t\tFirearms spending data\n\n\t\t\t\t\tMinimum values by year\n\nNo known limitations.\n\n\t\t\t\tAmmunition spending data\n\n\t\t\t\t\tMinimum values by year\n\nDollars (in millions)\n\n\t\t\t\tTactical equipment spending data\n\n\t\t\t\t\tU.S. Department of Homeland Security\n\n\t\t\t\tNational Protection and Programs Directorate (NPPD)\n\nNPPD\u2019s Federal Protective Service prevents,  protects, responds to and recovers from  terrorism, criminal acts, and other hazards  threatening the U.S. Government\u2019s workforce,  critical infrastructure, services, and the people  who receive these services.\nNo known challenges.\nOfficers with the Federal Protective Service  are responsible for enforcing all federal laws  and regulations on and off federal property;  investigating, mitigating, and defeating threats to  federal facilities and the people who work within  or visit those facilities; and providing integrated  security, law enforcement, and protective  intelligence capabilities to ensure the Federal  Government functions securely.\n\n\t\t\t\tFirearms spending data\n\n\t\t\t\t\tValues by year\n\nDollars (in thousands)\n\n\t\t\t\tAmmunition spending data\n\n\t\t\t\t\tValues by year\n\nDollars (in thousands)\n\n\t\t\t\tTactical equipment spending data\n\nNo known limitations.\n\n\t\t\t\t\tU.S. Department of Homeland Security\n\n\t\tTransportation Security Administration (TSA)\n\nTSA\u2019s Federal Air Marshal Service (FAMS)  detects, deters and defeats criminal and terrorist  activities that target our nation\u2019s transportation  systems. TSA\u2019s Office of Inspection (OOI)  ensures the integrity, efficiency, and  effectiveness of TSA\u2019s workforce, operations,  and programs through objective audits, covert  testing, inspections, and criminal investigations.\nNo known challenges.\nOfficers with FAMS are deployed on U.S. aircraft  worldwide to protect airline passengers and  crew against the risk of criminal and terrorist  violence, and perform investigative work to  proactively fight terrorism. Officers with OOI  investigate allegations of misconduct by TSA  employees and contractors, conduct inspections  of TSA operations, and evaluate effectiveness  of security systems through covert testing and  audits.\n\n\t\t\tFirearms spending data\n\n\t\t\t\tValues by year\n\nNo known limitations.\n\n\t\t\tAmmunition spending data\n\nDollars (in millions)\n\n\t\t\tTactical equipment spending data\n\n\t\t\t\tU.S. Department of Homeland Security\n\n\tU.S. Secret Service (USSS)\n\nEnsures the safety and security of the President,  the Vice President, their families, the White  House, the Vice President\u2019s Residence,  national and visiting world leaders, former U.S.  Presidents and events of national significance;  and protects the integrity of our currency and  investigates crimes against our national financial  system committed by criminals around the world  and in cyberspace.\nOfficers are responsible for executing security  operations that prevent, deter, and mitigate  identified threats and vulnerabilities; and  conducting investigations to identify, locate and  apprehend individuals and criminal organizations  targeting the nation\u2019s critical financial  infrastructure and payment systems.\nRecord-keeping system changed in 2015 and  older records may be incomplete. Officials  were unable to provide records of equipment  purchases because purchasing is decentralized  among field offices and records required manual  review; they provided current inventory records  of the equipment instead.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\nOfficials reported that some  cost data were estimated  based on available information The percentages do not total  100 because of rounding.\n\n\t\tAmmunition spending data\n\n\t\t\tMinimum values by year\n\nDollars (in millions)\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of the Interior\n\n\tBureau of Indian Affairs (BIA)\n\nBIA\u2019s Office of Justice Services upholds tribal  sovereignty and customs while supporting tribal  justice systems, and corroboratively ensures the  safety of Indian communities by protecting life  and property, enforcing laws, and maintaining  justice and order.\nOfficers are responsible for patrolling designated  Indian reservations, providing local law  enforcement, responding to calls for emergency  response, investigating crimes, transporting  prisoners to and from tribal court appearances,  gathering and analyzing criminal intelligence,  and collaborating with state and federal task  forces.\nThe current financial management system was  implemented in 2013, and records from the  previous system may be incomplete.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\nNo known limitations.\n\n\t\tAmmunition spending data\n\nDollars (in thousands)\nBecause of incomplete data from  the  agency, we determined the data  are not  reliable for reporting in this  category.\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of the Interior\n\n\tU.S. Fish and Wildlife Service (FWS)\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tAmmunition spending data\n\nDollars (in thousands)\nBecause of incomplete data from  the  agency, we determined the data  are not  reliable for reporting in this  category.\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of the Interior\n\n\tNational Park Service (NPS)\n\nevents within the NPS; and providing protection  for dignitaries and visiting foreign heads of state.\nNPS\u2019 Visitor and Resource Protection  Directorate\u2014under which fall the Law  Enforcement, Security, and Emergency Services  and U.S. Park Police\u2014protects the safety and  health of NPS visitors, partners, and staff, as well  as our natural and cultural resources.\nFinancial management system implemented in  2013, and older records did not retain the cost  data fields. Some records kept as paper copies  and were decentralized among field offices.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tAmmunition spending data\n\nDollars (in thousands)\n\n\t\tTactical equipment spending data\n\n\t\tU.S. Department of Justice Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)\n\n\t\t\tMission\n\nProtects the public from crimes involving  firearms, explosives, arson, and the diversion of  alcohol and tobacco products; regulates lawful  commerce in firearms and explosives; and  provides worldwide support to law enforcement,  public safety, and industry partners.\nOfficers are responsible for reducing violent  crime by targeting firearms traffickers, violent  criminal organizations, armed violent offenders,  and career criminals; investigating and arresting  individuals and organizations that illegally supply  firearms to prohibited individuals; and deterring  the diversion of firearms from lawful commerce  into the illegal market with enforcement  strategies and technology.\nRetention policy is 6 fiscal years, so older  records may have been unavailable. There may  be errors associated with manual data entry.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands) firearms in 2017. At the time  of our review, the funds were  obligated but not yet spent.\n\n\t\tAmmunition spending data\n\nDollars (in thousands)\nNo known limitations.\n\n\t\tTactical equipment spending data\n\nNo known limitations.\n\n\t\t\tU.S. Department of Justice\n\n\tFederal Bureau of Investigation (FBI)\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nNo quantity or type data reported.\n\n\t\tAmmunition spending data\n\n\t\t\tMinimum values by year\n\nFirearm of intended use for all years No quantity or firearm of intended use data  reported.\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of Justice\n\n\tFederal Bureau of Prisons (BOP)\n\nProtects society by confining offenders in prisons  and community-based facilities and provides  work and other self-improvement opportunities  to assist offenders in becoming law-abiding  citizens.\nOfficers are responsible for ensuring the security  of federal prisons, providing inmates with  needed programs and services, and modeling  mainstream values. Officers help protect public  safety and provide security and safety to the  staff and inmates in prison facilities. All non- custody staff are trained to assume the duties of  Correctional Officers.\nOfficials reported limited data\u2014most records  prior to 2016 were stored in file cabinets at  prison facilities or in warehouses and would have  required significant time and resources to review.  Purchasing is decentralized across prison  facilities, which limited the availability of data,  and inconsistent data entry procedures among  officials may limit the reliability of data.\n\n\t\tDrug Enforcement Administration (DEA)\n\nillicit drug trafficking; coordination with law  enforcement officials on drug enforcement efforts  and to reduce availability of illicit drugs.\nFirearms purchases were embedded in contracts  and required manual review.\n\n\t\t\tFirearms spending data\n\n\t\t\t\tValues by year\n\nDollars (in thousands)\n\n\t\t\tAmmunition spending data\n\nDollars (in millions)\n\n\t\t\tTactical equipment spending data\n\n\t\t\t\tU.S. Department of Justice\n\n\tU.S. Marshals Service (USMS)\n\nOfficers provide for the security of federal courts  and execute and enforce federal court orders,  apprehend fugitives and non-compliant sex  offenders. Officers also transport federal prisoners  from arrest to incarceration, manage and disposes  of assets subject to forfeiture, and provide protection  for government witnesses and their families.\nThe record-keeping system changed in 2012,  and there may be gaps in the data from 2013  and 2014 while the agency transitioned to the  new system.\n\n\t\tFirearms spending data\n\n\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\tAmmunition spending data\n\nFirearm of intended use for all years No quantity data provided.\n\n\t\tTactical equipment spending data\n\n\t\t\tU.S. Department of the Treasury\n\n\tThe Internal Revenue Service (IRS)\n\nIRS\u2019 Criminal Investigation serves the American  public by investigating potential criminal  violations of the Internal Revenue Code and  related financial crimes in compliance with the  law.\nOfficers enforce tax laws and support tax  administration to ensure compliance with the law  and combat fraud. Investigations focus on tax  fraud, abusive tax schemes, identity theft, public  corruption, virtual currency, cyber-crimes, and  narcotics-related financial crimes.\nSome requested data were not retained in the  system. Agency could not provide equipment  purchase data. Ammunition, equipment, and  purchases $3,500 or less are decentralized  among field offices.\n\n\t\tThe Internal Revenue Service (IRS) Police\n\nIRS\u2019 Police Force at the Enterprise Computing  Center in Martinsburg, West Virginia provides  protection for the people, property and processes  of this location, which houses 10 of IRS\u2019 19  critical tax processing functions.\nNo known challenges.\nOfficers patrol the facility and have authority to  serve warrants and make arrests.\n\n\t\t\tFirearms spending data\n\nNo reported firearms purchases between fiscal years 2010 through 2017.\nDollars (in thousands)\nNo known limitations.\n\n\t\t\tTactical equipment spending data\n\n\t\t\tInventory as of November 2017\n\n\t\t\t\tU.S. Department of the Treasury\n\n\t\t\tThe Treasury Inspector General for Tax Administration (TIGTA)\n\nProvides independent oversight of Internal  Revenue Service (IRS) activities and addresses  threats arising from lapses in IRS employee  integrity, violence directed against the IRS, and  external attempts to corruptly interfere with  federal tax administration.\nOfficers are responsible for conducting  investigations that protect the integrity of  the IRS; detecting and preventing fraud  and other misconduct within IRS programs;  investigating allegations of criminal violations and  administrative misconduct by IRS employees; and  protecting IRS against external attempts to corrupt  or threaten its employees.\nAfter fiscal year 2016, record-keeping system no  longer tracked purchases under $3,000.\n\n\t\t\tFirearms spending data\n\n\t\t\t\tMinimum values by year\n\nDollars (in thousands)\nNo known limitations.\n\n\t\t\tAmmunition spending data\n\nDollars (in thousands)\n\n\t\t\tTactical equipment spending data\n\nNo known limitations.\n\n\t\t\t\tU.S. Department of the Treasury\n\n\tThe U.S. Mint\n\nNo known challenges.\nOfficers with the Mint Police protect life and  property, prevent, detect, and investigate criminal  acts, collect and preserve evidence, make  arrests, and enforce federal and local laws.\n\n\t\tOffice of Enforcement and Compliance Assurance (OECA)\n\nEPA\u2019s criminal enforcement program focuses on  criminal conduct that threatens people\u2019s health  and the environment; enforces the nations\u2019 laws  by investigating cases, collecting evidence,  conducting forensic analyses; and provides legal  guidance to assist with prosecutions.\nNo known challenges.\nAgents enforce the nation\u2019s laws by investigating  cases, collecting evidence, conducting forensic  analyses and providing legal guidance to assist  with prosecutions.\n\n\t\t\tFirearms spending data\n\nNo reported firearms purchases from fiscal years 2010 through 2017.\nDollars (in thousands)\n\n\t\t\tTactical equipment spending data\n\n\t\t\tInventory as of November 2017\n\n\t\t\t\tU.S. Environmental Protection Agency (EPA)\n\n\tOffice of Inspector General (OIG)\n\nHelps the agency protect the environment in  a more efficient and cost effective manner by  performing audits, evaluations, and investigations  of EPA and its contractors; promoting economy  and efficiency; and preventing and detecting  fraud, waste, and abuse.\nLaw enforcement agents conduct criminal  investigations of financial fraud involving EPA  programs or funds; employee misconduct;  intrusion into EPA computers; threats against  EPA employees, contractors, facilities and  assets; assaults on EPA employees or  contractors and other acts of violence in  EPA facilities; impersonating EPA officials;  counterfeiting or misuse of insignia, logos or  credentials; and theft of property or funds within  EPA facilities.\nNo known challenges.\n\n\t\tOffice of the Inspector General (OIG)\n\nOIG\u2019s Office of Investigations conducts and  coordinates investigative activity related to fraud,  waste, abuse, and mismanagement in SSA  programs and operations.\nNo known challenges.\nOfficers with the Office of Investigations  investigate wrongdoing by applicants,  beneficiaries, contractors and third parties,  and employees; conduct joint investigations  with other law enforcement agencies; share  responsibility for investigating threats or violence  against SSA employees and facilities; and assist  in the investigation of terrorism cases and other  cases involving national security.\n\n\t\t\tFirearms spending data\n\n\t\t\t\tValues by year\n\nDollars (in thousands)\nNo known limitations.\n\n\t\t\tAmmunition spending data\n\nDollars (in thousands)\nNo known limitations.\n\n\t\t\tTactical equipment spending data\n\nNo known limitations.\n\n\t\t\t\tDepartment of Veterans Affairs (VA)\n\n\t\tVeterans Health Administration (VHA)\n\nProtects veterans by enforcing federal law at VA  medical facilities (and some National Cemetery  and Benefits locations) and by serving as initial  response forces to active threat incidents.\nOfficers protect veterans, visitors, and staff on  department facilities and grounds; investigate  serious incidents on VA controlled property; and  provide personal protection to the Secretary and  Deputy Secretary of the VA.\nPurchasing and record-keeping are decentralized  among facilities, and there is no agency-wide  system for recording purchases. Purchase card  records were not easily accessible or identifiable.\n\n\t\t\tFirearms spending data\n\n\t\t\t\tMinimum values by year\n\nDollars (in thousands)\nWe identified missing data for  some cost and date fields\nOfficials reported some cost  data were estimated based on  available information The percentages do not total  100 because of rounding.\n\n\t\t\tAmmunition spending data\n\n\t\t\t\tMinimum values by year\n\nDollars (in thousands)\n\n\t\t\tTactical equipment spending data\n\n\t\t\t\tType by year\n\nAppendix III: Comments from the Department of Homeland Security\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the above contact, Adam Hoffman (Assistant Director) and  Michelle Serfass (Analyst-in-Charge) managed this assignment.  Christoph Hoashi-Erhardt, Allison Gunn, and Kelsey Burdick made  significant contributions to this report. David Alexander, David Blanding  Jr., Willie Commons III, Eric D. Hauswirth, Julia Kennon, Susan Hsu,  Diana Maurer, Wayne McElrath, and Kevin Reeves also contributed.","output":"Why GAO Did This Study\n\nFederal law enforcement agencies purchase firearms, ammunition, and tactical equipment, such as riot shields, to support their missions. GAO was asked to review these purchases for federal law enforcement agencies, and inventory controls at HHS, EPA, and IRS specifically.\nThis report examines, among other objectives (1) firearms, ammunition, and selected tactical equipment spending by federal agencies with 250 or more FLEOs from fiscal years 2010 through 2017; (2) the extent to which select agencies accurately reported purchases of firearms and ammunition in publicly-available data; and (3) inventory controls in place at HHS, EPA, and IRS.\nGAO obtained available data on purchases from 20 agencies and from USASpending.gov, and reviewed inventory information and controls within HHS, EPA, and IRS. GAO also conducted site visits to HHS, EPA, and IRS offices to observe inventory controls, selected based on data discrepancies or reports of loss or theft, among other factors.\nThis is a public version of a sensitive report that GAO issued in October 2018. Information that HHS, IRS, and the Transportation Security Administration deemed sensitive has been omitted.\n\nWhat GAO Found\n\nThe 20 federal law enforcement agencies in GAO's review reported spending at least $38.8 million on firearms, $325.9 million on ammunition, and $1.14 billion on tactical equipment\u2014at least $1.5 billion in total\u2014from fiscal years 2010 through 2017, based on data agencies provided to GAO.\nThe internal agency data on firearms and ammunition purchases for the Bureau of Indian Affairs, U.S. Forest Service, and U.S. Immigration and Customs Enforcement (ICE) did not always match data that were publicly available on USASpending.gov\u2014a government source for federal contract data. In particular, the dollar value of firearms purchases by ICE in USASpending.gov was approximately 8 times greater than the value of the purchases reported by ICE to GAO. Some differences result from other agencies using ICE contracts to make firearms and ammunition purchases, and ICE not properly identifying the funding agency for those purchases in the system that supplies data to USASpending.gov. Because ICE does not accurately report the agency that funded these purchases, the public does not have accurate information on how much ICE\u2014and the agencies that make purchases using ICE contracts\u2014have spent on firearms and ammunition. This decreases accountability and transparency of federal purchases, which is in conflict with the intended purpose of this system.\nDepartment of Health and Human Services (HHS), the Environmental Protection Agency (EPA), and the Internal Revenue Service (IRS) have inventory controls for tracking, verifying, and securing federal law enforcement officers' (FLEOs) firearms. GAO observed these agencies' law enforcement components and found them to be generally following their inventory and security policies at selected locations. In instances where agencies were not in compliance with their policies, the agencies made corrections during the course of GAO's review. Each component has a process whereby at least once yearly officials review the firearms inventory to ensure that firearms match with records in the office's inventory system. The figure below illustrates a general process that all components GAO reviewed follow to verify their firearms inventory. Ammunition and tactical equipment inventory controls varied because agencies generally did not consider these items to be as sensitive as firearms. Examples of these controls include security for, and limited access to, equipment that might be vulnerable to risk of loss or unauthorized use, such as silencers or pyrotechnics.\n\nWhat GAO Recommends\n\nGAO recommends that the Director of ICE update ICE's contracting process to provide the name of the agency funding the purchase of firearms and ammunition to improve the accuracy of publicly available data. ICE concurred with the recommendation."}
{"id":"gao_GAO-18-367T","pid":"gao_GAO-18-367T_0","input":"\tBackground\n\nUnder the Rail Safety Improvement Act of 2008, a PTC system must be  designed to prevent train-to-train collisions, derailments due to excessive  speed, incursions into work zone limits, and the movement of a train  through a switch left in the wrong position. Railroads may implement any  PTC system that meets these requirements, and the majority of the 29  commuter railroads are implementing one of three primary types of  systems: the Interoperable Electronic Train Management System (I- ETMS), the Advanced Civil Speed Enforcement System, or Enhanced  Automated Train Control (E-ATC). PTC\u2019s intended safety benefits can  only be achieved when all required hardware has been installed and  tested, and a train is able to communicate continually and in real time with  the software and equipment of its own railroad and also with that of other  railroads operating on the same tracks. Real-time communication is  needed to account for changing track conditions, which may, for example,  include temporary speed restrictions where railroad employees are  conducting track maintenance. Figure 1 illustrates how one system is  intended to operate.\nPTC\u2019s multi-step implementation process can be grouped into three  primary phases (see fig.2). Each phase involves key activities for  railroads to complete\u2014such as installing PTC equipment\u2014as well as the  submission of key documents for FRA review and approval\u2014such as test  plans. Based on railroad data reported to FRA, most commuter railroads  are currently in the second phase, which involves system design,  installation, and testing. According to a recent FRA presentation,  completing key activities within this phase is the near-term focus for many  commuter railroads.\nAccording to FRA officials, railroads must complete certain  implementation steps sequentially, while other activities can be worked on  simultaneously; for example, railroads may work to finish installing  locomotive and wayside equipment while also beginning testing on an  initial track segment. Furthermore, based on railroads\u2019 PTC  implementation plans, the scale of implementation activities can vary by  railroad, based on the size of the railroad and the number of components to be installed. For example, one relatively large commuter railroad must  install computer hardware on 528 locomotives and 789 wayside units  along 218 route miles, while one relatively small commuter railroad\u2019s  installation is limited to 17 locomotives and 35 wayside units along 32  route miles.\nAccording to FRA, full implementation of PTC is achieved when a  railroad\u2019s system is FRA-certified and interoperable, and all hardware,  software, and other components have been fully installed and in operation  on all route miles required to use PTC. The PTC system is required to be  interoperable, meaning the locomotives of any host railroad and tenant  railroad operating on the same track segment will communicate with and  respond to the PTC system, including uninterrupted movements over  property boundaries.\nIn early 2016, railroads required to install PTC had to submit revised  implementation plans to FRA that included a schedule and milestones for  specific activities, such as installing locomotive and wayside hardware,  acquiring radio spectrum (if necessary), and training employees who will  have to use and operate PTC systems. Railroads are required to report  annually to FRA certain information on their implementation progress.  As part of overseeing railroads\u2019 PTC implementation, FRA established a  PTC Task Force in May 2015 to track and monitor individual railroads\u2019  progress. Railroads are also required to report quarterly to FRA on the  status of PTC implementation in several areas such as: locomotives  equipped, employees trained, territories where revenue service  demonstration (RSD) has been initiated, and route miles in PTC  operation.\nFRA\u2019s oversight tools include assessing civil penalties if a railroad fails to  comply with legal requirements, including a railroad\u2019s failure to comply  with its implementation plan. FRA has a national PTC director,  designated PTC specialists in the 8 FRA regions, and a few additional  engineers and test monitors responsible for overseeing technical and  engineering aspects of implementation and reviewing railroad  submissions of documents and test requests. FRA officials told us they  conduct various types of PTC-related work simultaneously, such as  providing technical assistance to railroads, addressing questions, and  reviewing documentation submitted by railroads. As railroads progress  with testing and before completing implementation, FRA must review and  approve a safety plan for each railroad and certify the PTC system.\nCommuter railroads that will not be able to implement a PTC system by  December 31, 2018, may receive a maximum 2-year extension if they  meet six criteria set forth in statute. Specifically, commuter railroads must  demonstrate, to the satisfaction of the Secretary of Transportation, that  they have: (1) installed all PTC system hardware; (2) acquired all  necessary spectrum; (3) completed required employee training; (4)  included in a revised implementation plan an alternative schedule and  sequence for implementing their PTC system as soon as practicable; (5)  certified to FRA that they will be in full compliance with PTC requirements  by the date provided in the alternative schedule and sequence; and (6)  either initiated RSD on at least one territory required to have operations  governed by a PTC system or \u201cmet any other criteria established by the  Secretary.\u201d\n\n\tProgress Reported in Some Implementation Areas, but Significant Work Remains\n\nMost of the 29 commuter railroads have reported progress in some of the  key areas of PTC implementation that FRA monitors, such as locomotive  and wayside equipment installation, but the amount of progress reported  varies across individual railroads (see fig. 3 below).\nOver half of the commuter railroads reported that they have made  substantial progress in some initial implementation activities, while other  railroads reported that they have made much more limited progress or  have yet to begin equipment installation or employee training. For  example, as of the end of September 2017:\nLocomotive Equipment Installation: 18 commuter railroads reported  50 percent or more of their locomotive PTC equipment was installed,  and of these, 13 had completed installation. In contrast, 6 railroads  reported that they had not started installation of locomotive  equipment.\nWayside Equipment Installation: 16 commuter railroads reported 50  percent or more of their wayside PTC equipment was installed, and  half of them reported that they had completed installation. In contrast,  7 reported that less than 20 percent of this equipment was installed.\nEmployee Training: 11 commuter railroads reported completing PTC  training for 50 percent or more of their employees requiring training.  Of these, four reported that they had completed employee training.  Thirteen commuter railroads had completed 10 percent or less of their  employee training, and of these, 11 reported that they had not started  training their employees. However, some commuter railroad  representatives we spoke with stated that they are waiting to conduct  training until their PTC system is closer to deployment. For example,  representatives from one railroad told us they are waiting to conduct  training so employees will be recently trained and familiar with PTC as  the system is rolled out.\nNotably, commuter railroads reported that they have made the most  progress in obtaining spectrum, which allows PTC components to  transmit information about a train\u2019s movements and location. Specifically,  15 of the 17 railroads that require spectrum reported that they have  obtained it. The two other railroads reported that they are in discussions  to obtain leased spectrum.\nBeyond the initial implementation activities, much work remains for the  majority of commuter railroads to complete other key PTC activities that  will enable them to complete implementation. PTC implementation  requires many additional steps to integrate equipment and software  systems that go beyond installing equipment and training employees, and  the majority of commuter railroads reported that they continue to work to  complete these steps, which are technically complex and time  consuming. For example, as of the end of September 2017:\nLocomotives Fully Equipped and PTC-Operable: Fifteen commuter  railroads reported that half or more of their locomotives were fully  equipped and PTC-operable, meaning that all necessary onboard  hardware and software is installed and commissioned, and is capable  of operating over a PTC-equipped territory. Eight commuter railroads  reported that none of their locomotives were fully equipped and  operable.\nField Testing: Thirteen railroads reported that they had begun field  testing\u2014a key implementation milestone that precedes RSD and  allows railroads to assess how PTC components and software  function together. FRA officials said that the testing phase can be a  long and difficult process, as data obtained during field testing must  prove the functionality of the system and be included as part of a  railroad\u2019s application to enter RSD.\nRSD: Following successful field testing, FRA may grant a railroad  approval to enter the next level of testing, RSD. In RSD, testing is  performed on trains operating PTC as part of regular operations.\nAccording to FRA, RSD is the final phase of testing that a railroad  completes in order to validate and verify its PTC system, and the  results from RSD, along with earlier testing, are to be included in the  safety plan a railroad submits to FRA. While six commuter railroads  reported that they have begun RSD, most had not yet reached this  key milestone\u2014including some of the largest commuter railroads.\nConditional Certification: Once FRA approves a railroad\u2019s safety plan,  the railroad receives a PTC system certification. According to FRA  officials, as of September 30, 2017, only two commuter railroads were  conditionally certified\u2014meaning FRA has reviewed their safety plans  and granted conditional approval for PTC operations, and the  railroads are providing regular service in PTC operations\u2014and two  additional commuter railroads had submitted a safety plan for FRA  review.\nGiven the variation in commuter railroads\u2019 progress, especially related to  completing later-stage PTC activities such as testing and developing  safety plans, 13 of 29 commuter railroads told us they planned to seek a  deadline extension, and the remaining 16 told us they do not intend to  seek an extension. However, the number of commuter railroads planning  to seek an extension is subject to change before the end of 2018.\n\n\tOver Half of Commuter Railroads May Be at Risk of Not Meeting the 2018 Deadline or Criteria for RSD-based Extension, Though Numerous Factors Create Uncertainty\n\nBased on our analysis of the PTC schedules of the 29 commuter  railroads, over half may not have sufficient time to complete activities  needed to implement PTC by the end of 2018 or to qualify for an  extension of that deadline by meeting criteria based on initiating RSD\u2014 for the purposes of this statement, referred to as an RSD-based  extension. In particular, our analysis focused on the time likely needed for  railroads to conduct RSD activities, because RSD is both the final step of  field testing required by the 2018 deadline as well as one of the statutory  options railroads have in seeking a deadline extension. For our analysis,  we compared the amount of time railroads plan for completing two key  milestones\u2014installing the back office server and conducting field  testing\u2014to the amount of time FRA officials estimate is required for each  milestone and to the experiences of railroads that have already  completed RSD. However, it is important to recognize that numerous  factors could affect railroads\u2019 planned and future progress. For example,  commuter railroads could face delays due to unexpected issues with PTC  components or FRA reviews of documents submitted by the railroads.\n\n\t\tOver Half of Commuter Railroads May Be at Risk\n\nIn May 2017, FRA sent letters to 14 commuter railroads and their  respective state departments of transportation and governors informing  the recipients that they had not installed at least 50 percent of their  required locomotive and wayside equipment. In these letters FRA raised  concerns that these railroads were at risk of not meeting the 2018  deadline and not completing requirements for a deadline extension.  Subsequently, in January 2018, FRA applied a more stringent  benchmark\u2014whether a railroad had installed at least 65 percent of all  equipment\u2014and determined that 13 commuter railroads remained at  risk. Using this more stringent criterion, only one railroad had made  enough progress installing equipment to no longer be classified as at risk  by FRA.\nIn addition to FRA\u2019s benchmarks for equipment installation, for our  analysis we evaluated more broadly railroads\u2019 progress in completing  other implementation activities that follow equipment installation and that  FRA and stakeholders said are more difficult to achieve. Specifically, we  analyzed commuter railroads\u2019 planned schedules for two key milestones  to determine whether these railroads appear to have built sufficient time  into their implementation plans to complete these and other activities by  the 2018 deadline or to qualify for an RSD-based extension. The two  key milestones we examined, both of which need to be completed before  a railroad enters RSD, were:  installing the back office server (BOS) and associated software  necessary to connect and interface with wayside, locomotive, and  dispatch equipment (the BOS transmits and receives data among this  equipment that enables PTC to work); and  conducting field testing, in particular testing of installed infrastructure  and initial assessments of the PTC system\u2019s overall functionality on  trains that are not transporting passengers or operating during regular  passenger service.\nOur analysis found that at least one quarter, and potentially up to  approximately two thirds, of commuter railroads may not have sufficient  time to enter RSD and, thus, may not meet the 2018 PTC implementation  deadline or qualify for an RSD-based extension. These railroads vary by  size and type of PTC system and by whether they plan to apply for a  deadline extension. Specifically, our analysis found the following:\nProjection based on BOS status: Between 9 and 19 commuter  railroads appear to be at potential risk of not meeting the 2018  deadline or qualifying for an RSD-based extension based on our  analysis. Our analysis found that the 6 commuter railroads already in  RSD took an average of 10 months from installing the BOS to starting  RSD. However, the schedules of 9 railroads indicate that they plan  to install a BOS less than 10 months before the 2018 deadline. We  believe that given past experience of other railroads, this places these  9 railroads at potential risk. Moreover, FRA officials estimate that it  can take 2 to 3 years for a railroad to install and prepare the BOS and  associated software to support testing and RSD. Using FRA\u2019s 2-year  installation estimate (which would require BOS installation before  January 1, 2017) further exacerbates the potential risk of not meeting  the deadline or of not qualifying for any RSD-based extension for up  to 19 railroads.\nProjection based on time allowed to conduct field testing: Based on  our review of the planned schedules, between 7 and 14 railroads may  not have built sufficient time into their plans either to complete field  testing ahead of the 2018 deadline or to qualify for an RSD-based  extension. Commuter railroads and FRA officials told us that field  testing is challenging and can take a substantial amount of time due  to, for example, unanticipated issues and limited available track for  testing given regular passenger operations. On average, our analysis  found that the 6 commuter railroads already in RSD took 7 months to  move from starting field testing to starting RSD. However, 7 commuter  railroads plan to start their field testing less than 7 months before the  2018 deadline. This situation raises concerns about their ability to  conduct field testing before the 2018 deadline. Moreover, FRA  officials told us that moving from the start of field testing to the start of  RSD can take between 1 and 3 years, averaging about 2 years, and  that most railroads under-estimate the amount of time needed for  testing. When we applied the lower end of FRA\u2019s estimate, we found  that it further increases the potential risk for 14 railroads that plan to  start field testing less than a year prior to the 2018 deadline. As a  result, they could be at risk of not meeting the 2018 deadline or  qualifying for an RSD-based extension.\nWe used RSD as a benchmark for our analysis of key milestones based  on the importance of this benchmark in implementing PTC and on the  three RSD-based alternative criteria that FRA has approved to date.\nWhile the three approved alternative criteria all include RSD, FRA has  broad authority to approve \u201cany other\u201d alternative criteria even if not  based on RSD, as noted above. One FRA official told us the agency  approved these three alternative criteria requests because they were all  based on specific, quantifiable measures, rather than because they  included RSD in particular. FRA officials stated that they have not issued  guidance on uniform alternative criteria because they will strive for  railroads to meet the criteria for a deadline extension that are listed in  statute and want the discretion to make determinations on a case-by-case  basis. In addition, FRA officials said they want to ensure that each  railroad\u2019s criteria are consistent with the statutory requirements for final  implementation by December 31, 2020. Because it is unknown what  alternative criteria FRA may establish in the coming months, which may  not include RSD, it is difficult to determine at this time whether the  railroads we found to be potentially at risk of not qualifying for an RSD- based extension might be more or less likely to qualify for an extension  based on other, non-RSD criteria.\n\n\t\tMany Factors May Affect Commuter Railroads\u2019 Ability to Meet the Deadline or Qualify for an Extension\n\nMuch uncertainty exists regarding railroads\u2019 ultimate implementation  progress and their ability to meet the 2018 deadline or qualify for an  extension. This uncertainty is due, in part, to the fact that PTC is a new  way of operating and involves technologies that are more complex to  implement than many other railroad capital projects. Furthermore, a  number of factors can affect commuter railroads\u2019 planned and future  progress, including unexpected setbacks installing PTC components and  resources and capacity issues. Below we highlight some of the factors  that that could affect implementation progress.\n\n\t\t\tLimited Industry Expertise and Resources\n\nThree out of five PTC contractors and suppliers and about half of the  commuter railroads we spoke with acknowledged that industrywide, there  are a limited number of individuals with PTC technical expertise available  to successfully implement the technology. This can affect the ability of  railroads and contractors to meet planned schedules. For example, one  large commuter railroad said it took a year and a half to hire an internal  expert to continue work on its PTC project. In addition, five commuter  railroads told us that they faced other issues with their prime contractors  missing their milestones; such issues, going forward, could impact  railroads\u2019 progress during the coming year. Also, though most railroads  we spoke to are relying on contractors, some commuter railroads may  lack the in-house resources and expertise to plan and oversee a project  as large and complex as PTC. Representatives from three commuter  railroads we interviewed noted that PTC is not a traditional capital or  construction project for a railroad; therefore, it requires additional  expertise. FRA officials also stated that small commuter railroads may not  have technical capacity or expertise with large contracts for such complex  projects, especially given limited industry resources.\nIn addition to limited expertise and resources, some commuter railroads  told us they faced unexpected delays in obtaining PTC equipment, such  as radios, from the supplier. Some PTC equipment is only available from  a single provider, which can lead to delays executing contracts and  obtaining equipment. Three commuter railroads we spoke with said they  encountered issues executing contracts for PTC radios, in particular  negotiating unique liability requirements sought by the only supplier of this  equipment, which resulted in delays or higher overall costs to the  railroads. One railroad noted that executing sole-source contracts for  such circumstances is particularly problematic for state and public  agencies.\n\n\t\t\tInteroperability and Host and Tenant Coordination\n\nAs noted above, PTC is being implemented by different types of railroads  using different systems, and achieving interoperability among PTC  systems can complicate implementation. For example, Northeast Corridor  railroads that are implementing versions of the Advanced Civil Speed  Enforcement System need interoperability with freight railroads using I- ETMS. Even railroads that are installing the same PTC system have to  take significant steps to ensure that systems will communicate and  interoperate properly. In one case, a railroad told us that it is equipping its  locomotives with equipment for multiple PTC systems to ensure that it  can operate on various host railroads\u2019 tracks.\nSome commuter railroads that only operate as tenants on other railroads\u2019  tracks may be able to complete some PTC implementation work more  quickly, as these railroads may benefit from work the host railroads  already completed as they coordinate to implement PTC. For example,  representatives from one commuter railroad we spoke with said they have  to acquire and install PTC equipment on their locomotives but rely on the  host railroads to install the remainder of the necessary PTC infrastructure.  These tenant-only commuter railroads, however, have to coordinate field  testing and RSD with the host railroads.\n\n\t\t\tSchedule Changes\n\nUnexpected issues with components or technology can also require  additional time to complete certain activities, causing schedules to slip.  Such issues could affect railroads currently on schedule as well as  railroads pursuing aggressive schedules in an effort to overcome late  starts or early setbacks. For example, representatives from 10 railroads  we spoke with said that installing the BOS and associated software, and  ensuring it functions properly, can pose a challenge. One contractor told  us that once the BOS is delivered to a railroad, a lot of testing work  remains, and unexpected issues inevitably arise during testing, even if the  BOS works according to all specifications. Representatives from one  railroad said that despite strong organizational commitment to  implementation and setting internal targets for progress, their PTC project  schedule slipped many times over the course of implementation due to a  variety of issues, including on-going software updates that caused delays  while also straining the budget and burdening staff. Representatives from  that commuter railroad also noted that equipping vehicles with PTC  components took three times longer than originally expected (3 years  instead of 1 year). However, some railroads are looking for ways to  accelerate implementation. For example, representatives from one  railroad said they made the difficult decision to cut some weekend  passenger service to accelerate wayside equipment installation.  Therefore, as representatives from one railroad articulated, given the  schedule slippage experienced by railroads further along in  implementation, railroads with aggressive schedules would have a limited  ability to accommodate any additional delays.\n\n\t\t\tFRA\u2019s Resources and Capacity\n\nAs the 2018 deadline approaches and railroads progress with  implementation activities, the amount of documentation railroads will  submit to FRA for review and approval is likely to increase significantly.  For example, FRA reported in summer 2017 that it had taken between 10  and 100 days to review each of the test requests it received from  railroads. As the 2018 deadline approaches, FRA will have to review a  considerable amount of additional test plans and procedures as well as  applications to begin RSD. In addition, FRA will have to concurrently  review any safety plans that are submitted by railroads reaching the  certification phase. At the American Public Transportation Association\u2019s  (APTA) Commuter Railroad Summit in June 2017, FRA officials said that  they expect each safety plan review\u2014which involves all the regional  specialists and some contract personnel\u2014to take between 6 and 12  months to review. These plans are about 5,000 pages in length. FRA  officials told us that reviewing all of the safety plans in a timely manner  will be a challenge given staff resources. FRA has 12 technical staff  dedicated to the review of railroads\u2019 PTC documentation and monitoring  of PTC testing. Representatives from 10 out of 19 commuter railroads we  interviewed said they are concerned about FRA\u2019s ability to review  submitted documentation in a timely manner.\n\n\t\t\tLessons Learned\n\nAs railroads continue to progress with their projects and the industry  becomes more experienced with PTC, railroads could benefit from  lessons learned. For example, representatives from one railroad that is  implementing I-ETMS, the system all large Class I freight railroads are  implementing, told us that they anticipate being able to capitalize on  lessons learned from freight railroads that have operated in RSD. By  leveraging the freight railroads\u2019 experiences, one commuter railroad  hopes to address issues before testing, rather than during, and therefore  move more quickly through the testing process. If commuter railroads are  able to apply lessons learned from other railroads\u2019 testing processes, then  they may be able to accelerate their implementation efforts. Railroads  may also accelerate implementation schedules as they become more  adept at the overall testing process, which involves submitting test  documents to FRA and scheduling multiple tests. This could potentially  shorten the average time it takes a railroad to complete one or more of  the key milestones analyzed. The two commuter railroads that have been  conditionally certified told us they have met with other commuter railroads  informally and have shared their project experiences as a way to facilitate  information sharing.\n\n\tFRA Monitors Railroads\u2019 Progress but Has Not Systematically Communicated with Them or Prioritized Efforts\n\n\t\tFRA Monitors Railroads\u2019 Implementation Progress, Reviews Documents, and Shares PTC Information\n\nSince 2015, FRA has assumed additional roles and responsibilities\u2014 primarily through the PTC Task Force and regional PTC specialists\u2014to  monitor railroads\u2019 implementation progress, review required  documentation, and share information about implementation steps and  activities.\nMonitoring and Document Review: In response to a recommendation  in our September 2015 report, FRA began to identify and collect  additional information from the railroads to enable it to effectively track  and monitor railroads\u2019 PTC progress. For example, in 2016, the PTC  Task Force began collecting quarterly progress data and monitoring  railroads\u2019 annual reports to track progress in meeting the PTC  implementation milestones set out in railroads\u2019 implementation plans,  such as locomotive equipment installed at the end of the year. As  previously noted, the Task Force used this implementation progress  data in May 2017 to identify 14 commuter railroads at risk of not  meeting the 2018 deadline or requirements for an extension. FRA  also monitors railroads\u2019 PTC implementation through meetings with  railroad and industry associations, visits to individual railroads, and  reviewing and commenting on PTC documentation submissions, such  as requests to begin field testing and RSD. FRA officials told us that  they monitor railroads\u2019 progress to determine how much commuter  railroads understand about the implementation process and to trigger  discussions between FRA and the railroads. Regional PTC specialists  are responsible for reviewing and approving requests submitted by  railroads preparing to test system functionality as well as individual  testing procedures describing the specific equipment and movements  involved in each test. In addition, FRA officials told us that assessing  civil penalties and sending commuter railroads letters of concern are  the primary enforcement mechanisms they have available to oversee  PTC.\nInformation Sharing: FRA officials said that they have primarily used  informal assistance and participation in group meetings to convey  information related to the implementation process and specific  milestones necessary to meet the 2018 deadline or qualify for an  extension. FRA officials acknowledged that they do not have the  capacity to provide frequent one-on-one assistance to all railroads  given their growing PTC workload and limited agency resources. As  such, FRA officials explained that in order to reach a wide audience  given the approaching deadline, their current focus is on  presentations at industry group meetings (e.g., APTA\u2019s Commuter  Rail Summit) and specific PTC systems user-group meetings. FRA\u2019s  regional PTC specialists told us they also provide direction on  technical aspects of PTC implementation and testing, primarily by  discussing issues at individual and railroad-industry meetings and  providing informal feedback on commuter railroads\u2019 PTC  documentation, such as testing requests.\n\n\t\tFRA Has Not Systematically Communicated Information to Help Railroads Prepare for the 2018 Deadline or to Qualify for Extensions\n\nWhile the majority of the railroad representatives we met with said FRA  officials were consistently available to discuss issues that arise during  day-to-day PTC implementation activities, the information conveyed by  these officials has sometimes been inconsistent. In particular, FRA\u2019s  heavy reliance on informal assistance and participation in group meetings  to convey information to commuter railroads has led, at least on some  occasions, to different or inconsistent information being communicated in  different meetings. For example, representatives from one PTC  equipment supplier said that FRA has not consistently commented on  different railroads\u2019 test plans, and as a result, they have not been able to  carry lessons learned on to other railroads\u2019 plans. In addition, while FRA\u2019s  officials said their position has been consistent with the regulations stating  that the host railroad must submit a safety plan to FRA, representatives  from one railroad we met with said they had heard conflicting information  from FRA. For example, these railroad representatives told us that FRA  officials originally said commuter railroads that are only tenants on other  railroads needed to submit their own safety plans but later stated at an  industry association meeting that tenant railroads could be included in the  host railroads\u2019 plans.\nIn addition, commuter railroads have expressed a need for additional  clarification about the criteria for applying for an extension. FRA officials  also told us that they have received a lot of questions from commuter  railroads about the criteria for an extension related to RSD or other  alternative criteria. As noted above, to date, FRA has approved  alternative extension criteria for three railroads, and in each case, the  criteria involved RSD testing on a shorter track segment. However,  representatives from one contractor working with several commuter  railroads said it is unclear what \u201calternative criteria\u201d FRA will approve to  receive an extension. In addition, representatives from one commuter  railroad stated that any opportunity to clearly outline FRA\u2019s interpretation  of the PTC requirements, specifically the alternative extension criteria that  could, for example, allow for a shorter test segment, would enable  railroads to better position themselves to apply for an extension.\nRepresentatives from some commuter railroads we met with were  likewise unclear about the agency\u2019s approach to reviewing and granting  extension requests. Representatives from three commuter railroads said  clarification of FRA\u2019s planned approach would be helpful as the deadline  approaches. According to FRA officials, the statute does not set a  deadline by which railroads have to apply for an extension, and FRA has  not set a deadline or indicated the latest date by which a railroad should  apply. Nonetheless, for railroads that do not comply with PTC deadlines,  FRA officials said they could impose civil penalties for each day a railroad  fails to implement a PTC system by the applicable statutory deadline, but  the agency has yet to determine how it will handle railroads that do not  meet the deadline or receive an extension. With less than a year  remaining before the 2018 deadline, FRA officials stated that they  anticipate their workload is likely to increase as railroads submit additional  documentation to review and continue to progress with testing. More  systematic communication that delineates FRA\u2019s planned approach for  the upcoming deadline and extension process may be critical for the  agency to efficiently use its limited resources and convey consistent  information to all the railroads.\nStandards for internal control in the federal government state that  management should externally communicate the quality information  necessary to achieve the entity\u2019s objectives. These standards also note  that management should select the appropriate form and method of  communication, so that information is communicated widely and on a  timely basis. As we have previously found, the particular form of the  agency\u2019s communication\u2014for example, by oral presentation, written  guidance, or formal regulation\u2014will depend on multiple factors including  the purpose and content of the specific communication and applicable  legal requirements. Moreover, internal control standards indicate  agencies should have standard processes in place to determine which  form of communication is appropriate in each case. FRA officials told us  that the agency could issue written guidance explaining how it has  decided to apply its deadline extension authority and what type of  information railroads will then need to submit to get an extension.  However, FRA officials stated this written guidance would require time- consuming approval by the Office of Management and Budget under the  Paperwork Reduction Act, and would make timely issuance of such  guidance difficult. As noted, however, FRA may have the option to use  less formal, less time-consuming methods of communicating key  information about the extension process, such as webinars or conference  calls, to communicate information more systematically. FRA officials  acknowledged they are working to identify mechanisms such as these,  but they have yet to do so. Absent systematic communication articulating  the agency\u2019s planned approach for the extension process, railroads may  not have the information they need to effectively prepare for the deadline  or seek an extension.\n\n\t\tFRA Has Made Limited Use of Implementation Progress to Prioritize Efforts and Mitigate Risks\n\nWhile FRA has taken steps to more closely monitor railroads\u2019  implementation progress, the agency has not prioritized its efforts,  including its allocation of resources, based on an assessment of risk. In  its 2015 Railroad Accountability Plan, FRA stated that its PTC data  collection and monitoring efforts would allow the agency to inform, among  other things, its resource allocation and risk mitigation. While FRA has  used its data to identify at-risk railroads, it has not used this information to  prioritize how to allocate its resources or address risks. For example, as  discussed earlier after reviewing railroads\u2019 data on their progress in  installing PTC equipment, FRA notified 14 commuter railroads of their at- risk status in May 2017. However, while FRA officials said that they hold  regular meetings with many\u2014but not all\u2014of the at-risk railroads, 9 of  these 14 commuter railroads said that the formal letter they received did  not ultimately trigger any change in the type of interaction they have with  FRA. More recently, in December 2017, the Secretary of Transportation  notified all railroads required to implement PTC by letter of the  expectation that all possible measures be taken to ensure implementation  requirements are met by the 2018 deadline. However, these letters made  no distinction between railroads\u2014that is, the same letter was sent to  railroads with conditionally certified PTC systems and to railroads that  reported completing no training or installing no locomotive equipment to  date\u2014nor did the letters describe how FRA\u2019s approach to working with  the railroads would respond to their particular circumstances and risks.\nAs noted above, FRA officials have stated that the agency does not have  the resources to meet more frequently with or provide additional  assistance to railroads. While the PTC Task Force helps monitor  railroads\u2019 progress, FRA still employs fewer than 12 individuals with the  requisite PTC expertise and experience to review technical documents  and help railroads implement PTC systems. In an environment with  limited agency resources, targeting agency efforts to areas of the greatest  risk or highest priority areas is one way to leverage existing resources.  According to standards for internal control in the federal government,  management should identify, analyze, and respond to risks. In addition,  FRA\u2019s Strategic Human Capital Plan states that developments including  the rapid introduction of new technologies, such as PTC, demand that  FRA continuously evaluate its programs and resources to adapt to  changing demands.\nHowever, FRA has not fully leveraged the implementation progress data  that railroads\u2019 submit to the agency to identify and develop a risk-based  approach to prioritize agency actions. At present, it is unclear whether the  agency\u2019s priorities are, for example, to help the largest commuter  railroads meet the deadline or extension requirements, push those  railroads that are very close to full implementation, or assist railroads that  are in the earliest stages of their PTC project. For example, one regional  PTC specialist we met with said that if he did not need to be reviewing  documentation or observing railroads\u2019 field testing, he could spend more  time with at-risk railroads. By not effectively targeting actions to help  mitigate risks posed by railroads most at risk of not meeting the PTC  deadline or qualifying for an extension, FRA misses the opportunity to  leverage its limited resources by providing direct assistance in the areas  of greatest need.\n\n\tConclusions\n\nMuch progress has been made in implementing PTC by commuter  railroads. Nevertheless, about half of commuter railroads plan to apply for  an extension, and many of the railroads\u2019 planned schedules raise  questions about their ability to complete key implementation milestones  and qualify for RSD-based extensions prior to the 2018 deadline. As the  2018 deadline rapidly approaches, the need for clear information that is  systematically communicated to all railroads implementing PTC becomes  even more critical. FRA cannot expect to provide information and  guidance to railroads individually, and therefore, adopting a risk-based  communication strategy could help it more efficiently share information in  the coming year. Moreover, the information FRA collects on railroads\u2019  progress has not been used to inform the agency\u2019s resource allocation  decisions. Using this information to better allocate resources could help  position FRA to better meet its responsibility to monitor and oversee PTC  implementation in the future.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to FRA:\nThe Administrator of FRA should identify and adopt a method for  systematically communicating information to railroads regarding the  deadline extension criteria and process. (Recommendation 1)\nThe Administrator of FRA should develop an approach to use the  information gathered to prioritize the allocation of resources to  address the greatest risk. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this statement to DOT for review and comment. In  its comments, reproduced in appendix II, the agency concurred with our  recommendations. DOT also provided technical comments, which we  incorporated as appropriate.\nChairman Thune, Ranking Member Nelson, and Members of the  Committee, this completes my prepared statement. I would be pleased to  respond to any questions that you may have at this time.\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 team at (202)  512-2834 or flemings@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Susan Zimmerman (Assistant Director), Sarah Arnett, Jim Geibel,  Delwen Jones, Joanie Lofgren, SaraAnn Moessbauer, Malika Rice, Amy  Suntoke, Maria Wallace, Eric Warren, and Crystal Wesco.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis statement examines commuter railroads\u2019 implementation of positive  train control (PTC). Specifically, this report addresses:  commuter railroads\u2019 progress in implementing PTC; how many, if any, commuter railroads may be at risk of not meeting  the mandated PTC deadline or certain extension criteria, and what  factors may be affecting implementation progress; and  the extent to which FRA\u2019s management and oversight approach has  helped ensure that commuter railroads either meet the deadline or  qualify for an extension.\nTo address these objectives, we reviewed the Rail Safety Improvement  Act of 2008, the Positive Train Control Enforcement and Implementation  Act of 2015, and applicable Federal Railroad Administration (FRA)  regulations, reports, and guidance. Our review focused on the 29  railroads FRA officials identified as commuter railroads required to  implement PTC. We also reviewed previous GAO work on PTC and  applied Standards for Internal Control in the Federal Government to  FRA\u2019s role overseeing PTC implementation, including the principles that  management should externally communicate the necessary quality  information to achieve the entity\u2019s objectives and that management  should identify, analyze, and respond to risks. In addition, we interviewed  representatives from 19 commuter railroads to further understand their  implementation progress, factors that may be affecting progress, and the  interviewees\u2019 perspectives on FRA\u2019s management and oversight of PTC  implementation. We selected the 19 railroads to include the 14 railroads  that according to FRA were identified in May 2017 as at risk of both not  meeting the 2018 implementation deadline and not completing statutory  requirements necessary to receive a deadline extension, as well as 5  other railroads that were further ahead with implementation and that  varied in geographic location and size of rail system, among other factors.\nWe met with relevant FRA officials involved in PTC monitoring,  enforcement, and technical assistance including the PTC Staff Director,  regional PTC specialists working in each of the FRA regions where  commuter railroads selected for interviews operate, and members of the  headquarters-based PTC Task Force. In addition, we met with FRA Office  of Railroad Safety specialists and engineers, among others. We also  interviewed representatives from all 7 of the Class I freight railroads  (which are also required to implement PTC), 5 major PTC equipment  suppliers and contractors identified by FRA, and representatives from 2  railroad industry associations\u2014the Association of American Railroads  and the American Public Transportation Association\u2014to obtain their  perspectives on commuter railroads\u2019 implementation of PTC, factors  affecting implementation progress, and FRA\u2019s PTC management and  oversight.\nTo identify commuter railroads\u2019 progress in implementing PTC, we  reviewed railroads\u2019 third quarter progress reports submitted to FRA for the  period ending September 30, 2017. We reviewed the most recently  available quarterly data outlining the 29 commuter railroads\u2019 installation  and implementation progress in selected areas as of September 30,  2017, including: locomotive equipment installed, wayside equipment  installed, employee training, locomotives fully equipped and PTC- operable, spectrum obtained, the status of field testing, and revenue  service initiated. As necessary, we also reviewed the narrative fields in  the quarterly reports for additional context related to a given railroad\u2019s  implementation activities and the extent of progress made in specific  implementation areas. We assessed the data in these reports by  reviewing it for anomalies, outliers, or missing information, and reviewing  supporting narratives to ensure they aligned with the reported data,  among other things. Based on these steps, we determined that these  data were sufficiently reliable for our purpose of describing railroads\u2019  progress implementing PTC. We also reviewed other sources of  information, such as PTC Implementation Plans, railroads\u2019 2016 annual  progress reports, and interviews with railroad representatives.\nTo assess progress on locomotive equipment installation and wayside  equipment installation, we compared the quantities installed to the total  quantities required for PTC implementation. Similarly, to assess progress  on employee training, we compared the number of employees trained to  the number of employees required to be trained for PTC implementation.  To assess progress in fully equipping locomotives to be PTC-operable,  we compared the quantity of locomotives that are fully equipped and  PTC-operable to the quantity required for PTC implementation. To assess  progress on obtaining spectrum, we reviewed the quarterly update on  spectrum. We concluded that a railroad had obtained spectrum if, for one  or more area or location, it reported that spectrum was either (1) acquired  but not available for use or (2) acquired and available for use. We also  reviewed the narrative, as appropriate. For some railroads, we concluded  that spectrum was not applicable because they use a PTC system that  does not require spectrum, or because their host railroad is responsible  for obtaining spectrum. To assess progress on field testing, we reviewed  the third quarter status on installation and track-segment progress. We  concluded that a railroad initiated field testing if one or more of its  segments were reported as (1) testing or (2) operational\/complete. To  determine which railroads initiated revenue service demonstration (RSD),  we reviewed the cumulative territories where RSD had been initiated. If  the railroad reported that one or more territories had initiated RSD, we  concluded that RSD had been initiated.\nFinally, to determine which railroads anticipate completing implementation  before the December 31, 2018 deadline and which plan to seek any RSD- based extension, we obtained information from all 29 commuter railroads  to identify which railroads plan to implement PTC by the 2018 deadline  and which plan to submit an alternative schedule (that is, a request for an  extension) to implement PTC after the December 31, 2018 deadline.\nTo identify commuter railroads at risk of meeting neither the PTC deadline  nor any RSD-based extension criteria, we first reviewed data on railroads\u2019  progress installing PTC locomotive and wayside equipment. We did this  because FRA used such installation progress to identify 14 commuter  railroads as being at risk and notified them via formal letter in May 2017.  To confirm FRA\u2019s identification of commuter railroads that would be at risk  based on an updated benchmark for the third quarter of 2017\u2014railroads  with less than 65 percent of total hardware installed\u2014we analyzed  railroads\u2019 reported locomotive and wayside equipment installation status  as of September 30, 2017 to determine the percentage of total hardware  installed for each commuter railroad.\nTo build on this analysis, we collected information from all 29 commuter  railroads on their actual and planned schedules for key implementation  milestones. For the 19 commuter railroads we met with, we collected this  information as part of our interviews, and for the remaining 10 commuter  railroads, we collected this information by email using a standard data  collection instrument. The key implementation milestones covered  procuring a prime contractor for PTC implementation; applying for and  entering field testing and RSD, which is the final phase of field testing;  installing the back office server (BOS) and associated software; and  completing PTC implementation. This schedule information was collected  between September 2017 and January 2018.\nWe compared the amount of time commuter railroads\u2019 planned for  completing two key milestones to the amount of time that FRA officials  estimate is required for each milestone and to the experiences of  railroads that already initiated RSD. The two milestones are as follows:  Install the BOS and associated software necessary to connect and  interface with wayside, locomotive, and dispatch equipment.\nConduct field testing of installed infrastructure, which is an initial  assessment of the PTC system\u2019s overall functionality on trains that  are not transporting passengers or operating during regular  passenger service.\nWe selected these two milestones because (1) each milestone follows  equipment installation (which FRA had previously analyzed to assess  commuter railroads PTC implementation progress); (2) a railroad must  complete both to enter RSD; and (3) several interviewees, including PTC  contractors and suppliers and FRA officials, said these activities are  important project milestones that are complex and time consuming. We  calculated the amount of time a commuter railroad planned for each  milestone (with initiating RSD as the endpoint for each milestone), and  compared that amount of time to two benchmarks: first, the anticipated  length of time FRA officials said that the milestones have taken or may  take, and second, the average amount of time (in months) that each  milestone took the six commuter railroads that had started RSD as of  September 2017. Since we used two benchmarks, we present a range of  railroads that may not have sufficient time to complete these milestones  and thus may be at risk of not meeting the 2018 deadline or qualifying for  an RSD-based extension.\n\nAppendix II: Agency Comments\n\nAppendix II: Agency Comments  This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.","output":"Why GAO Did This Study\n\nForty-one railroads including 29 commuter railroads are required by statute to implement PTC. Commuter railroads unable to implement a PTC system by December 31, 2018, may receive a maximum 2-year extension if they meet certain statutory criteria.\nGAO was asked to review commuter railroads' PTC implementation. Among other objectives, this statement discusses (1) commuter railroads that may not be positioned to meet the PTC deadline or to qualify for an extension, and factors affecting their progress, and (2) the extent to which FRA's management and oversight approach has helped ensure that commuter railroads meet the deadline or qualify for an extension.\nGAO analyzed commuter railroads' most recently available quarterly progress reports and collected information on planned implementation schedules, interviewed 19 commuter railroads\u2014including 14 FRA identified as at-risk and 5 others further ahead with implementation\u2014and interviewed FRA officials.\n\nWhat GAO Found\n\nThe Federal Railroad Administration (FRA) is responsible for overseeing railroads' (including commuter railroads') implementation of positive train control (PTC) by December 31, 2018. PTC is a communications-based train control system designed to prevent certain types of accidents and involves the installation, integration, and testing of hardware and software components. For example, railroads must install equipment on locomotives and along the track, and complete field testing, including revenue service demonstration (RSD)\u2014an advanced form of testing that occurs while trains operate in regular service.\nGAO's analysis of commuter railroads' PTC scheduled milestones for two key activities necessary to meet the 2018 deadline or qualify for an RSD-based extension (one of the statutory options) found that as many as two-thirds of the 29 commuter railroads may not have allocated sufficient time to complete these milestones. Specifically, in comparing the commuter railroads' schedules to FRA's estimates of the time required to complete these milestones and the experiences of railroads that have already completed them, GAO's analysis found that from 7 to 19 commuter railroads may not complete the milestones before the 2018 implementation deadline or qualify for an RSD-based extension. For example, FRA estimates that field testing (one of the milestones) takes at least one year, but GAO found that 14 commuter railroads plan to start this testing less than a year before the 2018 deadline, increasing the potential risk that this milestone will not be completed. However, FRA has the authority to establish alternative criteria for an extension not based on RSD, and several other factors can affect commuter railroads' planned and future progress. As a result, the number of commuter railroads at risk of not meeting the deadline or qualifying for an extension could increase or decrease in the coming year.\nFRA's PTC management and oversight includes monitoring commuter railroads' progress, reviewing documentation, and sharing information with them, but the agency has not systematically communicated information or used a risk-based approach to help these railroads prepare for the 2018 deadline or qualify for an extension. GAO found that FRA has primarily used informal assistance, meetings with individual railroads, and participation in industry-convened groups to share information with commuter railroads, and in some cases the information conveyed has been inconsistent according to industry representatives. Some commuter railroads also told GAO that clarification about the agency's planned process for reviewing and approving extension requests would be helpful. Federal internal control standards state that management should externally communicate the necessary quality information to achieve its objectives. While FRA officials have said they are working to identify additional ways to convey extension-related information, they have not yet done so. Moreover, although FRA receives information from commuter railroads on their progress in implementing PTC, it has not used this information to prioritize resources using a risk-based approach. With the year-end 2018 deadline approaching, and an anticipated significant increase in FRA's workload, targeting resources to the greatest risk can help better ensure that FRA effectively fulfills its oversight responsibilities and provides commuter railroads the information they need to prepare for the 2018 deadline or seek an extension.\n\nWhat GAO Recommends\n\nGAO recommends FRA identify and adopt a method for systematically communicating information to railroads and use a risk-based approach to prioritize its resources and workload.\nDOT concurred with the recommendations. The agency also provided technical comments, which were incorporated as appropriate."}
{"id":"gao_GAO-18-207","pid":"gao_GAO-18-207_0","input":"\tBackground\n\nThe SBIR program was initiated in 1982 and has four main purposes: (1)  use small businesses to meet federal R&D needs, (2) stimulate  technological innovation, (3) increase commercialization of innovations  derived from federal R&D efforts, and (4) encourage participation in  technological innovation by small businesses owned by women and  disadvantaged individuals. The STTR program was initiated a decade  later, in 1992, and has three main purposes: (1) stimulate technological  innovation, (2) foster technology transfer through cooperative R&D  between small businesses and research institutions, and (3) increase  private-sector commercialization of innovations derived from federal R&D.\nThe SBIR and STTR programs are similar in that participating agencies  identify topics for R&D projects and support small businesses, but the  STTR program requires the small business to partner with a nonprofit  research institution, such as a college or university or a federally funded  research and development center.\nEach participating agency must manage its SBIR and STTR programs in  accordance with program laws and regulations and the policy directives  issued by SBA. In general, the programs are similar across participating  agencies. All of the participating agencies follow the same general  process to obtain proposals from and make awards to small businesses  for both the SBIR and STTR programs. However, each participating  agency has considerable flexibility in designing and managing specific  aspects of these programs, such as determining research topics,  selecting award recipients, and administering funding agreements. At  least once a year, each participating agency issues a solicitation  requesting proposals for projects in topic areas determined by the  agency. Each participating agency uses its own process to review  proposals and determine which proposals should receive awards. The  agencies that participate in both SBIR and STTR programs usually use  the same process for both programs. Also, each participating agency  determines whether to provide the funding for awards as grants or  contracts.\nAccording to the policy directives, SBA maintains a system that records  SBIR and STTR award information\u2014using data submitted by the  agencies\u2014as well as commercialization information, such as information  about patents, sales, and investments reported by small businesses that  received these awards. SBA is to use these data to assess small  businesses that received awards against the benchmarks and identify any  small businesses that did not meet the benchmarks. SBA is to initially  assess the small businesses against the benchmarks and then in April of  each year notify those that do not meet the benchmarks so that the  businesses can review their award data and work with participating  agencies to correct the database if necessary. SBA then is to analyze the  award data again to identify, on June 1, those small businesses that still  do not meet the benchmarks. These small businesses are then ineligible  for certain awards from that date through May 31 of the following year.\n\n\t\tData Challenges Have Limited the Implementation of the Benchmarks, and SBA and Participating Agencies Have Provided Inconsistent Information about the Consequence SBA and Participating Agencies Assessed Small Businesses against the Transition Rate Benchmark, but the Assessments Have Been Based on Inaccurate or Incomplete Data\n\nData challenges have limited SBA\u2019s and the 11 participating agencies\u2019  efforts to fully implement the benchmarks. Since 2014, SBA and the  participating agencies have regularly assessed small businesses against  the Transition Rate Benchmark, but the assessments have been based  on inaccurate or incomplete data. SBA and the participating agencies  have assessed small businesses against the Commercialization  Benchmark only once, in 2014, because of challenges in collecting and  verifying the accuracy of data. In addition, SBA and the participating  agencies have provided inconsistent information to small businesses  about the consequence of not meeting the benchmarks.\nSince 2014, SBA and the participating agencies have regularly assessed  small businesses against the Transition Rate Benchmark, which, in  general, measures the rate at which businesses move projects from  phase I to phase II. From 2014 through 2017, SBA determined that 4 to  7 small businesses did not meet the benchmark each year and placed  those businesses on a list of those ineligible to receive certain additional  awards.\nHowever, we found instances in which the data used to generate the list  were inaccurate or incomplete. For example, we identified an instance in  which the data in the awards database changed considerably after SBA\u2019s  initial assessment, indicating that the data used for that assessment were  inaccurate. SBA\u2019s list of small businesses subject to the benchmark in  2015 showed that a small business received 297 phase I awards during  the assessment period. However, data received from SBA officials in  August 2017 showed that this small business received only 1 phase I  award. Agencies can update their data in the awards database at any  time to, for example, submit additional award data or correct previously  submitted award data, which is what an SBA official stated may have  caused this change. Because the small business received only 1 award, it  would not have been subject to the Transition Rate Benchmark. In this  case, the change meant that SBA did not miss identifying a small business that should have been ineligible for an award; however, in other  instances, changes to the data may lead SBA to miss identifying a small  business that should have been ineligible for awards.\nIn addition, we identified instances in which the publicly available data on  awards were incomplete, including data that were missing or otherwise  unusable. For example, based on our review of the award data from 2007  through 2016, we identified more than 2,700 small businesses that had  multiple records with different spellings of the same business\u2019s name.  Furthermore, we identified more than 1,400 instances in which a unique  identification number had errors, such as having an incorrect number of  digits, all zeros, or hyphens. SBA officials told us that the quality of the  award information in the database has been an issue, and that accurate  information is important because small businesses may avoid being  identified as subject to the benchmark if their business names and  identification numbers are different across multiple records. For example,  if the database contains 18 phase I awards made within the assessment  period to a small business with a certain unique identification number but  also contains 3 other phase I awards within that period with a different or  missing unique identification number, the small business may avoid being  identified as subject to the benchmark because the data would suggest it  did not meet the threshold of receiving more than 20 phase I awards,  even if it did. As a result, it could be difficult to determine which small  businesses actually received more than 20 awards and should be subject  to the benchmark.\nStandards for Internal Control in the Federal Government state that  management should use quality information to achieve the entity\u2019s  objectives, and SBA\u2019s Information Quality Guidelines state that SBA  seeks to ensure the quality, utility, and integrity of the information it  shares with the public, among other things. SBA\u2019s policy directives for  the SBIR and STTR programs state that SBA maintains a system that  records SBIR and STTR award information, which is publicly available,  and uses this information to calculate small businesses\u2019 performance  against the benchmark. SBA officials told us they depend on the accuracy  of the data received from the participating agencies to perform SBA\u2019s  assessment. These officials also acknowledged that confirming the  accuracy of SBA\u2019s annual assessments against the benchmarks has  been challenging because agencies can update their data over time. SBA  officials stated that they have sought to improve the quality of the data  after the data are entered into the database, such as fixing instances in  which small businesses\u2019 names were spelled differently across multiple  records; however, the officials said that correcting the data already  entered in the awards database is an ongoing and time-consuming  process. SBA officials told us that there are errors in the database, in part  because SBA has not worked with participating agencies to ensure that  agencies enter high-quality, accurate data into the database. SBA officials  provided us guidance on how to enter data that they said is available to  agencies, but the errors we found suggest that agencies are not fully  utilizing this guidance. As a result, SBA cannot reasonably ensure the  quality and reliability of its award data and therefore cannot reasonably  ensure that it has correctly assessed small businesses against the  Transition Rate Benchmark.\n\n\t\tSBA and the Participating Agencies Assessed Small Businesses against the Commercialization Benchmark Only in 2014\n\nThe Small Business Act requires agencies to evaluate whether small  businesses have met a minimum performance standard for  commercializing their technology. SBA and participating agencies do not  know the extent to which small businesses are meeting the  Commercialization Benchmark because SBA and the agencies have  assessed businesses against the benchmark only once, in 2014, when  SBA determined that 12 businesses did not meet the benchmark. This is  in part because, according to officials from SBA and several agencies,  they cannot collect and verify the accuracy of the data needed to  implement the benchmark as written.\nFor SBA and participating agencies to assess whether small businesses  meet the Commercialization Benchmark, these small businesses must  provide data on sales, investments, or patents resulting from the awards.  However, agency officials told us about challenges related to obtaining  the data they need to implement this benchmark. For example, agency  officials told us that the needed data are not consistently applicable  across agencies or projects. Specifically, these officials said that an  agency may purchase the technology developed as a result of the SBIR  or STTR award, while another agency may focus on funding technologies  that will be sold on the commercial market, leading to different kinds of  data on \u201csales.\u201d Additionally, officials from SBA and several of the  participating agencies told us they have been unable to collect and verify  the accuracy of the information from small businesses to assess them  against the Commercialization Benchmark. In addition, officials from 2  agencies told us that small businesses can easily circumvent the  benchmark by submitting incorrect data.\nThe Small Business Act and the policy directives provide agencies  flexibility in how they can implement the Commercialization Benchmark.  Officials from participating agencies said that they thought the  Commercialization Benchmark should be revised, but they provided  differing views on how to do it. Officials from SBA and 2 agencies told us  that they would consider having individual agencies develop a benchmark  or metric tailored to their agency, in part because the definition of  successful commercialization could vary across the agencies. However,  officials acknowledged that collecting and verifying the accuracy of the  data would still be a concern with this approach. Officials from 2  participating agencies told us that collecting and verifying the accuracy of  the data is a significant amount of work, and officials from a third agency  added that implementing the benchmark independently is impractical  because they do not have the capability to track small businesses\u2019  commercialization efforts. Officials from 1 agency said they preferred to  keep a uniform benchmark across the agencies, in part because having  varying benchmarks could lead to a small business being eligible to  participate in the programs with one agency but not with another.  Although views differed across agencies, working together to find a way  to implement the benchmark as designed or revising it so that it can be  implemented could allow the agencies to fulfill the requirement in the  Small Business Act.\nOfficials from 3 agencies told us they would prefer to consider  businesses\u2019 prior commercialization experience as part of their overall  evaluation of businesses\u2019 proposals, rather than implement the current  Commercialization Benchmark. The SBIR and STTR policy directives  currently allow agencies to define the benchmark in terms other than  revenue or investment, such as using a commercialization scoring system  that rates awardees on their past commercialization success. Defining the  benchmark in these terms could help agencies to implement the statutory  requirement. Officials from SBA said they see the value of allowing  reviewers to use professional judgment in determining the  commercialization success of applicants, rather than assessing small  businesses against standard criteria. Officials from 1 agency said that  such a change could help achieve the goal of the benchmark without the  challenges of collecting data from all small businesses participating in the  programs.\nNine of the 11 participating agencies currently consider prior  commercialization experience as part of their evaluation when making  award selections (see table 2), which shows that evaluating  commercialization experience at individual agencies can be feasible. For  example, project solicitations from the Department of Agriculture, the  Department of Defense, and the National Science Foundation state that  these agencies require applicants to provide sales or revenue information  for products resulting from SBIR or STTR awards, and the Department of  Homeland Security\u2019s solicitation requires applicants to provide a history of  previous federal and nonfederal funding and subsequent  commercialization of their products. All agencies consider  commercialization potential when selecting these awards.\n\n\t\tSBA and Participating Agencies Have Provided Inconsistent Information to Small Businesses on the Consequence of Not Meeting the Benchmarks\n\nThe consequence for small businesses not meeting the benchmarks is  ineligibility to participate in phase I of the SBIR or STTR program for a  year, according to the Small Business Act. SBA officials stated that they  and the agencies initially interpreted this to mean that small businesses  could not receive awards during the ineligibility period of June 1 through  May 31 of the following year, and this is how the consequence is  described in the SBIR and STTR policy directives. SBA officials told us  that they and the participating agencies sought to change how to  implement the consequence of businesses not meeting the benchmarks  because of SBA\u2019s and agencies\u2019 difficulties in implementing the  benchmarks. Officials from 4 agencies said that they generally evaluate  and select awards shortly before SBA releases the list of ineligible  companies, leading them to potentially select projects from small  businesses that will be on the ineligible list by the time the award period  begins. Based on our review of award data from October 2014 to May  2017, we identified 13 phase I awards across 5 small businesses with  award start dates during the period that the business was ineligible to  receive such awards. According to agency officials, each of these awards  was selected before the small business became ineligible to receive the  award. SBA and the participating agencies agreed to change how the  consequence would be implemented, starting in 2017, so that small  businesses that do not meet the benchmarks are ineligible to submit  proposals, according to SBA officials.\nAs of November 2017, however, the information available about this new  way to implement the consequence was inconsistent because some of  the agencies had not updated their project solicitations. Specifically,  information in the most recent project solicitations available at that time  for 2 agencies and one subunit of an agency stated that businesses that  do not meet the benchmarks are ineligible to submit certain proposals,  consistent with the revised approach for how to implement the  consequence. However, the most recent project solicitations available at  that time for 7 other agencies and the other subunit of the agency  mentioned above instead stated that those businesses that do not meet  the benchmarks are ineligible to receive certain awards, consistent with  the prior approach for how to implement the consequence. One other  agency directed users to SBA\u2019s website in its solicitation. Table 3 shows  the information about the consequence of not meeting the benchmarks  that each agency included in its most recent project solicitations as of  November 2017.\nAs of November 2017, the SBIR and STTR policy directives stated that  the consequence for not meeting these benchmarks is ineligibility to  receive certain awards. SBA officials told us they are in the process of  updating the policy directives to reflect this change in how the  consequence is implemented, but these officials said that it is a long  process and they could not provide a timeframe for when the update  would be complete. As mentioned earlier in this report, SBA\u2019s Information  Quality Guidelines state that SBA seeks to ensure the quality, utility, and  integrity of the information it shares with the public, among other things.  Until participating agencies update their project solicitations and SBA  updates its policy directives to accurately reflect agreed-upon practices  about the consequence for small businesses that do not meet the  benchmarks, small businesses may be confused about their eligibility to  submit proposals and could invest time developing and submitting  proposals when they are not eligible to do so.\n\n\tConclusions\n\nUnder the SBIR and STTR programs, federal agencies have awarded  billions of dollars to small businesses to help these businesses develop  and commercialize innovative technologies. SBA and the participating  agencies have assessed these small businesses against the Transition  Rate Benchmark, but those assessments have been based on inaccurate  or incomplete data. Without ensuring the reliability of its data, SBA cannot  reasonably ensure that it has correctly assessed small businesses  against the Transition Rate Benchmark.\nSBA and the participating agencies developed a Commercialization  Benchmark across all the participating agencies but have not fully  implemented it, in part because they have been unable to collect  information from the small businesses and verify the accuracy of that  information. Working together to implement the benchmark as written or  revise it so that it can be implemented could allow the agencies to fulfill  the requirement in the Small Business Act to evaluate whether small  businesses have met a minimum performance standard for  commercializing their technology.\nLastly, SBA and the participating agencies have provided inconsistent  information to small businesses about the consequence of not meeting  the benchmarks. Officials from SBA and the participating agencies had  agreed to change how the consequence would be implemented, starting  in 2017, because of difficulties implementing the benchmarks. However,  as of November 2017, seven agencies, and a subunit of one agency, had  not updated their project solicitations and SBA had not updated its policy  directives. Without consistent information on the benchmarks, small  businesses may be confused about their eligibility to submit proposals  and could invest time developing proposals that they are not eligible to  submit.\n\n\tRecommendations for Executive Action\n\nWe are making a total of 11 recommendations, including 3 to SBA and 1  each to the Department of Commerce\u2019s National Oceanic and  Atmospheric Administration; the Departments of Defense, Education,  Energy, Health and Human Services, and Homeland Security; the  Environmental Protection Agency; and the National Science Foundation.  Specifically:  The Director of the Office of Investment and Innovation within SBA should  work with participating agencies to improve the reliability of its SBIR and  STTR award data (Recommendation 1).\nThe Director of the Office of Investment and Innovation within SBA should  work with participating agencies to implement the Commercialization  Benchmark or, if that is not feasible, revise the benchmark so that it can  be implemented (Recommendation 2).\nThe Director of the Office of Investment and Innovation within SBA should  update the SBIR and STTR policy directives to accurately reflect how the  consequence of the benchmarks is to be implemented (Recommendation  3).\nThe SBIR Program Manager of the Department of Commerce\u2019s National  Oceanic and Atmospheric Administration should update the agency\u2019s  SBIR project solicitation to accurately reflect how the consequence of not  meeting the benchmarks is to be implemented (Recommendation 4).\nThe SBIR Program Administrator within the Department of Defense  should update the agency\u2019s SBIR and STTR project solicitations to  accurately reflect how the consequence of not meeting the benchmarks is  to be implemented (Recommendation 5).\nThe SBIR Program Manager within the Department of Education should  update the agency\u2019s SBIR project solicitation to accurately reflect how the  consequence of not meeting the benchmarks is to be implemented  (Recommendation 6).\nThe SBIR Program Manager within the Department of Energy should  update the agency\u2019s combined SBIR and STTR project solicitation to  accurately reflect how the consequence of not meeting the benchmarks is  to be implemented (Recommendation 7).\nThe SBIR\/STTR Program Coordinator within the Department of Health  and Human Services should update the agency\u2019s SBIR and STTR project  solicitations to accurately reflect how the consequence of not meeting the  benchmarks is to be implemented (Recommendation 8).\nThe SBIR Program Director within the Department of Homeland Security  should update the agency\u2019s SBIR project solicitation to accurately reflect  how the consequence of not meeting the benchmarks is to be  implemented (Recommendation 9).\nThe SBIR Program Manager within the Environmental Protection Agency  should update the agency\u2019s SBIR project solicitation to accurately reflect  how the consequence of not meeting the benchmarks is to be  implemented (Recommendation 10).\nThe SBIR and STTR Program Manager within the National Science  Foundation should update the agency\u2019s SBIR and STTR project  solicitations to accurately reflect how the consequence of not meeting the  benchmarks is to be implemented (Recommendation 11).\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to SBA and the 11 participating  agencies for review and comment. In written comments, the Department  of Commerce\u2019s National Oceanic and Atmospheric Administration; the  Departments of Defense, Education, Energy, Health and Human  Services, and Homeland Security; the Environmental Protection Agency;  and SBA agreed with the respective recommendations directed to their  agencies. Agencies\u2019 written comments are reproduced in appendixes I  through VIII. An official from one agency\u2014the National Science  Foundation\u2014stated in an email that the agency concurred with the  recommendation and did not have any further comments. Two  agencies\u2014the Department of Homeland Security and SBA\u2014also  provided technical comments, which we incorporated as appropriate.  Three agencies\u2014the Departments of Agriculture and Transportation, and  the National Aeronautics and Space Administration\u2014as well as the  Department of Commerce\u2019s National Institute of Standards and  Technology stated via email that they had no technical or written  comments.\nIn its comments, SBA stated that it disagreed with a statement in our draft  report that SBA had not worked with agencies to enter high-quality and  accurate data into the database and provided us documentation of an  instruction guide on entering data that SBA officials said was available to  agencies. Based on our review of this information, we clarified the text of  the report and modified the draft report\u2019s recommendation by removing  the suggested example that SBA provide guidance to the agencies to  improve SBIR and STTR award data reliability. SBA agreed with the  revised recommendation.\nAfter we provided a draft of the report to the agencies for comment, the  Departments of Education and Homeland Security took action on their  respective recommendations. Specifically, in December 2017, the  agencies issued new project solicitations that reflected the updated  consequence of not meeting the benchmarks. We agree that these  agencies fully implemented the recommendations we made to them in  this report.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretaries of Agriculture, Commerce, Defense,  Education, Energy, Health and Human Services, Homeland Security, and  Transportation; the Administrators of the Small Business Administration,  the Environmental Protection Agency, and the National Aeronautics and  Space Administration; the Director of the National Science Foundation;  and other interested parties. In addition, the report is available at no  charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix IX.\n\nAppendix I: Comments from the Small Business Administration\n\nAppendix II: Comments from the Department of Commerce\n\nAppendix III: Comments from the Department of Defense\n\nAppendix IV: Comments from the Department of Education\n\nError! No text of specified style in document.\n\nAppendix V: Comments from the Department of Energy\n\nAppendix VI: Comments from the Department of Health and Human Services\n\nAppendix VII: Comments from the Department of Homeland Security\n\nAppendix VII: Comments from the Department of Homeland  Security Error! No text of specified style in document.\n\nAppendix VIII: Comments from the Environmental Protection Agency\n\nAppendix IX: GAO Contact and Staff Acknowledgments\n\nAppendix IX: GAO Contact and Staff  Acknowledgments Error! No text of specified style in document.\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Hilary Benedict (Assistant  Director), John Barrett, Natalie Block, Antoinette Capaccio, Tanya Doriss,  Justin Fisher, Ellen Fried, Juan Garay, Cindy Gilbert, Perry Lusk, William  Shear, and Elaine Vaurio made key contributions to this report.","output":"Why GAO Did This Study\n\nThrough the SBIR and STTR programs, federal agencies have awarded about 162,000 contracts and grants totaling $46 billion to small businesses to help them develop and commercialize new technologies. Eleven federal agencies participate in the SBIR program, and 5 agencies also participate in the STTR program. Each program has three phases, which take projects from initial feasibility studies through commercialization activities. SBA oversees both programs.\nIn response to the 2011 reauthorization of the programs, SBA and the participating agencies developed benchmarks to measure small businesses' progress in developing and commercializing technologies. GAO was asked to review SBA's and the agencies' efforts related to these benchmarks. This report examines the extent to which SBA and the participating agencies have implemented these benchmarks, including assessing businesses against them and establishing the consequence of not meeting them. GAO analyzed award data and interviewed officials from SBA and the 11 participating agencies.\n\nWhat GAO Found\n\nData challenges have limited the Small Business Administration's (SBA) and the 11 participating federal agencies' efforts to assess businesses against two benchmarks\u2014the Transition Rate Benchmark and the Commercialization Benchmark\u2014of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.\nTransition Rate Benchmark. Small businesses that received more than 20 awards for the first phase of the programs in the past 5 fiscal years\u2014excluding the most recent fiscal year\u2014must have received an average of 1 award for the second phase of the programs for every 4 first phase awards. Since 2014, SBA and the agencies participating in the programs have regularly assessed small businesses against this benchmark. From 2014 through 2017, SBA determined that 4 to 7 businesses did not meet the benchmark each year. SBA officials provided GAO guidance on how to enter data into the programs' awards database they said is available to agencies, but GAO found evidence that suggests agencies are not fully utilizing it. For example, GAO found that the database used to perform the assessments contained inaccurate and incomplete data, such as about 2,700 businesses with multiple records with different spellings of their names and more than 1,400 instances in which a unique identification number had errors, such as an incorrect number of digits, all zeros, or hyphens. Thus, it could be difficult to determine which small businesses should be subject to the benchmark.\nCommercialization Benchmark. Small businesses that received more than 15 awards for the second phase of the programs in the past 10 fiscal years\u2014excluding the most recent 2 fiscal years\u2014must have received a certain amount of sales, investments, or patents resulting from their efforts. SBA and participating agencies have assessed small businesses against this benchmark only once, in 2014, and identified 12 businesses that did not meet the benchmark. This is, in part, due to challenges in collecting and verifying the accuracy of the data that small businesses report and that are needed to implement the benchmark, according to officials from SBA and several agencies. For example, agency officials told GAO that some needed data, such as for reported sales, are not consistently applicable across agencies or projects. The Small Business Act and policy directives provide flexibility in how the agencies can implement the benchmark. Working together to implement it as designed or revise it so that it can be implemented could allow the agencies to fulfill statutory requirements.\nSBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. SBA and the agencies agreed to change how the consequence of not meeting the benchmarks was to be implemented, starting in 2017, from ineligibility to receive certain awards to ineligibility to submit certain proposals. However, as of November 2017, some agencies had not updated this information in their project solicitations. Furthermore, SBA has not updated this information in its policy directives. Without consistent information, businesses may be confused about their eligibility to submit proposals or receive awards and could invest time developing and submitting proposals when they are not eligible to do so.\n\nWhat GAO Recommends\n\nGAO is making 11 recommendations to SBA and other agencies to take actions to improve implementation of the benchmarks, including improving the reliability of award data; implementing or revising the Commercialization Benchmark; and updating information about the consequence of not meeting the benchmarks. SBA and these agencies agreed with GAO's recommendations."}
{"id":"crs_R43783","pid":"crs_R43783_0","input":"\tIntroduction and Background\n\nThe federal child nutrition programs provide assistance to schools and other institutions in the form of cash, commodity food, and administrative support (such as technical assistance and administrative funding) based on the provision of meals and snacks to children. In general, these programs were created (and amended over time) to both improve children's nutrition and provide support to the agriculture economy. \nToday, the child nutrition programs refer primarily to the following meal, snack, and milk reimbursement programs (these and other acronyms are listed in Appendix A ):\nNational School Lunch Program (NSLP) (Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)); School Breakfast Program (SBP) (Child Nutrition Act, Section 4 (42 U.S.C. 1773)); Child and Adult Care Food Program (CACFP) (Richard B. Russell National School Lunch Act, Section 17 (42 U.S.C. 1766)); Summer Food Service Program (SFSP) (Richard B. Russell National School Lunch Act, Section 13 (42 U.S.C. 1761)); and Special Milk Program (SMP) (Child Nutrition Act, Section 3 (42 U.S.C. 1772)). \nThe programs provide financial support and\/or foods to the institutions that prepare meals and snacks served outside of the home (unlike other food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) where benefits are used to purchase food for home consumption). Though exact eligibility rules and pricing vary by program, in general the amount of federal reimbursement is greater for meals served to qualifying low-income individuals or at qualifying institutions, although most programs provide some subsidy for all food served. Participating children receive subsidized meals and snacks, which may be free or at reduced price. Forthcoming sections discuss how program-specific eligibility rules and funding operate. \nThis report describes how each program operates under current law, focusing on eligibility rules, participation, and funding. This introductory section describes some of the background and principles that generally apply to all of the programs; subsequent sections go into further detail on the workings of each. \nUnless stated otherwise, participation and funding data come from USDA-FNS's \"Keydata Reports.\" \n\n\t\tAuthorization and Reauthorization\n\nThe child nutrition programs are most often dated back to the 1946 enactment of the National School Lunch Act, which created the National School Lunch Program, albeit in a different form than it operates today. Most of the child nutrition programs do not date back to 1946; they were added and amended in the decades to follow as policymakers expanded child nutrition programs' institutional settings and meals provided: \nThe Special Milk Program was created in 1954, regularly extended, and made permanent in 1970. The School Breakfast Program was piloted in 1966, regularly extended, and eventually made permanent in 1975. A program for child care settings and summer programs was piloted in 1968, with separate programs authorized in 1975 and then made permanent in 1978. These are now the Child and Adult Care Food Program and Summer Food Service Program. The Fresh Fruit and Vegetable Program began as a pilot in 2002, was made permanent in 2004, and was expanded nationwide in 2008.\nThe programs are now authorized under three major federal statutes: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and the Workforce Committee; and, to a limited extent (relating to commodity food assistance and Section 32 issues), the House Agriculture Committee. \nCongress periodically reviews and reauthorizes expiring authorities under these laws. The child nutrition programs were most recently reauthorized in 2010 through the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ); some of the authorities created or extended in that law expired on September 30, 2015. WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children) is also typically reauthorized with the child nutrition programs. WIC is not one of the child nutrition programs and is not discussed in this report. \nThe 114 th Congress began but did not complete a 2016 child nutrition reauthorization (see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview ). There was no significant legislative activity with regard to reauthorization in the 115 th Congress.\n\n\t\tProgram Administration: Federal, State, and Local\n\nThe U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administers the programs at the federal level. The programs are operated by a wide variety of local public and private providers and the degree of direct state involvement differs by program and state. At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to millions of children (e.g., there were 30.0 million in the National School Lunch Program, the largest of the programs, in FY2017), through some 100,000 public and private schools and residential child care institutions, nearly 170,000 child care centers and family day care homes, and just over 50,000 summer program sites.\nAll programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa). \n\n\t\tFunding Overview\n\nThis section summarizes the nature and extent to which the programs' funding is mandatory and discretionary, including a discussion of appropriated entitlement status. Table 3 lists child nutrition program and related expenditures.\n\n\t\t\tOpen-Ended, Appropriated Entitlement Funding\n\nMost spending for child nutrition programs is provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws. That is, the level of spending for such programs, referred to as appropriated mandatory spending, is not controlled through the annual appropriations process, but instead is derived from the benefit and eligibility criteria specified in the authorizing laws. The appropriated mandatory funding is treated as mandatory spending. Further, if Congress does not appropriate the funds necessary to fund the program, eligible entities may have legal recourse. Congress typically considers the Administration's forecast for program needs in its appropriations decisions. For the majority of funding discussed in this report, the formula that controls the funding is not capped and fluctuates based on the reimbursement rates and the number of meals\/snacks served in the programs. \n\n\t\t\t\tCash Reimbursements and Commodity Foods\n\nIn the meal service programs, such as the National School Lunch Program, School Breakfast Program, summer programs, and assistance for child care centers and day care homes, federal aid is provided in the form of statutorily set subsidies (reimbursements) paid for each meal\/snack served that meets federal nutrition guidelines. Although all (including full-price) meals\/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal\/snack subsidy rates are indexed annually (each July) for inflation, as are the income eligibility thresholds for free and reduced-price meals\/snacks. Subsequent sections discuss how a specific program's eligibility and reimbursements work. \nMost subsidies are cash payments to schools or other providers, but a smaller portion of aid is provided in the form of USDA-purchased commodity foods . Laws for three child nutrition programs (NSLP, CACFP, and SFSP) require the provision of commodity foods (or in some cases allow cash in lieu of commodity foods). \nMeal and snack service entails nonfood costs. Federal child nutrition per-meal\/snack subsidies may be used to cover local providers' administrative and operating costs. However, the separate direct federal payments for administrative\/operating costs (\"State Administrative Expenses,\" discussed in the \" Related Programs, Initiatives, and Support\u00a0Activities \" section) are limited. \n\n\t\t\tOther Federal Funding\n\nIn addition to the open-ended, appropriated entitlement funds summarized above, the child nutrition programs' funding also includes certain other mandatory funding and a limited amount of discretionary funding. Some of the activities discussed in \" Related Programs, Initiatives, and Support\u00a0Activities ,\" such as Team Nutrition, are provided for with discretionary funding.\nAside from the annually appropriated funding, the child nutrition programs are also supported by certain permanent appropriations and transfers. Notably, funding for the Fresh Fruit and Vegetable Program is funded by a transfer from USDA's Section 32 program, a permanent appropriation of 30% of the previous year's customs receipts. \n\n\t\t\tState, Local, and Participant Funds\n\nFederal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers. States and localities help cover program costs, as do children's families by paying charges for nonfree or reduced-price meals\/snacks. There is a nonfederal cost-sharing requirement for the school meals programs (discussed below), and some states supplement school funding through additional state per-meal reimbursements or other prescribed financing arrangements. \n\n\t\tChild Nutrition Programs at a Glance\n\nSubsequent sections of this report delve into the details of how each of the child nutrition programs support the service of meals and snacks in institutional settings; first, it is useful to take a broader perspective of primary program elements. Table 1 is a top-level look at the different programs that displays distinguishing characteristics (what meals are provided, in what settings, to what ages) and recent program spending.\n\n\t\tLinks to Resources\n\nOther relevant CRS reports in this area include\nCRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview CRS Report R44588, Agriculture and Related Agencies: FY2017 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program\nOther relevant resources include \nUSDA-FNS's website, https:\/\/www.fns.usda.gov\/school-meals\/child-nutrition-programs USDA-FNS's Healthy, Hunger-Free Kids Act page, http:\/\/www.fns.usda.gov\/school-meals\/healthy-hunger-free-kids-act The FNS page of the Federal Register , https:\/\/www.federalregister.gov\/agencies\/food-and-nutrition-service\n\n\tSchool Meals Programs\n\nThis section discusses the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). Principles and concepts common to both programs are discussed first; subsections then discuss features and data unique to the NSLP and SBP, respectively.\n\n\t\tGeneral Characteristics\n\nThe federal school meals programs provide federal support in the form of cash assistance and USDA commodity foods; both are provided according to statutory formulas based on the number of reimbursable meals served in schools. The subsidized meals are served by both public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced-price meals to eligible low-income children. Both cash and commodity support to participating schools are calculated based on the number and price of meals served (e.g., lunch or breakfast, free or full price), but once the aid is received by the school it is used to support the overall school meal service budget, as determined by the school. This report focuses on the federal reimbursements and funding, but it should be noted that some states have provided state financing through additional state-specific funding.\nFederal law does not require schools to participate in the school meals programs. However, some states have mandated that schools provide lunch and\/or breakfast, and some of these states require that their schools do so through NSLP and\/or SBP. The program is open to public and private schools. \nA reimbursable meal requires compliance with federal school nutrition standards, which have changed throughout the history of the program based on nutritional science and children's nutritional needs. Food items not served as a complete meal meeting nutrition standards (e.g., a la carte offerings) are not reimbursable meals, and therefore are not eligible for federal per-meal, per-snack reimbursements. Following rulemaking to implement provisions in the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ), USDA updated the nutrition standards for reimbursable meals in January 2012 (see \" Nutrition Standards \" for more information). Schools serving meals that meet the updated nutrition standards are eligible for an increased reimbursement of 6 cents per lunch. \nUSDA-FNS administers the school meals programs federally, and state agencies (typically state departments of education) oversee and transmit reimbursements through agreements with school food authorities (SFAs) (typically local educational agencies (LEAs); usually these are school districts). Figure 1 provides an overview of the roles and relationships between these levels of government.\nThere is a cost-sharing requirement for the programs, which amounts to a contribution of approximately $200 million from the states. There also are states that choose to supplement federal reimbursements with their own state reimbursements. \n\n\t\tSchool Meals Eligibility Rules\n\nThe school meals programs and related funding do not serve only low-income children. All students can receive a meal at a NSLP- or SBP-participating school, but how much the child pays for the meal and\/or how much of a federal reimbursement the state receives will depend largely on whether the child qualifies for a \"free,\" \"reduced-price,\" or \"paid\" (i.e., advertised price) meal. Both NSLP and SBP use the same household income eligibility criteria and categorical eligibility rules. States and schools receive the largest reimbursements for free meals, smaller reimbursements for reduced-price meals, and the smallest (but still some federal financial support) for the full-price meals.\nThere are three pathways through which a child can become certified to receive a free or reduced-price meal:\n1. Household income eligibility for free and reduced-price meals (information typically collected via household application), 2. Categorical (or automatic) eligibility for free meals (information collected via household application or a direct certification process), and 3. School-wide free meals under the Community Eligibility Provision (CEP) , an option for eligible schools that is based on the share of students identified as eligible for free meals.\nEach of these pathways is discussed in more detail below.\n\n\t\t\tIncome Eligibility\n\nThe income eligibility thresholds (shown in Table 2 ) are based on multipliers of the federal poverty guidelines. As the poverty guidelines are updated every year, so are the eligibility thresholds for NSLP and SBP. \nFree Meals: Children receive free meals if they have household income at or below 130% of the federal poverty guidelines; these meals receive the highest subsidy rate. (Reimbursements are approximately $3.30 per lunch served, less for breakfast.) Reduced-Price Meals: Children may receive reduced-price meals (charges of no more than 40 cents for a lunch or 30 cents for a breakfast) if their household income is above 130% and less than or equal to 185% of the federal poverty guidelines; these meals receive a subsidy rate that is 40 cents (NSLP) or 30 cents (SBP) below the free meal rate. (Reimbursements are approximately $2.90 per lunch served.) Paid Meals: A comparatively small per-meal reimbursement is provided for full-price or paid meals served to children whose families do not apply for assistance or whose family income does not qualify them for free or reduced-price meals. The paid meal price is set by the school but must comply with federal regulations. (Reimbursements are approximately 30 cents per lunch served.)\nThe above reimbursement rates are approximate; exact current-year federal reimbursement rates for NSLP and SBP are listed in Table B -1 and Table B -3 , respectively. \nHouseholds complete paper or online applications that collect relevant income and household size data, so that the school district can determine if children in the household are eligible for free meals, reduced-price meals, or neither.\nThough these income guidelines primarily influence funding and administration of NSLP and SBP, they also affect the eligibility rules for the SFSP, CACFP, and SMP (described further in subsequent sections).\n\n\t\t\tCategorical Eligibility\n\nIn addition to the eligibility thresholds listed above, the school meals programs also convey eligibility for free meals based on household participation in certain other need-tested programs or children's specified vulnerabilities (e.g., foster children). Per Section 12 of the National School Lunch Act, \"a child shall be considered automatically eligible for a free lunch and breakfast ... without further application or eligibility determination, if the child is\"\nin a household receiving benefits through SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations) benefits; or TANF (Temporary Assistance for Needy Families) cash assistance; enrolled in Head Start; in foster care; a migrant; a runaway; or homeless.\nFor meals served to students certified in the above categories, the state\/school receive a reimbursement at the free meal amount and children receive a free meal. (See Table B -1 and Table B -3 for school year 2018-2019 rates.)\nSome school districts collect information for these categorical eligibility rules via paper application. Others conduct a process called direct certification \u2014a proactive process where government agencies typically cross-check their program rolls and certify a household's children for free school meals without the household having to complete a school meals application. \nPrior to 2004, states had the option to conduct direct certification of SNAP (then, the Food Stamp Program), TANF, and FDPIR participants. In the 2004 child nutrition reauthorization ( P.L. 108-265 ), states were required under federal law to conduct direct certification for SNAP participants, with nationwide implementation taking effect in school year 2008-2009. Conducting direct certification for TANF and FDPIR remains at the state's discretion.\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made further policy changes to expand direct certification (discussed further in the next section). One of those changes was the initiation of a demonstration project to look at expanding categorical eligibility and direct certification to some Medicaid households. The law also funded performance incentive grants for high-performing states and authorized correcting action planning for low-performing states in direct certification activities. \nUnder SNAP direct certification rules generally, schools enter into agreements with SNAP agencies to certify children in SNAP households as eligible for free school meals without requiring a separate application from the family. Direct certification systems match student enrollment lists against SNAP agency records, eliminating the need for action by the child's parents or guardians. Direct certification allows schools to make use of SNAP's more in-depth eligibility certification process; this can reduce errors that may occur in school lunch application eligibility procedures that are otherwise used. From a program access perspective, direct certification also reduces the number of applications a household must complete.\n Figure 2 , created by GAO and published in a May 2014 report, provides an overview of how school districts certify students for free and reduced-price meals under the income-based and category-based rules, via applications and direct certification. A USDA-FNS study of school year 2014-2015 estimates that 11.1 million students receiving free meals were directly certified\u201468% of all categorically eligible students receiving free meals.\n\n\t\t\tCommunity Eligibility Provision (CEP)\n\nHHFKA also authorized the school meals Community Eligibility Provision (CEP), an option in NSLP and SBP law that allows eligible schools and school districts to offer free meals to all enrolled students based on the percentage of their students who are identified as automatically eligible from nonhousehold application sources (primarily direct certification through other programs). \nBased on the statutory parameters, USDA-FNS piloted CEP in various states over three school years and it expanded nationwide in school year 2014-2015. Eligible LEAs have until June 30 of each year to notify USDA-FNS if they will participate in CEP. According to a database maintained by the Food Research and Action Center, just over 20,700 schools in more than 3,500 school districts (LEAs) participated in CEP in SY2016-2017, an increase of approximately 2,500 schools compared to SY2015-2016.\nFor a school (or school district, or group of schools within a district) to provide free meals to all children\nthe school(s) must be eligible for CEP based on the share (40% or greater) of enrolled children that can be identified as categorically (or automatically) eligible for free meals, and the school must opt-in to CEP. \nThough CEP schools serve free meals to all students, they are not reimbursed at the \"free meal\" rate for every meal. Instead, the law provides a funding formula: the percentage of students identified as automatically eligible (the \"identified student percentage\" or ISP) is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free meal rate, with the remainder reimbursed at the far lower paid meal rate. For example, if a CEP school identifies that 40% of students are eligible for free meals, then 64% of the meals served will be reimbursed at the free meal rate and 36% at the paid meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free meal reimbursement for all meals served.\nSome of the considerations that may impact a school's decision to participate in CEP include whether the new funding formula would be beneficial for their school meal budget; an interest in reducing paperwork for families and schools; and an interest in providing more free meals, including meals to students who have not participated in the program before.\n\n\t\tNutrition Standards\n\n\t\t\tSchool Meals\n\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) set in motion changes to the nutrition standards for school meals, requiring USDA to update the standards within a certain timeframe. The law required that the revised standards be based on recommendations from the Institute of Medicine (IOM) (now the Health and Medicine Division) at the National Academy of Sciences. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance related to implementation. \nUSDA published the final regulations in January 2012. The final rule sought to align school meal patterns with the 2010 Dietary Guidelines for Americans, and, generally consistent with IOM's recommendations, increased the amount of fruits, vegetables, whole grains, and low-fat or fat-free milk in school meals. The regulations also included calorie maximums and sodium limits to phase in over time, among other requirements. \nThe nutrition standards largely took effect in SY2012-2013 for lunches and in SY2013-2014 for breakfasts. A few other requirements were scheduled to phase in over multiple school years. Some schools experienced difficulty implementing the new guidelines, and Congress and USDA have made changes to the 2012 final rule's whole grain, sodium, and milk requirements. For SY2019-2020 and onwards, schools are operating under a final rule published December 12, 2018.\n\n\t\t\tCompetitive Foods\n\nThe HHFKA also gave USDA the authority to regulate other foods in the school nutrition environment. Sometimes called \"competitive foods,\" these include foods and drinks sold in a la carte lines, vending machines, snack bars and concession stands, and fundraisers. \nRelying on recommendations made by a 2007 IOM report, USDA-FNS promulgated a proposed rule and then an interim final rule in June 2013, which went into effect for SY2014-2015. The interim final rule created nutrition guidelines for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published on July 29, 2016, maintained the interim final rules with minor modifications. Under the final standards, these foods must meet whole-grain requirements; have certain primary ingredients; and meet calorie, sodium, and fat limits, among other requirements. Schools are limited to a list of no- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). \nThere are no limits on fundraisers selling foods that meet the interim final rule's guidelines. Fundraisers outside of the school day are not subject to the guidelines. HHFKA and the interim final rule provide states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards.\nThe rule does not limit foods brought from home, only foods sold at school during the school day. The federal standards are minimum standards; states and school districts are permitted to issue more stringent policies. \n\n\t\tNational School Lunch Program (NSLP)\n\nIn FY2017, NSLP subsidized 4.9 billion lunches to children in close to 96,000 schools and 3,200 residential child care institutions (RCCIs). Average daily participation was 30.0 million students (58% of children enrolled in participating schools and RCCIs). Of the participating students, 66.7% (20.0 million) received free lunches and 6.5% (2.0 million) received reduced-price lunches. The remainder were served full-price meals, though schools still receive a reimbursement for these meals. Figure 3 shows FY2017 participation data.\nFY2017 federal school lunch costs totaled approximately $13.6 billion (see Table 3 for the various components of this total). The vast majority of this funding is for per-meal reimbursements for free and reduced-price lunches.\nThe HHFKA also provided an additional 6-cent per-lunch reimbursement to schools that provide meals that meet the updated nutritional guidelines requirements. This bonus is not provided for breakfast, but funds may be used to support schools' breakfast programs. NSLP lunch reimbursement rates are listed in Table B -1 .\nIn addition to federal cash subsidies, schools participating in NSLP receive USDA-acquired commodity food s . Schools are entitled to a specific, inflation-indexed value of USDA commodity foods for each lunch they serve. Also, schools may receive donations of bonus commodities acquired by USDA in support of the farm economy. In FY2017, the value of federal commodity food aid to schools totaled nearly $1.4 billion. The per-meal rate for commodity food assistance is included in Table B-4 .\nWhile the vast majority of NSLP funding is for lunches served during the school day, NSLP may also be used to support snack service during the school year and to serve meals during the summer. These features are discussed in subsequent sections, \" Summer Meals \" and \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\" Reimbursement rates for snacks are listed in Table B -2 .\n\n\t\tSchool Breakfast Program (SBP)\n\nThe School Breakfast Program (SBP) provides per-meal cash subsidies for breakfasts served in schools. Participating schools receive subsidies based on their status as a severe need or nonsevere need institution. Schools can qualify as a severe need school if 40% or more of their lunches are served free or at reduced prices. See Table B -3 for SBP reimbursement rates.\n Figure 4 displays SBP participation data for FY2017. In that year, SBP subsidized over 2.4 billion breakfasts in over 88,000 schools and nearly 3,200 RCCIs. Average daily participation was 14.7 million children (30.1% of the students enrolled in participating schools and RCCIs). The majority of meals served through SBP are free or reduced-price. Of the participating students, 79.1% (11.6 million) received free meals and 5.7% (835,000) purchased reduced-price meals. Federal school breakfast costs for the fiscal year totaled approximately $4.3 billion (see Table 3 for the various components of this total).\nSignificantly fewer schools and students participate in SBP than in NSLP. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal and eat before school starts. Some schools offer (and anti-hunger groups have encouraged) models of breakfast service that can result in greater SBP participation, such as Breakfast in the Classroom, where meals are delivered in the classroom; \"grab and go\" carts, where students receive a bagged breakfast that they bring to class, or serving breakfast later in the day in middle and high schools. \nUnlike NSLP, commodity food assistance is not a formal part of SBP funding; however, commodities provided through NSLP may be used for school breakfasts as well.\n\n\tOther Child Nutrition Programs\n\nIn addition to the school meals programs discussed above, other federal child nutrition programs provide federal subsidies and commodity food assistance for schools and other institutions that offer meals and snacks to children in early childhood, summer, and after-school settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit child care centers, (3) family\/group day care homes, and (4) nongovernmental institutions\/organizations that offer outside-of-school programs for children. (Although this report focuses on the programs that serve children, one child nutrition program (CACFP) also serves day care centers for chronically impaired adults and elderly persons under the same general per-meal\/snack subsidy terms.) The programs in the sections to follow serve comparatively fewer children and spend comparatively fewer federal funds than the school meal programs. \n\n\t\tChild and Adult Care Food Program (CACFP)\n\nCACFP subsidizes meals and snacks served in early childhood, day care, and after-school settings. CACFP provides subsidies for meals and snacks served at participating nonresidential child care centers, family day care homes, and (to a lesser extent) adult day care centers. The program also provides assistance for meals served at after-school programs. CACFP reimbursements are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, children with disabilities of any age, and, in the case of adult care centers, chronically impaired and elderly adults. Children in early childhood settings are the overwhelming majority of those served by the program. \nCACFP provides federal reimbursements for breakfasts, lunches, suppers, and snacks served in participating centers (facilities or institutions) or day care homes (private homes). The eligibility and funding rules for CACFP meals and snacks depend first on whether the participating institution is a center or a day care home (the next two sections discuss the rules specific to centers and day care homes). According to FY2017 CACFP data, child care centers have an average daily attendance of about 56 children per center, day care homes have an average daily attendance of approximately 7 children per home, and adult day care centers typically care for an average of 48 chronically ill or elderly adults per center. \nProviders must demonstrate that they comply with government-established standards for other child care programs. Like in school meals, federal assistance is made up overwhelmingly of cash reimbursements calculated based on the number of meals\/snacks served and federal per-meal\/snack reimbursements rates, but a far smaller share of federal aid (4.3% in FY2017) is in the form of federal USDA commodity foods (or cash in lieu of foods). Federal CACFP reimbursements flow to individual providers either directly from the administering state agency (this is the case with many child\/adult care centers able to handle their own CACFP administrative functions) or through \"sponsors\" who oversee and provide administrative support for a number of local providers (this is the case with some child\/adult care centers and with all day care homes). \nIn FY2017, total CACFP spending was over $3.5 billion, including cash reimbursement, commodity food assistance, and costs for sponsor audits. (See Table 3 for a further breakdown of CACFP costs.) This total also includes the after-school meals and snacks provided through CACFP's \"at-risk after-school\" pathway; this aspect of the program is discussed later in \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\"\n\n\t\t\tCACFP Nutrition Standards\n\nAs with school foods, the HHFKA required USDA to update CACFP's meal patterns. USDA's final rule revised the meal patterns for both meals served in child care centers and day care homes, as well as preschool meals served through the NSLP and SBP, effective October 1, 2017. For infants (under 12 months of age), the new meal patterns eliminated juice, supported breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older, the new meal patterns increased whole grains, fruits and vegetables, and low-fat and fat-free milk; limited sugar in cereals and yogurts; and prohibited frying, among other requirements. \n\n\t\t\tCACFP at Centers\n\n\t\t\t\tParticipation\n\nChild care centers in CACFP can be (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet certain requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2017, over 65,000 child care centers with an average daily attendance of over 3.6 million children participated in CACFP. Over 2,700 adult care centers served nearly 132,000 adults through CACFP. \n\n\t\t\t\tEligibility and Administration\n\nParticipating centers may receive daily reimbursements for up to either two meals and one snack or one meal and two snacks for each participant, so long as the meals and snacks meet federal nutrition standards. \nThe eligibility rules for CACFP centers largely track those of NSLP: children in households at or below 130% of the current poverty line qualify for free meals\/snacks while those between 130% and 185% of poverty qualify for reduced-price meals\/snacks (see Table 2 ). In addition, participation in the same categorical eligibility programs as NSLP as well as foster child status convey eligibility for free meals in CACFP. Like school meals, eligibility is determined through paper applications or direct certification processes.\nLike school meals, all meals and snacks served in the centers are federally subsidized to some degree, even those that are paid. Different reimbursement amounts are provided for breakfasts, lunches\/suppers, and snacks, and reimbursement rates are set in law and indexed for inflation annually. The largest subsidies are paid for meals and snacks served to participants with family income below 130% of the federal poverty income guidelines (the income limit for free school meals), and the smallest to those who have not met a means test. See Table B -5 for current CACFP center reimbursement rates. \nUnlike school meals, CACFP institutions are less likely to collect per-meal payments. Although federal assistance for day care centers differentiates by household income, centers have discretion on their pricing of meals. Centers may adjust their regular fees (tuition) to account for federal payments, but CACFP itself does not regulate these fees. In addition, centers can charge families separately for meals\/snacks, so long as there are no charges for children meeting free-meal\/snack income tests and limited charges for those meeting reduced-price income tests.\nIndependent centers are those without sponsors handling administrative responsibilities. These centers must pay for administrative costs associated with CACFP out of nonfederal funds or a portion of their meal subsidy payments. For centers with sponsors, the sponsors may retain a proportion of the meal reimbursement payments they receive on behalf of their centers to cover such costs. \n\n\t\t\tCACFP for Day Care Homes\n\n\t\t\t\tParticipation\n\nCACFP-supported day care homes serve a smaller number of children than CACFP-supported centers , both in terms of the total number of children served and the average number of children per facility. Roughly 17% of children in CACFP (approximately 757,000 in FY2017 average daily attendance) are served through day care homes. In FY2017, approximately 103,000 homes (with just over 700 sponsors) received CACFP support.\n\n\t\t\t\tEligibility and Reimbursement\n\nAs with centers, payments to day care homes are provided for up to either two meals and one snack or one meal and two snacks a day for each child. Unlike centers, day care homes must participate under the auspices of a public or, more often, private nonprofit sponsor that typically has 100 or more homes under its supervision. CACFP day care home sponsors receive monthly administrative payments based on the number of homes for which they are responsible. \nFederal reimbursements for family day care homes differ by the home's status as \"Tier I\" or \"Tier II.\" Unlike centers, day care homes receive cash reimbursements (but not commodity foods) that generally are not based on the child participants' household income. Instead, there are two distinct, annually indexed reimbursement rates that are based on area or operator eligibility criteria\nTier I homes are located in low-income areas (defined as areas in which at least 50% of school-age and enrolled children qualify for free or reduced-price meals) or operated by low-income providers whose household income meets the free or reduced-price income standards. They receive higher subsidies for each meal\/snack they serve. Tier II (lower) rates are by default those for homes that do not qualify for Tier I rates; however, Tier II providers may seek the higher Tier I subsidy rates for individual low-income children for whom financial information is collected and verified. (See Table B-6 for current Tier I and Tier II reimbursement rates.)\nAdditionally, HHFKA introduced a number of additional ways (as compared to prior law) by which family day care homes can qualify as low-income and get Tier I rates for the entire home or for individual children. \nAs with centers, there is no requirement that meals\/snacks specifically identified as free or reduced-price be offered; however, unlike centers, federal rules prohibit any separate meal charges. \n\n\t\tSummer Meals\n\nCurrent law SFSP and the NSLP\/SBP Seamless Summer Option provide meals in congregate settings nationwide; the related Summer Electronic Benefits Transfer (SEBTC or Summer EBT) demonstration project is an alternative to congregate settings. \n\n\t\t\tSummer Food Service Program (SFSP)\n\nSFSP supports meals for children during the summer months. The program provides assistance to local public institutions and private nonprofit service institutions running summer youth\/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash reimbursements for each meal or snack served; however, federally donated commodity foods are also offered. Participating service institutions are often entities that provide ongoing year-round service to the community including schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. \nSimilar to the CACFP model, sponsors are institutions that manage the food preparation, financial, and administrative responsibilities of SFSP. Sites are the places where food is served and eaten. At times, a sponsor may also be a site. State agencies authorize sponsors, monitor and inspect sponsors and sites, and implement USDA policy. Unlike CACFP, sponsors are required for an institution's participation in SFSP as a site.\n\n\t\t\t\tParticipation\n\nIn FY2017, nearly 5,500 sponsors with 50,000 food service sites participated in the SFSP and served an average of approximately 2.7 million children daily (according to July data). \nParticipation of sites and children in SFSP has increased in recent years. Program costs for FY2017 totaled over $485 million, including cash assistance, commodity foods, administrative cost assistance, and health inspection costs.\n\n\t\t\t\tEligibility and Administration\n\nThere are several options for eligibility and meal\/snack service for SFSP sponsors (and their sites)\nOpen sites provide summer food to all children in the community. These sites are certified based on area eligibility measures, where 50% or more of area children have family income that would make them eligible for free or reduced-price school meals (see Table 2 ). Closed or Enrolled sites provide summer meals\/snacks free to all children enrolled at the site. The eligibility test for these sites is that 50% or more of the children enrolled in the sponsor's program must be eligible for free or reduced-price school meals based on household income. Closed\/enrolled sites may also become eligible based on area eligibility measures noted above. Summer camps (that are not enrolled sites) receive subsidies only for those children with household eligibility for free or reduced-price school meals. Other programs specified in law , such as the National Youth Sports Program and centers for homeless or migrant children. \nSummer sponsors get operating cost (food, storage, labor) subsidies for all meals\/snacks they serve\u2014up to one meal and one snack, or two meals per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. See Table B -7 for current SFSP reimbursement rates. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor.\n\n\t\t\tSchool Meals' Seamless Summer Option64\n\nAlthough SFSP is the child nutrition program most associated with providing meals during summer months, it is not the only program option for providing these meals and snacks. The Seamless Summer Option, run through NSLP or SBP programs, is also a means through which food can be provided to students during summer months. Much like SFSP, Seamless Summer operates in summer sites (summer camps, sports programs, churches, private nonprofit organizations, etc.) and for a similar duration of time. Unlike SFSP, schools are the only eligible sponsors , although schools may operate the program at other sites. Reimbursement rates for Seamless Summer meals are the same as current NSLP\/SBP rates. \n\n\t\t\tSummer EBT for Children Demonstration\n\nBeginning in summer 2011 and (as of the date of this report) each summer since, USDA-FNS has operated Summer Electronic Benefit Transfer for Children (SEBTC or \"Summer EBT\") demonstration projects in a limited number of states and Indian Tribal Organizations (ITOs). These Summer EBT projects provide electronic food benefits over summer months to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided, through a WIC or SNAP EBT card model. In the demonstration projects, these benefits were provided as a supplement to the Summer Food Service Program (SFSP) meals available in congregate settings.\nSummer EBT and other alternatives to congregate meals through SFSP were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of alternatives were tested and evaluated, findings from Summer EBT were among the most promising, and Congress provided subsequent funding. Summer EBT evaluations showed significant impacts on reducing child food insecurity and improving nutritional intake. \u00a0Summer EBT was funded by P.L. 111-80 in the summers from 2011 to 2014. Projects have continued to operate and were annually funded by FY2015-FY2018 appropriations; most recently, the FY2018 appropriations law ( P.L. 115-141 ) provided $28 million. According to USDA-FNS, in summer 2016 Summer EBT served over 209,000 children in nine states and two tribal nations\u2014an increase from the 11,400 children served when the demonstration began in summer 2011. \n\n\t\tSpecial Milk Program (SMP)\n\nSchools (and institutions like summer camps and child care facilities) that are not already participating in the other child nutrition programs can participate in the Special Milk Program. Schools may also administer SMP for their part-day sessions for kindergartners or pre-kindergartners.\nUnder SMP, participating institutions provide milk to children for free and\/or at a subsidized paid price, depending on how the enrolled institution opts to administer the program (see Table B -8 for current Special Milk reimbursement rates for each of these options)\nAn institution that only sells milk will receive the same per-half pint federal reimbursement for each milk sold (approximately 20 cents). An institution that sells milk and provides free milk to eligible children (income eligibility is the same as free school meals, see Table 2 ), receives a reimbursement for the milk sold (approximately 20 cents) and a higher reimbursement for the free milks. An institution that does not sell milk provides milk free to all children and receives the same reimbursement for all milk (approximately 20 cents). This option is sometimes called nonpricing.\nIn FY2017, over 41 million half-pints were subsidized, 9.5% of which were served free. Federal expenditures for this program were approximately $8.3 million in FY2017. \n\n\t\tFresh Fruit and Vegetable Program (FFVP)\n\nStates receive formula grants through the Fresh Fruit and Vegetable Program, under which state-selected schools receive funds to purchase and distribute fresh fruit and vegetable snacks to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population. States select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per-student grant amounts (between $50 and $75). \nFunding is set by law at $150 million for school year 2011-2012 and inflation-indexed for every year after. In FY2017, states used approximately $184 million in FFVP funds. FFVP is funded by a mandatory transfer of funds from USDA's Section 32 program\u2014a permanent appropriation of 30% of the previous year's customs receipts. This transfer is required by FFVP's authorizing laws (Section 19 of the Richard B. Russell National School Lunch Act and Section 4304 of P.L. 110-246 ). Up until FY2018's law, annual appropriations laws delayed a portion of the funds to the next fiscal year.\nAfter a pilot period, the Child Nutrition and WIC Reauthorization Act of 2004 ( P.L. 108-265 ) permanently authorized and funded FFVP for a limited number of states and Indian reservations. In recent years, FFVP has been amended by omnibus farm bill laws rather than through child nutrition reauthorizations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding, specifically providing funds through Section 32, and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to this program but did include, and fund at $5 million in FY2014, a pilot project that requires USDA to test offering frozen, dried, and canned fruits and vegetables and publish an evaluation of the pilot. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in SY2014-2015 and the evaluation was published in 2017. Other proposals to expand fruits and vegetables offered in FFVP have been introduced in both the 114 th and 115 th Congress.\n\n\tOther Topics\n\n\t\tAfter-School Meals and Snacks: CACFP, NSLP Options\n\nTwo of the child nutrition programs discussed in previous sections, the National School Lunch Program (NSLP) and Child and Adult Care Food Program (CACFP), provide federal support for snacks and meals served during after-school programs. \nNSLP provides reimbursements for after-school snacks; however, this option is open only to schools that already participate in NSLP. These schools may operate after-school snack-only programs during the school year, and can do so in two ways: (1) if low-income area eligibility criteria are met, provide free snacks in lower-income areas; or (2) if area eligibility criteria are not met, offer free, reduced-price, or fully paid-for snacks, based on household income eligibility (like lunches in NSLP). The vast majority of snacks provided through this program are through the first option. Through this program, approximately 206 million snacks were served in FY2017 (a daily average of nearly 1.3 million). This compares with nearly 4.9 billion lunches served (a daily average of 27.8 million).\nCACFP provides assistance for after-school food in two ways. First, centers and homes that participate in CACFP and provide after-school care may participate in traditional CACFP (the eligibility and administration described earlier). Second, centers in areas where at least half the children in the community are eligible for free or reduced-price school meals can opt to participate in the CACFP At-Risk Afterschool program, which provides free snacks and suppers. Expansion of the At-Risk After-School meals program was a major policy change included in HHFKA. Prior to the law, 13 states were permitted to offer CACFP At-Risk After-School meals (instead of just a snack); the law allowed all CACFP state agencies to offer such meals. In FY2017, the At-Risk Afterschool program served a total of approximately 242.6 million free meals and snacks to a daily average of more than 1.7 million children. \n\n\t\tRelated Programs, Initiatives, and Support Activities\n\nFederal child nutrition laws authorize and program funding supports a range of additional programs, initiatives, and activities. \nThrough State Administrative Expenses funding, states are entitled to federal grants to help cover administrative and oversight\/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 2% of child nutrition reimbursements. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for CACFP, commodity distribution, and Administrative Review efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit, and appropriated funding is available to states for two years. State Administrative Expense spending in FY2017 totaled approximately $279 million.\nTeam Nutrition is a USDA-FNS program that includes a variety of school meals initiatives around nutrition education and the nutritional content of the foods children eat in schools. This includes Team Nutrition Training Grants, which provide funding to state agencies for training and technical assistance, such as help implementing USDA's nutrition requirements and the Dietary Guidelines for Americans. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge (HUSSC), which originated in the 2004 reauthorization of the Child Nutrition Act. HUSSC was a voluntary certification initiative designed to recognize schools that have created a healthy school environment through the promotion of nutrition and physical activity. \nFarm-to-school programs broadly refer to \"efforts that bring regionally and locally produced foods into school cafeterias,\" with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education to school districts and farmers. HHFKA amended existing child nutrition programs to establish mandatory funding of $5 million per year for competitive farm-to-school grants that support schools and nonprofit entities in establishing farm-to-school programs that improve a school's access to locally produced foods. The FY2018 appropriations law provided an additional $5 million in discretionary funding to remain available until expended. Grants may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, developing partnerships, and implementing farm-to-school programs. USDA's Office of Community Food Systems provides additional resources on farm-to-school issues. \nThrough an Administrative Review process (formerly referred to as Coordinated Review Effort (CRE)), USDA-FNS, in cooperation with state agencies, conducts periodic on-site NSLP school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. State agencies are required to conduct administrative reviews of all school food authorities (SFAs) that operate the NSLP under their jurisdiction at least once during a three-year review cycle. Federal Administrative Review expenditures were approximately $9.9 million in FY2017. \nUSDA-FNS and state agencies conduct many other child nutrition program support activities for which dedicated funding is provided. Among other examples, there is the Institute of Child Nutrition (ICN), which provides technical assistance, instruction, and materials related to nutrition and food service management; it receives $5 million a year in mandatory funding appropriated in statute. ICN is located at the University of Mississippi. USDA-FNS provides training on food safety education. Funding is also provided for USDA-FNS to conduct studies, provide training and technical assistance, and oversee payment accuracy. \nAppendix A. Acronyms Used in This Report \nAppendix B. Per-meal or Per-snack Reimbursement Rates for Child Nutrition Programs\nThis appendix lists the specific reimbursement rates discussed in the earlier sections of the report. Reimbursement rates are adjusted for inflation for each school or calendar year according to terms laid out in the programs' authorizing laws. Each year, the new rates are announced in the Federal Register .","output":"The \"child nutrition programs\" refer to the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) programs that provide food for children in school or institutional settings. The best known programs, which serve the largest number of children, are the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). The child nutrition programs also include the Child and Adult Care Food Program (CACFP), which provides meals and snacks in day care and after school settings; the Summer Food Service Program (SFSP), which provides food during the summer months; the Special Milk Program (SMP), which supports milk for schools that do not participate in NSLP or SBP; and the Fresh Fruit and Vegetable Program (FFVP), which funds fruit and vegetable snacks in select elementary schools.\nFunding: The vast majority of the child nutrition programs account is considered mandatory spending, with trace amounts of discretionary funding for certain related activities. Referred to as open-ended, \"appropriated entitlements,\" funding is provided through the annual appropriations process; however, the level of spending is controlled by benefit and eligibility criteria in federal law and dependent on the resulting levels of participation. Federal cash funding (in the form of per-meal reimbursements) and USDA commodity food support is guaranteed to schools and other providers based on the number of meals or snacks served and participant category (e.g., free meals for poor children get higher subsidies).\nParticipation: The child nutrition programs serve children of varying ages and in different institutional settings. The NSLP and SBP have the broadest reach, serving qualifying children of all ages in school settings. Other child nutrition programs serve more-narrow populations. CACFP, for example, provides meals and snacks to children in early childhood and after-school settings among other venues. Programs generally provide some subsidy for all food served but a larger federal reimbursement for food served to children from low-income households.\nAdministration: Responsibility for child nutrition programs is divided between the federal government, states, and localities. The state agency and type of local provider differs by program. In the NSLP and SBP, schools and school districts (\"school food authorities\") administer the program. Meanwhile, SFSP (and sometimes CACFP) uses a model in which sponsor organizations handle administrative responsibilities for a number of sites that serve meals.\nReauthorization: The underlying laws covering the child nutrition programs were last reauthorized in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296, enacted December 13, 2010). This law made significant changes to child nutrition programs, including increasing federal financing for school lunches, expanding access to community eligibility and direct certification options for schools, and expanding eligibility options for home child care providers. The law also required an update to school meal nutrition guidelines as well as new guidelines for food served outside the meal programs (e.g., snacks sold in vending machines and cafeteria a la carte lines).\nCurrent Issues: The 114th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant legislative activity with regard to reauthorization in the 115th Congress. However, the vast majority of operations and activities continue with funding provided by appropriations laws. Current issues in the child nutrition programs are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues."}
{"id":"gao_GAO-18-135","pid":"gao_GAO-18-135_0","input":"\tBackground\n\n\t\tCoast Guard Organizational Structure for TAP\n\nCoast Guard staffing for the TAP program reflects the organizational  structure of its Health, Safety, and Work-Life Directorate, which oversees  TAP policy. The Coast Guard\u2019s TAP managers are assigned to 13  installations where Health, Safety, and Work-Life offices are located.  One or two TAP managers are assigned to each of the Coast Guard\u2019s  nine districts, which often span multiple states and territories, and these  TAP managers oversee operations both for the installation where they  work and for units stationed throughout the region (see fig. 1). For  example, the TAP manager assigned to Coast Guard Base Cleveland  oversees TAP implementation both for that installation and for Coast  Guard units serving in Coast Guard District 9\u2014a region that  encompasses portions of eight states and the Great Lakes area. The  program manager in Coast Guard Headquarters manages Coast Guard\u2019s  Transition Assistance Program. The Coast Guard protects and defends  over 100,000 miles of U.S. coastline and inland waterways, and  consequently, TAP-eligible Coast Guard servicemembers sometimes  work in small, widely dispersed units assigned to remote locations,  including on Coast Guard vessels. One aspect of the Coast Guard\u2019s  mission\u2014a first responder for maritime search and rescue in United  States waters\u2014can require Coast Guard servicemembers to respond to  emergency situations at a moment\u2019s notice.\n\n\t\tTAP Process and Timing\n\nThe Coast Guard, which is overseen by DHS, not DOD, generally  oversees TAP implementation for its servicemembers. Federal law  requires DOD and DHS to require eligible servicemembers under their  respective command to participate in TAP, with some exceptions. In  response to this statutory requirement, DOD has promulgated regulations  and developed issuances which require that servicemembers complete  the component parts of the TAP program, and that commanding officers  ensure that servicemembers under their command complete these parts,  with some exceptions. In contrast, according to Coast Guard officials,  Coast Guard has not promulgated any regulations to implement TAP.  Further, Coast Guard issued its most recent Commandant Instruction in  2003, approximately 8 years prior to TAP redesign in 2011. However,  Coast Guard issued policy guidance in 2014 that made some limited  updates to the Commandant Instruction. Coast Guard officials also said  the Coast Guard plans to issue a new TAP Commandant Instruction in  May 2018.\nUnder the redesigned TAP, Coast Guard servicemembers\u2014like their  DOD counterparts\u2014begin TAP by attending pre-separation or transition  counseling where they are briefed on TAP requirements and available  transition resources. Pre-separation or transition counseling can be  delivered by TAP managers, uniformed career counselors, or online (see  fig. 2). Coast Guard servicemembers are able to participate in TAP  either through the Coast Guard or at a DOD installation, if space is  available.\nDuring or at the end of pre-separation or transition counseling,  participants register for and attend TAP courses. The core curriculum  includes three required courses\u2014the Department of Labor (DOL)  Employment Workshop, unless exempt, and Department of Veterans  Affairs (VA) Benefits Briefings I and II\u2014and other courses that focus on  aspects such as translating military skills and experiences into  credentialing for civilian jobs and preparing a financial plan. Participants  may also elect to attend additional 2-day classes either at a Coast Guard  or DOD installation or online through the Joint Knowledge Online  platform, according to agency officials. These additional 2-day classes  include Accessing Higher Education, Career Technical Training, and  Entrepreneurship. Federal law requires the Coast Guard to permit  servicemembers who elect to take these additional 2-day classes to  receive them.\nFederal law establishes a time frame within which servicemembers with  anticipated separation or retirement dates should begin the program.  According to federal law, retirees with anticipated separation dates are  expected to begin TAP as soon as possible during the 24-month period  preceding that date, but not later than 90 days before separation.  Similarly, servicemembers with anticipated separation dates who are not  retiring are expected to begin as soon as possible during the 12-month  period preceding that date, but not later than 90 days before separation.  Servicemembers who learn that they will separate or retire from the  military fewer than 90 days before their anticipated separation or  retirement date are expected to begin TAP as soon as possible within  their remaining period of service.\n\n\t\tInteragency Collaboration\n\nAs we previously reported, officials from multiple federal agencies  collaborate to deliver and assess TAP. The TAP interagency  governance structure includes senior officials from DOD, VA, DOL, DHS,  the Department of Education, the U.S. Office of Personnel Management,  and the Small Business Administration (SBA), who participate in TAP  Senior Steering Group meetings at least every month and TAP Executive  Council meetings each quarter. Further, officials tasked to particular  interagency working groups focus on specific elements of TAP (e.g.,  curriculum or performance measures), meet more frequently (typically at  least once a month), and generally communicate weekly, according to  agency officials. The TAP program manager for the Coast Guard told us  that he participates in several of the working groups.\nOne such working group is the performance management working group  that oversees the interagency TAP evaluation plan, which includes  monitoring performance measures related to TAP requirements,  indicators of post-program outcomes, and formal evaluations sponsored  by interagency partners. While DOD tracks TAP-specific performance  measures, other interagency partners track indicators of how well  veterans fare after leaving military service. For example, DOD tracks  performance measures prior to servicemembers\u2019 separation, such as TAP  participation and credential attainment rates, while other agencies track  post-separation indicators, such as unemployment rates among veterans  ages 18 to 24. The performance management working group also  reviews the formal evaluation efforts led by individual agencies and  provides feedback to help shape their efforts in accordance with the TAP  Evaluation Plan.\n\n\tCoast Guard Lacks Reliable Data and Cites Several Factors that Affect Participation Coast Guard Lacks Reliable Data on Servicemembers\u2019 Participation in TAP\n\nThe Coast Guard does not have complete or reliable data on participation  levels in TAP. According to Coast Guard officials, a major reason why  the data are not reliable is that the Coast Guard lacks an up-to-date  Commandant Instruction that specifies when to record TAP participation  data. Consequently, the data are updated on an ad-hoc basis,  according to agency officials, and may not be timely or complete. For  example, one TAP manager said she updates the list of TAP participants  for her installation only once every few months because of her other  duties. According to federal internal control standards, management  should use quality information\u2014including current and timely information\u2014 to achieve the entity\u2019s objectives and to communicate quality information  to external parties. Given the lack of timely and complete data, we  determined the Coast Guard\u2019s TAP data were not sufficiently reliable for an analysis of participation in TAP classes. Because it lacks policies and  procedures governing reliable data collection, including when data should  be entered and by whom, the Coast Guard cannot determine to what  extent its servicemembers attend TAP, although federal law mandates  that DHS ensure all TAP-eligible servicemembers participate in the  program.\nIn addition, the data collection system currently used to track TAP  participation is not sufficient to ensure reliable data. For example,  according to Coast Guard staff, TAP staff enter TAP participation data  into a shared spreadsheet that all TAP managers can edit. Specifically,  staff record the names of servicemembers they identify as TAP-eligible  and whether these individuals completed required portions of TAP. Coast  Guard officials said they are in the process of adopting a new data  system, in October 2018, to more reliably track TAP participation and that  they expect to fully adopt this system\u2013DOD\u2019s TAP-IT Enterprise  System\u2014after a new Commandant Instruction is finalized, in May 2018.  In November 2016, DOD launched the new system to collect TAP-related  data for servicemembers in the Army, Navy, Air Force, and Marine  Corps. In addition to standardizing data collection and improving data  completeness and accuracy, the TAP-IT Enterprise System is expected to  track information related to the time frames of servicemembers\u2019  participation. According to a senior DOD official, the military services will  not be able to use the system to generate unit-level or installation-level  reports until October 2018.\n\n\t\tServing at a Remote Installation and Rapid Separations Hindered TAP Participation, As Did Limited Staff Capacity and Competing Priorities\n\nAccording to our survey, the most common factor affecting TAP  participation, cited at 11 of the 12 Coast Guard installations we surveyed,  pertained to servicemembers assigned to geographically remote  locations. The next three most commonly cited factors\u2013each cited by 7 of  the 12 installations surveyed\u2014relate to the timing of TAP participation:  rapid separation from the military, not being sufficiently aware of the need  to attend TAP, and starting the transition process too late to attend. (See  fig. 3.) Headquarters-based TAP officials identified additional factors that  may affect servicemember participation, such as separating from the  Coast Guard Reserves or retiring with no plans to work after leaving the  military. However, the Coast Guard lacks participation data to verify  whether participation rates for these groups are in fact lower than for  other Coast Guard servicemembers.\nCoast Guard installations we surveyed did not indicate that unit  commanders or direct supervisors affected participation in TAP\u2019s required  courses or additional 2-day classes. However, Coast Guard  servicemembers and TAP officials we spoke with said unit commanders  or direct supervisors sometimes prevented participation. All three TAP  managers we spoke with (of 12 nationwide) told us that while  commanders generally allowed servicemembers to register for TAP  courses, they occasionally required them to return to their duties before  completing the courses. We observed this during a TAP class at a Coast  Guard installation we visited when a servicemember\u2019s commander  ordered her to return to the unit during TAP training and she missed a  briefing she wanted to attend. Two of three TAP managers we  interviewed also said commanders sometimes required servicemembers  under their command to wait to take TAP classes until close to their  separation date because of mission priorities.\nTwo of three TAP managers interviewed said that commanders in the  Coast Guard face unique challenges in ensuring TAP participation. They  said commanders in all branches of the military must balance competing  demands, including their primary mission and the training needs of the  personnel they oversee. They said it can be particularly difficult for Coast  Guard commanders to juggle these priorities because Coast Guard  servicemembers are sometimes assigned to very small units or called to  return to duty for emergency situations during scheduled TAP classes.  One TAP manager said that a commander in a remote location had  collaborated with her to provide a classroom-based TAP class for  transitioning Coast Guard servicemembers within the commander\u2019s unit,  but rescue efforts occurred during the class which resulted in most of  those servicemembers returning to their vessel to respond to the  emergency. In addition, all three TAP managers we spoke with said there  are limited resources for holding TAP in a classroom setting.  Consequently, classroom-based TAP may not be offered frequently in  remote locations, making rescheduling difficult. One TAP manager said  that her installation typically offers three or four TAP classes a year and  because classes are so infrequent, servicemembers are encouraged to  start TAP as soon as possible prior to separation.\nCoast Guard staff we interviewed said that juggling competing priorities  affected the Coast Guard\u2019s ability to implement TAP. Both the frontline  and headquarters staff who oversee TAP implementation said they  oversee at least three other programs in addition to TAP at their  installation and throughout their regions, including the Coast Guard\u2019s  relocation and spousal employment programs.\n\n\t\tCoast Guard Relies on Online Delivery of TAP for Several Categories of Servicemembers\n\nThe Coast Guard relies on online delivery of TAP information and classes  for servicemembers who are rapidly separating and assigned to remote  and geographically dispersed units, according to our survey results and  several Coast Guard staff we interviewed. For example, all 12  installations we surveyed cited servicemembers facing rapid separations  as a reason for accessing TAP training online, and 11 cited  servicemembers being remotely stationed as a reason. Coast Guard staff  also said online TAP was used for servicemembers interested in  attending additional 2-day classes.\nThe three TAP managers we interviewed also identified several reasons  why installations had to rely on online TAP classes. For example, one  manager corroborated our survey results, saying that many Coast Guard  servicemembers worked in small units assigned to remote and  geographically dispersed locations, making it difficult to convene a  sufficient number of transitioning Coast Guard servicemembers to meet  minimum class size requirements. In addition, all three managers said  they used the online version of TAP for remotely stationed Coast Guard  servicemembers because the Coast Guard lacked the resources for them  to attend classes in person. Although they preferred that  servicemembers participate in live, classroom-based TAP classes, all of  the managers acknowledged that the online version of TAP played an  integral role in ensuring that more servicemembers could participate in  the program. However, two of them noted that while classroom delivery of  TAP classes provided an interactive learning environment that allowed  participants to ask questions and learn from their peers, online  participants generally clicked quickly through the slides and had difficulty  understanding the information being presented. Two managers told us  that they regularly used the online version to deliver parts of the TAP  curriculum. For example, one TAP manager said she required  participants to complete the crosswalk of military and civilian occupations  class online before attending required classes in person. Two managers  noted that additional 2-day classes were available online, and one noted  that some servicemembers attended these classes in a classroom setting  either on a Coast Guard base or a DOD installation. Finally, all three TAP  managers said that many participants in online TAP classes would benefit  from participating in a real-time virtual version of TAP led by live  facilitators. Two managers told us that having a remote facilitator  delivering TAP in real time would give participants more opportunity to  ask questions and better understand and absorb class content.\n\n\t\tFeedback About TAP Was Generally Positive\n\nDespite these challenges, TAP managers and separating Coast Guard  servicemembers we interviewed provided generally positive feedback  about the TAP program. All of the 25 Coast Guard servicemembers we   spoke with said that the information they received during the courses was  useful and they liked the instructors. One Coast Guard servicemember  praised the classroom courses for being interactive, and several Coast  Guard servicemembers said they wanted the opportunity to retake TAP  before or shortly after they separated from the Coast Guard. However,  many said the volume of information presented in a short period of time  could be overwhelming and was like \u201ctrying to drink from a firehose.\u201d\n\n\tCoast Guard Cannot Effectively Measure Performance or Monitor Implementation to Ensure Key TAP Requirements Are Met\n\n\t\tCoast Guard Has Not Set a Formal Performance Goal for TAP Participation and Cannot Effectively Measure Program Performance Because it Lacks Reliable Data\n\nThe Coast Guard has not set a formal performance goal for TAP  participation, according to a Coast Guard official, and as previously  discussed, does not have complete, reliable data. Without reliable  information, the Coast Guard cannot effectively monitor TAP  implementation or measure program performance. DHS is mandated to  ensure that all TAP- eligible servicemembers of the Coast Guard  participate in TAP before leaving military service. However, without  effective monitoring of program participation, the Coast Guard cannot  know to what extent its servicemembers receive the required training they  need to prepare for civilian life. According to federal internal control  standards, management should consider external requirements\u2014such as  the laws with which the entity is required to comply\u2014to clearly define  objectives in specific and measurable terms. In addition, establishing  goals can help agencies define expected performance and articulate  results. A Coast Guard official said the Coast Guard\u2019s long-term goal is  for full compliance with TAP requirements, but in the interim, the Coast  Guard uses DOD\u2019s 85 percent VOW compliance goal as an informal  benchmark against which to gauge the Coast Guard\u2019s TAP  performance. However, the Coast Guard has not communicated a  specific, measurable goal to TAP staff implementing the program, or to  Coast Guard commanders who oversee separating and retiring Coast  Guard servicemembers, according to a Coast Guard official. Establishing  and communicating a formal goal could help the Coast Guard define  expected performance. The official also told us that, like DOD, the Coast  Guard tracks the elements of TAP mandated under the VOW Act\u2014 transition or pre-separation counseling, VA Benefits I and II, and the DOL  Employment Workshop.\n\n\t\tCoast Guard Does Not Monitor Compliance with Additional TAP Requirements\n\nThe Coast Guard does not monitor the (1) timeliness of participation in  TAP, and (2) access to additional 2-day classes. A Coast Guard official  said the Coast Guard does not currently monitor TAP beyond tracking  whether separating servicemembers participate in the required courses,  and currently lacks the capacity to undertake additional monitoring efforts.  However, he said additional monitoring would be possible once the Coast  Guard completed the move to the DOD TAP-IT Enterprise data system.\n\n\t\t\tTimeliness of TAP Participation\n\nAccording to a Coast Guard official, the Coast Guard does not currently  monitor the timeliness of TAP participation although federal law  prescribes time frames for servicemembers to begin TAP participation.  Generally, separating servicemembers who are not retiring are to begin  TAP participation no later than 90 days before their separation date.  Without a systematic method for monitoring timeliness, the Coast Guard  cannot know whether its servicemembers begin the program on time or  account for the timeliness of TAP participation. As a result, the Coast  Guard cannot know whether its servicemembers are starting TAP early  enough to complete the training they need to adequately prepare for their  transition to civilian life.\n\n\t\t\tAccess to Additional 2-Day Classes\n\nThe Coast Guard does not track which of its servicemembers participate  in the additional 2-day classes, according to a Coast Guard official we  interviewed, even though federal law requires that DHS ensure those who  elect to participate are able to receive the training. By not tracking which Coast Guard servicemembers participate in 2-day classes or requiring  transition staff to document when servicemembers ask to attend, the  Coast Guard cannot determine the extent to which servicemembers who  wished to attend these courses were able to do so, as required by law.\n\n\t\tRoles and Responsibilities Are Not Clearly Defined\n\nCoast Guard commanders and TAP managers do not have clearly  defined roles and responsibilities in implementing TAP because of the  lack of an up-to-date Commandant Instruction, according to TAP staff we  interviewed. As previously discussed, the Coast Guard\u2019s last  Commandant Instruction on TAP was issued in 2003, approximately 8  years prior to TAP\u2019s redesign. According to federal internal control  standards, to achieve the entity\u2019s objectives, management should assign  responsibility and delegate authority to key roles throughout the entity.  Without an up-to-date Commandant Instruction, TAP managers and  commanders may be unclear on who is ultimately responsible for  ensuring servicemembers attend TAP. Moreover, two TAP managers also  told us that an up-to-date Commandant Instruction might lead some  commanders to place higher priority on ensuring TAP participation. Coast  Guard officials said the Coast Guard was in the process of revising the  TAP Commandant Instruction and anticipated issuing the new instruction  in May 2018.\n\n\t\tCoast Guard Does Not Share Participation or Performance Data with Commanders or TAP Interagency Partners, Limiting Monitoring and Evaluation\n\nThe Coast Guard lacks the ability to share data with commanders, limiting  its ability to monitor TAP participation and ensure servicemembers attend  the program. According to a Coast Guard official, the Coast Guard\u2019s  current data collection system also cannot generate installation or unit- level participation rates to share with commanders who oversee  transitioning and retiring servicemembers. Federal internal control  standards state that management should share quality information  throughout an organization to enable personnel to perform key roles, and  we have previously reported that by regularly sharing useful performance  information with leaders at multiple levels of an organization, agencies  can help leaders make informed decisions. Without this information,  individual unit commanders or the commanders\u2019 supervisors cannot  determine whether Coast Guard servicemembers under their command  completed TAP or identify whether there is a need for corrective actions  to ensure they do so.\nAs we mention earlier in this report, the Coast Guard plans to adopt  DOD\u2019s TAP-IT Enterprise System, which according to officials, could help  the Coast Guard ensure eligible servicemembers participate in the  program. According to a Coast Guard official, once the system is fully  implemented by the Coast Guard, commanders will be required to verify  and document whether Coast Guard servicemembers under their  command completed TAP, potentially making commanders more vested  in the process. We previously reported that a senior DOD official said that  the TAP-IT Enterprise System may be able to generate unit- and  installation-level reports for the four DOD-led military services by October  2018, and a Coast Guard official said he would work with DOD to identify  whether this capability could also extend to the Coast Guard. Once data  reliability improves, sharing installation and unit-level TAP performance  information with Coast Guard commanders could support monitoring  efforts.\nThe performance measures tracked by the TAP interagency working  group do not reflect TAP implementation broadly across all five military  services, according to a Coast Guard official we interviewed. The Coast  Guard does not currently share TAP data it collects with DOD or other  members of the interagency performance working group. While the  benefits of interagency data sharing cannot be realized without the Coast  Guard first improving the quality and completeness of its TAP data, we  have identified leading practices for interagency collaboration, including  that members of interagency working groups identify and share relevant  agency performance data. Moreover, federal internal control standards  call for management to communicate quality information to external  parties. Because the Coast Guard does not share TAP data, the  performance measures tracked by the interagency group do not reflect  Coast Guard servicemembers\u2019 experiences and thus do not provide a  complete picture of TAP implementation across the five military services.  More specifically for the Coast Guard, without such data sharing, future  TAP evaluations may not be able to assess the effectiveness of TAP  delivery, hindering the Coast Guard\u2019s ability to make program  adjustments to better prepare its servicemembers to successfully  transition to life after military service. Coast Guard officials said migrating  to DOD\u2019s TAP-IT Enterprise System will facilitate information sharing with  interagency partners and that improving data completeness and reliability  is a top priority for 2018.\n\n\tConclusions\n\nGiven the sacrifices servicemembers have made to serve their country, it  is imperative they are afforded every chance to adequately prepare for  civilian life before leaving military service. In order to make a successful  transition, servicemembers need to be well-positioned to get a job or  make an informed decision about whether to pursue additional education  or start a small business. As such, the Transition Assistance Program  (TAP) serves a critically important function\u2014to give servicemembers the  tools and information they need to successfully transition to life outside  the military. Federal law requires that the Coast Guard ensure all eligible  servicemembers participate in the program, but thousands of Coast  Guard servicemembers may have transitioned without the support  provided by TAP. Reliably tracking participation has proven to be a  challenge for the Coast Guard, in part because it lacks a current  Commandant Instruction that defines the roles and responsibilities of staff  responsible for implementing TAP and ensuring complete and reliable  data are collected. In preparing to issue an updated Commandant  Instruction, the Coast Guard has taken a positive step toward addressing  the limitations of its current TAP data, and will be better positioned to  ensure compliance with VOW Act requirements using reliable data.\nIn addition to collecting reliable data, the Coast Guard could further  demonstrate its commitment to meeting TAP requirements by  establishing formal performance goals that measure the extent to which  Coast Guard servicemembers participate in TAP. By establishing interim  performance goals, the agency would be able to show its progress  towards achieving full compliance. Moreover, communicating  performance goals to unit and installation commanders could enhance  accountability and might spur progress toward meeting federal program  requirements.\nBy expanding its monitoring efforts beyond tracking participation in TAP\u2019s  required classes, the Coast Guard could enhance its ability to ensure  other TAP requirements are met and that its servicemembers are able to  access additional transition resources. Monitoring the timeliness of  participation would help ensure Coast Guard servicemembers have  adequate time to complete TAP before leaving the military. Further, by  monitoring requests to participate in additional 2-day classes and 2-day  class attendance, the Coast Guard would be in a better position to identify  whether servicemembers who wish to attend the classes are able to do  so, to determine whether more classes are needed, and to communicate  this information to the interagency partners responsible for delivering  these classes.\nCommanders can also play a key role in bolstering TAP participation.  Having an up-to-date written Commandant Instruction that explicitly  describes commanders\u2019 roles and responsibilities could enhance  commanders\u2019 ability to ensure TAP\u2019s proper implementation and  compliance with VOW Act requirements. Moreover, once data quality  improves, providing commanders a mechanism to readily determine  whether servicemembers under their command have completed TAP  could help them monitor the program to ensure that all TAP-eligible  servicemembers receive the resources they need to successfully  transition to civilian life.\nFinally, once more reliable data on Coast Guard servicemember  participation are available, sharing this information with interagency  partners could improve TAP implementation on a broader scale. Sharing  reliable data, such as participation figures for the Coast Guard, would  give TAP interagency partners a more complete picture of implementation  across all five military services. Sharing such information would also  enhance the interagency group\u2019s ability to evaluate how well TAP serves  the entire population of servicemembers. Improving the reliability of the  Coast Guard\u2019s TAP data will be essential for the benefits of data sharing  to be realized.\n\n\tRecommendations for Executive Action\n\nTo ensure that all eligible Coast Guard servicemembers are provided the  opportunity to complete the Transition Assistance Program (TAP), we  recommend the Commandant of the Coast Guard take the following  seven actions:  Issue an updated Commandant Instruction that establishes policies  and procedures to improve the reliability and completeness of TAP  data by including when and by whom data should be recorded and  updated. (Recommendation 1)\nEstablish a formal performance goal with a measurable target for  participation rates in VOW Act-mandated portions of TAP.  (Recommendation 2)\nMonitor the extent to which Coast Guard servicemembers participate  in TAP within prescribed time frames. (Recommendation 3)\nMonitor the extent to which Coast Guard servicemembers who elect  to participate in additional 2-day classes are afforded the opportunity  to attend. (Recommendation 4)\nIssue an updated Commandant Instruction that defines the roles and  responsibilities of the personnel who administer the program and  ensure servicemembers\u2019 participation. (Recommendation 5)\nOnce reliable data are available by installation or unit, enable unit  commanders and the higher-level commanders to whom they report  to access TAP performance information specifically for the units they  oversee so that they can monitor compliance with all TAP  requirements. (Recommendation 6)\nOnce reliable data are available, share TAP information with DOD and  other interagency partners, such as data on participation in required  TAP courses and additional 2-day classes. (Recommendation 7)\n\n\tAgency Comments and our Evaluation\n\nWe provided a draft of this report to the Departments of Homeland  Security, Defense, Education, Labor, and Veterans Affairs, the Office of  Personnel Management, and the Small Business Administration for their  review and comment. The formal written response of the Department of  Homeland Security (DHS) is reproduced in appendix II. In addition, DHS  provided technical comments from Coast Guard officials that we  incorporated into the report as appropriate. The other agencies did not  provide any comments.\nIn its written comments, DHS agreed with all seven of our  recommendations.\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 who made key contributions to this  report are listed in appendix III.\n\nAppendix I: Objective, Scope, and Methodology\n\n\tOverview\n\nThis report examines (1) what is known about the reliability of Transition  Assistance Program (TAP) data on participation levels and the factors  that affect Coast Guard servicemembers\u2019 participation, and (2) the extent  to which the Coast Guard measures TAP performance and monitors key  areas of TAP implementation. To address these questions, we surveyed  Coast Guard installations with full-time TAP operations; reviewed Coast  Guard data on TAP participation for fiscal years 2012 to 2017; visited one  Coast Guard installation and interviewed TAP managers from two  additional Coast Guard installations selected for diversity in location,  among other reasons; and interviewed Coast Guard officials responsible  for overseeing TAP implementation for the Coast Guard. We also  reviewed relevant federal laws, regulations, policies, documents, and  publications. Information in this report is current as of the date GAO  received formal agency comments from DHS.\n\n\tSurvey\n\nOur survey of Coast Guard installations with full-time TAP operations  asked about how TAP was being implemented. The survey included  questions about the accessibility of TAP components, challenges Coast  Guard servicemembers faced in attending the components, and the level  of commander support for participation. Our survey targeted front-line  TAP managers, who could draw on the expertise of TAP course  facilitators, transition counselors, career counselors, and other key TAP  staff as necessary.\nAfter drafting the survey questions, we pretested them with a TAP  manager to ensure (1) the questions were clear and unambiguous, (2)  terminology was used correctly, (3) the survey did not place an undue  burden on agency officials, (4) the information could feasibly be obtained,  and (5) the survey was comprehensive and unbiased. We revised the  content and format of the survey based on the feedback we received.\nWe initially sent the survey to TAP managers at all 13 Coast Guard  installations at which TAP staff were located. We removed one installation  when we later found that the TAP manager position was vacant and  revised the total to 12 Coast Guard installations. The survey was  accessible online from October 31, 2016, through January 18, 2017,  through a secure server that recipients were able to access using unique  usernames and passwords. We sent an email announcement to TAP staff  at all 13 Coast Guard installations at which TAP staff are located on  October 24, 2016. We sent a second email on October 31, 2016 to notify  participants the survey was available online, and provided their unique  passwords and usernames. We sent two follow-up e-mails (November 14,  2016 and November 28, 2016) to those who had not responded. Finally,  we contacted all remaining nonrespondents by telephone starting  December 5, 2016. The survey was available online until we reached a  100 percent response rate.\n\n\tInterviews with Coast Guard Installation TAP Staff and Servicemembers\n\nTo increase our understanding into how TAP was being implemented at  installations and supplement our survey findings, we visited one Coast  Guard installation and interviewed TAP managers from two additional  installations. We selected the installations based on several factors,  including the size of the installation, proximity to Department of Defense  (DOD) installations, and diverse locations in the United States. (See table  1.) At Coast Guard Base Elizabeth City in North Carolina, the installation  we visited, we interviewed the TAP manager, uniformed career  counselors, and senior installation leadership. During our interviews with  TAP managers at all three installations, we asked about the extent to  which Coast Guard servicemembers participate in TAP\u2019s required and  additional 2-day classes, including whether the servicemembers attended  classes online or in a classroom setting, challenges to ensuring Coast  Guard servicemembers participate in TAP, and the extent to which they  monitor Coast Guard servicemembers\u2019 participation in TAP. At Coast  Guard Base Elizabeth City, we also interviewed 25 Coast Guard  servicemembers (both officers and enlisted personnel) to get their  perspective on how well TAP worked and any challenges they had  participating. To help guide the interviews with the Coast Guard  servicemembers, we asked them to complete a short questionnaire that  asked about their experiences with the TAP program.\n\n\tInterviews with Agency Personnel\n\nWe also interviewed TAP staff at Coast Guard headquarters to learn  about TAP policy, monitoring efforts, and performance measures for the  service overall. For example, we asked what policies and procedures  guide installations\u2019 TAP implementation; what performance measures the  Coast Guard uses to monitor TAP; how performance results are reported  and shared with different levels of Coast Guard leadership; and to what  extent the Coast Guard uses results from TAP participant satisfaction  assessments. We also asked whether the Coast Guard plans to shift to  DOD\u2019s new TAP-IT Enterprise System and how using the new system  could affect its monitoring efforts in the future. In evaluating the Coast  Guard\u2019s performance measures, we focused on measures related to  servicemembers\u2019 transition experiences before leaving the military. We  did not gather information on post-program evaluations and outcomes  because they were determined to be outside the scope of this review.\n\n\tData Reliability Assessment\n\nWe reviewed DHS data on TAP participation for fiscal years 2012 to  2017. To assess the reliability of the Coast Guard\u2019s TAP participation  data, we interviewed agency officials knowledgeable about the data. We  determined these data were not sufficiently reliable due to limitations with  the Coast Guard\u2019s data collection system. Specifically, the system lacks  adequate controls to ensure TAP data are complete and accurate.\nWe conducted this performance audit from February 2016 to April 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Meeta Engle (Assistant Director),  Amy MacDonald (Analyst-in-Charge), James Bennett, Holly Dye, David  Forgosh, Ying Long, Jonathan McMurray, Jean McSween, Andrew  Sherrill, Benjamin Sinoff, and Timothy Young, made significant  contributions to this report.\nAlso contributing to this report were Susan Aschoff, Jessie Battle,  Ramona Burton, Melinda Cordero, Elizabeth Curda, Dawn Hoff, Ben  Licht, Serena Lo, Sheila McCoy, Almeta Spencer, Christopher Schmitt,  James Whitcomb, and Jill Yost.\n\nAppendix IV: Related Products\n\nTransitioning Veterans: DOD Needs to Improve Performance Reporting  and Monitoring for the Transition Assistance Program, GAO-18-23.  Washington, D.C.: November, 8, 2017.\nTransitioning Veterans: Improvements Needed in DOD\u2019s Performance  Reporting and Monitoring of the Transition Assistance Program,  GAO-18-225T. Washington, D.C.: November 8, 2017.\nDepartment of Defense: Transition Assistance Program (TAP) for Military  Personnel, GAO-16-302R. Washington, D.C.: December 17, 2015.\nVeterans\u2019 Employment: Need for Further Workshops Should Be  Considered before Making Decisions on Their Future, GAO-15-518.  Washington, D.C.: July 16, 2015.\nMilitary and Veteran Support: DOD and VA Programs That Address the  Effects of Combat and Transition to Civilian Life, GAO-15-24.  Washington, D.C.: November 7, 2014.\nVeterans Affairs: Better Understanding Needed to Enhance Services to  Veterans Readjusting to Civilian Life, GAO-14-676. Washington, D.C.:  September 10, 2014.\nTransitioning Veterans: Improved Oversight Needed to Enhance  Implementation of Transition Assistance Program, GAO-14-144.  Washington, D.C.: March 5, 2014.\nMilitary and Veterans\u2019 Benefits: Enhanced Services Could Improve  Transition Assistance for Reserves and National Guard, GAO-05-544.  Washington, D.C.: May 20, 2005.\nMilitary and Veterans\u2019 Benefits: Observations on the Transition  Assistance Program, GAO-02-914T (July 18, 2002).","output":"Why GAO Did This Study\n\nThousands of Coast Guard servicemembers have left the military and transitioned into civilian life, and some of these new veterans may face significant challenges, such as finding and maintaining employment. To help them prepare, federal law mandated that DHS provide separating Coast Guard servicemembers with counseling, employment assistance, and information on veterans' benefits through TAP. GAO was asked to examine TAP implementation.\nThis review analyzes (1) the reliability of TAP data on participation levels for Coast Guard servicemembers and the factors that affect participation, and (2) the Coast Guard's performance measures and monitoring efforts related to TAP. GAO interviewed Coast Guard headquarters staff; surveyed 12 Coast Guard installations that conduct TAP (100 percent response rate); collected and reviewed participation data for reliability; and interviewed TAP managers from three installations selected for size and location, and 25 Coast Guard servicemembers at one location. (For a companion report on TAP implementation for separating and retiring servicemembers in other military services, see GAO-18-23 .)\n\nWhat GAO Found\n\nThe United States Coast Guard (Coast Guard), which is overseen by the Department of Homeland Security (DHS), lacks complete or reliable data on participation in the Transition Assistance Program (TAP), designed to assist servicemembers returning to civilian life. According to senior Coast Guard officials, a major reason why data are not reliable is the lack of an up-to-date Commandant Instruction that specifies when to record TAP participation data. Consequently, the data are updated on an ad-hoc basis and may not be timely or complete, according to officials. Federal internal control standards call for management to use quality information to achieve the entity's objectives. Until the Coast Guard issues an up-to-date Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data, it will lack quality information to gauge the extent to which it is meeting TAP participation requirements in the VOW to Hire Heroes Act of 2011.\nAccording to GAO's survey of Coast Guard installations, various factors affected participation, such as servicemembers serving at geographically remote locations or separating from the Coast Guard rapidly. TAP officials and Coast Guard servicemembers GAO interviewed said commanders and direct supervisors sometimes pulled servicemembers out of TAP class or postponed participation because of mission priorities. TAP managers also said they rely on delivering TAP online because many Coast Guard servicemembers are stationed remotely.\nThe Coast Guard cannot effectively measure performance to ensure key TAP requirements are met because it lacks reliable data and does not monitor compliance with several TAP requirements. Further, the Coast Guard has not established a formal performance goal against which it can measure progress, although federal internal control standards stipulate that management should consider external requirements\u2014such as the laws with which the entity is required to comply\u2014to clearly define objectives in specific and measurable terms. Establishing a goal could help the Coast Guard define expected performance. In addition, the Coast Guard does not monitor TAP requirements regarding the timeliness of servicemembers' TAP participation or their access to additional 2-day classes. Consequently, it cannot know whether servicemembers are starting TAP early enough to complete the program or those who elected to attend additional 2-day classes were able to do so before separation or retirement, as required by the Act. Finally, the Coast Guard lacks an up-to-date Commandant Instruction that establishes the roles and responsibilities of Coast Guard staff in implementing TAP. Federal internal control standards stipulate that management should assign responsibility and delegate authority to key roles throughout the entity. Issuing an up-to-date Commandant Instruction that defines roles and responsibilities would clarify who is ultimately responsible for ensuring Coast Guard servicemembers attend TAP, thereby facilitating accountability.\n\nWhat GAO Recommends\n\nGAO is making seven recommendations, including that the Coast Guard issue a new Commandant Instruction establishing data collection policies, set TAP performance goals, monitor timeliness and access, and define roles and responsibilities. DHS agreed with all of GAO's recommendations."}
{"id":"gao_GAO-19-116","pid":"gao_GAO-19-116_0","input":"\tBackground\n\n\t\tU.S. Missions in Afghanistan\n\nSince 2001, the United States has made a commitment to building  Afghanistan\u2019s security and governance in order to prevent the country  from once again becoming a sanctuary for terrorists. To achieve its  security objectives, the United States currently has two missions in  Afghanistan: a counterterrorism mission that it leads and the NATO-led  Resolute Support train, advise, and assist mission, which it participates in  with other coalition nations. The objective of Resolute Support, according  to DOD reporting, is to establish self-sustaining Afghan security ministries  and forces that work together to maintain security in Afghanistan. The  United States is conducting these missions within a challenging security  environment that has deteriorated since the January 2015 transition to  Afghan-led security. The United Nations reported nearly 24,000 security  incidents in Afghanistan in 2017\u2014the most ever recorded\u2014and, despite a  slight decrease in the overall number of security incidents in early 2018,  the United Nations noted significant security challenges, including a spike  in high-casualty attacks in urban areas and coordinated attacks by the  insurgency on ANDSF checkpoints.\nDOD provides both personnel and funding to support its efforts in  Afghanistan. DOD documents indicate that the United States contributes  more troops to Resolute Support than any other coalition nation. As of  May 2018, the United States was contributing 54 percent of Resolute  Support military personnel, according to DOD reporting. Of the  approximately 14,000 U.S. military personnel in Afghanistan as of June  2018, about 8,500 were assigned to Resolute Support to train, advise,  and assist the ANDSF, according to DOD reporting. For fiscal year 2018,  Congress appropriated about $4.67 billion for the Afghanistan Security  Forces Fund\u2014the primary mechanism of U.S. financial support for  manning, training, and equipping the ANDSF. Other international donors  provided about $800 million, and the Afghan government committed to  providing about $500 million, according to DOD reporting.\nUnder Resolute Support and the International Security Assistance Force  mission that preceded it, CSTC-A is the DOD organization responsible for  (1) overseeing efforts to equip and train the ANA and ANP; (2) validating  requirements, including equipment requirements; (3) validating existing  supply levels; (4) submitting requests to DOD components to contract for  procurement of materiel for the ANDSF; and (5) ensuring that the Afghan  government appropriately uses and accounts for U.S. funds provided as  direct contributions from the Afghanistan Security Forces Fund. OSD-P  is responsible for developing policy on and conducting oversight of the  bilateral security relationship with Afghanistan focused on efforts to  develop the Afghan security ministries and their forces.\n\n\t\tU.S.-Purchased Equipment for the ANDSF\n\nIn August 2017, we reported that the United States had spent almost $18  billion on equipment and transportation for the ANDSF from fiscal years  2005 through April 2017, representing the second-largest expenditure  category from the Afghanistan Security Forces Fund. In that report, we  identified six types of key equipment the United States funded for the  ANDSF in fiscal years 2003 through 2016, including approximately:\n600,000 weapons, such as rifles, machine guns, grenade launchers,  shotguns, and pistols;\n163,000 tactical and nontactical radios, such as handheld radios and\n76,000 vehicles, such as Humvees, trucks, recovery vehicles, and  mine resistant ambush protected vehicles;\n30,000 equipment items for detecting and disposing of explosives,  such as bomb disposal robots and mine detectors;\n16,000 equipment items for intelligence, surveillance, and  reconnaissance, such as unmanned surveillance drones and night  vision devices; and\n208 aircraft, such as helicopters, light attack aircraft, and cargo  airplanes.\n\n\t\tANDSF Organization and Force Levels\n\nThe Ministry of Defense oversees the ANA, and the Ministry of the Interior  oversees the ANP. According to DOD reporting, the authorized force level  for the ANDSF, excluding civilians, as of June 2018 was 352,000:  227,374 for the Ministry of Defense and 124,626 for the Ministry of  Interior. The ANA includes the ANA corps, Afghan Air Force, Special  Mission Wing, ANA Special Operations Command, and Ktah Khas  (counterterrorism forces). The ANP includes the Afghan Uniformed  Police, Afghan Anti-Crime Police, Afghan Border Police, Public Security  Police, Counter Narcotics Police of Afghanistan, and General Command  of Police Special Units.\nThe ANA Special Mission Wing, Ktah Khas, ANA Special Operations  Command, and ANP General Command of Police Special Units are  collectively referred to as the Afghan Special Security Forces. In this  report, we refer to the Afghan Air Force and the Afghan Special Security  Forces as specialized forces, and the other components of the ANDSF as  conventional forces. According to DOD reporting, the combined  authorized force level for the specialized forces as of June 2018 was  approximately 34,500, or about 10 percent of the ANDSF\u2019s total  authorized force level of 352,000, compared with the conventional forces,  which make up about 74 percent of the total authorized force level for the  ANDSF. Figure 1 shows the ANDSF\u2019s organization.\n\n\t\tResolute Support Advising Strategy and Goals\n\nU.S. and coalition advisors from Resolute Support focus on capacity  building at the Ministry of Defense, Ministry of Interior, and ANDSF  regional headquarters, according to DOD reporting. Ministerial advisors  are located at Resolute Support headquarters in Kabul. At the ministerial  level, advisors provide assistance to improve institutional capabilities,  focusing on several functional areas. Table 1 summarizes the indicators  of effectiveness that ministerial advisors are to use to measure ministerial  progress in developing functioning systems that can effectively execute  each of the functional areas.\nRegional Resolute Support advisors from seven advising centers located  throughout Afghanistan provide support to nearby ANA corps and ANP  zone headquarters personnel, according to DOD reporting. Some  advisors are embedded with their ANDSF counterparts, providing a  continuous coalition presence, while others provide less frequent support,  based on proximity to and capability of their ANDSF counterparts.  Regional advisors are to track ANDSF capability development by  assessing the progress of the ANA corps and ANP zone headquarters  based on five capability pillars (see table 2). DOD and other Resolute  Support advisors are to document the results of these assessments each  quarter in an ANDSF Assessment Report.\nAccording to DOD reporting, in addition to ministerial and regional  advising, two tactical-level advisory commands provide continuous  support for the ANDSF\u2019s specialized forces: Train, Advise, and Assist  Command\u2013Air (TAAC-Air) advises the Afghan Air Force down to the unit  level, and NATO Special Operations Component Command\u2013Afghanistan  (NSOCC-A) primarily provides tactical-level special operations advising  for the Afghan Special Security Forces. TAAC-Air and NSOCC-A  assess capabilities at the headquarters level based on the five capability  pillars described above in table 2, and these assessments are included in  the quarterly ANDSF Assessment Report. Figure 2 shows the levels of  advising each Resolute Support advisory command type provides for the  ANDSF conventional forces and specialized forces.\n\n\t\tANDSF Capabilities Reportedly Continue to Improve; DOD Has Identified Several Capability Gaps and Initiated Efforts to Address Them DOD Has Reported the ANDSF Generally Continue to Improve Their Capabilities but Rely on Coalition Forces to Fill Several Critical Capability Gaps\n\nSince Resolute Support began, the ANDSF have improved some  capabilities related to the functional areas and capability pillars described  above, but face several capability gaps that leave them reliant on coalition  assistance, according to publicly available DOD reporting. DOD defines  capability as the ability to execute a given task. A capability gap is the  inability to execute a specified course of action, such as an ANDSF  functional area or a capability pillar (see tables 1 and 2 above). According  to DOD guidance, a gap may occur because forces lack a materiel or  non-materiel capability, lack proficiency or sufficiency in a capability, or  need to replace an existing capability solution to prevent a future gap  from occurring.\nAccording to DOD reporting on the Afghan security ministries, ANA corps,  and ANP zones, the ANDSF generally have improved in some capability  areas since Resolute Support began, with some components performing  better than others. For example, DOD has reported that the Afghan  ministries have improved in operational planning, strategic  communications, and coordination between the Ministry of Interior and  Ministry of Defense at the national level. In general, the ANA is more  capable than the ANP, according to DOD reporting. According to DOD  officials and SIGAR reporting, this is due, in part, to the ANA having more  coalition advisors and monitoring than the ANP. DOD officials also noted  that the Ministry of Interior, which oversees the ANP, and Afghanistan\u2019s  justice system are both underdeveloped, hindering the effectiveness of  the ANP. Corruption, understaffing, and training shortfalls have also  contributed to the ANP\u2019s underdevelopment, according to DOD and  SIGAR reporting. The Afghan Special Security Forces are the most  capable within the ANDSF and can conduct the majority of their  operations independently without coalition enablers, according to DOD  reporting. DOD and SIGAR reports have attributed the Afghan Special  Security Forces\u2019 relative proficiency to factors such as low attrition rates,  longer training, and close partnership with coalition forces. The Afghan Air  Force is becoming increasingly capable, and can independently plan for  and perform some operational tasks, such as armed overwatch and aerial  escort missions, according to DOD reporting.\nHowever, DOD has reported that the ANDSF generally continue to need  support in several key areas. For example, as of December 2017, DOD  reported several ministerial capability gaps, including force management;  logistics; and analyzing and integrating intelligence, surveillance, and  reconnaissance information. DOD also reported that, as of December  2017, the ANA and ANP continued to have capability gaps in several key  areas, such as weapons and equipment sustainment and integrating fire  from aerial and ground forces. The ANDSF rely on support from  contractors and coalition forces to mitigate capability gaps in these key  areas. For some capability areas, such as aircraft and vehicle  maintenance and logistics, the ANDSF is not expected to be self- sufficient until at least 2023, according to DOD reporting.\nAccording to DOD officials and SIGAR reporting, coalition and contractor  support helps mitigate ANDSF capability gaps in the immediate term but  may make it challenging to assess the ANDSF\u2019s capabilities and gaps  independent of such support. For example, vehicle and aircraft  maintenance contractors are responsible for sustaining specific  operational readiness rates for the equipment they service. While this  helps ensure that ANDSF personnel have working equipment to  accomplish their mission, thereby closing an immediate capability gap, it  may mask the ANDSF\u2019s underlying capabilities and potentially prolong  reliance on such support, according to DOD officials and SIGAR  reporting.\n\n\t\tDOD and the ANDSF Have Plans and Initiatives in Place to Address Some ANDSF Capability Gaps\n\nDOD and the ANDSF have begun implementing plans and initiatives that  aim to strengthen ANDSF capabilities. These include the following,  among others:\nANDSF Roadmap. In 2017, the Afghan government began  implementing the ANDSF Roadmap\u2014a series of developmental  initiatives that seek to strengthen the ANDSF and increase security  and governance in Afghanistan, according to DOD reporting. The  Roadmap is structured to span 4 years, but DOD has reported that its  full implementation will likely take longer than that. According to DOD  reporting, the Roadmap aims to improve four key elements: (1)  fighting capabilities; (2) leadership development; (3) unity of command  and effort; and (4) counter-corruption efforts.\nUnder the Roadmap\u2019s initiative to increase the ANDSF\u2019s fighting  capabilities, DOD and the ANDSF have begun implementing plans to  increase the size of the specialized forces. Specifically, DOD reports  that the ANDSF plans to nearly double the size of the Afghan Special  Security Forces by 2020 as an effort to bolster the ANDSF\u2019s offensive  reach and effectiveness. The Afghan Special Security Forces are to  become the ANDSF\u2019s primary offensive force, the conventional ANA  forces are to focus on consolidating gains and holding key terrain and  infrastructure, and the conventional ANP forces are to focus on  community policing efforts. In addition, to provide additional aerial fire  and airlift capabilities, the ANDSF began implementing an aviation  modernization plan in 2017. The aim is to increase personnel strength  and the size of the Afghan Air Force and Special Mission Wing fleets  by 2023.\nEnhanced vehicle maintenance efforts. To help improve the  ANDSF\u2019s vehicle maintenance abilities, DOD awarded a National  Maintenance Strategy Ground Vehicle Support contract, which,  according to DOD officials, became fully operational in December  2017. The National Maintenance Strategy Ground Vehicle Support  contract consolidated five separate vehicle maintenance and training  contracts into a single contract and contains provisions for building the  capacity of ANDSF and Afghan contractors to incrementally take  control of vehicle maintenance over a 5-year period.\nAdditional U.S. military personnel. As part of the South Asia  strategy, the United States committed 3,500 additional military  personnel to increase support to its missions in Afghanistan.  According to DOD reporting, most of the additional personnel will  support the Resolute Support mission, providing more advising and  combat enabler support to the ANDSF. Additionally, in March 2018,  the United States began deploying a Security Force Assistance  Brigade\u2014a new type of unit made up of U.S. Army personnel with  expertise in training foreign militaries\u2014to Afghanistan. The Security  Force Assistance Brigade will advise conventional and specialized  forces at and below the corps and zone levels and will accompany  and support ANA conventional forces at the battalion level in ground  operations as needed, according to DOD and SIGAR reporting.\n\n\tDOD Has Some Information on ANDSF Specialized Forces\u2019 Ability to Operate and Maintain U.S.-Purchased Equipment but Has Limited Reliable Information on Its Conventional Forces\n\n\t\tDOD Advisors Embedded with Specialized Forces Provide Some Information on Those Forces\u2019 Capabilities\n\nDOD collects some reliable information about the operation and  maintenance abilities of ANDSF specialized forces, in part because  advisors are embedded at the tactical level with the specialized forces,  according to DOD officials. Specifically, U.S. and coalition forces advise  specialized forces at the tactical level under Resolute Support because  building ANDSF aviation and special operations abilities are considered  particularly important, according to DOD reporting. DOD officials told us  that since U.S. and coalition forces are embedded at the tactical level for  specialized forces, they can monitor, assess, and report on tactical  abilities, including the ability to operate and maintain equipment.\nOur analysis of information provided by DOD about the Afghan Air  Force\u2019s ability to operate and maintain MD-530 helicopters illustrates that  DOD has some detailed information about specialized forces. TAAC-Air  advisors help train Afghan pilots and maintainers and collect information  on their tactical abilities. For example, TAAC-Air advisors track the  percentage of maintenance performed by Afghan Air Force maintainers  and aircraft operational readiness rates, according to DOD officials.  According to DOD reporting and officials, as of December 2017, the  Afghan Air Force could independently conduct MD-530 helicopter  operations for short intervals without contractor support but relied on  contractors to perform the majority of maintenance and sustainment  activities. See appendix II for more information on the Afghan Air Force\u2019s  ability to operate and maintain MD-530 helicopters.\n\n\t\tDOD Advisors Have Limited Contact with Conventional Forces in the Field, Yielding Little Information on Their Ability to Operate and Maintain Equipment\n\nU.S. and coalition forces perform high-level assessments of the ANDSF  conventional forces\u2019 capabilities at the corps and zone levels but do not  assess their tactical abilities, such as the ability to operate and maintain  equipment, according to DOD officials. For example, U.S. and coalition  forces assess the ANA and ANP conventional forces in quarterly ANDSF  Assessment Reports, but these reports are at the corps and zone  headquarters levels, and are not meant to provide an evaluation of the  entire ANDSF, according to DOD reporting. DOD officials stated that  other U.S.- and coalition-produced reports and assessments, such as  DOD\u2019s semiannual Section 1225 reports to Congress, semiannual  periodic mission reviews, and annual Afghanistan Plans of Record,  provide some information on the ANDSF\u2019s high-level capabilities.  However, according to DOD officials, these reports do not routinely  assess the conventional forces\u2019 ability to operate and maintain  equipment.\nAccording to DOD officials, DOD does not assess conventional forces\u2019  tactical abilities because advisors have had little or no direct contact with  conventional units below the corps and zone levels, and thus do not  collect such information on conventional forces. Specifically, under  Resolute Support, U.S. and coalition forces have not embedded with the  conventional forces below the corps and zone levels except in limited  circumstances.\nSince U.S. and coalition forces do not collect firsthand information on the  conventional units\u2019 tactical abilities, they rely on those units\u2019 self-reporting  for information on ANDSF abilities below the corps and zone levels,  which, according to DOD officials, may be unreliable. ANDSF reporting is  not verified by U.S. officials and can be unreliable in its consistency,  comprehensiveness, and credibility, according to DOD officials and  SIGAR. For example, the ANDSF produce a monthly tracker on vehicle  availability, maintenance backlog, repair times, and personnel  productivity, but DOD officials told us that the trackers are of questionable  accuracy.\nOur analysis of information provided by DOD about the ANDSF\u2019s ability to  operate and maintain tactical and nontactical radios illustrates the limited  amount of information DOD has on ANDSF conventional forces\u2019 tactical  abilities. Specifically, DOD officials could not say how well ANDSF  personnel on the front lines operate radios in the field and had only  limited information on the ANDSF\u2019s ability to maintain radios. For  example, the officials noted that the ANA conventional forces can perform  some unit-level radio repairs but that complex ANA radio maintenance  and all ANP radio maintenance is conducted by contractors. DOD officials  at Resolute Support headquarters told us that they provide ministerial- level advising on how to manage ANDSF radio systems and do not  provide tactical advising or inventory control for radios. See appendix III  for more information on the ANDSF\u2019s ability to operate and maintain  radios.\nOur analysis of information provided by DOD about the ANDSF\u2019s ability to  operate and maintain Mobile Strike Force Vehicles (MSFV) highlights the  limited amount of information DOD has on ANDSF conventional forces\u2019  tactical abilities compared with specialized forces. DOD officials were  able to provide operation and maintenance information for MSFVs that  had transferred to the specialized forces as of January 2018 but were  unable to provide operation and maintenance information for any other  MSFVs. The ANDSF began transferring one of the ANDSF\u2019s two MSFV  brigades from the conventional to specialized forces in August 2017,  according to DOD officials. As part of this transfer, NSOCC-A  advisors\u2014who provide tactical-level advising for the Afghan Special  Security Forces\u2014assumed oversight for the first brigade from Resolute  Support headquarters advisors. DOD officials stated that the ANDSF\u2019s  ability to operate and maintain MSFVs in this brigade prior to the transfer  was unknown, as neither Resolute Support headquarters nor the ANA  had assessed this. The operation and maintenance abilities of the second  brigade, which is still in the conventional forces, remains unknown. DOD  officials at NSOCC-A were able to provide information such as inventory  and mission capability rates for the MSFVs that had transferred, but only  for the short period of time the vehicles had been under the control of the  specialized forces. DOD officials told us that NSOCC-A plans to collect  more information on the specialized forces\u2019 ability to operate and maintain  MSFVs as they are transferred. See appendix IV for more information on  the ANDSF\u2019s ability to operate and maintain MSFVs.\nIn the absence of embedded advisors at the tactical level, DOD has not  implemented alternative approaches to collect reliable information about  the conventional forces\u2019 ability to operate and maintain equipment.  Federal internal control standards state that U.S. agencies should obtain  and process reliable information to evaluate performance in achieving key  objectives and assessing risks. DOD officials acknowledged that some  of the plans described above that DOD and the ANDSF have begun  implementing to address capability gaps may provide opportunities for  DOD to collect more reliable information on the conventional forces\u2019  ability to operate and maintain U.S.-purchased equipment. For example,  the National Maintenance Strategy Ground Vehicle Support contract  requires that contractors regularly report the total work orders received,  work in progress, and completed maintenance work performed by ANDSF  personnel as well as vehicle availability rates, which may be more reliable  than the ANDSF\u2019s monthly report on vehicle availability. In addition, the  Security Force Assistance Brigade may be able to collect and report on  the tactical abilities of units they advise and accompany on missions  since they are being deployed at or below the corps and zone levels.  However, as of June 2018, DOD officials had not decided which, if any, of  these options to pursue. Without reliable information on the equipment  operation and maintenance abilities of ANDSF conventional forces, which  represent nearly 75 percent of the ANDSF, DOD may be unable to fully  evaluate the success of its train, advise, assist, and equip efforts in  Afghanistan.\n\n\tConclusions\n\nThe United States invested nearly $84 billion in Afghan security in the 17- year period spanning fiscal years 2002 through 2018, but DOD continues  to face challenges to developing a self-sustaining ANDSF. While DOD  has reported the ANDSF have improved in several capability areas, they  continue to face critical capability gaps, impeding their ability to maintain  security and stability in Afghanistan independent of U.S. and coalition  forces. Moreover, DOD lacks reliable information about the degree to  which conventional forces\u2014which make up about three-quarters of the  ANDSF\u2014are able to operate and maintain U.S.-purchased equipment.  This limits DOD\u2019s ability to fully evaluate the success of its train, advise,  assist, and equip efforts in Afghanistan.\n\n\tRecommendation for Executive Action\n\nThe Secretary of Defense should develop and, as appropriate, implement  options for collecting reliable information on the ANDSF conventional  forces\u2019 ability to operate and maintain U.S.-purchased equipment.  (Recommendation 1)\n\n\tAgency Comments\n\nWe provided a draft of this report to DOD and State for comment. DOD  declined to provide written comments specifically on this public version of  the report, but DOD\u2019s comments on the sensitive version of this report are  reprinted in appendix V. The sensitive version of this report included two  recommendations, which DOD cited in its comments on the draft of the  sensitive report. One of those recommendations related to information  that DOD deemed to be sensitive and that must be protected from public  disclosure. Therefore, we have omitted that recommendation from DOD\u2019s  comment letter in appendix V. This omission did not have a material  effect on the substance of DOD\u2019s comments. In its comments, DOD  concurred with the recommendation we made in this version of the report  and stated it will take steps to implement it. DOD also provided technical  comments, which we incorporated as appropriate. The Department of  State had no comments.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of State. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov. If you or your staff has any questions about this  report please contact me at (202) 512-7114 or farbj@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VI.\n\nAppendix I: Objectives, Scope, and Methodology\n\nHouse Report 114-537 associated with the National Defense  Authorization Act for Fiscal Year 2017 included a provision for us to  review the Afghan National Defense and Security Forces\u2019 (ANDSF)  capability and capacity to operate and sustain U.S.-purchased weapon  systems and equipment. This report is a public version of a sensitive  report that we issued on September 20, 2018. Our September report  included three objectives, including one on the extent to which DOD  considers ANDSF input and meets their needs when identifying  equipment requirements. DOD deemed the information related to that  objective to be sensitive, which must be protected from public disclosure.  Consequently, we removed that objective and a related recommendation  from this public report. This version includes information on the other two  objectives: (1) what has been reported about ANDSF capabilities and  capability gaps and (2) the extent to which DOD has information about  the ANDSF\u2019s ability to operate and maintain U.S.-purchased equipment.  Although the information provided in this report is more limited, the report  uses the same methodology for the two objectives as the sensitive report.\nTo identify what has been reported about ANDSF capabilities and  capability gaps, we reviewed North Atlantic Treaty Organization (NATO)  and DOD documents and reports, such as DOD\u2019s semiannual Section  1225 reports to Congress, produced after the start of the NATO-led  Resolute Support mission on January 1, 2015. To determine what steps  DOD and NATO have taken to try to address gaps, we reviewed reports  the Center for Naval Analyses produced for DOD, as well as DOD and  NATO documents and reports produced after January 1, 2015, and  reports from GAO, the Special Inspector General for Afghanistan  Reconstruction (SIGAR), and the DOD Inspector General. We also  interviewed Center for Naval Analyses representatives and DOD officials  in the United States and Afghanistan, including DOD officials at the  Combined Security Transition Command\u2013Afghanistan (CSTC-A) and in  the Office of the Undersecretary of Defense for Policy (OSD-P) who  helped create the DOD reporting we reviewed.\nTo determine the extent to which DOD has information about the  ANDSF\u2019s ability to operate and maintain U.S.-purchased equipment, we  reviewed DOD documents and reports and interviewed DOD officials in  the United States and Afghanistan, including DOD officials who advise the ANDSF. We also reviewed federal internal control standards to  determine what responsibilities agencies have specifically related to  information collection. To provide illustrative examples of information  DOD has about the ANDSF\u2019s ability to operate and maintain U.S.- purchased equipment and what that information indicates about the  ANDSF\u2019s abilities and challenges, we interviewed and analyzed written  responses from DOD officials, including DOD officials who provide  procurement and lifecycle management for some ANDSF aircraft and  vehicles, about three equipment types\u2014MD-530 helicopters, Mobile  Strike Force Vehicles (MSFV), and radios. We selected these three  equipment types from a list that we developed, for an August 2017 report,  of key ANDSF equipment the United States purchased from fiscal years  2003 through 2016. We made our selections after reviewing DOD  documentation and interviewing DOD officials regarding a number of  considerations, such as (1) how critical the equipment is to the ANDSF\u2019s  ability to achieve its mission; (2) which ANDSF component uses the  equipment (i.e., Afghan National Police, Afghan National Army, or both);  (3) whether DOD intends to continue procuring the equipment for the  ANDSF; and (4) whether the equipment had been in use at least 5 years.\nWe collected detailed information about the ANDSF\u2019s ability to operate  and maintain MD-530 helicopters, MSFVs, and radios, as well as other  key statistics DOD provided about the equipment, such as inventory,  average lifespan, average cost, role, and training. This information was  based mainly on DOD responses collected from January 2018 to  February 2018 as well as DOD documents and reports produced after  January 1, 2015. The total amount of MD-530s and radios authorized for  procurement was based on DOD data that we collected for our August  2017 report on key ANDSF equipment the United States purchased in  fiscal years 2003 through 2016, which we supplemented with additional  data DOD provided on U.S.-purchased equipment from October 1, 2016,  through December, 31, 2017.\nThe performance audit upon which this report is based was conducted  from August 2016 to September 2018 in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate, evidence  to provide a reasonable basis for our findings and conclusions based on  our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. We subsequently worked with DOD from September 2018 to  October 2018 to prepare this public version of the original sensitive report  for public release. This public version was also prepared in accordance  with those standards.\nManufacturer: MD Helicopters,  Inc.\nU.S. Program Management  Office: U.S. Army, Non-Standard  Rotary Wing Aircraft Project  Management Office  Program Advising: Train Advise  Assist Command\u2013Air (TAAC-Air)\nThe United States originally procured 6 unarmed MD-530s for the AAF for  rotary wing training in 2011. In 2014, the United States purchased 12 armed  MD-530s and began retrofitting the 5 remaining trainer helicopters with  armament for operational missions to address a close air attack gap. MD- 530s were chosen to fill the gap over other aircraft, in part because they  could be delivered relatively quickly as the AAF awaited A-29 light attack  aircraft that were experiencing procurement delays, according to Department  of Defense (DOD) officials. The United States procured additional MD-530s  in 2015, 2016, and 2017 because of the aircraft\u2019s positive impact on the  battlefield, according to DOD officials (see fig. 3).\nKey Statistics   Variants: All can be armed with  .50-cal machine gun pods and\/or  2.75 inch rocket pods.\nTotal Authorized for  Procurement: 60 as of December  31, 2017  Inventory: 25 as of January 2018  (30 are scheduled for delivery;  attrition of 5 due to crashes and  enemy fire)\nAverage Lifespan: Absent  mishaps, and with good  maintenance, there is no defined  lifespan limit for MD-530s,  according to DOD officials.\nNational Army and Afghan National Police, depending on the mission, in  all but one region of Afghanistan, which is supported by other aircraft.\nMD-530s are typically tasked two at a time for missions, according to  DOD officials.\nAn MD-530 crew consists of a pilot and co-pilot, according to DOD.\nAverage cost: $6.3 million per  aircraft, including all electronic  devices, weapons management  systems, and weapons (excluding  ordnance), according to DOD  officials. o  Division of labor is based on the individual crew members'  capabilities, with one pilot handling navigation and communication  while the other identifies targets and operates the weapon systems.\nArmy pilot advisors at Kandahar Air Field, according to DOD officials.  o  MD-530 pilot training takes about 3 years (see fig. 4).\n\n\tGAO Comments\n\n1. The GAO report number cited in DOD\u2019s letter refers to a draft of the  sensitive version of this report, which we issued on September 20, 2018.  Prior to issuing that version, we changed its report number to GAO-18- 662SU to reflect its sensitive nature. That version of this report included  two recommendations. The second recommendation has been omitted  from DOD\u2019s letter in this public version because it was related to  information that DOD deemed to be sensitive.\n\nAppendix VI: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Joyee Dasgupta (Assistant  Director), Kara Marshall, Katherine Forsyth, and Bridgette Savino made  key contributions to this report. The team also benefitted from the expert  advice and assistance of David Dayton, Neil Doherty, Justin Fisher,  Ashley Alley, Cary Russell, Marie Mak, James Reynolds, Sally  Williamson, Ji Byun, and J. Kristopher Keener.","output":"Why GAO Did This Study\n\nDeveloping independently capable ANDSF is a key component of U.S. and coalition efforts to create sustainable security and stability in Afghanistan under the North Atlantic Treaty Organization (NATO)-led Resolute Support mission. The United States is the largest contributor of funding and personnel to Resolute Support, providing and maintaining ANDSF equipment, along with training, advising, and assistance to help the ANDSF effectively use and sustain the equipment in the future.\nHouse Report 114-537 included a provision for GAO to review the ANDSF's capability and capacity to operate and sustain U.S.-purchased weapon systems and equipment. This report addresses (1) what has been reported about ANDSF capabilities and capability gaps and (2) the extent to which DOD has information about the ANDSF's ability to operate and maintain U.S.-purchased equipment. To conduct this work, GAO analyzed DOD and NATO reports and documents, examined three critical equipment types, and interviewed DOD officials in the United States and Afghanistan.\nThis is a public version of a sensitive report issued in September 2018. Information that DOD deemed sensitive has been omitted.\n\nWhat GAO Found\n\nSince the Resolute Support mission began in 2015, the Afghan National Defense and Security Forces (ANDSF) have improved some fundamental capabilities, such as high-level operational planning, but continue to rely on U.S. and coalition support to fill several key capability gaps, according to Department of Defense (DOD) reporting. DOD has initiatives to address some ANDSF capability gaps, such as a country-wide vehicle maintenance and training effort, but DOD reports it does not expect the ANDSF to develop and sustain independent capabilities in some areas, such as logistics, for several years.\nWhile DOD has firsthand information on the abilities of the Afghan Air Force and Special Security Forces to operate and maintain U.S.-purchased equipment, it has little reliable information on the equipment proficiency of conventional ANDSF units. U.S. and coalition advisors are embedded at the tactical level for the Air Force and Special Security Forces, enabling DOD to directly assess those forces' abilities. However, the advisors have little direct contact with conventional ANDSF units on the front lines. As a result, DOD relies on those units' self-assessments of tactical abilities, which, according to DOD officials, can be unreliable.\nGAO's analysis of three critical equipment types illustrated the varying degrees of DOD's information (see figure above). For example, DOD provided detailed information about the Air Force's ability to operate and maintain MD-530 helicopters and the Special Security Forces' ability to operate and maintain Mobile Strike Force Vehicles; however, DOD had limited information about how conventional forces operate and maintain radios and Mobile Strike Force Vehicles. DOD's lack of reliable information on conventional forces' equipment operations and maintenance abilities adds to the uncertainty and risk in assessing the progress of DOD efforts in Afghanistan.\n\nWhat GAO Recommends\n\nGAO recommends that DOD develop options for collecting reliable information on conventional ANDSF units' ability to operate and maintain U.S.-purchased equipment. DOD concurred with this recommendation."}
{"id":"gao_GAO-19-134T","pid":"gao_GAO-19-134T_0","input":"\tFCC\u2019s Data Overstate Broadband Access on Tribal Lands\n\nIn our September 2018 report on broadband access on tribal lands, we  found that FCC collects broadband availability data from broadband  providers, but its method for collecting the data does not accurately or  completely capture broadband access\u2014the ability to obtain service\u2014on  tribal lands. Specifically, FCC directs fixed broadband providers to  submit a list of census blocks where service is available on their Form  477 filings. In the Form 477 instructions, FCC defines \u201cavailable\u201d as  whether the provider does\u2014or could, within a typical service interval or  without an extraordinary commitment of resources\u2014provide service to at  least one end-user premises in a census block. Thus, in its annual  reports and maps of fixed broadband service, FCC considers an entire  block to be served if a provider reports that it does, or could offer, service  to at least one household in the census block. As shown in figure 1,  FCC\u2019s definition of availability leads to overstatements of fixed broadband  availability on tribal lands by: (1) counting an entire census block as  served if only one location has broadband, and (2) allowing providers to  report availability in blocks where they do not have any infrastructure  connecting homes to their networks if the providers determine they could  offer service to at least one household. FCC has noted that  overstatements of availability can be particularly problematic in rural  areas, where census blocks cover larger areas.\nAccording to FCC officials, FCC requires providers to report fixed  broadband availability where they could provide service to: (1) ensure that  it captures instances in which a provider has a network nearby but has  not installed the last connection to the homes, and (2) identify where  service is connected to homes, but homes have not subscribed. FCC  officials also told us that FCC measures availability at the census block  level because sub-census block data may be costly to collect. However,  FCC acknowledged that by requiring a provider to report where it could  provide service, it is not possible to tell whether the provider would be  unable or unwilling to take on additional subscribers in a census block it  lists as served. In addition, when reporting on broadband access in  tribal lands, FCC uses the broadband availability data described above,  and does not collect information on factors that FCC and tribal  stakeholders have stated can affect broadband access. These factors  include affordability, service quality, and service denials.\nBy developing and implementing methods for collecting and reporting  accurate and complete data on broadband access specific to tribal lands,  FCC would be better able to target federal broadband funding to tribal  areas that need it the most. We recommended FCC develop and  implement methods for collecting and reporting accurate and complete  data on broadband access specific to tribal lands. FCC agreed with this  recommendation and stated that it is exploring methods to collect more  granular broadband deployment data.\n\n\tFCC Does Not Have a Formal Process to Obtain Tribal Input on its Broadband Data\n\nAs we reported in September 2018, FCC does not have a formal process  to obtain input from tribes on the accuracy of the data and tribal  stakeholders can face difficulties obtaining information from providers.  FCC\u2019s 2010 National Broadband Plan noted the need for the federal  government to improve the quality of data regarding broadband on tribal  lands and recommended that FCC work with tribes to ensure that any  information collected is accurate and useful. Although the Plan also  noted that tribal representatives should have the opportunity to review  mapping data and offer supplemental data or corrections, FCC lacks a  formal process to obtain tribal input on its broadband data. FCC officials  told us that they address questions and concerns regarding providers\u2019  coverage claims submitted to FCC\u2019s Office of Native Affairs and Policy.  However, about half of the tribal representatives we spoke to stated that  they were not aware of the Form 477 data or corresponding maps, or  raised concerns about a lack of outreach from FCC to inform tribes about  the data. Most of the tribal stakeholders we interviewed told us that FCC  should work more directly with tribes to obtain information from them to  improve the accuracy of FCC\u2019s broadband deployment data for tribal  lands. These stakeholders identified several ways in which FCC could  work with tribes on this issue, including onsite visits, increased outreach  and technical training, and opportunities for tribes to collect their own data  or submit feedback regarding the accuracy of FCC\u2019s data.\nFCC\u2019s National Broadband Plan also noted the importance of supporting  tribal efforts to build technical expertise with respect to broadband issues.  A few of the stakeholders we interviewed noted that tribes have faced  difficulties when they attempt to challenge FCC\u2019s broadband availability  data. For example, in 2013, all of the tribal entities that challenged FCC\u2019s  data on mobile service availability were unsuccessful in increasing the  number of eligible areas. A few tribal stakeholders provided varying  reasons for this, one of which was the need for more technical expertise  to help the tribes meet FCC\u2019s requirements regarding the information  needed to support a challenge. Because FCC lacks a formal process to  obtain tribal input on its broadband data, FCC is missing an important  source of information regarding areas in which the data may overstate  broadband service on tribal lands.\nBy establishing a process to obtain input from tribal governments on the  accuracy of provider-submitted broadband data as recommended in the  National Broadband Plan, FCC could help tribes develop and share  locally-specific information on broadband access and improve FCC\u2019s data  for tribal lands. However, the success of such an effort may rely on the  tribes\u2019 knowledge of, and technical ability to participate in, the process.  Thus, we recommended FCC develop a formal process to obtain tribal  input on the accuracy of provider-submitted broadband data that includes  outreach and technical assistance to help tribes participate in the  process. FCC agreed with this recommendation and stated that it will  work with stakeholders to explore options for implementing such a  process.\nFinally, some tribes face challenges accessing data from providers. In  2011, FCC required that providers receiving funds to serve tribal lands  meaningfully engage with the tribes and discuss broadband deployment  planning. In 2012, FCC issued guidance on meeting this requirement  and stated that the guidance would evolve over time based on the  feedback of both tribal governments and broadband providers.  However, FCC has taken limited steps to obtain such feedback and has  not updated the guidance. About half of the tribal stakeholders we  interviewed raised concerns about difficulties accessing information from  providers regarding broadband deployment on their tribe\u2019s lands (which  providers may consider proprietary), and some providers told us that they  attempt to engage with tribes, but the level of responsiveness they  receive from tribes varies. Thus, we recommended, and FCC agreed, that  FCC obtain feedback from tribal stakeholders and providers to determine  whether it needs to clarify its tribal engagement guidance.\n\n\tFew Tribal Broadband Partnerships Exist\n\nIn our September 2018 report on tribal partnerships, we found that  partnership arrangements between tribes and other entities to increase  broadband deployment on tribal lands are not widespread. Because of  the greater costs associated with deploying broadband on unserved tribal  lands that are generally rural, with possibly rugged terrain, there may be  little to no private sector incentive to deploy broadband or enter into a  partnership arrangement to do so. The partnership examples we  identified were ones that obtained federal funding under past programs  funded by the Recovery Act. Among these examples, tribes partnered  with several different types of entities, including private providers, a  community access network provider, an electric cooperative, a regional  consortium, and tribally owned providers.\n\n\tTribes Face Barriers to Obtain Federal Funding for Broadband Deployment\n\nWe also reported in September 2018 that FCC and RUS are the primary  sources of federal funding to deploy broadband infrastructure in rural and  remote areas where the cost of providing service is high, including tribal  lands. Based on our review of the funding provided by four federal  programs targeted to increase deployment in unserved areas, very little  has gone directly to tribes or to tribally owned broadband providers.  Specifically, we found that from 2010 to 2017, less than 1 percent of FCC  funding and about 14 percent of RUS funding went directly to tribes and  tribally owned providers. Combined, FCC and RUS funding totaled $34.6  billion during that time period and tribes and tribally owned providers  received $235 million, or about 0.7 percent.\nFCC\u2019s 2010 National Broadband Plan stated that tribes needed  substantially greater financial support than was available to them at the  time and that accelerating tribal broadband deployment would require  increased funding. Furthermore, the National Congress of American  Indians expressed concerns that the needs for federally funded  broadband projects are greater on tribal lands but tribes do not receive  the appropriate share of federal funding aimed at increasing broadband  deployment. Several of the tribes we visited told us they were trying to  deploy broadband infrastructure or offer service because the private  providers were not building out on their lands.\nThrough our analysis, we found that from 2010 to 2017, 14 tribal entities  received federal funding from FCC and RUS to increase broadband  deployment (see fig. 2).\nThe tribal officials, tribal associations, and tribally owned broadband  providers we interviewed cited several barriers that tribes may face when  seeking federal funding for broadband deployment. The two primary  barriers these interviewees cited were (1) the statutory requirement for  the eligible telecommunications carrier (ETC) designation and (2) grant  application requirements. Regarding the statutory requirement for ETC  designation, FCC officials told us there were 11 tribes that have providers  designated as ETCs and therefore would be eligible to receive support  from FCC\u2019s Connect America Fund (CAF)\u2014the largest source of federal  funding for broadband deployment in unserved and underserved areas.  Although FCC adopted rules in 2011 to create CAF and modernize the  program so that it could support broadband capable networks, FCC  officials told us that most ETCs are the telephone companies that were in  existence when the Telecommunications Act of 1996 was enacted into  law. According to FCC officials, FCC has explored whether it has  authority to allow non-ETC providers to receive CAF support payments  but determined that the statute is clear that only ETCs can receive  program support. Between 2012 and 2017, FCC officials said FCC  received nine ETC applications, four of which were from tribally owned  providers. Of those four, only one tribally owned provider was designated  as an ETC.\nAccording to representatives from a tribal association we contacted, FCC  has provided ETCs with billions of dollars to deploy service to unserved  areas, but FCC\u2019s efforts have not always been successful in the hardest  to reach areas, particularly tribal lands. The representatives stated that  FCC\u2019s competitive market approach does not work where competition  cannot be supported and that there needs to be a different approach.  Similarly, tribal officials from Idaho told us that although the provider in  their area has received millions of dollars in CAF subsidies, it has not  deployed broadband on the tribal lands. Other tribal officials from Idaho  told us that although private providers received CAF subsidies to deploy  broadband service to their reservation, the private providers told the tribe  it would be years before they offer service on tribal lands.\nAdditionally, the tribal officials, tribal associations, and tribally owned  broadband providers we interviewed said tribes may face barriers  completing federal grant applications to obtain funding for broadband  deployment. For example, they said tribes face regulatory barriers in  applying for RUS\u2019s grant funding, including preparing existing and  proposed network design, demonstrating financial sustainability of the  broadband project within 5 years, and obtaining matching funds.\nThe National Broadband Plan recommended that federal agencies  facilitate tribal access to broadband funding opportunities. Furthermore,  recognizing the need to reduce barriers to expand broadband  deployment, the Broadband Opportunity Council, established in March  2015, issued a memorandum stating that federal agencies should use all  available and appropriate authorities to identify and address regulatory  barriers that may unduly impede either broadband deployment or the  infrastructure to augment broadband deployment. However, according  to RUS officials, RUS has not taken steps to identify or address the  barriers tribes face when applying for RUS grant funding due to limited  resources and multiple competing priorities for those resources. We  recommended that RUS identify any regulatory barriers that may unduly  impede efforts by tribes to obtain RUS grant funds for broadband  deployment on tribal lands and implement any steps necessary to  address the identified barriers. By doing so, RUS could help tribes obtain  funding to expand broadband deployment on tribal lands. RUS neither  agreed nor disagreed with this recommendation.\nChairman Hoeven, Vice Chairman Udall, and Members of the Committee,  this completes my prepared statement. I would be pleased to respond to  any questions that you may have.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact Mark Goldstein, Director, Physical Infrastructure Issues at (202)  512-2834 or GoldsteinM@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. GAO staff who made key contributions to this testimony  are Rose Almoguera, Katherine Blair, Keith Cunningham, Crystal  Huggins, Sally Moino, and Tina Paek. Other staff who made contributions  to the reports cited in this testimony are identified in the source product.\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":"Why GAO Did This Study\n\nThis testimony summarizes the information contained in two GAO reports: Broadband Internet: FCC\u2019s Data Overstate Access on Tribal Lands , ( GAO-18-630 ) and Tribal Broadband: Few Partnerships Exist and the Rural Utilities Service Needs to Identify and Address Any Funding Barriers Tribes Face ( GAO-18-682 ). Specifically, it addresses (1) the extent to which FCC\u2019s approach to collecting broadband availability data accurately captures broadband access on tribal lands, (2) the extent to which FCC obtains tribal input on the data, (3) partnerships tribes have formed with entities to deploy broadband infrastructure on tribal lands, and (4) barriers tribes face in obtaining federal funding. For these reports, GAO analyzed FCC and RUS data, and interviewed agency officials as well as a non-generalizable sample of stakeholders representing tribes and broadband providers.\n\nWhat GAO Found\n\nThe Federal Communications Commission\u2019s (FCC) approach to collecting data on broadband availability causes it to overstate broadband access\u2014the ability to obtain service\u2014on tribal lands. In FCC\u2019s approach, broadband is considered to be \u201cavailable\u201d for an entire census block if the provider could serve at least one location in the census block. FCC, tribal stakeholders, and providers have noted that this approach leads to overstatements of broadband availability. Because FCC uses these data to measure broadband access, it also overstates broadband access on tribal lands. By developing and implementing methods for collecting and reporting accurate and complete data on broadband access specific to tribal lands, FCC would be better able to target federal broadband funding to tribal areas that need it the most.\nFCC does not have a formal process to obtain tribal input on the accuracy of provider-submitted broadband data. Most of the tribal stakeholders GAO interviewed stated FCC should work more directly with tribes to improve the accuracy of FCC\u2019s data. Establishing a formal process to obtain input from tribal governments could help improve the accuracy of FCC\u2019s broadband data for tribal lands.\nTribes have formed partnerships with different types of entities to deploy broadband infrastructure on tribal lands, but such partnerships are not widespread. The partnerships GAO identified included private providers, a community access network provider, an electric cooperative, a regional consortium, and tribally owned broadband providers.\nGAO reviewed four federal programs to deploy broadband services and found that from 2010 to 2017, less than 1 percent of funding has gone directly to tribes or tribally owned providers. The tribal entities GAO contacted cited barriers to obtaining funds from the Rural Utilities Service (RUS) grant funding, such as preparing network design, demonstrating financial sustainability of the broadband project within 5 years, and obtaining matching funds required to apply for federal grants. However, according to RUS officials, RUS has not taken steps to identify or address the barriers tribes face when applying for RUS grant funding due to limited resources and multiple competing priorities for those resources. By identifying and addressing regulatory barriers that may impede tribal entities\u2019 access to RUS funding, RUS could help tribes obtain funding to expand broadband deployment on tribal lands.\n\nWhat GAO Recommends\n\nIn GAO-18-630 , GAO made three recommendations to FCC, two of which related to improving its collection of broadband data. In GAO-18-682 , GAO made one recommendation to RUS to address regulatory barriers. FCC agreed and RUS neither agreed nor disagreed and both agencies described actions planned to address the recommendations."}
{"id":"gao_GAO-18-184T","pid":"gao_GAO-18-184T_0","input":"\tBackground\n\nAccording to NRC\u2019s website, the higher the radiation dose, the sooner the  effects of radiation will appear, and the higher the probability of death.  Radiation doses such as those received by survivors of the atomic bombs  in Japan can cause cancers such as leukemia and colon cancer and, if  levels are high enough, acute radiation syndrome. The symptoms of this  syndrome range from nausea, fatigue, and vomiting to death within days  or weeks. In contrast, the effects of low-dose radiation are more difficult to  detect. In particular, below about 100 millisieverts (mSv) (10 rem)\u2014the  level below which the National Academies of Sciences, Engineering, and  Medicine\u2019s (National Academies) 2006 report on radiation and human  health considered radiation to be low dose\u2014data do not definitively  establish the dose-response relationship between cancer and radiation  exposure.\n\n\tSelected Agencies Generally Used Advice from Scientific Advisory Bodies to Develop and Apply Radiation-Protection Requirements and Guidance\n\nIn developing and applying radiation protection requirements and  guidance for workers and the public\u2014specifically, limits on dose or  increased health risk and guidance levels on exposure\u2014EPA, NRC,  DOE, and FDA have generally taken the advice of scientific advisory  bodies. In particular, they have relied on the advice of the International  Commission on Radiological Protection, the National Council on  Radiation Protection and Measurements, and the National Academies\u2019  Nuclear and Radiation Studies Board. This advice includes the use of  the linear no-threshold model, which assumes that the risk of cancer  increases with every incremental increase in radiation exposure. For  example, the National Academies published a report in 2006 stating that  the balance of evidence from various types of studies tends to favor a  simple proportionate relationship between radiation at low doses and  cancer risk. According to the National Academies, the availability of new  and more extensive data since the publication of its previous report in  1990 strengthened confidence in the 2006 report\u2019s estimates of cancer  risk.\nThe advisory bodies have recognized challenges in accurately estimating  cancer risks from very low doses of radiation exposure when using the  linear no-threshold model. For example, much of the data on health  effects of radiation exposure come from non-U.S. populations, such as  Japanese atomic bomb survivors. These individuals received a large  exposure to radiation over a short period of time (an acute exposure), and  there is uncertainty about the extent to which the health effects for these  populations can be extrapolated to a U.S. population that is regularly  (chronically) exposed to low-dose radiation.\nNevertheless, NRC officials told us that, in the absence of convincing  evidence that there is a dose threshold below which low levels of  radiation are beneficial or not harmful, NRC will continue to follow the  recommendations of scientific advisory bodies to use the linear no- threshold model. Similarly, officials from EPA told us that they would  consider changing the use of the linear no-threshold model as the basis  of their requirements and guidance only if there were a strong  recommendation from scientific advisory bodies on radiation protection as  well as an endorsement of the change by the National Academies.\nUnder this model, federal regulations set dose limits for radiation  exposure that are below the level in the National Academies\u2019 2006 report  on radiation and human health for defining low-dose radiation. For  example, NRC\u2019s annual dose limit for members of the public (excluding  natural, or background, sources of radiation) from operation of nuclear  power plants is a hundredth of the level the National Academies  considers low dose. NRC based the dose limit on an advisory body  recommendation that the cancer risk to the general public from exposure  to radiation should be comparable to the public\u2019s risk from everyday  activities, such as taking public transportation.\nThe low-dose radiation limits and guidance that federal agencies have  developed and applied vary depending on the settings in which exposure  can occur. For example, NRC has established limits on occupational dose  that apply to nuclear power-plant workers; these limits are higher than  NRC\u2019s annual dose limit for members of the public but are still below the  level the National Academies considers low dose. In keeping with  advisory body recommendations, NRC also applies the principle that  doses should be kept as low as reasonably achievable (ALARA). NRC  defines ALARA to mean making every reasonable effort to maintain  exposures to radiation as far below dose limits as is practical. At a  nuclear power plant we visited as part of our work, representatives told us  that under their ALARA plan, the plant set its own dose limit for workers at  40 percent of the NRC\u2019s regulatory limit. Moreover, officials at the plant  told us that they have been able to keep exposures below the plant\u2019s own  limit by continuously seeking opportunities to reduce unnecessary worker  exposure to radiation, such as using robots to perform maintenance work  in radiation areas.\nIn contrast to radiation exposure received from nuclear power plants, FDA  officials stated that the agency regulates the maximum radiation output of  medical equipment, instead of setting limits on the total amount of  radiation exposure to patients. According to FDA officials, FDA does not  generally have the authority to regulate the total amount of radiation  exposure a patient receives from medical imaging equipment. However,  in keeping with the principle that radiation exposure should be kept as low  as reasonably achievable, FDA encourages voluntary measures by health  care providers, such as to investigate and determine whether it is  possible to reduce radiation exposure to patients from the use of medical- imaging equipment.\n\n\tSeven Agencies Have Funded Research on the Health Effects of Low-Dose Radiation but Have Not Collaborated on Overall Research Priorities\n\nFrom fiscal year 2012 through fiscal year 2016, seven federal agencies  obligated $209.6 million for research on the health effects of low-dose  radiation, but they did not use a collaborative mechanism to address  overall research priorities in this area. DOE and NIH accounted for most  of the funding, with DOE obligating $116.3 million and NIH obligating  $88.6 million, or about 56 percent and 42 percent of the total,  respectively. The five other agencies\u2014NRC, NASA, DOD, EPA, and  CDC\u2014obligated the remaining $4.7 million, or about 2 percent of the  total.\nDOE has two offices that have funded research on the health effects of  low-dose radiation\u2014the Office of Science and the Office of Environment,  Health, Safety and Security\u2014according to funding information DOE  provided. The Office of Science established the Low Dose Radiation  Research Program in 1998 and funded it through fiscal year 2016. A  primary focus of this program was radiobiological research, which  examines molecular and cellular responses to radiation exposure.  According to DOE\u2019s website for the program, the program provided data  and information about the low-dose range of exposure, producing 737  peer-reviewed publications as of March 2012. The Office of Environment,  Health, Safety and Security provided funding for epidemiological studies,  including studies involving Japanese atomic bomb survivors.\nNIH has funded and conducted both epidemiological and radiobiological  studies on low-dose radiation, according to NIH officials. The officials  stated that the studies are conducted through the National Cancer  Institute\u2019s internal research program for radiation epidemiology, as well as  through NIH\u2019s research programs for external funding of investigator- initiated research. Other institutes of NIH, including the National Institute  of Environmental Health Sciences, also fund research related to the  health effects of radiation exposure as part of NIH\u2019s overall mission to  fund medical research.\nAmong the other agencies that provided some funding to low-dose  radiation studies, several provided funding to the Epidemiological Study  of One Million U.S. Radiation Workers and Veterans (Million Person  Study)\u2014an ongoing study headed by the National Council on Radiation  Protection and Measurements. DOE also provided funding for this study.\nIn fiscal years 2012 through 2016, the seven agencies who provided  funding for research on health effects of low-dose radiation collectively  decreased their annual funding obligations in this area by 48 percent,  from $57.9 million in fiscal year 2012 to $30.4 million in fiscal year 2016.  DOE accounted for a large portion of this overall decrease in annual  funding. Specifically, over this 5-year period, DOE reduced its annual  funding obligations for this area of research by 45 percent\u2014from $32.6  million in fiscal year 2012 to $18.0 million in fiscal year 2016. According to  DOE, the decrease was primarily due to DOE\u2019s reduction in funding for its  Low Dose Radiation Research Program. According to DOE officials,  decreases in funding for the program reflected a shift toward bioenergy  and environmental research. Similarly, over the 5-year period, NIH\u2019s  funding for low-dose radiation research decreased by 48 percent\u2014from  $23.1 million in fiscal year 2012 to $12.0 million in fiscal year 2016. NIH  officials explained that funding levels for a particular disease or research  area can fluctuate depending on several factors, including the number  and quality of research proposals submitted and the outcome of NIH\u2019s  peer reviews of the proposals, as well as the overall research budget.\nThe seven agencies that funded research on health effects of low-dose  radiation for fiscal years 2012 through 2016 collaborated on particular  research projects through various mechanisms, including joint funding of  individual projects, but they did not use a collaborative mechanism to  address overall research priorities. As previously noted, the 2016 report  of DOE\u2019s Biological and Environmental Research Advisory Committee  provided information about research needs in low-dose radiation and  found that further research could decrease uncertainty in predicting  cancer risk from low-dose radiation. The report stated that other  agencies\u2014including NRC, NIH, EPA, DOD, and NASA\u2014could benefit  from the reduction in uncertainty that could be obtained by this research.\nIn our September 2017 report, we recommended that the Secretary of  Energy lead the development of a mechanism for interagency  collaboration to determine roles and responsibilities for addressing  priorities related to research on the health effects of low-dose radiation.  We made this recommendation because our previous work has shown  that collaborative mechanisms can serve multiple purposes, such as  leading interagency efforts to develop and coordinate sound science and  technology policies across the federal government. Although collaborative  mechanisms differ in complexity and scope, they all benefit from certain  key features, such as leadership.\nWe directed this recommendation to DOE for several reasons. In the  past, DOE took a leading role in advocating for greater communication  and coordination between the fields of radiation biology and  epidemiology. In addition, DOE is the federal agency that currently has  primary responsibility under the Atomic Energy Act of 1954 for research  related to the protection of health during activities that can result in  exposure to radiation. DOE is well positioned to lead an effort to ensure  that federal agencies have a mechanism for interagency collaboration to  address overall research priorities related to low-dose radiation health  effects because of the agency\u2019s past experience as a leader in this area  of research. Such an effort could help DOE and the collaborating  agencies determine roles and responsibilities, including leadership when  addressing shared research priorities.\nDOE did not agree with our recommendation. In particular, DOE stated  that EPA and NRC also have legal mandates to research low-dose  radiation exposure and that these agencies establish their research  priorities in accordance with their respective budget authorities and  recommendations from independent advisory bodies. DOE stated that as  a result, it would not be appropriate for DOE to lead the development of a  mechanism for interagency collaboration.\nWe believe that DOE\u2019s concerns stem from a misinterpretation of our  recommendation, and we made several changes to our report and our  recommendation to clarify DOE\u2019s role. We noted that we did not  recommend that a mechanism for interagency collaboration serve as a  replacement for agencies\u2019 legal mandates, budget authorities, and  recommendations from independent advisory bodies. Instead, this  mechanism would help agencies address shared research priorities. In  making our recommendation, we did not specify the coordinating  mechanism that agencies should use and instead left it to DOE to lead  the development of an appropriate mechanism. We continue to believe  that an interagency coordination mechanism for low-dose research is  needed and that DOE is in the best position to lead agencies in  developing the most appropriate mechanism.\nChairman Weber, Ranking Member Veasey, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this statement, please  contact John Neumann at (202) 512-3841 or neumannj@gao.gov. In  addition, contact points for our Offices of Congressional Relations and  Public Affairs may be found on the last page of this statement. Individuals  who made key contributions to the report on which this testimony is based  include Allen Chan, Kendall Childers, Joseph Cook, Richard Johnson,  Cynthia Norris, Josie Ostrander, Amber Sinclair, and Jack Wang.\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":"Why GAO Did This Study\n\nThis testimony summarizes the information contained in GAO's September 2017 report, entitled Low-Dose Radiation: Interagency Collaboration on Planning Research Could Improve Information on Health Effects ( GAO-17-546 ).\n\nWhat GAO Found\n\nThe Department of Energy (DOE), Nuclear Regulatory Commission (NRC), Environmental Protection Agency (EPA), and Food and Drug Administration generally used the advice of scientific advisory bodies to develop and apply radiation protection requirements and guidance for workers and the public in the radiation exposure settings that GAO reviewed. These settings were: (1) the operation and decommissioning of nuclear power plants; (2) the cleanup of sites with radiological contamination; (3) the use of medical equipment that produces radiation; and (4) accidental or terrorism-related exposure to radiation. Specifically, the agencies relied on the advice of three scientific advisory bodies that supported the use of a model that assumes the risk of cancer increases with every incremental radiation exposure. Accordingly, the agencies have set regulatory dose limits and issued guidance to confine exposure to levels that reduce the risk of cancer, while recognizing that scientific uncertainties occur in estimating cancer risks from low-dose radiation. For example, NRC requires nuclear power plants to consider measures for limiting workers' exposure below NRC's regulatory dose limit, such as by using robots for maintenance work in radiation areas.\nGAO identified seven federal agencies that funded research on low-dose radiation's health effects. In fiscal years 2012 to 2016, DOE, NRC, EPA, and four other federal agencies obligated about $210 million for such research . Although the agencies have collaborated on individual projects on radiation's health effects, they have not established a collaborative mechanism to set research priorities. GAO's previous work has shown that federal agencies can use such mechanisms to implement interagency collaboration to develop and coordinate sound science policies. In the past, DOE took a leading role in this area because DOE provided stable funding and advocated for greater coordination on research on low-dose radiation's health effects. However, since fiscal year 2012, DOE has phased out funding for one of its main research programs in this area. This has created a void in coordination efforts among federal agencies, and no other agency has stepped forward to fill this void. Because of DOE's prior experience as a leader in this area of research and its research responsibility under the Atomic Energy Act of 1954, it could play an important role in helping federal agencies establish a coordinating mechanism for low-dose radiation research.\nDollars are in millions and have not been adjusted for inflation\nSource: GAO analysis of agency data. | GAO-17-546"}
{"id":"crs_R44306","pid":"crs_R44306_0","input":"\tIntroduction\n\nFY2019 is the fourth year in a row that Congress has enacted a special provision to allow for the issuance of H-2B visas beyond the annual statutory cap of 66,000 in response to high levels of demand for the visa. For FY2016, Congress exempted certain H-2B workers from the statutory cap. For the three past fiscal years, Congress has authorized the Department of Homeland Security (DHS) to make additional H-2B visas available subject to certain conditions. For FY2017 and FY2018, DHS used this authority to make an additional 15,000 H-2B visas available each year. For FY2019, DHS is making an additional 30,000 H-2B visas available. \n\n\tH-2B Nonagricultural Worker Visa\n\nThe Immigration and Nationality Act (INA) of 1952, as amended, enumerates categories of aliens, known as nonimmigrants, who are admitted to the United States for a temporary period of time and a specific purpose. Nonimmigrant visa categories are identified by letters and numbers, based on the sections of the INA that established them. Among the major nonimmigrant visa categories is the \"H\" category for temporary workers. Included in this category is the H-2B visa for temporary nonagricultural workers. \nThe H-2B program allows for the temporary admission of foreign workers to the United States to perform nonagricultural labor or services of a temporary nature if unemployed U.S. workers are not available. H-2B workers perform a wide variety of jobs. Top H-2B occupations in recent years have included landscape laborer, groundskeeper, forest worker, housekeeper, and amusement park worker. By regulation, participation in the H-2B program is limited to designated countries, and DHS publishes a list of eligible countries each year. \nBringing workers into the United States under the H-2B program is a multiagency process involving the U.S. Department of Labor (DOL), DHS, and the Department of State (DOS). The program itself is administered by DHS's U.S. Citizenship and Immigration Services (USCIS) and DOL's Employment and Training Administration (ETA). DOL's Wage and Hour Division (WHD) also has certain concurrent enforcement responsibilities. The H-2B program currently operates under regulations issued by DHS in 2008 on H-2B requirements, DHS and DOL jointly in 2015 on H-2B employment, and DHS and DOL jointly in 2015 on H-2B wages.\nFor work to qualify as temporary under the H-2B visa, the employer's need for the duties to be performed by the worker must \"end in the near, definable future\" and must be a one-time occurrence, a seasonal need, a peak load need, or an intermittent need. The employer's need for workers generally must be for a period of one year or less, but in the case of a one-time occurrence, can be for up to three years.\nIn order to bring H-2B workers into the United States, an employer must first receive labor certification from DOL. An interim final rule on H-2B employment that was issued jointly by DHS and DOL in April 2015 establishes a new registration requirement as a preliminary step in the labor certification process; once it is implemented, prospective H-2B employers would demonstrate their temporary need to DOL through this registration process before submitting a labor certification application. (As of the date of this report, however, DOL continues to make determinations about temporary need during the processing of labor certification applications.)\nAt the same time that the employer submits the labor certification application to DOL, the employer must submit a job order to the state workforce agency (SWA) serving the area of intended employment. The job order is used to recruit U.S. workers. The employer also must conduct its own recruitment.\nIn order to grant labor certification to an employer, DOL must determine that (1) there are not sufficient U.S. workers who are qualified and available to perform the work, and (2) the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. To prevent an adverse effect on U.S. workers, H-2B employers must offer and provide required wages and benefits to H-2B workers and workers in \"corresponding employment.\" H-2B employers must pay their workers the highest of the prevailing wage rate or the federal, state, or local minimum wage. They must provide a \"three-fourths guarantee\"; that is, they must guarantee to offer workers employment for at least three-fourths of the contract period. H-2B employers also must pay worker visa fees and certain worker transportation costs. H-2B employers are not required to provide health insurance coverage. \nAfter receiving labor certification, a prospective H-2B employer can submit an application, known as a petition, to DHS to bring in foreign workers. If the foreign workers are already in the United States, the employer can request a change of status to H-2B status on the petition. In the typical case, however, the workers are abroad. If the petition is approved, they can visit a U.S. embassy or consulate to apply for H-2B nonimmigrant visas from DOS. If the visa applications are approved, the workers are issued visas that they can use to apply for admission to the United States at a port of entry. H-2B workers can be accompanied by eligible spouses and children, who are issued H-4 visas. \nAn alien's total period of stay as an H-2B worker may not exceed three consecutive years. An H-2B alien who has spent three years in the United States may not seek an extension of stay or be readmitted to the United States as an H-2B worker until he or she has been outside the country for at least three months.\nThe INA grants enforcement authority with respect to the H-2B program to DHS, but allows for the delegation of that authority to DOL. DHS has delegated that authority to DOL, and now DOL's WHD has responsibility for enforcing compliance with the conditions of an H\u20102B petition and temporary labor certification.\n\n\t\tSeafood Industry Staggered Entry Provision\n\nAs part of the labor certification process, prospective H-2B employers must accurately indicate the starting and ending dates of their period of need for H-2B workers. According to the supplementary information to the 2015 DHS-DOL interim final rule on H-2B employment: \"An application with an accurate date of need will be more likely to attract qualified U.S. workers to fill those open positions, especially when the employer conducts recruitment closer to the actual date of need.\" If within a season an employer has more than one date of need for workers to perform the same job, the employer must file a separate labor certification application for each date of need. The employer is not allowed to stagger the entry of H-2B workers based on one date of need. \nThere is an exception to this prohibition on the staggered entry of H-2B workers, however, that applies to employers in the seafood industry. First enacted as part of the Consolidated Appropriations Act, 2014, and subsequently incorporated into the 2015 DHS-DOL interim final rule on H-2B employment, this provision permits an employer with an approved H-2B petition to bring in the H-2B workers under that petition any time during the 120 days beginning on the employer's starting date of need. In order to bring in the workers between day 90 and day 120, though, the employer must conduct additional U.S. worker recruitment. This provision has been reenacted in DOL appropriations acts for each year from FY2015 through FY2019.\n\n\tNumerical Limitations\n\nThe H-2B program is subject to an annual statutory numerical limit. Under the INA, as amended by the Immigration Act of 1990, the total number of aliens who may be issued H-2B visas or otherwise provided with H-2B nonimmigrant status in any fiscal year may not exceed 66,000. Also, since FY2006 there has been a cap of 33,000 on the number of aliens subject to H-2B numerical limits who may enter the United States on an H-2B visa or be granted H-2B status during the first six months of a fiscal year. This INA amendment, enacted as part of the REAL ID Act of 2005, effectively divided the annual H-2B cap of 66,000 into two semiannual caps of 33,000, respectively covering work in the first and second halves of the fiscal year.\nCertain categories of H-2B workers are exempt from the cap, including the following:\ncurrent H-2B workers seeking an extension of stay, change of employer, or change in the terms of employment; H-2B workers previously counted toward the cap in the same fiscal year; fish roe processors, fish roe technicians, and\/or supervisors of fish roe processing; and H-2B workers performing labor in the U.S. territories of the Commonwealth of the Northern Mariana Islands (CNMI) and\/or Guam until December 31, 2029.\nAs noted, spouses and children who are accompanying H-2B workers are issued H-4 visas and, as such, are not counted against the H-2B cap.\n\n\t\tSpecial H-2B Cap-Related Provisions\n\nLegislation has been regularly introduced in Congress concerning the H-2B cap. Several measures have been enacted since 2005 to provide for the issuance of H-2B visas, or the granting of H-2B status, beyond the statutory cap. The enacted provisions have been of two main types.\n\n\t\t\tReturning Worker Exemption\n\nThe INA was amended during the 109 th Congress to add a provision establishing a temporary exemption from the H-2B statutory cap for certain H-2B returning workers. The provision, initially in effect for FY2005 and FY2006, exempted from the cap H-2B returning workers who had been counted against the cap in any one of the three prior fiscal years. This H-2B returning worker provision was subsequently extended for FY2007, and expired at the end of that fiscal year. An H-2B returning worker exemption of the same type was reinstated for FY2016. It provided that an H-2B returning worker who had been counted against the statutory cap in FY2013, FY2014, or FY2015 would not be counted again in FY2016. Multiple bills were introduced in the 115 th Congress to enact temporary or permanent H-2B returning worker exemptions from the statutory cap. At least one H-2B returning worker bill has been introduced in the 116 th Congress as of the date of this report.\n\n\t\t\tProvision Authorizing Additional H-2B Visas\n\nFor FY2017 and FY2018, a different type of H-2B cap-related provision was enacted by the 115 th Congress. For each of these years, provisions in year-end omnibus appropriations laws authorized DHS to make additional H-2B visas available beyond the statutory cap after consultation with DOL and \"upon the determination that the needs of American businesses cannot be satisfied\" with available U.S. workers. Under these provisions, the number of additional aliens who could receive H-2B visas each year was limited to \"not more than the highest number of H\u20132B nonimmigrants who participated in the H\u20132B returning worker program in any fiscal year in which returning workers were exempt from such numerical limitation.\"\nThe FY2019 Consolidated Appropriations Act includes a provision of the same type for FY2019. Using the same language as the FY2017 and FY2018 provisions, the FY2019 provision authorizes DHS, after consultation with DOL and \"upon the determination that the needs of American businesses cannot be satisfied\" with available U.S. workers, to make additional H-2B visas available for FY2019 up to a maximum of \"the highest number of H\u20132B nonimmigrants who participated in the H\u20132B returning worker program in any fiscal year in which returning workers were exempt from such numerical limitation.\" As discussed below, the DHS-DOL rule implementing this provision limits the additional visas to H-2B returning workers.\n\n\t\t\t\tFY2017 Provision\n\nIn July 2017, DHS and DOL jointly published a final rule to implement the FY2017 provision. The rule temporarily amended DHS regulations on the H-2B visa to state that for FY2017, DHS \"has authorized up to an additional 15,000 aliens who may receive H\u20132B nonimmigrant visas.\" In the supplementary information to the rule, DHS explained that the statutory provision applied only to H-2B workers entering the United States on visas and not to aliens in the United States who were seeking a change of status to H-2B status.\nThe statutory definition of the maximum authorized number (i.e., \"the highest number of H\u20132B nonimmigrants who participated in the H\u20132B returning worker program in any fiscal year\") can be interpreted in different ways, as DHS acknowledged in the supplementary information to the rule. However, the agency determined that 64,716 was the most appropriate maximum number of additional H-2B visas authorized under the special FY2017 provision, this being \"the number of beneficiaries covered by H\u20132B returning worker petitions that were approved for FY 2007.\" \nThe supplementary information to the rule included the following explanation for limiting the FY2017 numerical increase to 15,000:\nMost recently, in FY 2016, 18,090 returning workers were approved for H\u20132B petitions, despite Congress having reauthorized the returning worker program with more than three-quarters of the fiscal year remaining. Of those 18,090 workers authorized for admission, 13,382 were admitted into the United States or otherwise acquired H\u20132B status.... [T]he Secretary, in consideration of the statute's reference to returning workers, determined that it would be appropriate to use these recent figures as a basis for the maximum numerical limitation under section 543. This rule therefore authorizes up to 15,000 additional H\u20132B visas (rounded up from 13,382) for FY 2017.\nIn addition, in implementing the statutory provision, DHS decided to limit eligibility for the additional H-2B workers to certain U.S. businesses. Under the FY2017 rule, the prospective H-2B employer must submit to DHS, along with the H-2B petition, a new attestation form \nevidencing that without the ability to employ all of the H\u20132B workers requested on the petition ... its business is likely to suffer irreparable harm (that is, permanent and severe financial loss).\n\n\t\t\t\tFY2018 Provision\n\nIn May 2018, DHS and DOL jointly published a final rule to implement the FY2018 H-2B cap-related provision. The FY2018 rule, which is similar to the FY2017 rule, temporarily amended DHS H-2B regulations to state that for FY2018, DHS had authorized the issuance of up to 15,000 additional H\u20132B visas. In supplementary information to the FY2018 rule, DHS explained its decision to authorize up to 15,000 additional visas despite the fact that all 15,000 additional visas authorized in FY2017 were not used. \nOut of a maximum of 15,000 supplemental H\u20132B visas for FY 2017, a total of 12,294 beneficiaries were approved for H\u20132B classification.... [T]he Secretary has determined that it is appropriate to authorize 15,000 additional visas again, as employers will have a longer period in which to submit their petitions due to the earlier publication date of this rule, thereby allowing for the possibility of more petitions being filed this fiscal year than in FY 2017.\nThe FY2018 rule also included the same language as the FY2017 rule requiring an employer petitioning for supplemental visas to submit an attestation along with the H-2B petition evidencing that without the ability to employ all the requested H\u20132B workers the employer's business would likely suffer irreparable harm.\n\n\t\t\t\tFY2019 Provision\n\nIn May 2019, DHS and DOL jointly published a final rule to implement the FY2019 provision. The FY2019 rule temporarily amends DHS H-2B regulations to state that for FY2019, DHS has authorized the issuance of up to 30,000 additional H\u20132B visas. As it did in the supplementary information to the FY2017 and FY2018 rules, DHS clarifies in the supplementary information to the FY2019 rule that the FY2019 provision only authorizes DHS to increase the number of H-2B visas; it does not cover individuals in the United States who change to H-2B status. As a result, DHS states that the supplemental cap is limited to workers who obtain visas abroad and then seek admission to the United States.\nThe supplementary information to the FY2019 rule, consistent with the supplementary information to the FY2017 and FY2018 rules, indicates that the most appropriate maximum number of additional H-2B visas authorized under the statutory provision is 64,716. DHS explains its decision to allow 30,000 supplemental visas as follows:\nIn setting the number of additional H\u20132B visas to be made available during FY 2019, DHS considered this number [i.e., 64,716], overall indications of increased need, and the time remaining in FY 2019, and determined that it would be appropriate to limit the supplemental cap to approximately half of the highest number for returning workers, or up to 30,000.\nLike its FY2017 and FY2018 predecessors, the FY2019 rule requires an employer petitioning for supplemental visas to submit an attestation along with the H-2B petition evidencing that without the ability to employ all the requested H\u20132B workers the employer's business would likely suffer irreparable harm.\nIn addition, the FY2019 rule imposes a limitation not applicable under the FY2017 and FY2018 rules. Under the FY2019 rule, an employer may request supplemental visas only for H-2B workers \"who have been issued an H\u20132B visa or otherwise granted H\u20132B status in Fiscal Years 2016, 2017, or 2018.\" DHS offers the following rationale for limiting the additional visas to H-2B returning workers:\nSuch workers (i.e., those who recently participated in the H\u20132B program) have previously obtained H\u2013 2B visas and therefore been vetted by DOS, would have departed the United States after their authorized period of stay as generally required by the terms of their nonimmigrant admission, and therefore may obtain their new visas through DOS and begin work more expeditiously.\nThe supplementary information to the rule highlights the importance, in particular, of returning workers' proven \"willingness to return home after they have completed their temporary labor or services or their period of authorized stay.\" It states:\nThe returning workers condition therefore provides a basis to believe that H\u20132B workers under this cap increase will likely return home again after another temporary stay in the United States. That same basis does not exist for non-returning workers, not all of whom have a track record of returning home. Although the returning worker requirement limits the flexibility of employers, the requirement provides an important safeguard, which DHS deems paramount.\n\n\t\tImplementation of H-2B Numerical Limits\n\nUSCIS is responsible for implementing numerical limits on temporary worker visas (including the H-2B visa), which it does at the petition receipt stage. Under DHS regulations:\nWhen calculating the numerical limitations ... USCIS will make numbers available to petitions in the order in which the petitions are filed. USCIS will make projections of the number of petitions necessary to achieve the numerical limit of approvals, taking into account historical data related to approvals, denials, revocations, and other relevant factors. USCIS will monitor the number of petitions (including the number of beneficiaries requested when necessary) received and will notify the public of the date that USCIS has received the necessary number of petitions (the \"final receipt date\").... If the final receipt date is any of the first five business days on which petitions subject to the applicable numerical limit may be received (i.e., if the numerical limit is reached on any one of the first five business days that filings can be made), USCIS will randomly apply all of the numbers among the petitions received on any of those five business days.\nIn one recent fiscal year, the final receipt date announced by USCIS ended up being too early. For FY2015, USCIS announced on April 2, 2015, that March 26, 2015, was the final receipt date for new H-2B petitions. The agency had accepted about 3,900 H-2B petitions for FY2015 through March 26, 2015, which it believed was sufficient to reach the annual 66,000 cap. In early June 2015, however, USCIS announced that it would reopen the H-2B cap for the second half of FY2015 and accept additional petitions for new H-2B workers. It offered the following public explanation:\nUSCIS continues to work in collaboration with DOS to monitor the issuance of H-2B visas and has determined that as of June 5, 2015, DOS received fewer than the expected number of requests for H-2B visas. A recent analysis of DOS H-2B visa issuance and USCIS petition data reveals that the number of actual H-2B visas issued by DOS is substantially less than the number of H-2B beneficiaries seeking consular notification listed on cap-subject H-2B petitions approved by USCIS. In light of this new information, USCIS has determined that there are still available H-2B visa numbers remaining for the second half of the FY15 cap.\nFollowing a brief reopening, USCIS announced that June 11, 2015, was the final receipt date for new H-2B worker petitions for FY2015.\n\n\t\t\tFY2018\n\nUntil FY2018, the final receipt date for H-2B petitions had never fallen within the first five days of filing and, thus, the random selection process (lottery) described in the regulatory provision in the preceding section had never been required. As described below, that changed with petition filings by employers seeking to hire H-2B workers for the second half of FY2018, which began on April 1, 2018. DOL was also impacted by the high level of employer demand for H-2B workers for the second half of FY2018 since an employer must receive labor certification from DOL before filing an H-2B petition.\n\n\t\t\t\tDOL Labor Certification Applications\n\nIn accordance with H-2B regulations, January 1, 2018, was the first date that employers could submit H-2B temporary labor certifications to DOL requesting a work start date of April 1, 2018. On January 1, 2018, DOL received about 4,498 applications requesting an April 1, 2018, start date; those applications covered 81,008 workers. In response, DOL announced a process change. It indicated in a Federal Register notice that it would not begin releasing certified H\u20132B applications, which employers need in order to petition USCIS for H-2B workers (see \" H-2B Nonagricultural Worker Visa \"), until February 20, 2018, and on that date, it would issue such certified applications in order of receipt. DOL offered the following explanation for adopting this procedure:\nThis process change will allow employers who filed promptly on January 1, 2018, sufficient time to meet regulatory requirements, including the recruitment and hiring of qualified and available U.S. workers, thus preserving the sequential order of filing that took place on January 1, 2018, to the extent possible.\n\n\t\t\t\tDHS Petitions\n\nOn March 1, 2018, USCIS announced that in the first five business days of accepting H-2B petitions for the second half of FY2018, it had received petitions requesting about 47,000 H-2B workers subject to the statutory cap. It further reported that it had conducted a lottery on February 28, 2018, to randomly select a sufficient number of these petitions to meet the statutory cap.\nAs discussed, on May 31, 2018, USCIS published a final rule authorizing the issuance of up to 15,000 additional H\u20132B visas for FY2018. In the first five business days of accepting petitions under this supplemental cap, USCIS received petitions for more beneficiaries than the number of H-2B visas available. As a result, it conducted a second FY2018 H-2B lottery on June 7, 2018, to randomly select a sufficient number of petitions to meet the supplemental cap.\n\n\t\t\tFY2019\n\nEmployer demand for H-2B visas and associated temporary labor certifications for the second half of FY2019 reached new heights. \n\n\t\t\t\tDOL Labor Certification Applications\n\nJanuary 1, 2019, was the first day that employers could file H-2B labor certification applications for the second half of FY2019. On January 2, 2019, DOL announced that due to high demand its iCERT online application filing system had \"experienced a system disruption\" on January 1, 2019, that prevented some employers from submitting their H-2B certification applications: \"Within the first five minutes of opening the semi-annual H-2B certification process on January 1, 2019, the U.S. Department of Labor iCERT system had an unprecedented demand for H-2B certifications with more than 97,800 workers requested in pending applications for the 33,000 available visas.\" When the system re-opened on January 7, 2019, it \"handled the submission of approximately 4,749 H-2B applications covering more than 87,900 workers positions for an April 1, 2019, start date of work within the first one hour of operation.\" This experience led DOL to announce additional process changes for FY2020, as described below.\n\n\t\t\t\tDHS Petitions\n\nOn February 19, 2019, the first day of accepting H-2B petitions for the second half of FY2019, USCIS announced that it had received petitions for more H-2B workers than there were remaining H-2B numbers under the FY2019 cap. On February 21, 2019, USCIS conducted a lottery to randomly select a sufficient number of petitions to meet the cap. \n\n\t\t\tFY2020\n\nIn February 2019, in light of its experience with H-2B submissions in January 2019 and the unanticipated \"burdens\" placed on \"its electronic filing system, network infrastructure, and staff resources,\" DOL announced new H-2B temporary labor certification application processing changes for FY2020. It indicated that beginning with H-2B certification applications for the first half of FY2020, it would randomly order and assign for processing all applications submitted within designated groups. The first group would consist of applications requesting the earliest start date of work (e.g., October 1, 2019, for the first half of FY2020) and filed during the first three calendar days of the filing period (which begins on July 3, 2019, for the first half of FY2020). DOL maintains that this new process \"balances employers' interest in utilizing the H-2B program with OFLC's [DOL's Office of Foreign Labor Certification's] interest in ensuring that access to its filing system is equitable and occurs with no user disruption.\" DOL is seeking comments on these changes and plans for the new procedures to take effect on July 3, 2019.\n\n\t\tNumbers Granted H-2B Status\n\nIn any year, most, but not all, foreign nationals who obtain H-2B status acquire that status through admission to the United States on H-2B visas. Those who obtain H-2B status but are not issued visas include H-2B workers who are admitted to the United States without visas (mostly Canadians) and individuals who change to H-2B status while in the United States. USCIS data are available on the latter group. These data show that between FY2009 and FY2017, the number of individuals who were approved for a change of status to H-2B status ranged from about 110 (in FY2017) to about 470 (in FY2010).\n\n\t\t\tH-2B Visa Issuances\n\n Figure 1 provides data on H-2B visa issuances from FY1992 through FY2018. These data offer one way to measure the growth of the H-2B program over the years. As explained above, the visa application and issuance process occurs after DOL has granted labor certification and DHS has approved the visa petition. \nAs illustrated in Figure 1 , the number of H-2B visas issued generally increased from FY1992 until FY2007, when H-2B visa issuances reached a highpoint of 129,547 (see the Appendix for yearly visa issuance data). H-2B visa issuances fell after FY2007 with the start of the economic recession, but, as shown in Figure 1 , they have generally been increasing since FY2009.\nIn FY2005-FY2007 and FY2016-FY2018, as discussed, temporary provisions established exceptions to the statutory annual cap of 66,000. In some other years in which visa issuances surpassed 66,000, it seems reasonable to assume that the H-2B cap was exceeded given the magnitude of the numbers. \n\n\tConclusion\n\nWith employer demand for H-2B visas exceeding supply, H-2B admissions and the statutory cap are once again receiving attention from policymakers. While previous Congresses considered broad immigration reform bills that included proposals for new temporary worker programs to address any perceived shortfalls in the supply of foreign workers, any legislative efforts to address the numerical limitations on nonagricultural guest workers in the near term seem likely to be focused on the existing H-2B program.\n\n\t\tAppendix. H-2B Visa Issuances","output":"The Immigration and Nationality Act (INA) of 1952, as amended, enumerates categories of foreign nationals, known as nonimmigrants, who are admitted to the United States for a temporary period of time and a specific purpose. One of these nonimmigrant visa categories\u2014known as the H-2B visa\u2014is for temporary nonagricultural workers.\nThe H-2B visa allows for the temporary admission of foreign workers to the United States to perform nonagricultural labor or services of a temporary nature if unemployed U.S. workers are not available. Common H-2B occupations include landscape laborer, housekeeper, and amusement park worker.\nThe H-2B program is administered by the U.S. Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS) and the U.S. Department of Labor's (DOL's) Employment and Training Administration. DOL's Wage and Hour Division also has certain concurrent enforcement responsibilities. The H-2B program currently operates under regulations issued by DHS in 2008 on H-2B requirements, by DHS and DOL jointly in 2015 on H-2B employment, and by DHS and DOL jointly in 2015 on H-2B wages.\nBringing workers into the United States under the H-2B program is a multiagency process involving DOL, DHS, and the Department of State (DOS). A prospective H-2B employer must apply to DOL for labor certification. Approval of a labor certification application reflects a finding by DOL that there are not sufficient U.S. workers who are qualified and available to perform the work and that the employment of foreign workers will not adversely affect the wages and working conditions of U.S. workers who are similarly employed.\nIf granted labor certification, an employer can file a petition with DHS to bring in the approved number of H-2B workers. If the petition is approved, a foreign worker overseas who the employer wants to employ can go to a U.S. embassy or consulate to apply for an H-2B nonimmigrant visa from DOS. If the visa application is approved, the worker is issued a visa that he or she can use to apply for admission to the United States at a port of entry. H-2B workers can be accompanied by eligible spouses and children.\nBy law, the H-2B visa is subject to an annual numerical cap. Under the INA, the total number of individuals who may be issued H-2B visas or otherwise provided with H-2B nonimmigrant status in any fiscal year may not exceed 66,000. USCIS is responsible for implementing the H-2B cap, which it does at the petition receipt stage. Spouses and children accompanying H-2B workers are not counted against the H-2B cap. In addition, certain categories of H-2B workers are exempt from the cap. Among these categories are current H-2B workers who are seeking an extension of stay, change of employer, or change in the terms of their employment.\nEmployer demand for H-2B workers has varied over the years. In recent years, demand has exceeded supply, and special provisions have been enacted to make additional H-2B visas available. For FY2016, a temporary statutory provision exempted certain H-2B workers from the cap. It applied to H-2B workers who had been counted against the cap in any one of the three prior fiscal years and would be returning as H-2B workers in FY2016. For FY2017, FY2018, and FY2019, a different type of H-2B cap-related provision authorized DHS to issue additional H-2B visas (above the cap) subject to specified conditions."}
{"id":"gao_GAO-19-93","pid":"gao_GAO-19-93_0","input":"\tBackground\n\n\t\tThe 2017 Hurricanes and California Wildfires\n\nIn 2017, three major hurricanes made landfall in the United States and  historic wildfires struck California. According to FEMA, the 2017  hurricanes and wildfires collectively affected 47 million people\u2014nearly 15  percent of the nation\u2019s population. See figure 1 for a timeline of these  major disasters.\n\n\t\tOverview of Federal Disaster Response and Recovery\n\nWhen disasters hit, state and local entities are typically responsible for  disaster response efforts. The Robert T. Stafford Disaster Relief and  Emergency Assistance Act established a process by which a state may  request a presidential disaster declaration to obtain federal assistance.  According to the DHS National Response Framework\u2014a guide to how  the federal government, states and localities, and other public and private  sector institutions should respond to disasters and emergencies\u2014the  Secretary of Homeland Security is responsible for ensuring that federal  preparedness actions are coordinated to prevent gaps in the federal  government\u2019s efforts to respond to all major disasters, among other  emergencies. The framework also designates FEMA to lead the  coordination of the federal disaster response efforts across federal  agencies.\nThe National Response Framework identifies 14 emergency support  functions that serve as the federal government\u2019s primary coordinating  structure for building, sustaining, and delivering disaster response efforts  across more than 30 federal agencies. Each function addresses a specific  need\u2014such as communication, transportation, and energy\u2014and  designates a federal department or agency as the coordinating agency.  For example, the emergency support function for public works and  engineering assists DHS by coordinating engineering and construction  services, such as temporary roofing or power, and USACE is the primary  agency responsible for these functions during disaster response activities.\nFEMA coordinates disaster response efforts through mission  assignments\u2014work orders that FEMA issues to direct other federal  agencies to utilize the authorities and the resources granted to it under  federal law. Mission assignments are authorized by the Robert T. Stafford  Disaster Relief and Emergency Assistance Act and can consist of federal  operations support or direct federal assistance, which includes federal  contracts.\nFEMA\u2019s contracting efforts are supported by its Office of the Chief  Procurement Officer and its contracting workforce. While the majority of  FEMA\u2019s contracting workforce is located in headquarters, contracting  officers are also located in each of FEMA\u2019s 10 regional offices. See  appendix II for the location of FEMA\u2019s 10 regional offices as well as the  states each one is responsible for coordinating with to address National  Response Framework responsibilities.\n\n\t\tPKEMRA Requirements and the Use of Advance Contracts\n\nCongress enacted PKEMRA in 2006, which addressed various  shortcomings identified in preparation for and response to Hurricane  Katrina, which hit the Gulf Coast in 2005 and was one of the largest, most  destructive natural disasters in U.S. history. Among the provisions  included were requirements for FEMA to identify and establish advance  contracts to ensure that goods and services are in place to help FEMA  rapidly mobilize resources in immediate response to disasters. Examples  of these goods and services are:\nGoods: construction supplies and tarps; food and water; cleaning and  hygiene supplies; and power equipment and generators.\nServices: engineering; information technology and communication  support; transportation of goods; and housing and lodging assistance.\nAs of June 2018, FEMA reported having advance contracts in place for  56 different types of goods and services.\nAmong other contracting requirements, PKEMRA requires FEMA to develop a contracting strategy that maximizes the use of advance  contracts to the extent practical and cost effective;  coordinate advance contracts with state and local governments; encourage state and local governments to engage in similar pre- planning and contracting; and  submit quarterly reports to the appropriate committees of Congress on  each disaster contract entered into by the agency using non- competitive procedures.\nAccording to FEMA\u2019s advance contracting strategy, the agency will  maximize the use of advance contracts to the extent they are practical  and cost-effective, which will help preclude the need to procure goods  and services under unusual and compelling urgency. When disasters  strike, contracting officers may use the unusual and compelling urgency  exception to full and open competition to support non-competitive contract  awards. FEMA\u2019s strategy also states that advance contracts will help to  ensure that goods and services are in place to help FEMA rapidly  mobilize resources in immediate response to disasters.\nUSACE also has its own advance contracts in place as a preparedness  measure. According to USACE officials, they established advance  contract initiatives in 2003, two years prior to Hurricane Katrina, to help  facilitate their emergency support function under the National Response  Framework\u2014public works and engineering. As of September 2018,  USACE reported having advance contracts in place for three services\u2014 debris removal, temporary roofing, and temporary power. Appendix III  provides details on specific advance contracts established by FEMA and  USACE.\nAccording to FEMA documentation, most of its advance contracts are  indefinite delivery contracts, which can facilitate the goal of having  contracts available if there is a disaster. One type of indefinite delivery  contract\u2014an indefinite delivery, indefinite quantity contract\u2014can be  awarded to single or multiple vendors and provides for an indefinite  quantity, within stated limits, of supplies or services during a fixed period.  Under these contracts, the government places orders for individual  requirements. These contracts also require the government to order and  the contractor to provide at least a stated minimum quantity of supplies  and services. Additionally, the contracting officer should also establish a  reasonable maximum quantity for the contract based on market research,  trends in similar recent contracts, or any other rational basis. Minimum  and maximum quantity limits can be stated as the number of units or as  dollar values, and may also be referred to by contracting officers as  minimum guarantees or contract ceilings, respectively.\nAs part of its overall acquisition strategy, FEMA officials identified other  vehicles aside from its own advance contracts through which they obtain  goods and services.\nDHS strategic sourcing vehicles: When a disaster occurs, FEMA  contracting officers are first required to use any available DHS  strategic sourcing vehicles\u2014a broader, aggregate approach for  procuring goods and services\u2014with limited exceptions.\nBlanket purchase agreements: FEMA also relies on blanket  purchase agreements, such as those established through the General  Service Administration Federal Supply Schedule program, to provide  some commercial goods and services needed for disaster response.\nInteragency Agreements: FEMA may also leverage interagency  agreements, by which it obtains needed supplies or services from  another agency by an assisted or direct acquisition.\nFEMA and other agencies may also award new contracts to support  disaster response efforts following a disaster declaration. According to  FEMA officials, these post-disaster contract awards may be required, for  example, if advance contracts reach their ceilings, or if goods and  services that are not suitable for advance contracts are needed.\n\n\t\tFAR Requirements\n\nThe FAR requires agencies to perform acquisition planning activities for  all acquisitions to ensure that the government meets its needs in the most  effective, economical, and timely manner possible. Generally, program and contracting officials share responsibility for the majority of acquisition  planning activities, which include the following:\nPre-Solicitation: The program office identifies a need, and develops  key acquisition documents to summarize that need, such as market  research, a statement of work defining requirements, cost estimates,  and a written acquisition plan. The pre-solicitation process ends  when the program office submits these documents, typically referred  to as an acquisition package, to the contracting officer to determine  what type of contract is appropriate to fulfill the requirements.\nSolicitation: The contracting officer develops a solicitation, in  consultation with other agency stakeholders, to request bids or  proposals from contractors. The acquisition planning process ends  once a solicitation is issued.\nContracting for disaster relief and recovery efforts can also present  unique circumstances in which to solicit, award, and administer contracts.  Under the FAR, agencies are generally required to use full and open  competition when soliciting offers and awarding contracts. However, an  agency may award contracts noncompetitively when the need for goods  or services is of such unusual and compelling urgency that the federal  government faces the risk of serious financial or other type of injury.\nWhen it becomes evident that a base contract period and any option  periods will expire before a subsequent contract to meet the same need  can be awarded, contracting officers may, for example, extend the existing contract, or award a short-term stand-alone contract to the incumbent contractor  on a non-competitive basis to avoid a lapse in services, along with  sufficient justification and approval.\nThese extensions and new sole source contracts are informally referred  to as bridge contracts by some in the acquisition community, and we use  that terminology in this report. In October 2015, we established the  following definitions related to bridge contracts:\nBridge contract: An extension to an existing contract beyond the  period of performance (including base and option years), and a new,  short-term contract awarded on a sole-source basis to an incumbent  contractor to avoid a lapse in service caused by a delay in awarding a  follow-on contract.\nPredecessor contract: The contract that was in place prior to the  award of a bridge contract.\nFollow-on contract: A longer-term contract that follows a bridge  contract for the same or similar services. This contract can be  competitively awarded or awarded on a sole-source basis.\nContracts, orders, and extensions (both competitive and non-competitive)  are included in our definition of a \u201cbridge contract\u201d because the focus of  the definition is on the intent of the contract, order, or extension.\nHowever, the FAR does not formally define bridge contracts or require  that they be tracked. We recommended that the Office of Federal  Procurement Policy amend the FAR to incorporate a definition of bridge  contracts. The Office of Federal Procurement Policy agreed with our  recommendation to provide guidance to agencies on bridge contracts and  has taken steps to develop that guidance, but has not yet implemented  our recommendations.\nIf a contracting officer opts to extend the existing contract in place\u2014often  referred to as a predecessor contract\u2014the contracting officer may use a  number of different mechanisms to do this. One of these is the \u201coption to  extend services\u201d clause. If the contract includes this clause, the  contracting officer may use it to extend the contract for up to six months.  While this option may be exercised more than once, the total extension of  performance shall not exceed 6 months.\n\n\tFEMA and USACE Relied on Advance Contracts to Respond to the 2017 Disasters, but FEMA Lacks an Updated Advance Contracting Strategy and Guidance\n\nFEMA and USACE obligations on advance contracts\u2014as of May 31,  2018\u2014accounted for about half of total federal contract obligations for the  three hurricanes, and more than three quarters of the contract obligations  identified by those agencies for the California wildfires. However, an  outdated strategy and lack of guidance to contracting officers resulted in  confusion about whether and how to prioritize and use advance contracts  to quickly mobilize resources in response to the three 2017 hurricanes  and the California wildfires.\n\n\t\tAdvance Contracts Accounted for about Half of Government-wide Contract Obligations for the 2017 Hurricanes, and over Three-Quarters of FEMA and USACE\u2019s Obligations for the California Wildfires\n\nGovernment-wide contract obligations for the three hurricanes were about  $8.2 billion as of May 31, 2018. FEMA and USACE obligated 46  percent, or about $3.8 billion, of the $8.2 billion spent government-wide  on the three hurricanes through advance contracts. Data on government- wide contract obligations for the California wildfires were not able to be  identified because national interest action codes were not established for  them in FPDS-NG. However, FEMA and USACE provided information  on their contracting activities related to the wildfires. Their use of advance  contracts accounted for 86 percent, or about $667 million, of the contract  obligations they identified. FEMA and USACE advance contract  obligations for the three hurricanes and California wildfires totaled about  $4.5 billion, about 56 percent of the total contract obligations made by  these agencies for these disasters. See figure 2 for details on FEMA and  USACE\u2019s advance and post-disaster contract obligations by event.\nThe greatest proportion of FEMA and USACE\u2019s obligations on advance  contracts supported Hurricane Maria disaster relief efforts\u201441 percent  and 59 percent, respectively. About 39 percent of USACE\u2019s obligations on  advance contracts were used in support of the California wildfires,  compared to less than 1 percent of FEMA\u2019s obligations. FEMA awarded  orders against 72 base advance contracts in response to the three 2017  hurricanes and California wildfires, and USACE awarded orders against  15 of its advance contracts. See figure 3 for FEMA and USACE\u2019s  obligations on advance contracts by event.\n\n\t\tAdvance Contracts Were Used Primarily for Services\n\nFEMA and USACE procured a variety of goods and services through  advance contracts in response to the three hurricanes and wildfires, but  about 86 percent of obligations, or $3.8 billion, were used to procure  services. For example, all of USACE\u2019s $1.7 billion in advance contract  obligations were for services, such as debris removal. FEMA obligated  about $2.2 billion on services, such as architect and engineering services  to rebuild roads and bridges. FEMA\u2019s obligations on goods totaled $624  million and included prefabricated buildings, such as manufactured  housing units to provide lodging, and food and water. See figure 4 for  examples of obligations on goods or services by event.\n\n\t\tFEMA Lacks an Updated Strategy and Guidance on the Use of Advance Contracts\n\nFEMA lacks an updated strategy and guidance on advance contract use,  despite the PKEMRA requirement to develop a contracting strategy that  maximizes their use to the extent practical and cost effective. As we  found in May 2006 following Hurricane Katrina, and reiterated in our  September 2015 report, agencies need to have competitively awarded  contracts in place before a disaster to be effective in their response. Our  current review found that FEMA has established advance contracts for  goods and services to enable it to respond following a disaster. However,  FEMA\u2019s lack of an updated strategy and guidance on advance contract  use resulted in confusion about whether and how to maximize their use to  the extent cost-effective and practical to facilitate a faster response when  providing goods and services to survivors.\nPKEMRA required the FEMA Administrator to identify specific goods and  services that the agency could contract for in advance of a natural  disaster in a cost-effective manner. PKEMRA also required the FEMA  Administrator to develop a contracting strategy that maximizes the use of  advance contracts to the extent practical and cost-effective. Following the  enactment of PKEMRA, in 2007 FEMA issued the Advance Contracting of  Goods and Services Report to Congress, in part to address the  requirement for an advance contracting strategy. In addition to the  strategy, FEMA provides information on advance contracts in its Disaster  Contracting Officer Desk Guide.\nThe 2007 strategy notes that advance contracts will help to preclude the  need to procure goods and services for disaster response under the  unusual and compelling urgency exception to full and open competition,  and allow FEMA to rapidly mobilize resources in immediate response to  disasters. Several contracting officials we spoke with said that it is a  requirement to use advance contracts before awarding new contracts.  Moreover, a senior FEMA contracting official told us that advance  contracts are intended to be used before awarding post-disaster  contracts, even if the advance contract is not capable of fulfilling all of the  requirements for a needed good or service. However, our review of the  strategy found that it does not provide any specific direction on how  contracting officers should award or use advance contracts to meet  PKEMRA\u2019s objectives, or how they should be prioritized in relation to  post-disaster contracts. Further, there is no mention in FEMA\u2019s 2017  Disaster Contracting Officer Desk Guide that advance contracts should  be considered prior to the award of post-disaster contracts.\nIn September 2015, we found shortfalls with the information available to  contracting officers about advance contracts and recommended that  FEMA provide new or updated guidance with information on how advance  contracts should be used. FEMA agreed with this recommendation and  stated that in 2015 it included information on advance contracts and their  use in training documentation. However, our review of semi-annual  training documentation provided in May 2018 found that it only lists some  of the advance contracts that are available, and not guidance on their  use.\nA report by the Senate Committee on Homeland Security and  Governmental Affairs identified concerns about FEMA\u2019s use of advance  contracts for self-help tarps in response to the 2017 hurricanes.  Specifically, the report found that while FEMA ordered some tarps  through one of its existing advance contracts, that order was placed after  a post-disaster contract for tarps was signed, raising questions about  whether FEMA\u2019s actions were informed by an overall strategy for using its  advance contracts, in this case, for tarps. Our current review identified  similar concerns, and found that the lack of an updated strategy and  guidance on the use of advance contracts contributed to challenges in  using these contracts to respond to the 2017 disasters.\nIn our review of advance contracts for meals and tarps, we found the  following:\nMeals: Prior to the 2017 disasters, FEMA had advance contracts in  place to provide meals with specific nutritional requirements.  According to FEMA contracting officials, the advance contract vendors  were at capacity for these specific meals following the response to  Hurricane Harvey, requiring FEMA to issue a new post-disaster  competitive solicitation and award new contracts with less specific  nutritional requirements following Hurricane Maria. Based on our  review of contract documentation, two of the existing advance  contract vendors were awarded these new post-disaster contracts, but  at different prices than those negotiated through their advance  contracts. FEMA officials told us that contracting officers will negotiate  to ensure the price of the contract is fair and reasonable and may  utilize historical information or current contract prices to inform this  determination. Normally, adequate price competition establishes a fair  and reasonable price. According to a contracting officer involved with  the award, FEMA relied on competition and historical prices, but not  the existing advance contract prices, to determine that the new post- disaster contract meal prices were fair and reasonable. Guidance on  the extent to which advance contract prices should be considered  when comparing proposed prices to historical prices paid could help  to further inform contracting officers\u2019 decision-making during a  disaster.\nTarps: Our review of FEMA\u2019s use of contracts for tarps is another  example of how FEMA lacked an updated advance contracting  strategy and guidance to provide goods and services to facilitate a  faster response to the 2017 disasters. For example, in September  2014, FEMA awarded multiple award indefinite delivery, indefinite  quantity advance contracts to three small businesses for self-help  tarps, which are used to cover small areas of roof damage. In  November 2014, these contracts were modified by the contracting  officer to include delivery requirements for providing tarps to replenish  FEMA\u2019s stock during steady state operations or during emergency  response operations, such as a natural disaster. The contract  modification added that during an emergency response, vendors  would be expected to deliver up to 150,000 tarps within 96 hours of  being issued a task order. However, these small businesses were not  required to meet the emergency response delivery time frames and  amounts since they would not be expected to store tarps on FEMA\u2019s  behalf, limiting the use of FEMA\u2019s advance tarp contracts for  immediate disaster response needs. According to a contracting officer  involved with these contracts, the tarp advance contracts are typically  used only to replenish tarp stockpiles in FEMA\u2019s distribution centers.  However, the contracting officer also noted that not being able to fully  use the existing advance contracts for tarps to respond to the three  2017 hurricanes was a challenge and required FEMA to award post- disaster contracts to meet tarp requirements.\nFurthermore, we found that FEMA awarded post-disaster contracts for  tarps before utilizing its advance contracts with the small businesses.  Contract file documentation for the post-disaster contracts stated that  FEMA\u2019s advance contract holders for tarps had reached their  capacity, and that market research had confirmed that it would be  difficult for small businesses to meet the urgent delivery timeframes  for tarps. Yet, after the award of the post-disaster tarp contracts,  FEMA awarded task orders to one of the advance contractors to  provide tarps in response to Hurricane Maria. Another small business  advance contractor, which according to FEMA\u2019s post-disaster contract  documentation had reached its capacity, also submitted a proposal as  part of the post-disaster contract solicitation. According to FEMA,  neither of the post-disaster contract holders ultimately provided the  required tarps. The timing and use of the existing tarp advance  contracts raises questions about their ability to provide tarps  immediately following a disaster, and whether an updated advance  contracting strategy would have enabled FEMA to more quickly  provide the needed tarps to survivors, considering the additional time  and staff resources needed to award new post-disaster contracts.\nFEMA established advance contracts to provide critical goods, like meals  and tarps, following a disaster; however FEMA\u2019s 2007 contracting  strategy does not provide direction on the objectives of advance contracts  or how to maximize their use to the extent practical and cost-effective, as  required by PKEMRA. According to FEMA officials, they had not  considered updating the 2007 advance contracting strategy because they  believed the use of advance contracts following PKEMRA had been  incorporated into their disaster contracting practices. FEMA has also not  communicated specific guidance to program and contracting officials on  whether and how advance contracts should be prioritized before issuing  new post-disaster solicitations and awarding contracts for the same or  similar requirements, or how to maximize their use to the extent practical  and cost-effective following a disaster, as required by PKEMRA. FEMA  officials also acknowledged that additional guidance regarding advance  contracts, including their availability and use during a disaster, could be  useful. Without an updated strategy\u2014and clear guidance that is  incorporated into training\u2014on the use of advance contracts and how they  should be prioritized and used in relation to new post-disaster contract  awards, FEMA lacks reasonable assurance that it is maximizing the use  of advance contracts  to quickly and cost-effectively provide goods and  services following a disaster. This places FEMA at risk of continued  challenges in quickly responding to subsequent disasters.\n\n\tImprovements Needed in FEMA\u2019s Planning, Management, and Reporting of Advance Contracts\n\nWhile FEMA used a variety of advance contracts to respond to the 2017  disasters, we found weaknesses in the process of awarding and  overseeing selected advance contracts in our review. These weaknesses  were: (1) challenges in FEMA\u2019s acquisition planning; (2) limited record  keeping or management of certain FEMA contracts; and (3) incomplete  reporting on FEMA\u2019s advance contract actions to certain congressional  committees. Related to USACE, we did not identify any planning or  management challenges based on our review of its four selected  contracts, and USACE is not required to report on its advance contract  actions to the congressional committees.\n\n\t\tChallenges in FEMA\u2019s Acquisition Planning Resulted in Bridge Contracts\n\nFEMA has taken some steps since 2016 to improve competition and  develop processes and guidance on the acquisition process for advance  contracts, but shortfalls in acquisition planning have resulted in a number  of bridge contracts. Bridge contracts can be a useful tool in certain  circumstances to avoid a gap in providing products and services. We  have previously reported that when non-competitive bridge contracts are  used frequently or for prolonged periods, the government is at risk of  paying more than it should for products and services.\nBased on our analysis, 63 of FEMA\u2019s 72 advance contracts used in  response to the 2017 disasters were initially competed. All 15 of USACE\u2019s  advance contracts used in responding to the three hurricanes and  California wildfires in 2017 were initially competed. We found that at least  10 of FEMA\u2019s advance contracts used in 2017 were bridge contracts.  Within the 10 FEMA advance contracts we identified as bridge contracts,  6 were part of our selected case studies. The six advance contracts with  subsequent bridges in our review obligated roughly $778 million in  response to the three hurricanes and California wildfires in 2017. These  bridge contracts included five that are associated with two of FEMA\u2019s  largest programs used in 2017\u2014the Individual Assistance Program and  Public Assistance Program\u2014and one that is associated with a  telecommunications program.\nThree of the six bridge advance contracts we reviewed were awarded to  support FEMA\u2019s Individual Assistance Program, which provides mass  care services such as food and water as well as financial and direct  assistance, among other services, to survivors whose property has been  damaged or destroyed and whose losses are not covered by insurance.  In 2017, this assistance was supported through the Individual Assistance- Technical Assistance Contract (IA-TAC), known as IA-TAC III. The IA- TAC III predecessor contracts had an original period of performance from  a base year starting in May 2009 with four 1-year options that ended in  May 2014. However, FEMA program and contracting officials were unable  to implement changes to the requirements\u2014recommended by FEMA  senior leadership in 2010\u2014prior to expiration. According to FEMA  officials, staffing shortfalls, operational tempo, and unrealistic contract  requirements led to acquisition planning delays. These challenges, in  turn, led to a series of extensions from May 2014 to November 2016 and  a new non-competitive bridge contract (base with options) from  November 2016 to May 2018. At that point new, competitive follow-on  indefinite delivery indefinite quantity contracts\u2014the Individual Assistance  Support Contract (IASC) and Logistics Housing Operations Unit  Installation, Maintenance, and Deactivation (LOGHOUSE)\u2014were  awarded. See figure 5.\nTwo of our six selected advance contracts that were bridge contracts  were awarded to support FEMA\u2019s Public Assistance Program, which  provides supplemental federal assistance to state, tribal, territorial, and  local governments for debris removal, life-saving emergency protective  measures, and the repair, replacement, or restoration of damaged  facilities. The predecessor Public Assistance-Technical Assistance  Contract (PA-TAC) used in 2017, known as PA-TAC III, was awarded  with an original period of performance from a base year in February 2012  with four 1-year options that ended in February 2017. FEMA officials  noted that changes to the PA-TAC III contract requirements and  acquisition strategy were identified in 2015. Yet due to the time needed to  incorporate these changes, FEMA was unable to complete required  acquisition planning activities, such as finalizing the acquisition plan, prior  to the expiration of PA-TAC III. Following 11 months of extensions to  complete these activities, FEMA competitively awarded new contracts in  December 2017. These awards were protested to the GAO and the  protests were denied and are currently under review at the Court of  Federal Claims. According to FEMA officials, these events required PA- TAC III to be extended until January 2019, as shown in figure 6.\nThe remaining bridge contract in our sample is associated with the  Wireline Services Program, a telecommunication program that provides  FEMA employees deployed to respond to a disaster with local and long- distance telephone, high-speed data, and cable television services. The 5  year wireline predecessor contract was awarded in 2003 and again in  2008, but FEMA was unable to award a competed contract when the  2008 contract expired in December 2013 due to the time it took to update  program requirements. FEMA contracting officials extended the contract  for 6 months before letting it expire altogether. Due to high staff turnover  and inconsistent record keeping, at the time of our review FEMA officials  were unable to determine the cause for this lapse of service, which  occurred after the contract\u2019s expiration in June 2014. Starting in January  2015, FEMA contracting officials used a series of bridge contracts over  more than three years to address changing contract requirements and  delays in completing acquisition planning documentation, as shown in  figure 7. FEMA contracting officials anticipated awarding a competitive  contract by the end of fiscal year 2018, but the award has been delayed  and the existing contract extended through January 2019.\nIn one of the bridge contracts included in our review, FEMA improperly  used FAR clause 52.217-8. According to that clause, an agency may  extend a contract\u2019s period of performance for up to 6 months and is  generally used in the event of circumstances outside of the contracting  officer\u2019s control that prevent the new contract award, such as a bid  protest. This clause may be used multiple times to extend the contract so  long as the total extension of performance does not exceed 6 months.  Our analysis found that FEMA used the clause for a total of 14 months to  justify two 6-month extensions and one 2-month extension to the second  bridge contract. The FEMA contracting official associated with the  advance contract reported uncertainty over the proper use of this clause  and what other authorities should have been used instead to extend the  contract. FEMA\u2019s Office of Chief Counsel and contracting officials  acknowledged this error.\nWhile not all bridge contracts that we identified during our review were  non-competitive, FEMA officials acknowledged that the use of non- competitive bridge contracts is not an ideal practice as they cannot  ensure the government is paying what it should for products and services.  In October 2015 we identified delays in the completion of acquisition  planning documentation as one of the leading causes of awarding bridge  contracts. In an effort to decrease the need for non-competitive bridge  contracts and provide ample time for acquisition planning, FEMA began  implementing a 5-Year Master Acquisition Planning Schedule (MAPS) in  2016. MAPS is a tracking tool that monitors the status of and provides  acquisition planning timeframes for certain FEMA acquisitions over $5  million, as well as for all advance contracts and any acquisition deemed  by the agency to be mission critical, regardless of dollar value.\nAs we previously noted, acquisition planning includes both the pre- solicitation and solicitation phases. Based on our review of MAPS  documentation, the tool generates a timeline of discretionary acquisition  milestones across these two phases, based on certain considerations like  the type of acquisition and whether it will be competed. Using this  timeline, MAPS sends email alerts to program and contracting staff when  certain acquisition milestones should occur.\nSpecific to the solicitation phase, FEMA\u2019s Office of the Chief Procurement  Officer has developed annual lead time guidance for how long contracting  officers should be given to award new contracts following the completion  of the acquisition package, which is then conveyed through MAPS. For  example, for acquisitions $150,000 and under, FEMA\u2019s 2018 lead time  guidance states contracting officers should be given 60 days to award the  contract following completion of the acquisition package. FEMA officials  we spoke with acknowledged that these discretionary timeframes are  frequently shortened when program office officials are delayed in  completing acquisition packages. While FEMA has lead time guidance to  establish timeframes for completing the solicitation phase, FEMA  currently has no guidance establishing timeframes for the pre-solicitation  phase, when program offices complete the acquisition packages. Figure 8  provides an example timeline of the major milestones tracked in MAPS.\nIn its analysis of 12 fiscal year 2017 contracts tracked in MAPS that were  awarded late, FEMA found that half were late because contracting  officials were not given enough lead time to award a new contract  following the program office\u2019s completion of the acquisition package. Not  adhering to suggested timeframes can place a burden on contracting  officers and increase the likelihood of not awarding the contract on  schedule, requiring FEMA to non-competitively extend the existing  contract. According to FEMA\u2019s lead time guidance, based on the contract  values for the bridge contracts in our review contracting officers should  have been given between 240 and 300 days to award a new contract  once the acquisition package was completed. However, as we mention  earlier, due to delays from changing program requirements and  acquisition strategies we found that the acquisition plans for the follow-on  contracts related to these bridge contracts were not completed until after  the predecessor contract had already expired, as shown in figure 9 below.\nTimely completion of the acquisition package was a key challenge  identified in the contracts we reviewed. However, according to officials  from the Office of the Chief Procurement Officer, they do not have the  authority to establish guidance for FEMA program officials on completing  pre-solicitation phase activities. In August 2011, we identified challenges  with acquisition planning across DHS. Specifically, we found that DHS  and other agencies did not measure or incorporate into guidance the  amount of time it takes to develop and obtain approvals of the acquisition  planning documents required during the pre-solicitation phase. We  recommended that DHS procurement offices collect information about the  timeframes needed for the acquisition planning process to establish  timeframes for when program officials should begin acquisition planning.  DHS did not concur with this recommendation, stating that its acquisition  manual already encourages early planning, and has not implemented the  recommendation. At the time, we maintained that program officials  needed more guidance to have a better understanding of how much time  to allow for completing acquisition planning steps, and that the  component procurement offices are best positioned to provide guidance  on how long these planning processes may take. Given the current  challenges we identified with FEMA\u2019s ability to complete acquisition  planning activities in a timely manner and the resulting delays in awarding  new contracts for critical advance contract goods and services, additional  information and guidance on acquisition planning timeframes remains  important.\nAdditionally, while MAPS has been in place since 2016 and FEMA  officials have instituted training to communicate the system\u2019s intent,  program and contracting officials we spoke with varied in their familiarity  with it. For example, officials responsible for MAPS stated that by March  2016, 90 percent of FEMA\u2019s contracting staff had attended an hour long  training session and additional training sessions were held for all program  office staff at various points in 2016 and 2017. However, most of the  program office and contracting officials responsible for the bridge  contracts in our review reported limited familiarity with MAPS.\nWhile FEMA has taken some positive steps to institute training and has  guidance on timeframes for part of the acquisition planning process,  program and contracting staff we spoke with were still uncertain how best  to utilize MAPS to identify the time needed to effectively complete  acquisition planning activities. According to federal internal control  standards, agency management should internally communicate the  necessary quality information to achieve their objectives. Given FEMA\u2019s  emphasis on planning before a disaster and using advance contracts to  help reduce the need to award non-competitive contracts during a  disaster, establishing clear guidance on the factors that can affect  acquisition planning activities, and requiring officials to follow the  timeframes needed to complete them to meet the goal of awarding  competitive contracts, is essential. Until FEMA provides detailed guidance  about timeframes and considerations that affect the entire acquisition  planning process\u2014both the pre-solicitation and solicitation phases\u2014to all  officials responsible for acquisition planning, and clearly communicates  the intent of MAPS, it cannot ensure that MAPS will be effective at  reducing the number of non-competitively awarded bridge contracts, as is  FEMA\u2019s intent.\n\n\t\tCurrent Record-Keeping Practices Limit Visibility into Advance Contract Management\n\nWhile FEMA has procedures regarding the documentation required for its  contract files, current practices limited visibility into the advance contracts  in our review. Specifically we found that acquisition plans and some other  contract documents were unable to be located in certain cases.  Acquisition plans provide the program and contract history as well as  other information on which acquisition decisions, such as the type of  contract required, are based.\nFEMA contracting officials were unable to locate acquisition plans for 4 of  our 10 FEMA selected advance contracts despite FAR and DHS  acquisition guidance requiring plans for these particular contracts to be  completed and stored in the contract file. Three of these acquisition  plans are associated with the IA-TAC bridge contract which, as previously  noted, was associated with one of FEMA\u2019s largest programs used in  2017. FEMA contracting officials were also unable to locate the  acquisition plans completed for the prior iteration of IA-TAC because they  were not in the hard copy contract file or contract writing system, meaning  that no acquisition plan guiding the IA-TACs since before its 2009 award  could be found. In 2011, the DHS Office of the Inspector General  conducted a review of FEMA\u2019s IA-TAC and identified, among other things,  incomplete contract files as a problem. Not being able to locate  acquisition plans can result in the loss of contract knowledge and lessons  learned from prior awards.\nAdditionally, we found instances of contract documentation for advance  contracts related to our case studies that contract officials could not  locate. For instance, FEMA was unable to confirm whether or not an  option year for the last competed Wireline contract included in the  contract was exercised due to a lack of documentation. In order to obtain  this answer, FEMA officials had to reach out to the vendor for their  records. Moreover, the modification exercising the first option year for one  of the IA-TAC III predecessor contracts was missing, as were the  determination and findings documents exercising the first option year for  all three of the predecessor IA-TAC III contracts that were associated with  the advance contracts in our review. After we made FEMA officials aware  of the missing documentation, they subsequently added clarifying memos  to the contract files.\nFEMA standard operating procedures state that the acquisition  documents in the official contract file will be sufficient to constitute a  complete history of the entire transaction for the purpose of providing a  complete background, and as a basis for informed decisions at each step  in the acquisition process. Additionally, these procedures require  headquarters staff to place modifications to contracts and orders and  associated supporting documentation in the contract file within 5 business  days of awarding a contract or issuing an order. FEMA officials stated  they are required to follow these procedures until DHS has fully  transitioned to an electronic filing system. According to DHS officials, that  system is currently in the testing phase and a timeframe for  implementation has not yet been finalized. Furthermore, according to  these officials, DHS has not yet decided which, if any, existing contracts  will be required to be retroactively entered into the system. Until this  decision has been made and implementation occurs, FEMA\u2019s official file  of record for its advance contracts consists of a hardcopy file, which  contracting officers at FEMA headquarters are required to add completed  contract documentation to, per the standard operating procedures. A  FEMA official told us that some documentation, including some of the  missing documentation we identified, has been lost due to staff turnover  and an office move in 2016.\nFEMA officials anticipate some of the challenges associated with  managing the hard copy advance contract files will be alleviated after  implementation of the Electronic Contract File System. However, DHS  officials have not decided whether components will be required to  retroactively enter contract information for any contract awarded prior to  the implementation date. This would require FEMA and other DHS  components to continue to maintain hardcopy files for some contracts\u2014 including large strategic sourcing vehicles and advance contracts\u2014for the  foreseeable future. For example, FEMA\u2019s $2.7 billion LOGHOUSE, and  $14 million IASC advance contracts were awarded in 2018 and have a  period of performance lasting until 2023. Until FEMA adheres to existing  contract file management requirements, whether the contract files will be  transferred into the electronic system or remain in hard copy format, it is  at continued risk of having incomplete contract files and a loss of  institutional knowledge regarding these advance contracts.\n\n\t\tInformation on Advance Contracts in FEMA\u2019s Disaster Contract Quarterly Reports to Congressional Committees Is Incomplete\n\nSince December 2007, FEMA has submitted quarterly reports to  congressional committees that list all disaster contracting actions in the  preceding three months. These quarterly reports also include details on  contracts awarded by non-competitive means, as required by PKEMRA.  However, our analysis shows that some reports from fiscal year 2017 and  2018 have been incomplete. In September 2015, we found that FEMA\u2019s  quarterly reports to congressional committees in fiscal years 2013 and  2014 did not capture all of FEMA\u2019s noncompetitive orders. At that time,  FEMA attributed this to an error in data compilation prior to mid-2013 and  explained that it had updated its process for collecting these data and  strengthened the review process, resulting in accurate reports starting in  the fourth quarter of fiscal year 2013. Despite this change in the data collection process, our current analysis found that 29 contract actions  associated with the 10 selected advance contracts in our review were not  reported across FEMA\u2019s fourth quarter fiscal year 2017 and first quarter  fiscal year 2018 reports. For example, FEMA\u2019s fourth quarter fiscal year  2017 report did not include 13 contract actions equaling about $83 million,  or 15 percent, of the $558 million in total obligations associated with the  10 selected advance contracts in our review. Similarly, FEMA\u2019s first  quarter fiscal year 2018 report did not include 16 contract actions  equaling about $122 million, or 23 percent, of the $532 million in total  obligations associated with the 10 selected advance contracts in our  review. Figure 10 provides a breakdown of the total contract action  obligations by extent of competition.\nTo compile the quarterly reports, FEMA officials told us that their  methodology is to pull contract action data that is documented in their  contract writing system and FPDS-NG roughly one week after the end of  each fiscal quarter. Once the data are pulled from these two sources,  officials said they compare the data to ensure all reported actions are  captured. However, according to officials, the data may not include all  contract actions. Specifically, during disaster response efforts like those in  2017, FEMA policy allows contracting officers to execute what it refers to  as \u201cnotice to proceed\u201d, which is a notice to a construction contractor to  begin work under certain circumstances. FEMA officials responsible for  the quarterly reports stated that if notice to proceed documentation is  used, information on some contract actions that were issued during the  fiscal quarter, but not entered into the systems until after the quarter  ended, may be missed during the data compilation process.\nFEMA policy requires that contracting officers who execute the notice to  proceed documentation complete the contract award documentation in  the contract writing system within three days of when the contracting  officer receivers the contractor\u2019s acceptance of the notice. However, a  FEMA policy official acknowledged that during disaster response, this  does not always occur. Further, FEMA officials responsible for compiling  the reports stated that it is not part of their methodology to review data  from prior fiscal quarters to see whether any contract actions have been  entered that were not previously reported. By not adhering to FEMA  policy that establishes timeframes for entering data in a disaster response  scenario, FEMA risks reporting incomplete information. Moreover, without  taking steps to ensure its reporting methodology provides complete  information on all competed and not competed disaster contract actions,  FEMA cannot be certain it is providing the congressional committees with  visibility into all of its overall disaster contract awards or the extent of non- competitive contract obligations over time.\n\n\t\t\tNo Challenges Identified with the Planning and Management of Selected USACE Advance Contracts\n\nThe four selected USACE advance contracts in our review\u2014one  supporting USACE\u2019s temporary power mission and three supporting its  debris removal mission\u2014were awarded in 2014 with a period of  performance lasting until 2019. Since these contracts have not reached  the end of their period of performance, we were unable to assess the  effectiveness of USACE planning activities. According to contracting  officials, USACE is performing acquisition planning activities for both the  temporary power and debris removal advance contracts and anticipates  awarding the new contracts prior to the current contracts\u2019 expiration.\nAdditionally, USACE was able to provide the acquisition plans for each of  the four advance contracts in our review. Unlike FEMA, which retains  hard copy files of its contract documentation, USACE uses three official  systems of record to store contract file documentation electronically.  Officials acknowledged that while moving between the three official  systems to find documents may be time consuming, contract documents  are typically able to be located.\n\n\tFEMA and USACE Identified Lessons Learned from the Use of Advance Contracts in 2017, but Reported Challenges with State and Local Coordination Remain\n\nBoth FEMA and USACE have processes for identifying and assessing  lessons learned following a disaster. Contracting officials from these  agencies identified several lessons learned from the 2017 major  hurricanes and the California wildfires that directly affected their use of  advance contracts. These include the need for: (1) additional advance  contracts for certain goods and services; (2) flexibility to increase contract  ceilings; (3) use of USACE\u2019s debris removal advance contracts to  respond to the California wildfires; and (4) federal coordination and  information sharing with state and local governments on advance  contracts. While officials identified some lessons learned, they also  identified challenges related to FEMA\u2019s outreach with state and local  governments on advance contracting efforts.\n\n\t\tFEMA and USACE Have Identified Lessons Learned and Actions to Address Them\n\nFEMA and USACE have processes for identifying and assessing lessons  learned through after-action reviews and reports following major  disasters. According to FEMA and USACE officials, they routinely perform  these reviews and then compile after-action reports to identify lessons  learned and proposed actions to address them. Due to the concurrent  nature of hurricanes Harvey, Irma, and Maria, FEMA headquarters  completed one combined after-action review for all three hurricanes in  July 2018. The resulting report identified 18 strategic-level key findings  across five focus areas, and recommendations for improvement. These  recommendations included some that were specific to advance contracts,  such as the need for additional advance contracts to support future  disaster response efforts, and improved state and local coordination to  support state and local contracting and logistics operations. In addition,  USACE officials performed after-action reviews following disasters, and  have a process in place to discuss challenges and recommendations for  improvement on their use of advance contracts for temporary power,  temporary roofing, and debris removal.\nWhile the scope of FEMA\u2019s and USACE\u2019s after-action reports are broader  than just advance contracts, we identified, based on our review of reports  and interviews with FEMA and USACE officials, several lessons learned  related to advance contracts following the 2017 hurricanes and California  wildfires, as shown in table 1.\n\n\t\tChallenges in Coordinating with and Providing Information to State and Local Governments on the Use of Advance Contracts Continued\n\nWe also found that while FEMA has updated its guidance to reflect some  requirements for state and local coordination over the use of advance  contracts, inconsistencies in FEMA\u2019s outreach and information on the use  of advance contracts remains a challenge. PKEMRA required that FEMA  encourage state and local governments to establish their own advance  contracts with vendors for goods and services in advance of natural  disasters. In September 2015, we found that FEMA\u2019s outreach with  state and local governments to encourage the establishment of advance  contracts can result in more efficient contracting after a disaster.  PKEMRA also required that FEMA establish a process to ensure that  federal advance contracts are coordinated with state and local  governments, as appropriate. In our September 2015 report, we also  found that these efforts can ensure that states are aware of and can  access certain federal advance contracts, such as General Services  Administration schedule contracts.\nHowever, in the same report, we found that inconsistencies in whether  and how the regions perform state and local outreach limited FEMA\u2019s  ability to support advance contracting efforts. We recommended that  FEMA provide new or updated guidance to ensure that all contracting  officers are aware of requirements concerning the need to conduct  outreach to state and local governments to support their use of advance  contracts. DHS concurred with this recommendation and in 2017 FEMA  updated its Disaster Contracting Desk Guide to state that contracting  officers should inform their state and local counterparts of the availability  and use of federal advance contracts established by FEMA. Our review  of the guide found that it does remind contracting officers to coordinate  with states and localities over the use of federal advance contracts, but  does not provide any details on how often or what types of advance  contract information should be shared with states and localities, or  provide any instructions to contracting officers on PKEMRA\u2019s requirement  to encourage states and localities to establish their own advance  contracts for the types of goods and services needed during a disaster.\nOur current review also found inconsistencies with FEMA\u2019s efforts to  encourage states and localities to establish their own advance contracts  with vendors and ensure coordination with them on their use of federal  advance contracts. For example, some regional FEMA officials explained  that they regularly perform outreach, which can assist states and localities  with establishing advance contracts for goods and services commonly  needed during a disaster, like security, transportation, and office supplies.  Regional officials we spoke with said more frequent coordination allows  them to avoid overlap across state and federal contracting efforts, and  know what resources the states have in place and how long states are  capable of providing these resources following a disaster. However, other  regional officials reported having less frequent coordination with state and  local governments. For example, a FEMA official stated that one of the  regions has less frequent meetings with state and local governments  because the region is geographically dispersed and has fewer disasters.  According to another regional official, coordination between some  regional offices and state and local officials over advance contracting was  minimal prior to Hurricane Harvey, and in some cases only occurred  when FEMA and state and local officials were co-located during a  disaster.\nOfficials from some state and local governments and USACE reported  examples where increased coordination between FEMA, states, and  localities could have improved the use of advance contracts in 2017. For  example, in September 2018 we found that some localities were relying  on the same contractors to perform debris removal activities following  Hurricanes Harvey in Texas and Irma in Florida. As a result, we reported that some contractors that were removing debris in Texas did  not honor existing contracts in Florida, leading to delays in debris  removal. Additional communication and coordination between FEMA and  contracting officials in these states and localities about which contractors  they had established advance contracts with could have helped to  prevent this overlap and subsequent delay in removing debris. During our  current review, USACE and California officials also reported  miscommunications about state and local expectations for USACE\u2019s  debris removal contracts following the wildfires. Specifically, USACE and  state and local officials reported differing expectations about the work to  be performed under USACE\u2019s debris removal contracts, such as what  structures would be removed from private property and acceptable soil  contamination levels. According to USACE officials, they relied on FEMA,  as the lead for coordinating federal disaster response, to manage  communication with states and localities and to identify and manage  expectations about the scope of work to be performed using their  advance debris removal contracts. While state and local officials we met  with in California reported working closely with some FEMA officials not  responsible for regional contracting during the response to the wildfires,  FEMA regional contracting officials said that they had no direct  coordination with California officials.\nWe also identified inconsistencies in the information available to FEMA\u2019s  contracting officials on existing advance contracts, which can be used to  facilitate coordination with states and localities on the establishment and  use of advance contracts. Our review of FEMA\u2019s advance contract list  found that it does not include all of the advance contracts that FEMA has  in place, and contracting officers we spoke with cited other resources they  also use to identify advance contracts, like biannual training  documentation provided to contracting staff. For example, while FEMA  officials told us the advance contract list is updated on a monthly basis,  our analysis found that 58 advance contracts identified on the June 2018  advance contract list were not included in the May 2018 biannual training  documentation, including contracts for telecommunications services,  generators, and manufactured housing units. Further, 26 of the contracts  included in the May training documentation were not included on the June  advance contract list, including contracts for foreign language  interpretation services, hygiene items, and short-shelf life meals. Some  contracting officers we spoke with said they referred to the advance  contract list as the primary resource for identifying advance contracts,  while others referenced the biannual training as their primary resource.\nFEMA has recognized some shortcomings in how it coordinated and  communicated with state and local governments over the use of advance  contracts following the 2017 disasters, and identified some action to  address these issues moving forward. In the 2017 Hurricane Season  FEMA After-Action Report, FEMA identified the need to expand its  capabilities to support state, local, tribal, and territorial governments in  improving their capabilities for advance contracting, among other  issues. The report recommends that FEMA should continue efforts to  develop a toolkit that will provide state and local governments with  recommendations for advance contracts, emergency acquisition  guidance, and solicitation templates.\nAccording to FEMA contracting officials, the development of the toolkit  has been prioritized by FEMA\u2019s Administrator to help better prepare the  states and localities and decrease their reliance on FEMA for assistance  following a disaster. However, as of August 2018 the specific contents of  the toolkit were still being decided. For example, officials familiar with the  development of the toolkit originally said they intended for it to include  FEMA\u2019s advance contract list, to provide states with recommendations on  the types of advance contracts that may be useful. But in subsequent  discussions these officials told us they did not plan to provide states and  localities with a full list of advance contracts to avoid being overly  prescriptive, and because not all of the contracts on the list are relevant  for the types of disasters some states experience. Officials further stated  that since it is the responsibility of the federal coordinator in each region  to communicate available federal advance contracts to states and  localities, providing a full list of advance contracts is unnecessary.\nFederal internal control standards state that agency management should  use quality information to achieve their objectives. Agency management  should also internally and externally communicate that information to  achieve their objective. However, FEMA\u2019s guidance does not clearly  communicate its objectives and requirements for contracting officers to  encourage states and localities to enter into their own advance contracts,  nor is there a consolidated resource listing available advance contracts  that states and localities can use to inform their advance contracting  efforts. According to FEMA officials, information on advance contracts is  fluid, as new contracts are established or old contracts expire. Officials also told us that the advance contract list is updated monthly, yet as  mentioned earlier, contracts identified in the May training documentation  were not reflected in the list that was updated as of June. Ensuring that  advance contract information is complete and updated regularly is  important, because differences across FEMA\u2019s resources listing advance  contracts could result in FEMA\u2019s contracting officers not being aware of  the availability of certain contracts during a disaster, and states not  receiving recommendations on what advance contracts may be helpful for  them to establish. Without clear guidance on FEMA\u2019s expectations for  coordination with states and localities on advance contracting efforts, and  a centralized resource listing up to date information on FEMA\u2019s advance  contracts, FEMA contracting officers and their state and local  counterparts lack reasonable assurance they will have the tools needed  to effectively communicate about advance contracts, and use them to  respond to future disasters. Moreover, given FEMA\u2019s recent emphasis on  the importance of states and localities having the capability to provide  their own life-saving goods and services in the immediate aftermath of a  disaster, clearly communicating consistent and up to date information on  the availability and limitations of federal advance contracts through the  toolkit, or other means, is critical to informing state and local disaster  response efforts.\n\n\tConclusions\n\nContracting during a disaster can pose a unique set of challenges as  officials face a significant amount of pressure to provide life-sustaining  goods and services to survivors as quickly as possible. Advance  contracts are a tool that FEMA and others within the federal government  can leverage to rapidly and cost-effectively mobilize resources, while also  helping to preclude the need to procure critical goods and services non- competitively after a disaster. Given the circumstances surrounding the  2017 disasters and the importance of preparedness for future disasters, it  is critical to ensure that the federal government is positioned to maximize  its advance contracts to the extent practical and cost-effective to provide  immediate disaster response.\nAlthough FEMA has identified advance contracts for use during a  disaster, without an updated strategy\u2014and guidance that is incorporated  into training\u2014on how to maximize their use during a disaster, as well as  the development of clear guidance on acquisition planning timeframes,  FEMA is at risk of these contracts not being effectively planned and  used. Furthermore, FEMA officials have not always maintained complete  information on the advance contracts available for them to quickly  respond to disasters, or completely reported competitively and non- competitively awarded advance contract information to better help  congressional committees evaluate spending over time. Finally, without  continued efforts to improve outreach with states and localities and  centralize information on available advance contracts, FEMA\u2019s  contracting officers and their state and local counterparts may not have  the information needed to efficiently respond to a disaster.\n\n\tRecommendations for Executive Action\n\nWe are making nine recommendations to FEMA.\nFEMA\u2019s Administrator should update the strategy identified in its 2007  Advance Contracting of Goods and Services Report to Congress to  clearly define the objectives of advance contracts, how they contribute to  FEMA\u2019s disaster response operations, and whether and how they should  be prioritized in relation to new post-disaster contract awards.  (Recommendation 1)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  updates the Disaster Contracting Desk Guide to include guidance for  whether and under what circumstances contracting officers should  consider using existing advance contracts prior to making new post- disaster contract awards, and include this guidance in existing semi- annual training given to contracting officers. (Recommendation 2)\nFEMA\u2019s Administrator should update and implement existing guidance for  program office and contracting officer personnel to identify acquisition  planning timeframes and considerations across the entire acquisition  planning process, and clearly communicate the purpose and use of  MAPS. (Recommendation 3)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  adheres to current hard copy contract file management requirements to  ensure advance contract files are complete and up to date, whether they  will be transferred into the new Electronic Contract Filing System or  remain in hard copy format. (Recommendation 4)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  reminds contracting officers of the three day timeframe for entering  completed award documentation into the contract writing system when  executing notice to proceed documentation. (Recommendation 5)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  revises its reporting methodology to ensure that all disaster contracts are  included in its quarterly reports to congressional committees on disaster  contract actions. (Recommendation 6)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  revises the Disaster Contracting Officer Desk guide to provide specific  guidance for contracting officers to perform outreach to state and local  governments on the use and establishment of advance contracts.  (Recommendation 7)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  identifies a single centralized resource listing its advance contracts and  ensure that source is updated regularly to include all available advance  contracts. (Recommendation 8)\nFEMA\u2019s Administrator should ensure the Head of the Contracting Activity  communicates information on available advance contracts through the  centralized resource to states and localities to inform their advance  contracting efforts. (Recommendation 9)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD, DHS, and FEMA for review and  comment. DOD did not provide any comments on the draft report. In its  comments, reprinted in appendix IV, DHS and FEMA concurred with our  nine recommendations. DHS and FEMA also provided technical  comments, which we incorporated as appropriate.\nIn its written comments, FEMA agreed to take actions to address our  recommendations, such as updating guidance on advance contract use  and management, adding an addendum to its quarterly report that  captures the contract actions that were previously unreported, and better  communicating information on advance contracts to states and localities.  In its concurrence with two of our recommendations, FEMA requested  that we consider these recommendations resolved and close as  implemented based on our actions it had previously taken.\nFor example, in its response to our third recommendation, FEMA agreed  to update and implement existing guidance to identify acquisition  timeframes and the purpose and use of its 5-Year MAPS program. In its  response, FEMA reiterated that it has conducted training sessions for its  contracting and program staff on the 5-Year MAPS program and provides  notice to program managers when acquisition planning is set to begin,  which the agency believes satisfies this recommendation. We  acknowledge FEMA\u2019s training in this report; however, we noted that not  all program and contracting staff we spoke with were familiar with 5-Year  MAPS, and there is no formal guidance on timeframes for the entire  acquisition planning process. We continue to believe this  recommendation remains open and encourage FEMA to formalize  guidance on the timeframes and considerations for planning various types  of acquisitions across the entire acquisition planning process, and to  document the purpose and use of the 5-Year MAPS program to ensure a  uniform understanding of the program.\nFurther, in its concurrence with our eighth recommendation, FEMA stated  that it believes its current advance contract list satisfies our  recommendation for internally communicating available advance  contracts. We acknowledge in this report that the advance contract list is  updated monthly; however, we found inconsistencies in the advance  contract list and other documentation identifying advance contracts, which  could result in FEMA\u2019s contracting officers not having full visibility into  available advance contracts. We continue to believe the recommendation  remains open and encourage FEMA to identify a centralized resource  with all available advance contracts and ensure that it is regularly updated  for contracting staff.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the U.S. Army Corps of Engineers  Director of Contracting, the Secretary of Homeland Security, the  Administrator of the Federal Emergency Management Agency, and the  Federal Emergency Management Agency\u2019s Chief Procurement Officer. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report reviews the federal government\u2019s contracting efforts for  preparedness, response, and recovery efforts related to the three 2017  hurricanes and California wildfires. This report specifically addresses the  use of advance contracts, assessing the extent to which (1) the Federal  Emergency Management Agency (FEMA) and the U.S. Army Corps of  Engineers (USACE) used advance contracts, (2) the planning,  management, and reporting of selected FEMA and USACE advance  contracts met certain contracting requirements, and (3) FEMA and  USACE identified any lessons learned and challenges with their use of  these contracts. We also have an ongoing review on post-disaster  contracting that is expected to be completed in early 2019.\nTo identify the extent to which FEMA and USACE used advance  contracts, we reviewed data on contract obligations for the 2017 disasters  from the Federal Procurement Data System-Next Generation (FPDS-NG)  through May 31, 2018. We identified hurricane obligations using the  national interest code, as well as the contract description. Data on  obligations for the California wildfires is limited to those contracts that  FEMA and USACE identified as being used to respond to those events  because no national interest code was established in FPDS-NG. To  determine which obligations were made through the use of advance  contracts, we reviewed documentation provided by FEMA and USACE  identifying the advance contracts they have in place and that were used  in support of the 2017 disasters. We analyzed the FPDS-NG data to  identify FEMA and USACE advance contract obligations compared to  overall contract obligations by disaster, competition procedures used, and the types of goods and services procured. We assessed the reliability of  FPDS-NG data by reviewing existing information about the FPDS-NG  system and the data it collects\u2014specifically, the data dictionary and data  validation rules\u2014and performing electronic testing. We determined the  FPDS-NG data were sufficiently reliable for the purposes of this report.\nTo assess the extent to which FEMA used its advance contracts, we  reviewed FEMA contracting policies and guidance, such as FEMA\u2019s 2017  Disaster Contracting Desk Guide and FEMA\u2019s Advance Contracting of  Goods and Services Report to Congress to identify available guidance on  the use and intent of advance contracts. Based on our review of  documentation, we identified examples of goods\u2014tarps and meals\u2014that  FEMA had advance contracts in place for, but experienced challenges  using in response the 2017 disasters. We reviewed FPDS-NG data to  determine whether these goods were procured through post-disaster  contracts rather than advance contracts, and selected advance and post- disaster contracts for further review. To identify limitations that affected  the use of tarp and meal advance contracts, we gathered and reviewed  advance and post-disaster contract documentation and interviewed  contracting officials involved in the award and use of the contracts in  2017.\nTo assess the extent to which the planning, management, and reporting  of advance contracts used in response to the three hurricanes and  California wildfires in 2017 met selected applicable contracting  requirements, we reviewed relevant documentation, including the Post- Katrina Emergency Management Reform Act (PKEMRA), the Federal  Acquisition Regulation (FAR), and Department of Homeland Security  (DHS, FEMA, and USACE contracting policies. We identified a non- generalizable sample of advance contracts based on advance contract  obligation data from FPDS-NG as of March 31, 2018. We analyzed the  data to identify 10 competed and four h non-competed contracts. To  obtain a range of competed contracts, we identified contracts used for  goods and services with obligations above $50 million. All of the non- competed contracts used were for FEMA services; to obtain a range of  non-competed contracts we identified contracts with obligations above  $10 million. Our selected advance contracts included 10 from FEMA and  four from USACE. Findings based on information collected from the 14  contracts cannot be generalized to all advance contracts. Additional  details on our selected contracts can be found in table 2.\nTo review our selected FEMA and USACE advance contracts, we  developed a data collection instrument to gather selected contract  information, such as period of performance, contract type, estimated  contract value, and the presence of key contract documents, among  others. To assess FEMA and USACE\u2019s planning of selected advance  contracts, we reviewed information from our data collection instrument on  advance contract award date and period of performance, and determined  that six of FEMA\u2019s contracts met GAO\u2019s definition of a bridge contract. To  identify any planning challenges that contributed to these extensions, we  reviewed FEMA acquisition planning policies, timeframes and relevant  contract file documentation, such as written acquisition strategies and  justification and approval documents, to determine whether acquisition  planning activities for the selected advance contracts were completed  according to guidance. We interviewed FEMA officials associated with  these contracts on acquisition planning efforts, and factors that affected  their ability to award new contracts. We also reviewed documentation and  interviewed officials on FEMA\u2019s acquisition planning system\u2014the 5 Year  Master Acquisition Planning Schedule (MAPS).\nTo assess FEMA and USACE\u2019s management of selected advance  contracts, we reviewed information gathered from our data collection  instrument on the presence of selected acquisition documents, such as  acquisition strategies and contract modifications in the contract file, that  typically provide the history of a contract. We reviewed relevant  procurement regulations, the DHS Acquisition Manual, and other FEMA  and USACE policies, to identify acquisition documentation requirements  and record keeping processes. For contracts where documentation was  not found in the contract file or system of record, we requested the  missing documentation from FEMA and USACE officials to determine  whether it had been completed. We also interviewed FEMA and USACE  headquarters officials to supplement our understanding of FEMA and  USACE\u2019s record keeping policies, practices, and challenges.\nTo assess the reporting of selected advance contracts, we compared  advance contract action data identified in FPDS-NG to data reported in  FEMA\u2019s Disaster Contracts Quarterly Report Fourth Quarter, Fiscal Year  2017 and Disaster Contracts Quarterly Report First Quarter, Fiscal Year  2018 to congressional committees on disaster contracting to identify any  unreported actions. We interviewed FEMA officials to discuss the  methodology and data sources for the congressional committee reports,  and any limitations to the accuracy of the data reported.\nTo assess what challenges and lessons learned FEMA and USACE  identified with the use of advance contracts in 2017, we reviewed  PKEMRA advance contract requirements, FEMA and USACE  documentation on the use of advance contracts, and after-action reports  from 2017 and prior years, including the Hurricane Sandy FEMA After- Action Report, and the 2017 Hurricane Season FEMA After-Action  Report, and federal internal control standards for information and  communications. As part of our review, we identified FEMA and USACE\u2019s  processes for documenting lessons learned following a disaster, lessons  learned specific to advance contracts, and any recommendations or  actions planned by the agencies to address them. We interviewed FEMA  and USACE headquarters officials on reported lessons learned, any other  challenges related to the use of advance contracts, and ongoing or  completed actions to address them. To describe challenges related to  coordination with state and local officials on the use of advance contracts,  we interviewed FEMA and USACE regional staff. To obtain perspectives  and examples from state and local government officials involved in  disaster response efforts we interviewed officials in California on advance  contracting efforts. The information gathered from these officials is not  generalizable to all officials. We also analyzed information on available  advance contracts from FEMA\u2019s June 2018 advance contract list and  FEMA\u2019s May 2018 training documentation identifying advance contracts  to identify any differences in the information available to FEMA regional  contracting officers, and their state and local contracting counterparts.\nWe conducted this performance audit from March 2018 to December  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix II: Federal Emergency Management Agency (FEMA) Regional Offices\n\nAppendix III: Federal Emergency Management Agency (FEMA) and U.S. Army Corps of Engineers (USACE)-Identified Advance Contracts\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, Katherine Trimble (Assistant  Director), Meghan Perez (Analyst in Charge), Erin Butkowski, and  Suzanne Sterling were principal contributors. In addition, the following  people made contributions to this report: Sonja Bensen, Emily Bond,  Lorraine Ettaro, Suellen Foth, Julia Kennon, Elisha Matvay, Carol  Petersen, Sylvia Schatz, Alyssa Weir, and Robin Wilson.","output":"Why GAO Did This Study\n\nFollowing Hurricane Katrina, Congress required FEMA to establish advance contracts for goods and services to enable the government to quickly and effectively mobilize resources in the aftermath of a disaster, like those that affected the United States in 2017.\nGAO was asked to review the federal government's response to the three 2017 hurricanes and California wildfires. This report assesses, among other things, (1) FEMA and USACE's use of advance contracts, (2) FEMA's planning and reporting of selected advance contracts, and (3) challenges, if any, with FEMA's use of these contracts.\nGAO analyzed data from the Federal Procurement Data System-Next Generation through May 31, 2018; selected a non-generalizable sample of 14 FEMA and USACE advance contracts that were competed and obligated over $50 million, or non-competed and obligated over $10 million, in response to the 2017 disasters; and interviewed FEMA and USACE officials.\n\nWhat GAO Found\n\nIn response to Hurricanes Harvey, Irma, and Maria, as well as the 2017 California wildfires, the Federal Emergency Management Agency (FEMA) and U.S. Army Corps of Engineers (USACE) relied heavily on advance contracts. As of May 31, 2018, FEMA and USACE obligated about $4.5 billion for various goods and services through these contracts, see figure below.\nGAO found limitations in FEMA's use of some advance contracts that provided critical goods and services to survivors, including\nan outdated strategy and unclear guidance on how contracting officers should use advance contracts during a disaster, and\nchallenges performing acquisition planning.\nFEMA also did not always provide complete information in its reports to congressional committees. Specifically, GAO found 29 advance contract actions that were not included in recent reports due to shortcomings in FEMA's reporting methodology, limiting visibility into its disaster contract spending.\nFEMA identified challenges with advance contracts in 2017, including federal coordination with states and localities on their use. FEMA is required to coordinate with states and localities and encourage them to establish their own advance contracts with vendors. However, GAO found inconsistencies in that coordination and the information FEMA uses to coordinate with states and localities on advance contracts. Without consistent information and coordination with FEMA, states and localities may not have the tools needed to establish their own advance contracts for critical goods and services and quickly respond to future disasters.\n\nWhat GAO Recommends\n\nGAO is making nine recommendations to FEMA, including that it update its strategy and guidance to clarify the use of advance contracts, improve the timeliness of its acquisition planning activities, revise its methodology for reporting disaster contracting actions to congressional committees, and provide more consistent guidance and information to contracting officers to coordinate with and encourage states and localities to establish advance contracts. FEMA concurred with our recommendations."}
{"id":"crs_R45615","pid":"crs_R45615_0","input":"\tIntroduction\n\nInternational trophy hunting is a multinational, multimillion-dollar industry practiced in countries on almost every continent. Trophy hunting is broadly defined as the killing of animals for recreation with the purpose of collecting trophies such as horns, antlers, skulls, skins, tusks, or teeth for display. International and domestic trophy hunting has a long history in the United States, and U.S. citizens import more wildlife trophies than citizens of any other country\u2014over 650,000 trophies in 2017 alone. Many of these trophies are deer, geese, and other common species that were hunted in neighboring countries, such as Canada. However, some of these trophies are rare and threatened animals hunted in countries throughout Africa and parts of Asia and South America. \nThe practice of international trophy hunting, especially of rare and endangered species, has generated controversy for a number of reasons, including its relation to conservation (including of wildlife populations), ethical considerations, and its effect on local economies where the animals are hunted. Proponents of trophy hunting contend that the practice is a potential source of funding for the conservation of species in exchange for the hunting of a proportionally small number of individuals. Further, they argue that trophy hunting can create incentives for conserving habitat and ecosystems where hunted animals roam and, in some impoverished areas in range countries, can provide a means of income, employment, and community development. Critics of trophy hunting contend that the practice can lead to the decline of rare and endangered species and that the pathway of moving funds from hunting to conservation can be fraught with corruption and mismanagement. Further, some argue that it is unethical to kill animals for sport and that the life of an animal should not be valued according to how much a hunter would pay to kill it.\nDetermining the effects of international trophy hunting on species\u2014with regard to either killing animals or conserving them through hunting revenue\u2014can be challenging for several reasons, namely due to lack of data, according to scientists. Difficulty gathering data from range countries can hinder attempts to develop an accurate sense of how hunting affects animals. For example, limited data may misrepresent the number of trophies harvested or animals killed, corruption can blur the route of money from hunters to conservation efforts, and a lack of information on conservation plans and practices associated with domestic laws and regulations can lead to questions about the effectiveness of these conservation efforts. \nFrom a scientific perspective, teasing out the effects of trophy hunting from those of other factors that affect a species also can be challenging. Several factors affect the viability of animal populations in the wild, including habitat alteration or destruction, prey or resource availability, genetic makeup of the population, changes in climate, presence of non-native species, poaching, subsistence or market hunting, and trophy hunting, among others. Measuring the condition of a population usually involves taking into consideration several of these factors, and more than one factor typically affects the population's condition. Many scientific studies on trophy hunting's effects on wildlife populations contain disclaimers of insufficient data to measure the effect of hunting on a species. \nSome studies have reported that unregulated hunting has contributed to the decline of several species. For example, in the 1980s, hunting reportedly played a part in the decline of both the dorcas gazelle ( Gazella dorcus ) and the Nubian bustard ( Neotis nuba ) from Sahelian Africa. Some scientists contend that there are no documented extinctions solely resulting from trophy hunting. \nCongressional interest in trophy hunting hinges on several aspects of the practice and its potential consequences. There is interest among some Members of Congress and constituents in international trophy hunting of rare and threatened species, such as African lions, elephants, and rhinoceroses. As the largest importer of sport-hunted trophies in the world, the United States can play a role in shaping policy, which likely bolsters this interest. The killing of Cecil the lion in Africa in 2015 drew particular public interest and attention in Congress. The incident stimulated debate on trophy hunting and raised questions about the relative importance of trophy hunting versus other threats to a species.\nCongress's role in addressing international trophy hunting is limited in some aspects, because the range country oversees most controversial aspects of the activity. However, Congress can address the import of wildlife trophies into the United States and can use laws and regulations to indirectly influence trophy-hunting practices in range countries. Congress has addressed international trophy hunting through several bills and through oversight of the implementation of the Endangered Species Act (ESA; 16 U.S.C. \u00a7\u00a71531-1543) and the Convention on the International Trade in Endangered Species of Wild Fauna and Flora (CITES). In addition, some Trump Administration policies have stimulated congressional interest in trophy hunting, such as one to evaluate permits issued for importing sport-hunted trophies of listed animals into the United States on a case-by-case basis, a change from the previous practice of evaluating the range country before issuing permits for hunting these animals. Further, the Trump Administration established an International Wildlife Conservation Council, which is charged with providing advice to the Secretary of the Interior on the benefits of U.S. citizens hunting overseas. \nThis report discusses the history and scope of international trophy hunting in the United States, selected U.S. laws and international agreements that address trophy hunting, and potential issues for Congress to consider regarding international trophy hunting. It does not cover domestic trophy hunting. \n\n\t\tHistorical Perspective on Trophy Hunting\n\nSport hunting is one of the oldest known recreational activities, according to some historians. Although the origin of sport hunting remains unclear, some historians trace the practice to instances in Ancient Egypt and more prominently in the Middle Ages. Some authors note that game parks for controlled hunting were prevalent in the Persian Empire (534 BCE-330 BCE). Early reports of sport hunting indicate that it was unregulated and generally occurred in a commons area. Restrictions on sport hunting, according to some historians, first began in the Middle Ages, when it was forbidden to hunt in certain forests owned by a king or other royalty. In the 18 th and 19 th centuries, concerns about overhunting and its consequences for species led to the creation of parks and game lands with hunting regulations. For example, game reserves were created in England and its colonies to monitor and control the effects of sport hunting on animals in the 19 th century. \nSport hunting was also practiced in the name of conservation and science, in addition to recreation. Former President Teddy Roosevelt went on hunting expeditions throughout the world; in 1909, he went on an 11-month expedition through British-controlled East Africa and Sudan and reportedly shot or trapped nearly 11,000 animals, including hippopotamuses, elephants, and white rhinoceroses. The Smithsonian Institution financed the expedition, and many of the specimens were deposited into the Smithsonian Natural History Museum. In the 20 th century, sport hunting became a resource, in part, for conservation. For example, sport hunting in the United States contributes to conservation through the Federal Aid in Wildlife Restoration Act of 1937 ( 16 U.S.C. 669-669i) , also known as the Pittman-Robertson Act. Under this act, the purchase of guns, hunting licenses, and ammunition generates revenue for conservation. Further, fees from federal and state duck stamps (stamps are required for waterfowl hunting) and hunting permits have generated funds for conservation in the United States.\nTrophy hunting originated, in part, during the colonial settlement in Africa. Some note that the establishment of the Dutch East India Company in 1652 led foreign hunters to Africa. Explorers and hunters killed animals for ivory and hides; the emphasis on hunting was for subsistence and trade. Hunters later took advantage of an expanding railway system to access areas infrequently occupied by settlements. Hunters combined sport hunting with the international wildlife trade to generate money, as exemplified by killing elephants and harvesting their ivory and hides for trade. Trophy hunting in Africa increased in the 19 th century and was encouraged by the British authorities, who promoted sport hunting as a way to increase agricultural expansions into historic rangelands. Tourist trophy hunting started in Kenya in the 20 th century and later spread throughout Africa. According to some scientists, trophy hunting aligned with and aided in conservation and development in the 20 th century; funding from trophy hunts, according to some, led to the establishment of protected areas in Africa. Trophy hunting was seen as a mechanism to support development in local communities (see \" Trophy Hunting and Local Communities \"). \n\n\t\tScope of International Trophy Hunting\n\nTrophy hunting occurs throughout the world in areas where wild and managed populations of hunted animals exist. Trophy hunting can target large, charismatic mammals, such as white rhinoceroses ( Ceratotherium simum ) and elephants ( Loxodonta africana ), as well as smaller, lesser-known species, such as markhor ( Capra falconeri ) and argali ( Ovis ammon ). Trophy hunting generates millions of dollars each year through trophy fees and other revenue connected with associated tourism. \nThe largest community of international trophy hunters is from the United States. The United States is also the largest importer of animal trophies; it imports over 10 times more trophies than China, the world's second-largest trophy importer. Several species listed under CITES are hunted for trophies, and their export and import data can provide insight into the practice of international trophy hunting. CITES lists animals that are considered threatened or endangered due to trade and therefore require greater monitoring or conservation. From 2011 to 2015, trophy imports of CITES-listed species into the United States exceeded the sum of CITES-listed species imported into the other top nine trophy-importing countries in the world. (See Figure 1 .) \nAfrica is the most popular place for the international hunting of rare and threatened species for trophies (see Figure 2 ), and several African countries are popular areas for sport hunting. South Africa and Namibia export the most mammalian trophies listed under CITES; in these countries, most trophies exported from CITES-listed species are from lions, lechwe (antelope), certain species of zebra, and leopards. (Data for non-CITES listed species were not readily available.) \nSome of the most prized species for trophy hunting come from Africa, and their notoriety is reflected in the hunting fees the species command. Fees for hunting animals for trophies vary considerably and are based on the rarity of the animal, the effort needed to hunt the animal, and the animal's popularity for hunting. (See Table 1 .) In Africa, the so-called big five animals of trophy hunting are lions, white rhinoceroses, elephants, leopards, and buffalo. All five species are coveted trophies for hunters, although most international hunters in Africa seek more plentiful, less costly plains game. The big five are notable for the difficulty in hunting them and the high trophy fees that hunters pay, which can range from $9,000 to upward of $350,000. (See Table 1 .) Some studies indicate that many African countries earn most of their trophy-hunting revenue from the big five animals. Four of the big five species are protected under CITES, ESA, or both. \n\n\t\tRole of the United States in International Sport Hunting\n\nAs discussed, the United States is the largest importer of sport-hunted trophies in the world for all species and for CITES-listed species. This distinction gives the United States, according to some, an opportunity to influence international sport hunting through its policies for importing trophies and actions by its hunters. U.S. hunters primarily import sport trophies from Canada and South Africa, according to Fish and Wildlife Service (FWS) records; this also holds true for CITES-listed species. (See Figure 3 .) \nOf the species imported into the United States, the snow goose, mallard, and black bear are the most common (see Figure 4 ). Most of these trophies are imported from Canada, and most imported species into the United States are not considered to be threatened or endangered.\nOf the CITES-listed species, the black bear and the Sandhill crane are the most imported trophies into the United States with a permit. (See Figure 5 .) The black bear and the sandhill crane are imported largely from Canada; most of the other species are imported from Africa.\n\n\tInternational Sport Hunting: Regulatory Framework\n\nInternational sport hunting is largely regulated through laws of the range country, the country importing trophies, and international agreements. Hunters generally must consider regulations of all three entities and apply for applicable permits to hunt and transport trophies. This section will discuss the regulations associated with each category.\n\n\t\tMultilateral and Foreign Country Regulations for Sport Hunting\n\nInternational trophy hunting can be regulated through some international agreements, depending on the species being hunted. If the hunted species is considered rare or endangered due to trade, CITES might apply. \n\n\t\t\tCITES\n\nCITES is an international agreement signed by 183 governments, including the United States, which voluntarily agreed to adhere to a series of incrementally more stringent restrictions on imports and exports of wildlife, depending on the sustainability of such trade for the species. CITES lists and categorizes wildlife and plant species based on the extent that these species might be threatened by trade. Protected species are organized under CITES into three appendixes. Species in Appendix I are threatened with extinction due primarily to trade, and trade in Appendix I species for commercial purposes is prohibited. Appendix II contains species that are not necessarily threatened with extinction but require controlled trade to prevent population declines. Species in Appendix III are listed because at least one country has requested other countries to assist in regulating trade of that species.\nCountries regulate trade through a permit system for importing and exporting species and a quota system for regulating species' take (the act of killing or harvesting a species). Many CITES signatories have implemented permit regulations in their national laws. For the United States, CITES is implemented under ESA. CITES regulates the import and export of trophies from threatened wildlife through permits. For example, a hunter attempting to import a trophy of an animal listed under CITES Appendix I (the most protective category) into the United States would be required to obtain an import and export permit (from the importing country and range country, respectively) for the wildlife or wildlife parts. \nTrophy imports of CITES-listed species under Appendixes I and II generally are administered through a quota system established by the range country (or in some cases the CITES Secretariat), and they require a determination that the killing of the animal causes no detriment to the population, referred to as a n on- d etriment f inding (NDF). NDFs are required for Appendix I and II species only but can be used to guide the trade of Appendix III species. An NDF for an import permit is made by the designated CITES Scientific Authority of the country of import through the analysis of information (e.g., population status and trade information) from the range country and the permit. FWS is the United States' Scientific Authority for CITES-listed species. The establishment of a quota for exporting individuals of a species can meet the requirements of an NDF. The CITES Secretariat does not necessarily have complete information regarding how range countries set their quotas, but it receives reports from participating countries. For example, range countries regulate African elephant, cheetah, black rhinoceros, and lion trophies by voluntary quotas.\nTrade of a particular species or exports of a species from a range country can be temporarily suspended under CITES. Such a suspension may occur if there are not sufficient guarantees that trade is not detrimental to the survival of the listed species or if adequate legislation to implement CITES is absent, illegal trade is prevalent, or required scientific reports are missing. Some suspensions of trade are specific to the species, whereas other suspensions can be for all trade for a country. Currently, 29 countries are affected by species-specific trade suspension resolutions, including Equatorial Guinea, South Sudan, Sudan, Tanzania, Ghana, Niger, Liberia, Vietnam, Benin, and Togo, among others. Of those 29 countries, Afghanistan, Djibouti, Grenada, Liberia, Mauritania, and Somalia are subject to a complete suspension of trade on all species.\n\n\t\t\tEuropean Union\n\nAnother multilateral framework for addressing trophy hunting is the European Union (EU). The EU governs international trophy hunting under the EU Wildlife Trade Regulations (WTR). The WTR implements CITES for the EU and aims to protect species by regulating trade, authorizing permits for trade, and allowing for the suspension of certain species from trade with the EU. Regulations promulgated by the EU are in place for all national governments within the EU; however, individual countries enact enforcement regulations. \nThe EU regulates the trade of species through a permit system that is based on the classification of a species within four annexes. The annexes list species according to how trade affects the species. The classification of species within the annexes largely follows CITES classifications, but the annexes contain species not listed by CITES. The permit system addresses sport-hunted trophies directly and recently has listed regulations for the import of polar bear, African elephant, and African lion trophies, among others. Member states under the EU can implement more stringent policies than the EU to address the trade of species. For example, under German regulations, import applications of CITES Appendix I species that do not have an established quota go through heavier review than applications with export quotas. EU regulations also contain a suspension rule, which allows the European Commission (the EU executive arm) to restrict the entry of a species into any country in the EU. A handful of species are prohibited from entry into the EU, including the West African seahorse ( Hippocampus algiricus ) from Guinea and Senegal and the crab-eating macaque ( Macaca fascicularis ) from Laos.\nEU regulations differ from CITES regulations in a few ways. The EU regulations, according to some observers, are stricter than CITES regulations. For example, some CITES Appendix II species are in Annex A under the EU, and Annex A contains stricter regulations for trade than CITES, according to some. Annex B species under the EU require both import and export permits, whereas similar CITES Appendix II species require only an export permit. The EU wildlife trade system also regulates trade within the EU. Despite its potentially stricter regulations, the EU system is in compliance with CITES, because CITES stipulates that parties can have laws and regulations that are stricter than CITES. \n\n\t\t\tRange Country\n\nThe hunting and killing of animals generally are regulated by laws of the range country, which vary by country. Some range countries address trophy hunting with a combination of policies that involve annual quotas for hunting particular species, designated hunting ranges, and permit systems for allowing hunts (e.g., Zimbabwe and South Africa). Other range countries ban trophy hunting outright. Trophy hunting is currently banned in 13 range countries: Angola, Botswana, Congo, Gabon, Ghana, India, Kenya, Malawi, Mauritania, Niger, Nigeria, Rwanda, and South Sudan. Countries such as Romania and Holland ban imports of sport-hunted trophies. Analyzing trophy-hunting laws in range countries is beyond the scope of this report.\n\n\t\tU.S. Regulations on International Trophy Hunting\n\nIn the United States, laws related to international trophy hunting are governed by ESA, which implements CITES and is administered by FWS. ESA does not regulate trophy-hunting activities within range countries directly; rather, the law governs what can be imported into the United States. The actual killing of a listed species in a foreign country is governed by the range country. \nTrophy hunting is regulated by FWS based on the status of the species. Most trophies that are imported into the United States come through a designated port of entry and must have a declaration filled out. FWS may inspect the declaration and the trophy before allowing it into the country. If the species is listed under CITES or ESA, a permit from FWS might be necessary to import the trophy into the United States. For species listed under ESA or CITES, an import and potentially export permit from the range country might be needed. \nAn enhancement-of-survival permit is needed to import trophies of species listed under ESA. Enhancement of survival implies that the import of endangered animals or their parts or products will provide incentives to increase the survival of the species in its native habitat. If a species is listed as threatened, the same concepts apply, unless there is a special rule under Section 4(d) of ESA, which may allow for a limited number of trophies to be imported under different circumstances. In the past, when making an enhancement finding for issuing permits to import trophies, FWS reviewed information in the application and the status of species and conservation programs in the range country. The evaluation was a three-part process to ensure the survival of the species, according to FWS. First, FWS assessed the hunted animal's range country, looking at whether the management of the species is sustainable, if there are resources that support the enforcement of laws and illegal poaching, and whether the country will hold hunters accountable if violations arise. FWS also considered a hunter's actions; for example, a permit application for species in Mozambique asked the hunter to provide a written statement detailing antipoaching activities, clarifying whether the meat from the hunt goes to local communities, and affirming the status of the hunting organization. Reviewing the country's data and conservation program was, in part, an effort to streamline the issuance of individual permits for importing trophies. \nFWS also used to make non-detriment findings (NDFs) under CITES to facilitate the issuance of CITES permits for importing trophies of CITES-listed species. Species listed under Appendix I need an import permit from FWS; this permit is issued if the imported trophy will not be detrimental to the species' survival and is not primarily intended for commercial purposes. \nA recent policy change by FWS has altered the process for evaluating the enhancement-of-survival criteria and issuing NDFs for permits related to sport-hunted trophies. FWS issued a memorandum stating that the agency would withdraw ESA enhancement-of-survival findings and CITES NDFs for several species in various countries around the world and evaluate applications for ESA and CITES permits on a case-by-case basis pursuant to the authorities under ESA, which includes CITES. The memorandum further stated that FWS would use status and monitoring information from range countries and evaluate information in each application to ensure that management programs are promoting the conservation of the hunted species. It is unclear whether permit applications or their status will be made public or if there are specific criteria being evaluated in each application to make determinations in lieu of countrywide evaluations. According to the memorandum, the changes were derived from a District of Columbia Court of Appeals opinion on issuing enhancement-of-survival permits under ESA. The appeals court decided that FWS did not adhere to notice and comment rulemaking requirements under the Administrative Procedure Act when making a negative enhancement finding for the import of sport-hunted trophies from Zimbabwe. \n\n\tEcological, Ethical, and Economic Considerations of Trophy Hunting\n\nThe controversies surrounding international trophy hunting are rooted in the ecological, ethical, and economic considerations of the practice. Numerous factors affect a species, and teasing out the effects of trophy hunting is challenging due to a lack of long-term monitoring of hunted populations. Most studies also report that with appropriate and consistent management, trophy hunting can be potentially beneficial for species; however, with poor management, trophy hunting can be detrimental for species. This section will analyze several identified ecological and economic factors that are affected by international trophy hunting. \n\n\t\tEcological Factors Affected by Trophy Hunting\n\nScientists report that trophy hunting can affect a species population with respect to how many individuals are hunted annually ( rate of offtake ), the genetic consequences of hunting, the traits of the individuals selected for hunting (including the social status of the hunted individuals), and the consequences of hunting for the ecosystem where the species resides.\n\n\t\t\tHunting Rates\n\nHunting could significantly affect a population, if the number of animals killed is greater than the reproductive rate of the individuals in the population. According to scientists, high rates of trophy hunting have caused population declines in African lions ( Panthera leo ), American cougars ( Felis concolor ), and possibly African leopards ( Panthera pardus ). High rates of trophy hunting also could combine with other factors to cause population declines in animals. For example, poaching and, to a lesser extent, hunting of wild elephants in Africa currently are outpacing the species' reproductive rate, causing an unsustainable loss of elephants annually. \nTo combat this problem, some range countries have adopted regulations that limit hunting certain animals from a given species based on their age. Studies have shown that using an age-restricted quota system that allows the hunting of older animals could lead to sustainable growth of the species population. For example, these types of restrictions could be applied to long-lived species such as African elephants, according to some scientists. In some African countries, such as Mozambique, Tanzania, and Zimbabwe, regulations regarding age-restricted hunting incentivize hunters to respect this system by increasing quotas for hunters who adhere to age restrictions.\nHunting rates also are correlated to the rarity of the species, according to some scientists. Some have introduced the concept of the Anthropogenic Allee (AA) Effect (see box for description) to explain why the interest in trophy hunting increases as the species becomes rare. This hypothesis, under certain scenarios, could explain how trophy hunting could severely diminish a species. In contrast to this perspective, some observers contend that managed trophy hunting, which includes scientifically determined quotas, monitoring, and enforcement, can have few negative effects on a wildlife population and can be beneficial for a population in some cases. \n\n\t\t\tGenetic Effects of Trophy Hunting\n\nTrophy hunting might have a significant effect on the genetic makeup of a population if the population is small or if hunting is prolific and focused on individuals with specific traits (e.g., large horns or antlers). Trophy hunting of individuals in small populations could reduce the population's gene pool and increase the chance of inbreeding and breeding by less vigorous males; if too many males are removed from the population by hunting, there is less fighting to establish dominance and breeding rights among males, which can allow less vigorous males to breed. Inbreeding and a reduced gene pool can affect the population's viability and can cause extinction. Managing trophy hunting in small populations of animals through accurate quotas and population monitoring could avoid this problem, according to some scientists. \nSelectively hunting animals based on gender or body traits could have genetic and evolutionary consequences for the population and species. Targeting only males or females in a population could affect the animals' ability to disperse their traits to future generations. If trophy hunting, for example, focuses on larger, breeding males, there would be fewer males to mate and the population could suffer from low reproductive rates. African lions are vulnerable to excessive losses of males in their population. In addition to the probability of inbreeding, scientists report that removing too many males from a pride could lead to females being unable to mate. \nThese genetic effects of trophy hunting can be mitigated with accurate quotas and managed hunting that targets specific animals in a population, according to some scientists. In one case, scientists recommended that one lion be taken per 2,000 square kilometers in Africa, where population densities are low. Others note that restricting trophy hunting to male lions that are older than six years of age would allow younger males to reproduce and allow for higher-quality trophies from the population.\n\n\t\t\tEffect of Trophy Hunting on the Social Organization of Animals\n\nTrophy hunting can disrupt the social makeup of a population or pride if the species is social, such as brown bears ( Ursus arctos ) and African lions ( Panthera leo ). If a dominant male is killed, the male taking over the pride or social group might improve its reproductive success by killing the offspring of the former rival male. If this practice occurs frequently, the population's viability could suffer from lower growth rates and diminished reproduction. For example, in populations of brown bears in Alberta, Canada, scientists reported that cub survival lowered when mature males were killed, causing population declines. Further, male takeovers of lion prides due to trophy hunting can cause the dispersal of subadults away from the population or injury and death to remaining males. Management techniques to avoid these problems have been suggested and include specifying which individual in a social group to hunt and monitoring populations to see if target individuals change. \n\n\t\t\tTrophy Hunting and Habitat Conservation\n\nTrophy hunting could be a driver for increasing biodiversity and habitat conservation within range countries. Hunting lands often are cited as conservation areas because of the efforts made to maintain a pristine environment for game animals. In the United States, for example, Ducks Unlimited is involved in conserving nearly 10 million acres of waterfowl habitat used for hunting. In Africa, the area of hunting grounds is significant and exceeds the area of national parks in a few range countries. (See Table 2 .) Observers report that protected and managed hunting lands increase the biodiversity of a range country and could be considered a conservation tool. Some contend that without hunting, these lands would be converted to rangelands for livestock production, which have lower biodiversity than native habitat. Proponents of hunting also suggest that managed hunting grounds protect animals from poaching.\nSome critics of trophy hunting suggest that hunting grounds do not ensure that threatened or endangered animal populations will rebound from low levels. They contend that some rangeland managers artificially alter the ecosystem by introducing exotic species or manually reducing predators of trophy animals. Further, some note that rangelands for hunting generally are fenced, thus fragmenting the habitat into small blocks. Fenced ranges also could alter the migration and range of several non-hunted species, especially in Africa. In contrast, fences could protect animals from poachers. \n\n\t\tSelected Ethical Considerations of International Trophy Hunting\n\nSeveral ethical concerns are associated with trophy hunting, and these issues add to the debate on whether the practice is beneficial to conservation. Some critics of the practice contend that paying a fee to kill an animal and collect a trophy as a sign of conquest is unethical and represents objectification of the hunted animal. They further question the role of trophy hunting in aiding conservation, citing lack of data and other forms of generating value from wildlife, such as wildlife viewing. Some supporters of the practice contend that trophy hunting is a recreational pursuit that could increase the value of certain animals and aid in the overall conservation of a population. \nSome ethical arguments can be relevant in discussing the practice of trophy hunting and its alternative forms. For example, the practice of captive hunting (i.e., hunting animals within an enclosure) causes some hunters to question whether the hunting in this environment represents fair chase . Fair chase has been defined by one organization as \"the ethical, sportsmanlike, and lawful pursuit of free-ranging wild game animals in a manner which does not give the hunter an improper or unfair advantage over the animal.\" Some other hunters claim that fair chase is achieved if the enclosure is large enough for animals to roam a certain distance. Critics of trophy hunting also cite ethical considerations associated with other hunting practices, including shooting animals from vehicles and luring animals with baits.\n\n\t\tEconomic Considerations of International Trophy Hunting\n\nOverall, research on trophy-hunting operations and their economic effect is limited and varies according to the areas studied. Researchers describe both economic benefits and limitations of trophy hunting. \nTrophy hunting can be a lucrative enterprise for certain parties throughout the world, according to some scientists. In the United States and Europe, trophy hunting can generate billions of dollars. Revenues from trophy hunting in Africa, in comparison, are estimated to generate more than $200 million annually. This estimate varies among sources, causing some to question the accuracy of reported revenue data and the methodology used to aggregate reported revenue data over time and across countries. \nThese data do not illustrate how economically important or insignificant trophy hunting might be in different range countries in Africa. For example, FWS reports that 7 of the 10 countries where lions are allowed to be hunted for trophies are considered developing nations in which 27%-64% of the population is living in poverty. Trophy hunting in these areas could have a proportionally larger effect than in wealthier countries because of the low base income. \nProponents of trophy hunting also argue that trophy hunting is economically viable in areas that are unsuitable for photographic ecotourism\u2014areas that are remote, lack infrastructure, contain little attractive scenery, have experienced ongoing or recent struggles with political instability, and contain low densities of viewable wildlife. Countries such as Mozambique, which are less attractive ecotourism destinations, are nevertheless able to generate revenue from sport hunting. Researchers have used survey techniques to evaluate such assertions and found willingness among respondents to finance hunting trips to sites typically less suitable for ecotourism. \nCritics contend that trophy hunting does not have the significant effect on gross domestic product (GDP) that supporters claim. They argue that trophy-hunting revenue remains a small percentage\u20141.8%, according to one study\u2014of overall tourism revenues and just a fraction of overall GDP for some of the core wildlife source countries in Africa. A 2009 study by the International Union for the Conservation of Nature (IUCN) further criticized big-game hunting, particularly in West Africa, as a financially suboptimal use of land, because land used for big-game hunting generates smaller economic returns than land used for agriculture or livestock breeding. Additionally, studies have shown that in some instances, revenues associated with trophy hunting provide insufficient economic benefits to motivate local communities to promote the conservation of certain species\u2014particularly carnivores that prey on livestock, such as leopards. This was found to be the case in Niassa National Reserve, Mozambique. Another study found that local benefits derived from wildlife-related activities, including hunting revenue, were insufficient to change incentives for conservation in two observed sites in Mozambique and Namibia.\n\n\t\t\tTrophy Hunting and Local Communities\n\nSome proponents of trophy hunting contend that the money generated by trophy hunts helps the communities in and around the range areas by providing jobs and money for community services. For example, some found that trophy hunters were willing to pay substantial premiums for hunting trips that were advertised as offering benefit-sharing arrangements with local communities. \nThe literature often cites community-based natural resource management (CBNRM) as a mechanism to encourage local community involvement in wildlife management decisionmaking and to increase the amount of financial benefits associated with wildlife-related revenue that accrue to local communities. In practice, the results have been mixed. For example, the Communal Areas Management Plan for Indigenous Resources (CAMPFIRE) program in Zimbabwe attempted to create economic incentives for communities and landowners to conduct habitat and ecosystem restoration. At one point, CAMPFIRE generated more than $20 million, of which almost 90% came from trophy hunting, allowing communities to establish management over the habitat and resources within the range area. Of the income generated from tourist activities, such as trophy hunts, 49% went to the communities and 20% went to wildlife management; the remaining 31% went to other administrative projects. Trophy hunting, however, is one of several conservation-oriented wildlife management tools. \nHowever, some scientists emphasize that the amount of trophy-hunting revenue that accrues to local communities is disproportionately small. These researchers note that in Cameroon, less than 3% of trophy-hunting revenues accrued to local communities; in Zambia, local communities received some 12% of hunting revenues; and in Tanzania, though law requires a percentage of hunting revenues to accrue to communities living in or adjacent to hunting areas, the funding rarely has reached past the local council level. Others reported that approximately 3% of trophy hunting revenue in Tanzania was allocated to \"area and community development,\" which is vague and creates uncertainty about whether the funds went to species conservation. \nIn some areas, however, a higher percentage of revenues from trophy hunting flows to local communities. Some, for example, cite Zambia's ADMADE (Administrative Design for Game Management Areas) program as a model for locally accruing trophy-hunting revenue, noting that ADMADE receives 67% of all trophy-hunting revenue in game management areas and that 53% of ADMADE revenue is directed toward local wildlife management; the remainder goes to community development. They also cite Botswana and Namibia as examples where trophy-hunting revenue accrues locally. \nSome scientists conducted an evaluation of the economic contributions of safari hunting to the rural livelihoods of a CBNRM-participating village in Botswana. In addition to documenting multiple economic benefits, including cash dividends, employment income, and community facilities infrastructure development, the scientists found that the distribution of safari hunting benefits was \"fairly equitable\" among village households. \n\n\tTrophy Hunting and Conservation\n\nCongress might consider whether international trophy hunting is a benefit or detriment to wildlife conservation. There does not appear to be consensus among stakeholders as to whether international trophy hunting is being applied and used as an effective conservation tool throughout range countries where it is practiced. Several observers note that more data need to be collected on how species respond to trophy hunting in the short and long terms and how revenue from trophy hunting is managed in range countries. \nProponents of trophy hunting contend that it can be used as a conservation tool if managed in a sustainable and scientifically based manner. They argue that revenue from hunting operations can be channeled into conservation programs and activities that aim to support hunted species and their habitat. Some contend that governance (e.g., having laws in place that require hunting fees to be made available for conservation) is critical for trophy hunting to contribute to conservation. \nConservation benefits associated with trophy hunting are seen as wide and varied. Some contend that trophy hunting incentivizes land managers to conserve populations of hunted species, which include threatened and endangered species. In some instances, it may protect species from poaching and use hunting quotas to manage species in a sustainable manner. Additionally, efforts to support trophy hunting can lead to the protection and management of rangelands, which support hunted species and other wildlife in the ecosystem. Local communities can benefit from trophy hunting as part of a tourism framework that could bolster economies through the development of hotels, restaurants, and other tourism-related activities. In certain areas where tourism is sparse, some have noted that trophy hunting can provide income to sustain communities. South Africa provides economic incentives to maintain white and black rhinoceros populations through limited trophy hunting, along with other forms of tourism.\nSome economists note that countries sometimes use revenue to fund the operational costs of government wildlife management authorities, counterpoaching enforcement activities, and development assistance to local communities. In Zambia, for example, hunting revenues have been used to train and hire village scouts for antipoaching activities in game management areas and to support community development projects for clinics, shelters, and schools. \nCritics of trophy hunting as a conservation tool question the effectiveness of trophy-hunting management. They note several aspects of trophy-hunting management that could be weak and negatively affect conservation of species and the ecosystem. Critics also question the premise that significant funds from trophy hunting are used to conserve hunted species and the ecosystems they use; these critics cite issues such as corruption as a barrier to ensuring revenues are used for conservation. For example, corruption may result in local people allowing and sometimes assisting poachers. Corruption can take the form of exceeding quotas, allowing hunting outside of rangelands, accepting bribes to overlook illegal activities, and using funds for nonconservation activities. For example, some contend that corruption detrimentally affects conservation effectiveness of trophy hunting in Ethiopia; funds reportedly are funneled to uses other than for conservation.\nTanzania also suffers from mismanagement of both resources and funds, according to some studies. From failing to implement new policies designed to include communities in the trophy-hunting revenue cycle to operating a public auction system that allows discretionary spending by officials, leading to corruption and patronage, Tanzania is alleged to have misgoverned trophy hunting. This mismanagement led, in part, to a decreasing lion population, according to some. Scientists also noted that a lack of community involvement in the practice of trophy hunting led communities to defend themselves from lion encroachment, thus adding to the population's decline. \nCritics contend that offtake rates for some trophy hunted species are unsustainable and could affect populations. Some quotas for hunting animals do not use the best scientific information or are fixed and do not reflect changes in the population. In addition, some quotas do not accurately specify which individual animals may be hunted and their ages, which may have long-term negative genetic consequences on the population. Hunting the wrong individual animals also could have social consequences (e.g., infanticide) in some instances and could affect the viability of a population. Moreover, by not having a defined area or population to manage, hunting could result in several groups hunting the same population of animals without coordination, leading to overhunting quotas or other negative effects on the population. Fenced areas for hunting also could have negative effects on the ecosystem by preventing the migration of nonhunted species and allowing for the introduction of exotic species. \nIn addition, critics argue that if local communities do not receive revenues from trophy hunting, they might be alienated, which could have consequences for maintaining and monitoring the hunted species. Many communities report hunting revenue failing to reach them due to potential corruption and other factors. For example, some communities in Tanzania claim that hunting organizations fail to pay local communities the 5% of revenue upon which the parties agreed. \nSome stakeholders contend that trophy hunting in any form is unethical. They argue in favor of using other alternatives for generating income from natural resources in its stead (e.g., birdwatching and safari). \n\n\tPotential Issues for Congress\n\nInternational trophy hunting is an issue for Congress for several reasons, including the practice's recreational qualities; its effect on wildlife, especially charismatic species; constituent interest in the practice; its relevance to laws that regulate the trade of threatened and endangered animals; and its ethical considerations, among other things. For example, some argue that the killing of Cecil the Lion in 2015 heightened congressional interest because lions are charismatic species and some are against killing threatened species due to ethical concerns. Congress and the Trump Administration have addressed international trophy hunting through the implementation of laws and the dissemination of regulations that address the import of sport-hunted trophies into the United States. Further, the Trump Administration has established the International Wildlife Conservation Council to provide recommendations to the Secretary of the Interior on various aspects of U.S. international trophy hunting. \nThe role of Congress in this issue is limited by the jurisdiction of the United States overseas; hunting quotas, conservation activities, and the flow of revenue from international trophy-hunting activities are largely dictated by the range country. However, the congressional role is potentially meaningful in several areas discussed below. \n\n\t\tMonitoring and Data Gaps\n\nSome scientists and policymakers contend that fully evaluating the effects of trophy hunting on species conservation depends on monitoring and collecting more data on hunting operations and hunted species in range countries. Data from most hunting operations are largely self-reported. In some cases, they are gathered by the range country and international NGOs. Some policy experts contend that the United States could incentivize range countries and hunters to collect and report more data. For example, some argue that Congress could provide overseas development assistance for international programs and grants for NGOs to conduct studies on the effects of trophy hunting on wildlife populations and the distribution of revenue generated by trophy-hunting operations. Some contend that Congress or FWS could require permit applicants to solicit certain data from hunting operations that would verify the operations' conservation activities and the distribution of hunting revenue. Some might propose that international multilateral organizations, such as CITES, could encourage or require range countries to conduct oversight and report data on hunting operations and wildlife operations. This might take the form of long-term monitoring of hunted wildlife populations and systematic surveying of how trophy hunting affects local communities. For example, CITES collects data on specific species, such as African elephants. The Monitoring the Illegal Killing of Elephants Program aims to help range states improve their ability to monitor elephant populations, identify changes in the illegal and natural deaths of elephants, and apply these data to improve law enforcement and strengthen regulatory measures to conserve and manage elephants. This program is supported by parties to CITES and works with range countries and third parties to collect data. Some might contend that a similar program could be used to monitor and collect data on trophy hunting of selected iconic species, such as African lions, pangolins, and leopards. \nCritics of these approaches could argue that there are limited resources and incentives available for range countries to collect data on trophy hunting and monitoring. In addition, they might contend that data provided by hunting operations could be falsified or could fail to account for corruption and other illegal activities associated with the distribution of hunting revenue. They might question self-reporting by range countries, specifically, whether the data are accurate and affected by corruption. Some contend that to alleviate this issue, data should be transparent and fully identified when planning regulatory actions either through CITES or individual countries.\n\n\t\tPermits for Importing Sport-Hunted Trophies\n\nCongress can address international trophy hunting by U.S. hunters through the process of issuing permits to import trophies. In most cases, hunters need a permit to import a trophy from a listed species into the United States. The type of permit varies according to the status of the species under U.S. law or CITES. Currently, FWS is evaluating permit applications on a case-by-case basis, which involves reviewing individual hunting operations and potentially conservation programs in the range country. It is unclear what standards or methodology FWS uses to evaluate each permit on a case-by-case basis. \nSome might advocate for Congress to enact legislation that would direct the Secretary of the Interior to create and disseminate specific standards for evaluating trophy-import permits, including increasing the amount of information on the condition of the hunted species. Some might argue that equivalent standards across species for measuring whether hunting could enhance the survival of a population (e.g., criteria used by ESA) or be nondetrimental to a population (e.g., criteria used by CITES) could create consistency in evaluating trophy-import permits and lower the time needed to issue them. In addition, some Members argued that making permit applications and decisions publicly available could increase oversight over the process. H.R. 6885 in the 115 th Congress would have authorized this approach. \nHowever, other stakeholders could contend that a consistent approach for evaluating permits might not be applicable to all species being hunted or to all hunting operations being considered. For example, evaluating the conservation and hunting of listed species at the country level could mask individual hunting operations that might have different standards and conservation priorities than the range country as a whole. \nSome stakeholders might petition Congress to establish a third-party certification system to evaluate hunting operations that frequently appear on permit applications for importing trophies. The certification system could employ standards that reflect best practices for trophy hunting; some of these practices could include transparency in funding flows, support for local communities in proximity to hunts, equitable allocations of hunting concessions, and a quota system for hunted animals. A certification system might also alleviate concerns of questionable data sources for certain countries by having a standardized system for evaluating hunting operations. Under certain situations, a certification system could have a provision that allows for a moratorium on hunting a species to allow it to be replenished in the wild. The International Union for the Conservation of Nature has created a set of guiding principles and recommendations for sustainable trophy hunting that could be converted into standards. The principles include biological sustainability; net conservation benefit; socioeconomic benefit; adaptive management in planning, reporting, and monitoring hunting; and accountable and effective governance. \nCertification systems are used with other natural resources. For example, two primary wood certification programs affect wood consumed in the United States. The Forest Stewardship Council is an independent, international NGO that certifies that wood comes from well-managed forests that meet an established set of criteria. One key criterion is that the \"chain of custody\" information is provided; ideally, this information includes the names and locations of each handler of the wood from the forest where it originated to the shop where the product is being sold. A second certification program is offered by the Sustainable Forest Initiative (SFI). SFI also contains a set of guidelines and principles that must be followed to earn SFI certification, which is done for North American forests and does not have a chain-of-custody requirement. Approximately 120 million hectares are certified under this program in North America.\n\n\t\tAlternative Forms of Trophy Hunting or Bans\n\nAs Congress debates whether international trophy hunting is a benefit or a detriment to wildlife conservation, it might consider promoting alternative forms of trophy hunting in the wild. Some contend that trophy hunting in enclosed ranges could give hunting operations greater control over wildlife populations. The practice of hunting animals that are enclosed within a private game ranch is referred to as captive hunting or, in some cases, canned hunting . The species in captive hunts usually are larger megafauna, such as lions, and typically are bred in captivity for game ranches. Proponents of captive hunting contend that it guarantees hunting success for the hunter, allows hunts to be shorter and less expensive, produces better trophies, drives conservation through economic incentives, and allows for easier management of populations, because they are in a contained environment where hunting can be limited. \nCritics of captive hunting have a different perspective that drives the controversy behind the practice; they contend that killing animals in a contained environment with no chance of escape is unethical and detracts from the sport of hunting. This concept is termed fair chase and is considered the \"ethical, sportsmanlike, and lawful pursuit and taking of any free-ranging wild, big game animal in a manner that does not give the hunter an improper or unfair advantage over the game animals.\" They argue that animals bred in captivity are not equivalent to wild animals and therefore do not have conservation value or enhance the long-term survival of the wild population. In addition, animals bred in captivity can suffer from limited genetic diversity, and fenced game ranches fragment habitat and limit the free range of wild animals. \nCentral to the controversy behind captive hunting are lion populations in South Africa. Captive hunting is prevalent in South Africa, where over 80%-90% of the lions hunted are believed to be captive. Consumers of these hunts are largely from the United States (approximately 60% of captive lion trophies are exported to the United States) and the EU (approximately 40% of captive lion trophies are exported to the EU). Some in South Africa want to ban the hunting of lions bred in captivity; others note that it is a multi-million dollar industry that generates jobs and argue that the practice should stay. \nCaptive breeding of species listed under ESA with trophy hunting also occurs in the United States. Several species listed under ESA are bred in captivity on ranches in the United States for reintroduction to the wild and, in some cases, for trophy hunting. Ranchers can obtain an enhancement-of-survival permit to allow for the limited killing of some animals in a population. The aim is that the revenue generated from hunting surplus captive-bred animals will aid in the captive breeding and reintroduction of the species into the wild. Some also contend that limited trophy hunting of captive-bred populations could reduce hunting pressure in the wild. There are several examples of how certain species have thrived on ranches and bolstered their international populations; the scimitar-horned oryx ( Oryx dammah ), addax ( Addax nasomaculatus ), and dama gazelle ( Gazella dama ) are captive-bred in the United States and have an exemption under ESA that allows for sport hunting and trophies. The objective is to generate funds from hunting to bolster captive breeding that aims to enhance the propagation and survival of the species in the wild. Congress could address captive hunting through permit regulations, either supporting permits that request trophies imported from captive hunting operations or denying permits from these areas. \nAnother alternative to trophy hunting in wild areas is to ban trophy hunting outright. The range country would make this decision, with little to no participation from the United States. Several countries have banned trophy hunting, as discussed in the section on \" Range Country ,\" above. Some contend that banning hunting could benefit wildlife populations even with the loss of revenue from hunting fees. They argue that other forms of tourism (e.g., wildlife viewing) could sustain financial flows and incentivize conservation. \nOpponents of a ban on trophy hunting contend that trophy hunting has a positive impact in supporting biodiversity through increased revenue flows and rangeland conservation. They note that hunting bans result in lower revenues for wildlife conservation and communities and could be detrimental to certain communities that depend on hunting revenues. Furthermore, they contend that banning trophy hunting could affect habitat conservation; such a ban could allow for increased habitat conversion to agriculture or livestock rangelands, which has caused species declines due to poaching and human-wildlife conflicts. Banning trophy hunting in fringe regions within a country, where the only form of tourism that can be sustained is trophy hunting, can have negative economic effects, according to some. \nA ban on trophy hunting in Northern Botswana revealed negative consequences on the communal economy in areas that were previously hunting grounds. According to one study, the revenue generated by hunting expeditions represented around two-thirds of total tourism income. The ban on trophy hunting also led to halting certain CBNRM programs due to loss of funding for these opportunities. The ban on lion hunting particularly affected Botswana's economy, causing it to fall by almost 10% of GDP, according to some sources.\nIn some cases, the banning of hunting correlates with animal population declines. For example, in Kenya, which instituted a hunting ban in 1977, almost all the common wildlife species have declined from their previous levels since the ban to 2016. Concurrently, livestock numbers, notably sheep and goats, increased by 76.3% during the same period. Kenya's population increased from 14.5 million in 1977 to 48.5 million in 2016. Based, in part, on these data, scientists note that demographic pressure and livestock encroachment on wildlife rangelands appear to be the decisive factors leading to wildlife declines in Kenya.","output":"International trophy hunting is a multinational, multimillion-dollar industry practiced throughout the world. Trophy hunting is broadly defined as the killing of animals for recreation with the purpose of collecting trophies such as horns, antlers, skulls, skins, tusks, or teeth for display. The United States imports the most trophies of any country in the world. Congressional interest in trophy hunting is related to the recreational and ethical considerations of hunting and the potential consequences of hunting for conservation. For some, interest in trophy hunting centers on particular charismatic species, such as African lions, elephants, and rhinoceroses. Congress's role in addressing international trophy hunting is limited, because hunting is regulated by laws of the range country (i.e., the country where the hunted species resides). However, Congress could address trophy hunting through actions such as regulating trophy imports into the United States or providing funding and technical expertise to conserve hunted species in range countries.\nInternational trophy hunting generates controversy because of its potential costs and benefits to conservation, ethical considerations, and its contribution to local economies in range states. Proponents of trophy hunting contend that the practice provides an estimated millions of dollars for the conservation of species in exchange for the hunting of a proportionally small number of individuals. Further, they argue that trophy hunting can create incentives for conserving habitat and ecosystems where hunted animals roam and, in some impoverished areas in range countries, can provide a means of income, employment, and community development. Critics of trophy hunting contend that the practice can lead to the decline of rare and endangered species and that the pathway of moving funds from hunting to conservation can be fraught with corruption and mismanagement. Further, some contend it is unethical to kill animals for sport, or at all, and that animals should not be valued according to how much a hunter would pay to hunt them.\nThe international community, including the United States, has laws and regulations related to international trophy hunting. The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international agreement that creates a series of incrementally more stringent restrictions on imports and exports of wildlife, depending on the sustainability of such trade. The European Union (EU) also addresses trophy hunting through regulating trade of trophies, issuing permits for trade of trophies, and suspending certain species from trade with the EU if the species is in peril. In the United States, international trophy hunting is addressed by several laws, including the Endangered Species Act (ESA; 16 U.S.C. \u00a7\u00a71531-1543), which implements CITES. ESA does not regulate trophy-hunting activities within range countries directly; rather, the law governs what can be imported into the United States. The U.S. Fish and Wildlife Service (FWS) regulates trophy hunting, in part, by issuing permits to import trophies of species that are listed as threatened or endangered under ESA.\nCongress could address international sport hunting by regulating trophy imports and funding conservation and research activities overseas, among other options. Some activities that Congress could consider, according to observers, include\ndirecting the U.S. government to work with foreign governments and partners to monitor hunting practices and game species to help ensure a positive impact from trophy hunting in range states; creating uniform standards for evaluating trophy import permits, specifically whether trophy hunting could enhance the survival of a population as addressed under ESA or be nondetrimental to a population as defined by CITES; mandating that permit applications and decisions be made publicly available; and creating an independent third-party certification system to evaluate trophy hunting operations.\nCongress also might evaluate alternatives to trophy hunting in the wild. In Africa, for example, some countries have banned trophy hunting altogether and support wildlife viewing and tourism in its place. Some countries, such as South Africa, have large, fenced game ranches where animals can be hunted in a practice called captive hunting. Some contend these operations do not allow for fair chase hunting (i.e., hunting wild animals without boundaries) or contribute to conservation, whereas others argue that they facilitate wildlife management and reduce poaching."}
{"id":"gao_GAO-18-254","pid":"gao_GAO-18-254_0","input":"\tBackground\n\nFintech\u2014originally short for financial technology\u2014refers to the use of  technology and innovation to provide financial products and services. For  purposes of this report, fintech firms are nontraditional technology- enabled providers, such as start-ups or more established technology  firms, such as Apple or Google, that are offering traditional financial  products or services to consumers. Fintech products or services are  typically provided\u2014sometimes exclusively\u2014through the Internet or via  mobile devices, such as smartphones, rather than being provided through  face-to-face visits to financial institution branches.\nThe products and services that fintech firms offer include: payments between individuals, and between individuals and  loans to consumers and businesses; advice on wealth management or general financial activities; and distributed ledger technology used to make payments, record and  track asset ownership, and other purposes.\n\n\t\tFintech Payments\n\nVarious fintech firms offer ways for individuals to make payments and  transfer value, including for purchasing goods or services or for  transferring money to individuals domestically or internationally. The  payments offered by these providers are often conducted using  applications (apps) on smartphones or other mobile devices. Often these  fintech payments involve the use of accounts linked to existing debit or  credit cards and are processed through the existing networks and  channels for these types of payments. In some cases, fintech providers  may also route their payments through the Automated Clearing House  networks, which have traditionally been used to facilitate automatic bill  paying to utilities or other merchants or funds transfers between banks.  Fintech payments can also be made by charging a consumer\u2019s phone bill.  For example, consumers can send charity contributions via text or charge  in-app purchases to their mobile phone bill.\nOne common fintech payment method involves mobile wallets, or  electronic versions of consumers\u2019 wallets, which offer consumers the  convenience of conducting transactions without having to enter credit or  debit card information for each transaction. Using a mobile wallet,  consumers can store payment card information and other information on  their mobile devices that is often needed to complete a purchase.  Generally, mobile wallets replace sensitive information with random  values\u2014a process called tokenization\u2014to provide greater security when  making a payment, and transmit this information using existing credit and  debit card networks. A variety of fintech firms provide mobile wallets,  including Apple, Google, and Samsung.\nConsumers may use mobile wallets to make payments to other  consumers or to businesses; in mobile applications; through mobile  browsers; or in-person at a store\u2019s point-of-sale terminal. Some providers,  such as Paypal and Venmo, allow individuals to create accounts on  mobile devices to make payments funded by debit or credit cards, as well  receive and store funds sent to the account owner that can be used to  make payments to others or buy goods from merchants. Figure 1  illustrates how a mobile wallet enables the payment information to be  transferred by allowing compatible devices to exchange data when placed  in very close proximity to each other using various technologies, such as  wireless communication.\nRegarding the total volume of payments by fintech providers, the  association representing state banking supervisors estimated that fintech  payment firms were likely used to facilitate payments or currency  exchanges of up to $189 billion in the first 2 quarters of 2017. In a 2016  report on consumers\u2019 use of mobile financial services, the Federal  Reserve\u2019s survey of more than 2,220 respondents found that over 30  percent of consumers aged 18-44 had made payments using mobile  phones sometime during 2015. According to a report by the Smart  Payment Association, 200,000 locations accepted Apple Pay when it was  launched in September 2014, but by February 2016, this number had  reached 2 million. According to Paypal, it had 218 million active  customer accounts at the end of the third quarter of 2017 and processed  over 6 billion payments valued at more than $354 billion in 2016.\n\n\t\tFintech Lending\n\nFintech lenders\u2014often referred to as marketplace lenders and which  operate almost exclusively online \u2014offer a variety of loan types and may  use different sources of funds than traditional lenders. The types of loans  offered by fintech providers include consumer and small business loans.  While these lenders may use traditional means of assessing borrowers\u2019  creditworthiness, such as credit scores, they also may analyze large  amounts of additional or alternative sources of data on other aspects of  borrower characteristics, such as information from bank accounts, to  determine creditworthiness.\nFintech lenders can follow various models. For example, some conduct  person-to-person lending in which loans are financed by individual  investors. In other cases, the funds for these loans can come from  institutional investors such as hedge funds, financial institutions, or from  notes sold to individual investors. In some cases, funding for loans is  obtained by securitizing previously-made loans and selling securities  backed by the cashflows from the underlying loans. The fintech lenders  that use external capital are referred to as direct lenders and include such  firms as SoFi and Earnest. Figure 2 below shows the flow of funds for  typical direct lenders.\nOther fintech lenders include lenders that partner with depository  institutions\u2014including banks or credit unions\u2014to originate loans that are  then purchased by the lender or by another investor. Examples of lenders  partnered with depository institutions include LendingClub Corporation,  Prosper, and Upstart. Figure 3 shows the flow of funds for such lenders.  Some lenders, such as OnDeck, have now developed hybrid models,  selling some whole loans to institutional investors while retaining servicing  responsibilities.\nOne firm that tracks fintech activities reported that the volume of lending  by 13 of the most significant lenders had reached about $61 billion as of  the end of September 2016, and other market monitors estimate that  fintech lending volumes could grow to as much as $90 billion to $122  billion by 2020.\n\n\t\tFintech Wealth Management and Financial Advice\n\nFintech firms are also offering wealth management or other financial  advice, some with minimal or no human interaction. For example, new  firms called robo-advisers are offering investors advice using algorithms  based on these investors\u2019 data and risk preferences to provide advice on  recommended asset holdings and allocations. Fintech firms offering these  advice services include Betterment, Personal Capital, and Wealthfront.  Figure 4 illustrates a typical case of a consumer using a fintech wealth  management adviser.\nOne research firm estimated in July 2017 that robo-adviser firms would  have as much as $1 trillion in assets under management by 2020 and as  much as $4 trillion by 2022.\nIn addition, some fintech firms\u2014referred to as financial account  aggregators\u2014allow consumers to aggregate the information from their  various financial accounts, including their assets in bank accounts and  brokerage accounts, to enable them to better see their financial health  and receive advice on alternative ways to save money or manage their  finances. Consumers can access this combined information either online  or on mobile devices. Account aggregator firms offering this type of  advice on savings and other activities include Mint and HelloWallet.\n\n\t\tDistributed Ledger Technologies\n\nDistributed ledger technology (DLT) is a secured way of conducting  transfers of digital assets in a near real-time basis potentially without the  need for a central authority. DLT involves a distributed database  maintained over a network of connected computers that allows network  participants to share and retain identical cryptographically secured  records. Such networks can consist of individuals, financial entities, or  other businesses.\nBlockchain is one type of DLT. A blockchain is a shared digital ledger that  records transactions in a public or private network. Distributed to all  members in the network, the ledger permanently records, in a sequential  chain of cryptographically secured blocks, the history of transactions that  take place among the participants in the network. DLT products can have  different types of access control. For example, some may be  \u201cunpermissioned\u201d (public) ledgers that are open to everyone to contribute  data to the ledger and have no central control, while others may be  \u201cpermissioned\u201d (private) ledgers that allow only certain participants to add  records and verify the contents of the ledger.\nThe financial services industry has identified various potential uses for  DLT. These include tracking international money transfers or tracking  the changes of ownership of various financial assets, such as or  securities like bonds or stocks or derivatives like swaps contracts. In  addition, DLT is being used to track ownership of bitcoin, a virtual  currency, specifically using a blockchain.\nSome companies are using DLT to raise funds. According to a recent  bulletin by U.S. securities regulators, these virtual coins or tokens are  being created and then disseminated using DLT as part of offerings  known as token sales or initial coin offerings. As part of these token  sales, purchasers may use fiat currency (e.g., U.S. dollars) or virtual  currencies to buy these virtual coins or tokens. Currently, the capital  raised from the sales may be used to fund development of a digital  platform, software, or other project; or, the virtual tokens or coins may be  used to access the platform, use the software, or otherwise participate in  the project. After they are issued, in some cases the virtual coins or  tokens may be resold to others in a secondary market on virtual currency  exchanges or other platforms.\n\n\t\tVarious Regulators May Oversee Fintech Activities\n\nA variety of federal and state regulatory bodies may oversee fintech firms  or their activities to the extent these firms provide a regulated payment;  lending; wealth management; or distributed ledger technology service or  activity. Table 1 explains the basic functions of the relevant federal  regulators.\nIn addition to the federal regulators above, various state entities also  conduct regulatory activities over fintech firms operating within their  jurisdictions. According to the association representing state regulators,  state financial services regulators license and supervise activities, such  as money transmission, consumer lending, and debt collection,  irrespective of technology deployed. Nonbank financial service providers  that offer services directly to consumers are likely subject to state  oversight. In addition to state financial services regulators, state securities  regulators, state entities that oversee corporate activities, and state  attorneys general have jurisdiction over certain fintech firms. In general,  these entities may have authority to license or register firms, conduct  exams, and take enforcement actions for violations of state laws or  regulatory requirements.\n\n\tFintech Activities Can Provide Benefits and Pose Risks to Consumers and the Broader Financial System\n\nFintech products in payments; lending; wealth management; and  distributed ledger technology can provide consumers and the broader  financial system with various benefits but may also pose risks similar to  those of traditional products. While existing laws apply to fintech products  and services in most cases, some products pose additional risks that may  not be sufficiently covered by existing laws.\n\n\t\tFintech Products Can Provide Various Consumer Benefits\n\nAccording to our prior work, literature we reviewed, and stakeholders we  interviewed, consumer benefits of fintech products include greater  convenience; lower cost; increased financial inclusion; faster services;  and improved security.\nGreater convenience: Consumers can use fintech products and  services on their mobile device to make payments; transfer money;  easily obtain payment for shared expenses; obtain loans; or to receive  investment advice without the time and expense of visiting a financial  service provider\u2019s physical location. They can also access these  services outside of standard business hours. In addition, the ability to  see information from all of their financial accounts together in a single  dashboard provided by an account aggregator is more convenient  than reviewing information from each account on separate  statements.\nLower cost: Innovations in payments, including the use of DLT, could  reduce the cost of payments for consumers. For example, one fintech  firm uses DLT to reduce the operational and liquidity costs traditionally  incurred with some international payments. Some fintech providers  do not charge fees for payments, so consumers save by avoiding  paying for checks or incurring automated teller machine fees. In  addition, because fintech providers often do not have overhead costs  associated with physical locations and use automation instead of  relying on large staffs to provide services, they may be able to pass  these cost savings on to consumers. For example, according to a  Treasury report, automated loan processing, underwriting, and  servicing may allow fintech lenders to offer lower rates or fees on their  loans because they have to hire fewer loan officers. Similarly,  automation in robo-advising could allow consumers to obtain  investment advice at a lower cost than if they obtained services from a  firm that relied more heavily upon human advisers.\nIncreased financial inclusion: Using alternative data may allow  fintech lenders to offer loans to consumers whose traditional credit  history may have been insufficient for banks to extend them credit.  CFPB officials stated that using alternative data\u2014including bill  payment history as a proxy for debt repayment\u2014could expand  responsible access to credit, particularly to some consumers who are  among the estimated 45 million people who lack traditional credit  scores. Similarly, a study by FDIC staff noted that fintech accounts  may also enable consumers whose traditional accounts are closed  due to lack of profitability for the provider or other reasons to continue  to have access to financial services. Also, robo-advising services  can make investment advice more accessible to consumers who  cannot meet account minimums at traditional advisers by offering  lower account minimums.\nFaster services: Automation may reduce transaction times for  services like loan approval or investment advice. Stored payment data  in fintech providers\u2019 mobile wallets may reduce transaction time for  online purchases because consumers do not need to reenter billing  information. Further, such data may reduce transaction time for in- store purchases because transactions using contactless payments  are faster than transactions using card readers and cash. Peer-to- peer payments made via mobile wallets may transfer money faster  than checks. Also, using DLT may greatly reduce settlement times for  currency, derivatives, and securities transactions by improving  processes or reducing the number of entities involved in a transaction.  For example, one firm is using DLT to reduce settlement for securities  from 2 days to the same day.\nImproved security: While credit and debit transactions have  traditionally transmitted sensitive information that can be hacked and  used to make fraudulent transfers, fintech providers\u2019 mobile wallets  generally replace this sensitive information with randomly generated  numbers that mitigate the risk that transaction information can be  used fraudulently (tokenization), according to the Federal Reserve\u2019s  Mobile Payments Industry Workgroup. Similarly, while lost or stolen  credit and debit cards can be used to make fraudulent payments, a  lost or stolen mobile device can have security features that protect a  mobile wallet from unauthorized use. For example, according to FTC,  mobile device features such as device passwords, fingerprint readers,  and face recognition software can help protect consumer accounts  from unauthorized access. Additionally, FCC notes in a consumer  guide that consumers\u2019 ability to disable their mobile devices remotely  can help prevent fraudulent use of a consumer\u2019s fintech provider  accounts if their mobile devices have been lost or stolen. Further,  mobile device Global Positioning System (GPS) data can help identify  suspicious activity in consumer accounts or to ensure that a mobile  phone being used at a particular merchant is actually at that location,  according to the Federal Reserve\u2019s Mobile Payments Industry  Workgroup and others.\n\n\t\tFintech Products Generally Pose Consumer Risks Similar to Those of Traditional Products\n\nThe literature we reviewed and stakeholders we interviewed also  identified potential risks fintech products pose to consumers, including  fraud, discrimination, and unsuitable advice. In general, these risks are  similar to those posed by traditional financial products. While laws that  apply to traditional products also apply to fintech products in most cases,  some fintech products pose additional risks that may not be sufficiently  addressed by existing laws. While the legal framework for consumer  protection applies to many of the risks associated with fintech products,  the extent to which consumers benefit from these protections is a function  of the existing regulatory framework and its coverage of fintech activity.  We discuss the regulatory framework for fintech products in greater detail  later in this report.\n\n\t\t\tFintech Payments\n\nConsumers face the risk of unauthorized transactions regardless of  whether they use a traditional or fintech firm to make payments. CFPB  officials we interviewed told us that some fintech products, such as mobile  wallets, increase the number of firms involved in a transaction, which may  increase the risk of unauthorized transactions. However, when  consumers fund their mobile wallets by linking to traditional funding  sources\u2014debit or credit cards or bank accounts\u2014consumer protection  laws such as the Electronic Fund Transfer Act and the Truth in Lending  Act generally apply. These acts and their implementing regulations  provide that consumers can dispute charges to these accounts and  liability for losses may be limited to $0 if disputes are made within  specified time frames.\nConsumer protection laws, such as the Electronic Fund Transfer Act,  which apply to traditional funding sources, do not yet cover payments  funded by mobile wallet balances or mobile carrier billing. To address this  gap in protections for mobile wallet funds, CFPB issued a final rule on  prepaid accounts that will extend protections for error resolution and  liability for unauthorized transfers to prepaid account and mobile wallet  balances. This rule had previously been scheduled to become effective in  April 2018, but in January 2018, CFPB delayed the effective date of the  rule to April 1, 2019. However, fintech firms we interviewed told us that  even when certain consumer protections are not required by statute or  regulation, they voluntarily provide similar protections and disclose these  protections in their terms of service.\nAgencies have also issued tips for consumers to safeguard their mobile  devices and identify fraudulent payments. Similarly, wireless carriers  have taken steps to mitigate fraudulent billing in response to enforcement  actions, including offering services that prevent third parties from adding  charges to consumer bills without consumers\u2019 knowledge or permission\u2014 a practice known as \u201ccramming.\u201d However, FCC has found that fraudulent  billing continues to be a problem. FCC\u2019s July 2017 proposed cramming  rule seeks to codify the agency\u2019s existing prohibition against fraudulent  billing through language explicitly prohibiting wireless carriers from  placing third-party charges on consumers\u2019 bills without consumer  verification. In addition, FCC and FTC have issued tips for consumers  and firms publicizing practices that help avoid cramming.\nConsumers also face the risk their funds could be lost due to the failure of  their payment provider. Although consumers with funds in a bank account  have protection from this risk through federal deposit insurance up to  $250,000, consumers with funds in a mobile wallet may not be similarly  protected. To address this risk, some fintech firms deposit consumers\u2019  mobile wallet balances into an FDIC-insured bank or savings association,  resulting in the funds being insured by FDIC up to the applicable deposit  insurance limit in the event of the failure of the bank or savings  association. Other fintech firms voluntarily disclose to consumers in their  terms and conditions that any mobile wallet balances they hold are not FDIC insured. However, according to the Conference of State Bank  Supervisors (CSBS), 49 states have laws that require fintech firms  engaged in money transmission or stored value to self-insure through  bonding, holding investments against funds held or transmitted, and  meeting minimum net worth requirements.\nFurther, consumers face the risk that their mobile wallet balances will not  be accessible in a timely manner. Under the Expedited Funds Availability  Act, banks are required to make customers\u2019 deposited funds available to  them within prescribed time frames. For example, banks are typically  required to make funds a customer receives through an electronic  transfer available by the next business day. However, as nonbanks,  fintech firms are not subject to this act\u2019s requirements and therefore do  not have to make mobile wallet balances available under the same time  frames. For example, one fintech firm we interviewed told us that most  transfers from mobile wallets to bank accounts make funds available by  the next business day, but certain circumstances, such as suspicious  account activity, may cause the firm to delay transfers a few days.  Another fintech firm we interviewed told us that transfer amounts are  limited based on anti-money laundering requirements. However, fintech  firms we spoke with voluntarily disclose the availability of funds and any  limits on access in the terms and conditions provided to customers when  they create their accounts. However, FTC recently settled with a fintech  payment provider for delays in fund accessibility experienced by its  users.  In its complaint, FTC charged that the firm had failed to disclose  that these funds could be frozen or removed based on the results of the  firm\u2019s review of the underlying transaction. As a result, consumers  complained that at times, the firm delayed the withdrawal of funds or  reversed the underlying transactions after initially notifying them that the  funds were available.\n\n\t\t\tFintech Lending\n\nConsumers face risks associated with unclear terms and conditions  regardless of whether they borrow from a traditional or fintech lender. For  example, consumers could have difficulty understanding their repayment  obligations or how those terms compare to terms offered by other  lenders. However, the Truth in Lending Act requires lenders to provide  consumers with standardized, easy-to-understand information about the  terms of the loan and enables consumers to make claims against lenders  for violating Truth in Lending Act requirements.\nConsumers also face risk of discrimination and unfair credit practices  regardless of whether they borrow from a traditional or fintech lender.  However, these risks may not be fully understood with fintech lenders that  use alternative underwriting standards and consumer data\u2014such as  information on rent payments and college attended. For example, fintech  firms assessing applicants\u2019 creditworthiness with criteria highly correlated  with a protected class\u2014such as race or marital status\u2014may lead to a  disproportionate negative effect. As with traditional lenders, federal fair  lending laws, such as the Equal Credit Opportunity Act, apply to fintech  lenders. In addition, some fintech lenders have taken steps that aim to  address this risk. For example, one fintech lender said it monitors the  effect any changes to their underwriting models may have on fair lending  risk.\nConsumers face risk of harm due to inaccurate credit assessments, but  these risks are also less understood with fintech lenders that use  alternative data to underwrite loans. For example, inaccurate data or  models used by a fintech lender could classify borrowers as higher credit  risks than they actually are. This could result in those borrowers paying  unnecessarily high interest rates and increasing their risk of default or  could result in creditworthy borrowers being denied credit. Whereas the  Fair Credit Reporting Act requires that borrowers have an opportunity to  check and correct inaccuracies in credit reports, borrowers could face  more challenges in checking and correcting alternative data that some  fintech lenders use to make underwriting decisions because alternative  data are not typically reflected in credit reports. However, the Equal  Credit Opportunity Act requires lenders, including fintech lenders, that  deny credit to applicants to disclose the specific reasons for denial.  Alternatively, if the fintech lender\u2019s underwriting is too lax, loans could be  made to borrowers who lack the ability to repay them. Borrowers who  default under these circumstances then face limited access to and higher  prices for credit in the future.\n\n\t\t\tFintech Wealth Management\n\nConsumers face risks of receiving unsuitable investment advice  regardless of whether they obtain advice from a traditional or robo- adviser. While a human adviser may be able to mitigate this risk by  probing consumers for more information to assess needs, risk tolerance,  or other important factors, a robo-adviser\u2019s ability to mitigate this risk may  be based on a discrete set of questions to develop a customer profile. In  addition, advisers could make inaccurate or inappropriate economic  assumptions, perhaps due to a failure to factor in changing economic  conditions, which could result in flawed investment recommendations.  While human advisers may be able to mitigate this risk to some degree  based on their ability to adjust to economic conditions, a robo-adviser\u2019s  ability to mitigate this risk is based on whether its algorithm has been  updated to reflect the most recent economic conditions. Because, as we  discuss below, robo-advisers generally are required to comply with the  same requirements as traditional investment advisers, customers of robo- advisers and traditional advisers receive the same protection from these  risks.\nConsumers who use fintech services that provide an aggregated view of  their accounts at other financial institutions could potentially be more  exposed to losses due to fraud. If a consumer authorizes an account  aggregator to access their financial accounts and grants the aggregator  authority to make transfers, the consumer may be liable for fraudulent  transfers made. CFPB is studying risks associated with entities that rely  on access to consumer financial accounts and account-related  information, and has issued a related request for information (we address  this issue later in this report).\n\n\t\t\tDistributed Ledger Technology\n\nDLT can be used to issue and distribute digital assets known as tokens to  consumers and investors. Virtual currencies\u2014tokens that are digital  representations of value that are not government-issued legal tender\u2014 could pose some unique risks to consumers. For example, the ability of  virtual currency users to recover funds lost due to fraud or errors may be  more limited than that of customers using traditional products like  payment cards or bank transfers to make payments. Whereas traditional  transactions can be reversed to correct fraud or errors, many virtual  currency transactions are designed to be irreversible. Also, unlike  storing dollars in a bank account, if a consumer stores their virtual  currency in a mobile wallet, their wallet provider may disclaim  responsibility for replacing virtual currency that is stolen. Further, CFPB\u2019s  prepaid accounts rule, which will extend consumer protections to prepaid  cards and mobile wallets with stored value, explicitly does not extend  consumer protections to virtual currencies. However, firms that transmit,  exchange, hold, or otherwise control virtual currency may be subject to  state consumer protection law.\nIn addition to fraud and errors, consumers who use virtual currencies may  face other risks of loss. Federal deposit insurance does not apply to  virtual currency balances. As a result, according to FDIC staff, consumers  could face losses if they store their virtual currencies with a mobile wallet  firm that goes out of business unless the firm offers private insurance.  Further, if consumers store their virtual currency on their own and  misplace or forget their account access information, they may lose access  to their funds. Unlike bank accounts for which users can reset passwords  or usernames, some wallets do not offer a way to reset such information.  To help consumers address these risks, federal agencies and state  regulators have issued documents publicizing practices that may help  consumers use virtual currency more safely.\nTokens\u2014which may also function similarly to a security\u2014could pose  some unique risks to investors, and some investor protections may not be  available. Token sales, sometimes known as initial coin offerings or ICOs,  are being used by firms to raise capital from investors and may pose  investor risks, including fraud and theft. For example, one firm allegedly  promised investors it would invest its token sale earnings in real estate,  but instead allegedly defrauded investors of their investments. Fraud  and theft are risks of other securities offerings, and investors receive  protections from these risks under the Securities Act of 1933 and the  Securities Exchange Act of 1934 for token sales that meet SEC\u2019s  definition of a security. However, these protections do not apply to  investors who participate in token sales that do not meet the definition of  a security. In December 2017, SEC issued a cease-and-desist order to  one firm for failure to register their token sale with SEC. In addition,  SEC has reported that an investor\u2019s ability to recover funds may be  limited if key parties to token sales are located overseas or operating  unlawfully. To help investors address these risks, SEC and FINRA have  issued documents publicizing risks of token sale investment.\nTokens traded on a platform may also be considered commodities and  may pose investor risks including fraud and theft. Platforms that facilitate  leveraged, margined, or financed trading of tokens may be subject to a  requirement to register with the CFTC. To help investors understand  tokens, CFTC has issued a report publicizing potential risks of virtual  currencies and clarifying cases in which investors may be at risk because  CFTC does not have oversight authority. For example, virtual currency  and token exchanges that conduct certain spot or cash market  transactions but do not use leverage, margin, or financing are not  required to follow all of the rules that regulated exchanges are required to  follow.\nDLT applications may pose other unknown risks compared to the  technologies and processes they replace, given that the technology is in  the early stages of development. For example, CFTC and the Federal  Reserve have identified cybersecurity and operational risks as potential  risks of DLT. FDIC officials said that finality of a transaction under a DLT  settlement may potentially raise legal challenges. Also, applications of  DLT that depend on consensus for validating transactions are vulnerable  to a \u201c51 percent attack,\u201d which could defraud consumers by revising their  transactions or sending fraudulent payments. However, according to  market observers, such an attack is unlikely and has not been carried out.\n\n\t\tFintech Products Can Pose Other Risks to Consumers; Risks to the Broader Financial System Are Unclear\n\nConsumers face the risk of financial loss due to data breaches regardless  of whether they use a traditional or fintech firm, and these breaches could  undermine the financial system by eroding consumer trust in financial  institutions. Similar to traditional products and services that collect  sensitive consumer information and are connected to the Internet, fintech  products and services may be vulnerable to cyberattack and can pose  data security risks. In addition, one market observer we interviewed told  us that hackers may target these new fintech firms before their security  systems are mature.\nHowever, according to literature we reviewed and fintech firms and  market observers we interviewed, some fintech firms have adopted  technologies or practices designed to mitigate security risks. For  example, new fintech firms can use the latest information technology  systems to secure their products instead of having to update older  systems. Additionally, as discussed above, some fintech firms use new  techniques and leverage mobile device features to enhance data security,  and one fintech firm said that it also uses technology that contacts clients  if a data breach issue arises. Like traditional financial institutions, rules  and guidelines implementing the Gramm-Leach-Bliley Act (GLBA)  generally require fintech firms to secure customer information. In  addition, some regulators have issued guidance to consumers publicizing  practices that help avoid security problems when using fintech products.  Regulators have also issued guidance to businesses including fintech  firms that recommends that they adopt policies and procedures that  address the prevention and detection of, and response to, cybersecurity  threats. For example, the New York State Department of Financial  Services requires regulated entities to meet cybersecurity requirements  outlined in regulation.\nSome fintech firms may also pose privacy concerns because they may  collect more consumer data than traditional firms. For example, fintech  lenders that use alternative data in underwriting may have sensitive  information about consumers\u2019 educational background, mobile phone  payments, or other data. One fintech firm we spoke with requires  consumers to provide additional data, such as what a payment is for, in  order to make peer-to-peer payments. Some data aggregators may hold  consumer data without disclosing what rights consumers have to delete  the data or prevent the data from being shared with other parties. A leak  of these or other data held by fintech firms may expose characteristics  that people view as sensitive. GLBA generally requires fintech firms and  traditional financial institutions to safeguard nonpublic personal  information about customers. According to literature we reviewed and  fintech firms and market observers we interviewed, as with data security,  some fintech firms use new technologies or mobile device features to  mitigate data privacy risks. In addition, some regulators have issued  guidance to consumers publicizing practices that help maintain privacy  when using online products and services, including those provided by  fintech firms. Regulators have also issued GLBA guidance to  businesses including fintech firms recommending that they adopt policies  and procedures to prevent, detect, and address privacy threats.\nSimilar to traditional products and services, fintech products may be used  to facilitate illicit activities, including money laundering, terrorist financing,  and evading sanctions program requirements. For example, in 2015, the  Financial Action Task Force (FATF) reported that new payment methods  pose an emerging terrorist finance vulnerability because users can  access these methods from anywhere in the world and it is difficult for  enforcement agencies to identify the beneficiary. However, FATF found  that the extent to which terrorist groups actually exploit these  technologies is unclear and said that enforcement agencies should  monitor these risks for developments. Further, FATF has stated that  fintech innovations provide an opportunity to bring anti-money laundering  efforts into the 21st century by reducing dependency on cash and  informal systems and making it easier for authorities to detect and follow  illicit financial flows. Relevant laws that prohibit financial crimes apply to  fintech products. For example, the Bank Secrecy Act (which established  reporting, recordkeeping, and other anti-money laundering requirements)  and economic sanctions programs (which create economic penalties in  support of U.S. policy priorities) apply to all financial firms that transmit  money regardless of whether they use traditional or fintech products.\nFinally, market observers have questioned whether fintech activities could  create risks to overall financial stability, but many have said such risks are  relatively minimal due to fintech firms\u2019 small market presence. While  direct or indirect linkages between large financial institutions could lead  financial problems at one firm to create similar problems for other firms  that can undermine financial stability, studies by regulators in various  countries and international organizations found that fintech firms have not  generally reached a level of interconnectedness where their financial  distress would threaten the stability of other financial system  participants. For example, the Bank for International Settlements and  the Financial Stability Board reported that in 2015 fintech accounted for 2  percent of new credit in the United States. Additionally, after assessing  virtual currencies, the European Central Bank concluded in a November  2017 report that virtual currencies were not a threat to financial stability  due to their limited connection with the real economy, their low volume  traded, and the lack of wide user acceptance.\nHowever, the Financial Stability Board and other market observers have  noted that fintech firms could potentially affect financial stability in both  positive and negative ways as the activities and firms evolve. For  example, fintech firms could help decentralize and diversify the financial  services market, and they could diversify exposure to risk by increasing  access to financial services for consumers and small businesses. On the  other hand, providers could potentially also increase risks to financial  stability. For example, robo-advisers could amplify swings in asset prices  if their risk models rely on similar algorithms, making the portfolio  allocation methods of robo-advisers more highly correlated than those of  traditional advisers, although according to the Financial Stability  Oversight Council, this risk could also arise if traditional advisers follow  similar allocation strategies. Similarly, according to the Financial Stability  Board, fintech lenders could potentially amplify swings in credit availability  if the investors that fund many marketplace lending products are more  willing to fund loans during market upturns or less willing to fund loans  during market downturns. To help balance these potential benefits and  risks, the Financial Stability Board recommended that international bodies  and national authorities continue to monitor the issues and consider the  effects of fintech in their risk assessments and regulatory frameworks.\n\n\tFintech Firms\u2019 Compliance with Applicable Laws Is Subject to Varied Federal Oversight\n\nThe extent to which fintech firms are subject to federal oversight of their  compliance with applicable consumer or other laws varied. Fintech firms  that offer investment advice typically register with and are subject to  examinations by federal securities regulators. Some fintech firms  providing payments or loans that have partnered with federally regulated  banks or credit unions may receive indirect oversight from federal  financial regulators as part of their efforts to ensure that their regulated  entities are adequately managing the risks of these arrangements.  Nonpartnered fintech firms would not typically be subject to routine  examinations by a federal financial regulator but would instead be subject  to state regulatory oversight and enforcement. While fintech firms and  financial institutions are subject to different degrees of routine federal  oversight, we found that indications of fintech firms causing widespread  harm were limited as they were subject to fewer complaints than large  financial institutions.\n\n\t\tFintech Firms Providing Investment Advice Are Subject to the Same Oversight as Traditional Financial Institutions\n\nFintech robo-advisers offering wealth management advice would  generally be subject to the same federal and state oversight as traditional  investment advisers. Under the Investment Advisers Act of 1940 and  state securities laws, any entity or individual that offers investment advice  for compensation generally must register as an investment adviser\u2014with  SEC or states\u2014and adhere to various reporting and conduct  requirements. When providing advice, investment advisers\u2014traditional  or fintech\u2014are considered fiduciaries to their clients, which means they  owe a duty of care and loyalty to their clients, and they must disclose all  actual or potential conflicts of interest, and act in their clients\u2019 best  interest. To review for compliance with this standard and other applicable  requirements, staff from SEC and state securities regulators conduct  examinations of registered investment advisers. Specifically, state  regulators are responsible for conducting examinations of investment  advisers that operate in fewer than 15 states and hold client assets under  management of less than $100 million. However, according to staff from  the North American Securities Administrators Association\u2014a membership  organization for state, provincial, and territorial securities administrators in  the United States, Canada, and Mexico\u2014no robo-adviser firms were  solely regulated by the states as of October 2017.\n\n\t\tFintech Firms That Partner with Financial Institutions May Be Subject to Indirect Federal Financial Regulator Oversight\n\nSome fintech firms may be subject to indirect federal oversight as part of  relationships they have entered into with regulated financial institutions. If  fintech firms partner with federally-regulated financial institutions, such as  a bank or credit union, federal financial regulators may conduct  examinations of the regulated financial intuition that could include some  review of the extent to which the fintech firm may affect the partner  financial institution\u2019s adherence to relevant regulations through the  services provided to the financial institution. Regulators conduct these  examinations in order to assess the risk to the regulated institution  because the failure of the fintech firm to follow such laws could expose  the bank or credit union to financial or other risks.\nAs part of the indirect oversight of fintech firms, the financial institution  would be expected by its regulators, under various third-party guidance  issuances by these regulators, to ensure that any risks to the institution  resulting from the relationship with the fintech firm are assessed and  mitigated. Among other things, banks and credit unions should conduct  due diligence on potential third-party partners, including having a process  within the institution for managing the risks posed to their institution by the  third party. For example, OCC third-party guidance states that banks  should adopt risk management processes that are commensurate with  the level of risk and complexity of the third-party relationship. These  processes include establishing risk-mitigating controls, retaining  appropriate documentation of the bank\u2019s efforts to obtain information on  third parties, and ensuring that contracts meet the bank\u2019s compliance  needs.\nAlthough fintech firms partnering with federally regulated institutions  would be expected to follow the practices in this guidance, the extent to  which they would be overseen by a federal financial regulator was limited.  For example, FDIC and OCC staff told us that they had examined a  fintech firm that provides financial account aggregation services to  regulated institutions. This review focused on the fintech firm\u2019s data  security rather than its activities with consumers. FDIC staff also said they  conducted exploratory discussions with some fintech lenders, but these  firms were not part of their technology service provider examination  program. However, as of November 2017, FDIC and OCC staff noted that  they had not completed examinations of fintech firms within our scope.  NCUA staff noted that NCUA does not have authority to examine services  provided to credit unions by third-party service providers. In order to  examine any services provided to credit unions, NCUA must rely on credit  unions voluntarily providing information on the third-party service  provider. However, NCUA\u2019s staff noted some of their examiners had  accompanied state regulators in an examination that involved a credit  union\u2019s partnership with a fintech payments firm.\n\n\t\tOther Fintech Firms Are Not Routinely Overseen by Federal Financial Regulators, but Are Subject to State Oversight\n\nFintech firms not providing investment advice or partnered with federally- regulated financial institutions would be subject to routine oversight by a  federal regulator only under certain circumstances. For example, CFPB  could examine some fintech firms as a result of its examination  authorities. Specifically, it has supervisory authority over certain  nondepository institutions, including mortgage lenders and servicers,  payday and student loan providers, and \u201clarger participants\u201d in consumer  financial product and service markets, which could include fintech  providers. CFPB has conducted or plans to conduct examinations of  fintech firms that meet the agency\u2019s definition of \u2018\u201clarger participants\u201d in  sectors for which they have designated such participants. For example,  according to CFPB staff, it has conducted a stand-alone examination of a  fintech payments company that provides international remittances, and it  has scheduled an examination of a fintech lender that provides student  loans. As of October 2017, it had not defined other \u201clarger participants\u201d  specifically for other markets in which fintech firms may be active, but it is  considering a proposed rule to supervise larger participants in the  personal loan markets, which might include larger fintech lenders. CFPB  may also conduct examinations of individual companies that it determines  pose risks to consumers, as identified in public orders. Furthermore,  CFPB\u2019s supervisory authority also extends to third-party service providers  of nondepository institutions overseen by the agency.\nFintech firms may also be subject to examinations related to their  compliance with anti-money laundering laws and related requirements.  FinCEN, which is responsible for administering federal anti-money  laundering laws, has authority to examine any fintech firms conducting  money transmission, according to Treasury officials. These firms would  be required to comply with the applicable anti-money laundering and  counter-terrorist financing requirements, including registering with  FinCEN, establishing anti-money laundering programs, and reporting  suspicious activities to FinCEN. However, FinCEN delegates routine anti- money laundering examinations of federally-chartered or registered  financial institutions to the federal financial institution regulators. In other  cases, firms subject to anti-money laundering requirements, including  fintech payments or lending firms, could be examined by state regulators  and the Internal Revenue Service.\nFintech firms not subject to routine federal supervisory oversight would  instead generally be subject to state oversight. As of October 2017, 49  states, as well as the District of Columbia, Guam, Puerto Rico, and the  U.S. Virgin Islands, required entities that provide money transfer  services\u2014which may include some fintech payments firms\u2014to obtain  licenses to conduct such activities in their jurisdictions according to  documents from state regulator associations and CSBS staff. In  addition, all states and the District of Columbia required lending licenses  for consumer lenders operating in their states, according to CSBS staff.\nFurthermore, some states have created or provided guidance on licensing  statutes in order to include virtual currencies. For example, in 2015 New  York finalized a new license for virtual currency businesses under New  York\u2019s financial services law.\nState regulators in these jurisdictions conduct examinations of the firms  that hold licenses to assess their compliance with safety and soundness  and various other requirements. In addition, CSBS staff stated that as of  February 2018, approximately 37 states authorize state regulators to  examine banks\u2019 third-party service providers\u2014which could include fintech  companies.\nAccording to state regulators we interviewed in Illinois, New York, and  California, their agencies use the same approach to regulate and  examine fintech firms and traditional financial institutions providing similar  services. Furthermore, according to state regulatory associations and  some state regulatory agencies, fintech firms such as money transmitters  undergo regular supervision through on-site examinations to monitor  compliance with federal and state capital, liquidity, and consumer  protection requirements. For example, Money Transmitters Regulators  Association staff said that state regulators examine MSBs at least every 3  years depending on risk assessment and previous examination record,  and that state examinations cover federal and state laws, including data  security and anti-money laundering requirements. Similarly, staff from one  state regulator noted that they conduct consumer protection examinations  of direct lenders and take enforcement action if they identify potential  violations. CSBS staff noted that state requirements do not differ for  fintech firms because the requirements and examinations are activity- based. For example, most states have anti-money laundering  requirements within their money transmitter license laws. Due to state  anti-money laundering examination cycles, CSBS staff stated that MSBs  licensed in 40 or more total states experience an examination at least  once every 14 months.\n\n\t\tFintech Firms Can Be Subject to Enforcement Actions by Federal and State Regulators\n\nOutside of examinations, fintech firms that violate federal and state  regulations can be subject to enforcement actions by federal and state  agencies with such authorities. The OCC, Federal Reserve, and FDIC  may have enforcement jurisdiction over fintech firms when the fintech firm  is an \u201cinstitution affiliated party\u201d under the Federal Deposit Insurance Act  or a service provider under the Bank Service Company Act. In addition,  CFPB can take enforcement action against institutions under its  jurisdiction for noncompliance with federal consumer protection laws. For  example, in 2016, CFPB used its unfair, deceptive, or abusive acts or  practices authorities to investigate and issue a consent order against a  fintech firm operating an online payment system, which CFPB determined  had made deceptive data security claims to customers. FTC can also  take enforcement actions against fintech firms not registered or chartered  as a bank for violations of any federal consumer laws FTC enforces,  including the FTC Act\u2019s prohibition against unfair or deceptive acts or  practices. For example, in 2015, FTC took action against the providers of a smartphone application, alleging that they deceived consumers and  installed hidden malicious software code to generate virtual currencies for  the providers without consumer permission. It can also bring  enforcement action against non-bank service providers that maintain or  process customer information under its GLBA authority.\nOther federal entities can pursue enforcement action against fintech  firms. The Department of the Treasury\u2019s Office of Foreign Assets Control  can take action against fintech firms that violate U.S. sanctions  regulations. In addition, FinCEN can also pursue enforcement measures  against fintech firms that transmit funds\u2014such as certain fintech payment  and lending firms\u2014due to its authority to enforce compliance with the  Bank Secrecy Act\u2019s anti-money laundering and prevention of terrorist  financing provisions. For example, FinCEN took enforcement action in  May 2015 against the fintech firm Ripple\u2014a company that allows users to  make peer-to-peer transfers in any currency using a DLT-enabled  process\u2014for violating anti-money laundering requirements through its  sale of virtual currency. In 2016, CFTC brought an enforcement action  against a Hong Kong-based fintech firm for offering illegal off-exchange  financed retail commodity transactions in bitcoin and other  cryptocurrencies, and for failing to register as a futures commission  merchant.\nFinally, state regulators can also take enforcement action against  financial institutions and fintech firms that violate state data security or  consumer protection laws. In addition, state attorneys general may bring  actions against fintech companies through consumer protection and  deceptive trade practice acts, according to the National Association of  Attorneys General.\n\n\t\tIn Some Cases, Fintech Firms May Not Be Subject to Financial Regulator Oversight\n\nSome fintech companies may not be subject to any federal or state  financial oversight if they do not meet federal or state definitions of a  money service or other regulated business. For example, some fintech  payments firms\u2014such as certain mobile wallet providers\u2014might not be  subject to state or federal money service business requirements because  their role in the payment process does not specifically involve transmitting  money, according to state and federal regulators. One mobile wallet  provider claimed that it is not subject to federal financial regulatory  oversight because it does not transfer funds or authorize transactions, but  instead facilitates the transfer of customer data as part of the credit card  or debit card networks; it also does not retain any of its consumers\u2019  personal data, including data on purchase content, location, or dollar  amount.\n\n\t\tIndications of Fintech Activities Creating Widespread Consumer Harm Appear Limited Compared to Traditional Providers\n\nAvailable regulatory data show that the number of consumer complaints  against fintech activities appears modest compared to traditional  providers. For example, although our analysis of the CFPB\u2019s consumer  complaint database has limitations in assessing risk, the number of  published complaints submitted against several prominent fintech firms  from April 2012 through September 2017 included in this database was  generally low, when compared to select large financial institutions. Our  analysis showed that for 13 large firms offering fintech payments, lending,  investment advice, financial account aggregation, or virtual currencies,  only 5 of the firms had complaints in the CFPB database, with 4 having  received fewer than 400 complaints. The largest number of published  complaints had been submitted against a large fintech payment provider  with over 3,500 published complaints. Further, the number of published  complaints submitted against the fintech payment provider was relatively  small compared to the number of published complaints submitted against  other, often larger financial institutions. For example, our analysis showed  that 10 large financial institutions each received between approximately  14,300 and 67,300 total complaints April 2012 through September  2017.\nIn addition, various federal regulators, including CFPB and FTC, can  address the risk of consumer harm by taking actions against fintech firms  for deceptive or unfair acts or practices when warranted. For example, in  2016, FTC reached a settlement with a firm that sold machinery designed  to create virtual currencies\u2014a process known as mining\u2014and allegedly  had been deceiving its customers about the availability and profitability of  the machinery. As noted earlier, FTC also settled with a fintech payment  provider in February 2018 over complaints by thousands of consumers  the company had received regarding confusion over its funds availability  practices. Additionally, in 2016 CFPB assessed a $100,000 civil penalty  against a fintech payments firm for deceiving consumers about its data  security practices and the safety of its online payment system.\n\n\tThe U.S. Regulatory Environment Poses Various Challenges to Fintech Firms\n\nFintech firms can find that the complexity of the U.S. financial regulatory  system creates challenges in identifying the laws and regulations that  apply to their activities, and that complying with state licensing and  reporting requirements can be expensive and time-consuming for mobile  payment providers and fintech lenders. Also, federal agencies could  improve collaboration and clarify issues related to financial account  aggregation by making sure that interagency efforts dedicated to fintech  include all relevant participants and incorporate other leading practices. In  addition, because banks are liable for risks posed by third parties, fintech  firms may face delays in entering into partnerships with banks.\n\n\t\tChallenges with Complexity of Financial Regulatory Structure\n\nThe complex U.S. financial regulatory structure can complicate fintech  firms\u2019 ability to identify the laws with which they must comply and clarify  the regulatory status of their activities. As noted in our past reports,  regulatory oversight is fragmented across multiple regulators at the  federal level, and also involves regulatory bodies in the 50 states and  other U.S. jurisdictions. Fintech firms and other stakeholders we  interviewed told us that it was difficult for fintech firms to navigate this  structure. In particular, understanding the laws and regulations that may  apply to fintech firms was not easy because existing regulations were  sometimes developed before the type of product or service they are now  offering existed. In addition, the cost of researching applicable laws and  regulations can be particularly significant for fintech firms that begin as  technology start-ups with small staffs and limited venture capital funding.  Fintech payments and DLT firms and other market participants told us  that navigating this regulatory complexity can result in some firms  delaying the launch of innovative products and services\u2014or not launching  them in the United States\u2014because the fintech firms are worried about  regulatory interpretation. For example, staff from one U.S. firm that  developed a DLT payments technology told us that they and their peers  only work with foreign customers due to the fragmented U.S. financial  regulatory structure and lack of unified positions across agencies on  related topics.\nHowever, several U.S. regulators have issued rules and guidance to help  fintech firms understand where their products and services may fit within  the complex financial regulatory structure, as shown in the following  examples.\nIn December 2017, the Federal Reserve\u2019s Consumer Compliance  Outlook newsletter included an article that offered financial institutions  and fintech firms general guideposts for evaluating unfair and  deceptive practices and fair lending risk related to fintech, with a focus  on alternative data. Also, in 2016, a special edition of Consumer  Compliance Outlook focused on fintech, including summarizing  relevant federal laws, regulations, and guidance that may apply to  mobile payments, fintech lending, and digital wealth management.  For example, the newsletter listed laws and regulations related to  credit, privacy, and data security; anti-money laundering  requirements; and consumer and investor protection.\nIn 2016, CFPB issued a final rule that will extend wide-ranging  protections to consumers holding prepaid accounts, including peer-to- peer payments and mobile wallets that can store funds. Also, in  2015, CFPB issued a set of nonbinding consumer protection  principles for new faster payment systems, which outline CFPB  expectations for payment services providers.\nIn February 2017, SEC issued updated guidance on robo-advisers  that addresses the substance and presentation of disclosures  provided to clients on the robo-adviser and the investment advisory  services it offers, the obligation to obtain information from clients to  ensure that recommended investments are suitable, and the need to  implement effective compliance programs reasonably designed to  address the unique nature of providing automated advice. Similarly,  in March 2016, FINRA issued a report on effective practices related to  digital investment advice and reminded FINRA-registered broker- dealers of their obligations under FINRA rules.\nIn 2013, FinCEN issued guidance that clarified the applicability of anti- money laundering and related regulations to participants in certain  virtual currency systems, and in 2014 FinCEN issued administrative  rulings that further clarified the types of market participants to which  the 2013 guidance applies.\nIn October 2017, CFTC issued a report on virtual currencies that  explains that it considers virtual currencies to be commodities,  outlines related examples of permissible and prohibited activities, and  cautions investors and users on the potential risks of virtual  currencies.\nIn July 2017, SEC issued a report on DLT token sales, which cautions  market participants that sales with certain characteristics may be  subject to the requirements of federal securities laws. In general,  the report uses one company\u2019s token sale as an example to illustrate  how SEC could consider a token sale to be a securities offering, and  why companies offering such products would have to register the  offering with SEC or qualify for an exemption. In August 2017, FINRA  also issued an investor alert on DLT token sales, which includes  questions for investors to ask before participating in such sales.\nIn January 2017, FINRA issued a report on DLT uses more broadly,  which outlines key regulatory considerations for firms that want to use  DLT in equity, debt, and derivatives markets. For example, the  report outlines securities-related regulatory considerations for DLT  applications that could alter securities clearing arrangements, be used  for recordkeeping by broker-dealers, or change the equity or debt  trading process, among other things.\n\n\t\tChallenges Complying with Numerous State Regulatory Requirements\n\nAs mentioned previously, although federal oversight applies to some  fintech firms, fintech payments and lending firms not subject to routine  federal oversight must typically obtain state licenses based on their  activities. Banks can choose to be chartered at the state level or as a  national bank, which generally exempts them from state licensing  requirements and examination. In contrast, fintech payment providers  operating as MSBs\u2014including those using DLT\u2014and fintech firms  offering consumer loans must typically hold licenses in each state in  which they operate. Similarly, as mentioned above, small robo-advisers  would generally have to be licensed in states in which they wish to  operate.\nState regulators and other market observers we interviewed told us that  they believe state regulation of fintech firms provides benefits. Several  market participants and observers said that states understand the needs  of their local economies, consumers, and market participants and can use  their authorities to craft tailored policy and regulation. For example, New  York regulators created a special license for virtual currency firms. New  York regulators told us that they did so because of New York\u2019s status as a  financial and innovation hub, as well as activities and concerns of virtual  currency firms operating within their jurisdiction. In addition, state  regulators may complement the federal oversight structure by dedicating  additional resources to helping educate fintech firms on regulatory  requirements and making sure that firms follow these requirements. For  example, two state regulators told us that they work closely with many  fintech start-ups to help educate them on regulatory requirements before  they apply for licenses or begin operations, and a state regulatory  association told us that fintech firms and state regulators often meet to  discuss regulatory concerns. Representatives of a state regulatory  association told us that federal agencies also rely increasingly on state  examinations to ensure compliance with anti-money laundering  requirements.\nSimilarly, an industry association and state regulators told us that they  believe states are very responsive to consumer complaints. For example,  one state regulator told us that they investigate hundreds of consumer  complaints per month and believed they often resolved consumer  complaints more quickly than their federal consumer protection  counterparts, although CFPB staff told us that CFPB handles thousands  of complaints per month. California regulators also told us they have  initiated their own investigations into the extent to which fintech lenders  comply with state lending and securities laws, and risks that fintech  lenders may pose to consumers and to markets.\nHowever, complying with fragmented state licensing and reporting  requirements can be expensive and time-consuming for mobile payment  providers and fintech lenders. For example, stakeholders we interviewed  said that obtaining all state licenses generally costs fintech payments  firms and lenders $1 million to $30 million, including legal fees, state  bonds, and direct regulatory costs. Also, market participants and  observers told us that fintech firms may spend a lot of time on state  examinations because state exam requirements vary and numerous  states may examine a fintech firm in 1 year. For example, staff from a  state regulatory association said that states may examine fintech firms  subject to coordinated multistate exams 2 or 3 times per year, and as  many as 30 different state regulators per year may examine firms that are  subject to state-by-state exams.\nAlthough these challenges are not unique to fintech firms, they may be  more significant for fintech firms than for other MSBs and lenders. For  example, some MSBs and lenders operate in a limited geographic area  that can require them to be licensed by one state only. Other firms  operate in multiple states or nationwide, but may have started with a  license in one state and then obtained additional licenses and spread  these compliance costs as they grew over time. In contrast, fintech firms  are generally online-only businesses that likely seek to operate  nationwide from their inception, which immediately requires licenses in all  states and generates higher up-front compliance costs that may strain  limited venture capital funding. For example, one firm we interviewed that  funds fintech start-ups told us that one of their fintech firms spent half of  the venture capital funds it had raised obtaining state licenses. As a  result, some firms may choose not to operate in the United States. For  example, one DLT provider we interviewed told us that although they are  based in the United States, they operate abroad exclusively because  state licensing costs are prohibitively expensive.\nBank partnerships and specialized operating charters offered by federal  and state banking regulators may help fintech firms more easily operate  nationwide by generally preempting state licensing requirements. For  example, some fintech payments firms and fintech lenders have chosen  to partner with nationally chartered and state-chartered banks, which  allows them to operate nationwide without having to obtain individual  state licenses. Also, two fintech lenders have applied for an Industrial  Loan Corporation (ILC) charter, an FDIC-supervised state banking  charter, which commercial firms other than regulated financial institutions  can obtain in certain states to operate nationally. Such ILCs would also  be overseen by FDIC if they obtain FDIC deposit insurance.\nIn addition, in December 2016, OCC announced its intent to consider  applications for special-purpose national bank charters from fintech firms  such as lenders, which would allow such firms to operate nationally under  a single national bank charter if finalized. However, OCC officials we  interviewed told us that this special-purpose national bank charter is on  hold because they are still reviewing whether to go forward with the  proposal, and CSBS has filed a lawsuit against OCC challenging the  fintech charter. Some fintech lending firms and an industry association  representing payments firms have expressed interest in applying for this  special charter, but other stakeholders we interviewed told us that the  proposed fintech charter may not be a good option for small fintech firms  if the capital requirements are the same as those for banks.\nIn addition, state regulators are taking steps to make it easier for fintech  firms seeking to operate across multiple states. For example, CSBS staff  we interviewed told us that states leverage the Nationwide Multistate  Licensing System\u2014which enables firms to submit one application with  information that fulfills most of the licensing requirements of each state  that participates in this system. Staff from CSBS, some fintech firms,  and an industry observer we interviewed said that although the multistate  licensing system has reduced administrative requirements somewhat,  firms still have to make additional filings to address certain requirements  unique to some states. In February 2018, seven state regulators also  agreed to standardize key elements of the MSB licensing process and  mutually accept licensing findings. Additionally, in 2013, state  regulators established the Multi-State MSB Examination Taskforce, which  coordinates and facilitates multistate supervision of MSBs.  CSBS staff  told us that multistate exams have made the state MSB exam process  more efficient for state regulators and MSBs.\nIn May 2017, the CSBS also announced they would be expanding efforts  to modernize state regulation of fintech firms. For example, under this  initiative, officials we interviewed told us they plan to redesign their multistate licensing system to provide a more  streamlined licensing process for new applicants and shift state  resources to higher-risk cases by 2018; plan to harmonize multistate supervision by establishing model  approaches to key aspects of nonbank supervision, making  examinations more uniform, identifying and reporting violations at the  national level, and creating a common technology platform for  examinations by 2019; and have formed a fintech industry advisory panel\u2014with sub-groups on  payments, lending, and banking\u2014to identify licensing and regulatory  challenges.\n\n\t\tChallenges with Interagency Collaboration\n\nAlthough a few fintech market participants and observers we interviewed  told us that they thought regulatory collaboration on fintech was sufficient,  the majority of market participants and observers we interviewed who  commented on interagency collaboration said that it could generally be  improved. Some also cited additional areas in which better interagency  collaboration could facilitate innovation:\nUse of alternative data and modeling in fintech lending. Fintech  lenders may face challenges because agencies with authorities  related to consumer protection and fair lending have not issued  guidance on the use of alternative data and modeling. For example,  one fintech lender we interviewed told us that they discussed using  alternative data to assess creditworthiness with FDIC and FTC, but  they do not understand what each agency might consider to be an  unfair, deceptive, or abusive practice because the agencies have not  coordinated positions. Staff we interviewed from two consulting firms  that advise on fintech told us that lack of clarity or coordination on fair  lending and use of alternative data and modeling creates uncertainty  for fintech lenders. This has led some fintech lenders to forgo use of  alternative data for underwriting purposes since they do not know if it  will produce outcomes that violate fair lending laws and regulations.  However, FDIC staff told us that FDIC applies the same standards as  FTC in determining whether an act or practice is unfair or deceptive  and that existing guidance on fair lending applies broadly to traditional  and nontraditional modeling techniques and data sources.\nOCC special-purpose national bank charter. A few market  participants and observers we interviewed told us that fintech  payment providers and lenders may face challenges because OCC  has not sufficiently coordinated with the Federal Reserve and FDIC on  OCC\u2019s special-purpose national bank charter. Despite OCC  discussion with the Federal Reserve, the charter proposal does not  specify whether recipients could access the Federal Reserve  payments system. Federal Reserve officials have said that the  Federal Reserve will likely not take any policy positions or make any  legal interpretations about the proposed charter until OCC finalizes  the charter\u2019s terms and a firm applies for a charter. Officials have said  that this is their position because the potential policy and legal  interpretation issues that could arise related to membership and  access to Federal Reserve services will require a case-by-case, fact- specific inquiry unique to any firm that moves forward with an  application. One fintech lender we interviewed told us that obtaining  consistent and complete information from OCC and the Federal  Reserve on the specific rights this charter would grant a fintech lender  had been challenging, and that this lack of consistency and clarity  could discourage fintech firms from applying for the charter. However,  OCC staff we interviewed told us that the charter is not yet final and  that they facilitate communication between fintech firms that are  interested in the special charter and the Federal Reserve. Also, OCC  staff said that they briefed FDIC staff on the special charter, but will  coordinate further if appropriate.\nDiffering regulatory interpretation of consumer protection  requirements. As discussed above, fintech firms may be subject to  CFPB oversight and limited federal financial regulatory oversight if  they also partner with financial institutions. In addition, FTC and CFPB  can also take enforcement actions against fintech firms not registered  or chartered as a bank for violations of any federal consumer  protection laws they enforce. Fintech firms we spoke with said that  this can cause challenges because firms are concerned that  regulators may have different interpretations of what conduct might  merit consumer protection enforcement actions, and a research and  consulting firm we interviewed that works with fintech start-ups told us  that this is one of the industry\u2019s biggest challenges. Similarly, the  potential for differing regulatory interpretation may limit the  effectiveness of agency efforts to innovate. For example, fintech firms  can apply for a CFPB No Action Letter, which is intended to reduce  regulatory uncertainty for financial products or services that promise  substantial consumer benefit but face uncertainty regarding consumer  protection requirements. However, some entities we spoke with said  that few firms have applied, in part because a letter provided by CFPB  may not preclude prudential regulators or FTC from taking  enforcement actions in cases where they have jurisdiction.\nAlthough stakeholders indicated that agencies could improve interagency  collaboration on other fintech issues, federal agencies said that they  already collaborate through a variety of informal and formal channels at  the domestic and international levels. Domestically, in addition to informal  discussions and participation in fintech events hosted by other agencies,  some agencies have coordinated examinations of third-party service  providers and enforcement actions. For example, in 2014 and 2015,  CFPB, FCC, FTC, and state regulators coordinated on enforcement  actions related to unauthorized mobile carrier billing charges. Also, U.S.  agencies have had informal discussions regarding fintech with their  foreign counterparts. For example, Treasury staff have discussed  regulations designed to counter money laundering and terrorist financing  with officials from countries such as France and the United Kingdom. In  addition, federal agencies have begun to collaborate on fintech regulatory  issues through formal interagency working groups that are primarily  concerned with other financial regulatory issues. For example, at the  domestic level, U.S. prudential regulators have discussed issues related  to potential risks of fintech lending and DLT through the Financial Stability  Oversight Council. At the international level, the Federal Reserve  represents the United States at the Bank for International Settlements,  which has published papers on fintech topics including payments, fintech  lending, and DLT. For more information on these efforts and others, see  appendix II.\nFurther, federal agencies said that they have recently organized the  following interagency collaborative groups dedicated to fintech, as  detailed in appendix II:  In March 2017, the Federal Reserve convened the Interagency  Fintech Discussion Forum, an informal group which meets  approximately every 4 to 6 weeks and aims to facilitate information  sharing among consumer compliance staff from the federal banking  regulators on fintech consumer protection issues and supervisory  outcomes. Discussion topics have included account aggregation,  alternative data and modeling techniques, and third-party oversight.\nIn 2016, Treasury created the Interagency Working Group on  Marketplace Lending, which was active over the course of fiscal year  2016, meeting 3 times. This group shared information among  industry participants and public interest groups, and discussed issues  from a Treasury report on benefits and risks associated with online  marketplace lending.\nIn 2010, the Federal Reserve Banks of Atlanta and Boston created  the Mobile Payments Industry Workgroup to facilitate discussions  among industry stakeholders about how a successful mobile  payments system could evolve in the United States. This group also  functions as an interagency collaboration mechanism through biennial  meetings between industry stakeholders and relevant regulators that  update industry on regulatory concerns, identify potential regulatory  gaps, and educate regulators on mobile payment technologies.\nHowever, we found that these groups do not include all relevant  participants. For example, NCUA was not included in the Interagency  Fintech Discussion Forum or the Interagency Working Group on  Marketplace Lending, and FCC has not participated in the biennial  regulator meetings of the Mobile Payments Industry Workgroup since  2012. Federal Reserve staff said that they did not include NCUA in the  Interagency Fintech Discussion Forum because NCUA is not a bank  regulator. Treasury staff noted that staff who could explain why NCUA  had not been invited to participate in the Interagency Working Group on  Marketplace Lending were no longer with the agency. Similarly, FCC staff  could not recall why they had not participated in recent biennial regulator  meetings of the Mobile Payments Industry Workgroup.\nHowever, NCUA has experiences and perspectives that would make it a  relevant participant in the Interagency Fintech Discussion Forum, and  NCUA officials said that they would participate in these interagency  efforts if invited. NCUA would be a relevant participant because, although  it does not oversee banks, it oversees credit unions that have entered into  partnerships with fintech lenders and virtual currency exchanges, and  could enter into partnerships with other fintech firms. Similar to fintech  partnerships with banks, these partnerships could create risks related to  safety and soundness and consumer protection. Further, NCUA\u2019s 2018\u2013 2022 draft strategic plan includes fintech as a key risk to the credit union  system because fintech could provide a competitive challenge to credit  unions or take advantage of differences in how credit unions and fintech  firms are regulated, among other things.\nLikewise, as Federal Reserve staff have acknowledged, FCC could be a  relevant participant in biennial regulators meetings of the Mobile  Payments Industry Workgroup because FCC could share valuable insight  on regulatory concerns related to mobile device security with other  regulators and industry participants. Specifically, FCC has facilitated and  encouraged industry efforts to improve security of mobile devices, on  which consumers make fintech payments, and has conducted related  consumer education efforts. FCC staff said they would consider  participating in future biennial regulator meetings of the Mobile Payments  Industry Workgroup if the topics discussed aligned with FCC\u2019s work on  mobile device security.\nOur past work has identified key practices relating to collaborative  mechanisms among agencies that increase their effectiveness, such as  including participants with the appropriate knowledge, skills, and  abilities. In addition, these key practices also state that an interagency  group should continue to reach out to potential participants who may have  a shared interest in order to ensure that opportunities for achieving  outcomes are not missed.\nHowever, we found that interagency collaborative efforts dedicated to  fintech issues were not fully leveraging relevant agency expertise. Lack of  NCUA participation in the Interagency Fintech Discussion Forum may  preclude NCUA and the other participating agencies from sharing  information that could be useful in efforts to oversee the risks that fintech  poses to their regulated institutions. Similarly, lack of FCC participation in  the biennial regulators meetings of the Mobile Payments Industry  Workgroup could preclude industry participants from receiving updates on  FCC regulatory concerns related to mobile device security and could  preclude FCC from learning about new risks that fintech payments  products pose to mobile device security.\nFurthermore, OCC and international bodies have identified fintech as an  area where collaboration among agencies can be helpful. For example,  OCC has stated that collaboration among supervisors can promote a  common understanding and consistent application of laws, regulations,  and guidance through steps such as establishing regular channels of  communication. At the international level, the Bank for International  Settlements has recommended that bank supervisors in jurisdictions  where responsibilities related to fintech are fragmented among a number  of regulators with overlapping authorities should collaborate with other  relevant agencies to develop standards and regulatory oversight for  fintech, as appropriate. Similarly, the Financial Stability Board has  suggested that responsible agencies further open lines of communication  to address cross-cutting fintech issues.\n\n\t\tIndustry Disagreements on Aggregation of Consumer Financial Account Information Create the Need for Stronger Collaboration\n\nAmong other consumer protection issues related to financial account  aggregation, market participants do not agree about whether consumers  using account aggregators will be reimbursed if they experience  fraudulent losses in their financial accounts. While some account  aggregators negotiate contracts with the financial institutions that hold the  consumer accounts that are being aggregated, other account aggregators  have no relationship with the financial institutions holding the consumer  accounts that they access on behalf of those consumers. Officials from at  least one large bank have made public statements that they may not  reimburse losses from consumer accounts if the consumer provided his  or her account credentials to an account aggregator and fraudulent  activity subsequently occurs in the consumer\u2019s account. In contrast, some  account aggregators and consumer protection groups have argued that  consumer protection law establishes that banks retain the obligation to  reimburse losses due to transactions not authorized by the consumers.\nTo date, CFPB and the Federal Reserve have taken varying public  positions on this disagreement among market participants, and some  regulators told us that they have held related discussions with market  participants and observers. In October 2017, CFPB issued principles for  consumer-authorized financial data sharing and aggregation that stated  that consumers should have reasonable and practical means to dispute  and resolve instances of unauthorized transactions. However, CFPB\u2019s  principles are not binding and federal financial regulators have not issued  guidance or rules to clarify this issue. As previously mentioned, CFPB  also issued a request for information studying these topics to various  industry members, observers, and consumers in November 2016. A  member of the Board of Governors of the Federal Reserve System has  publicly stated that industry stakeholders will need to come to agreement  on which party bears responsibility for unauthorized transactions. Also,  Federal Reserve staff told us that some financial institutions and account  aggregators are negotiating contractual arrangements that could address  this issue on a case-by-case basis. In addition, staff from FDIC, the  Federal Reserve, and OCC said that they have discussed related issues  with market participants and observers.\nThe financial regulators have recently begun to hold collaborative  information sharing discussions on consumer compliance issues  surrounding financial account aggregation, but this collaboration has not  resulted in any coordinated public outcomes on the issues. In May 2017,  the federal financial regulators\u2014CFPB, the Federal Reserve, FDIC,  NCUA, and OCC\u2014and representatives of state financial regulators began  to share information on account aggregation and related consumer  compliance issues through the Federal Financial Institutions Examination  Council (FFIEC) Task Force on Supervision and the FFIEC Task Force  on Consumer Compliance. The regulators are collaborating through  FFIEC because they acknowledge that account aggregation issues cross  agency jurisdictions. According to participating agency officials, FFIEC  discussions have covered responsibilities for consumer reimbursement  due to fraudulent charges and access to consumer data, generated an  internal paper on consumer compliance issues, and previewed CFPB\u2019s  principles for consumer-authorized financial data sharing and aggregation  prior to publication. However, as of November 2017, these efforts have  not generated public outcomes to guide market participants.\nThe federal financial regulators\u2019 missions include ensuring that  consumers are protected. CFPB\u2019s primary mission is to protect  consumers in the financial marketplace, including ensuring that markets  for consumer financial products and services operate transparently and  efficiently to facilitate access and innovation. Similarly, according to their  mission and vision statements, the banking and credit union regulators  help protect consumer rights by supervising financial institutions to help  ensure compliance with consumer protections.\nHowever, some of the regulators told us that they have not taken more  steps to resolve the disagreements surrounding financial account  aggregation because they are concerned over acting too quickly. For  example, Federal Reserve staff we interviewed told us that premature  regulatory action could be detrimental to the negotiations between  individual financial institutions and financial account aggregators.  Similarly, OCC staff we interviewed told us that OCC staff does not  recommend publishing guidance or rules while the account aggregation  industry is evolving because regulation should not constantly change.  Nonetheless, the financial regulators could take additional steps to  address these issues without prematurely issuing rules or regulations.  Further, the FFIEC IT Examination Handbook on e-Banking\u2019s appendix  on aggregation services, which the financial regulators use in their  examinations of banks, indicates that the financial regulators have been  aware since at least 2003 that regulatory requirements related to  consumer protection responsibilities of financial account aggregators are  not clear.\nIncorporating leading practices on collaboration could strengthen the  efforts that regulators are making to address financial account  aggregation issues. As discussed previously, our prior work has  developed interagency collaboration principles that make efforts among  agencies more likely to be effective. These principles find that  collaborative efforts should define the short-term and long-term outcomes  that the collaboration is seeking to achieve and clarify the roles and  responsibilities of the participating agencies, among other things.  Although banking regulators and CFPB have discussed issues related to  account aggregation within FFIEC, these discussions have not yet  defined outcomes or produced any public outcomes to help guide fintech  firms and traditional financial institutions which could help lead to market- based solutions, or defined agency roles and responsibilities. In addition,  market participants, CSBS staff, and a member of the Board of Governors  of the Federal Reserve System have said that additional collaboration on  financial account aggregation issues\u2014including reimbursement for  unauthorized transactions\u2014would be beneficial. Similarly, in its 2017  annual report, the Financial Stability Oversight Council encouraged  financial regulators to monitor how fintech products affect consumers and  regulated entities and to coordinate regulatory approaches, as  appropriate.\nActing collaboratively to help address consumer compliance issues  related to financial account aggregation could help financial regulators  better meet their consumer protection missions. Improved collaboration  could help regulators and market participants resolve disagreements over  account aggregation and related consumer compliance issues more  quickly and in a manner that balances the competing interests involved.  Taking steps now, while the discussion on financial account aggregation  is in its relatively early stages, could help federal regulators better  address these needs over the long term. Until regulators coordinate and  assist the industry in clarifying and balancing the valid interests on both  sides, consumers could have to choose between facing potential losses  or not using what they may find to be an otherwise valuable financial  service, and fintech firms providing useful services to consumers will face  barriers to providing their offerings more broadly.\n\n\t\tChallenges Involving Fintech Partnerships with Banks\n\nPartnerships between fintech firms and financial institutions are  increasingly common because such partnerships offer benefits to both  parties involved. According to literature we reviewed and market  participants and observers we interviewed, the benefits to banks can  include the ability to meet consumer demand by providing their customers  with access to innovative products that provide good user experiences  without having to dedicate extensive internal time or resources. Market  observers and Federal Reserve staff we interviewed told us that this  benefit may be particularly important for small banks and credit unions,  which have fewer staff and fewer financial resources for research and  development. Similarly, the benefits to fintech firms can include access to  banking services and networks, customer acquisition, and assistance with  regulatory compliance. Some fintech firms enter contractual agreements  to partner with banks through white-labeling, a type of partnership where  the bank markets the fintech firm\u2019s product as its own when soliciting  customers. Other fintech firms enter contractual partnerships with banks  as stand-alone third-party relationships. For example, some fintech  lenders make loans to customers and partner with a bank that originates  or purchases loans sourced through the fintech lender.\nHowever, because banks are liable for risks posed by third parties as  discussed above, fintech firms may face delays in entering into  partnerships with banks. Financial regulators have issued guidance on  risk management for financial institutions\u2019 relationships with third  parties. Among other things, this guidance explains that financial  institutions are expected to conduct proper due diligence in selecting  partners and to monitor the activities conducted by third parties for  compliance with relevant laws, rules, and regulations, considering areas  such as consumer protection, anti-money laundering\/counter-terrorist  financing, and security and privacy requirements. Banks, fintech firms,  and market observers we interviewed told us that banks may interpret this  guidance conservatively. Large banks may also spend significant time  conducting due diligence on the practices and controls in place at the  fintech firms seeking to partner with them in order to prevent unnecessary  compliance or operational risks, while a banking association told us that  small banks with fewer resources to dedicate to due diligence may be  unwilling to risk partnering with fintech firms. Banks, fintech firms, and  market observers we interviewed told us that bank due diligence can also  lead to lengthy delays in establishing partnerships, which can put fintech  firms at risk of going out of business if they do not have sufficient funding  and are not able to access new customers through a bank partner. For  example, officials we interviewed from one bank told us that it takes about  18 months to launch a partnership with a fintech firm, and acknowledged  that this is too slow to align with venture capital funding cycles that many  fintech providers rely upon.\n\n\tConsideration of Regulatory Approaches Abroad Could Benefit Fintech Regulation and Innovation\n\nRegulators abroad have addressed the emergence of financial innovation  through various means, including establishing innovation offices;  establishing mechanisms for allowing fintech firms to conduct trial  operations; holding innovation competitions; providing funding for firms  through business accelerators; and using various methods to coordinate  with other regulators domestically and internationally. While certain U.S.  regulators have adopted similar efforts, further adoption of these  approaches by U.S. regulators could facilitate interactions between  regulators and fintech firms and improve regulators\u2019 knowledge of fintech  products. However, some initiatives may not be appropriate for the U.S.  regulatory structure. For example, adopting certain initiatives could raise  concerns about U.S. agencies picking winners, in which firms that  participate in these programs may be better positioned to succeed than  other firms. Further, particular initiatives may not align with agencies\u2019  legal authorities or missions.\n\n\t\tRegulators in the U.S. and Abroad Have Developed Approaches to Improve Interaction with Firms and Help Them Identify Applicable Regulatory Requirements\n\nCiting the complexity of the U.S. financial regulatory system, fintech firms  and industry observers noted having difficulty identifying which  regulations they were subject to or which regulators would oversee their  activities. Further, one fintech firm noted that when they were able to  identify their regulators, they had difficulty finding a point of contact at the  regulators. Officials from three regulators that we interviewed also noted  that they had been contacted by fintech firms that were confused about  their regulatory status and did not fall under the agency\u2019s regulatory  authority, but were subject to oversight by other regulators.\nRegulators in the U.S. and abroad have taken steps to better facilitate  interactions with fintech firms, including by establishing innovation offices  with dedicated staff to serve as a front door for start-up firms or  innovators to find information on regulation and to contact the agency.  These innovation offices generally maintain a webpage hosted on the  agencies\u2019 websites, a dedicated e-mail address, or dedicated staff.  Through these innovation offices, some agencies offer services including  office hours during which regulatory staff are available to meet and  provide informal guidance. For example, CFPB officials said that, as of  August 2017, they had met with approximately 115 companies in four  such events in New York and San Francisco, under the agency\u2019s Project  Catalyst. Similarly, OCC officials noted that through their Office of  Innovation, they have been able to answer regulatory questions for  fintech firms and connect firms to relevant OCC offices. Since the launch  of LabCFTC, CFTC\u2019s innovation office, in May 2017, CFTC officials have  met with more than 100 entities through office hour sessions in New York,  Chicago, and Washington, D.C.\nIn addition to office hours, several regulators have held fintech events  through their innovation offices. For example, FTC has held three fintech  forum events comprising panel discussions with industry experts,  covering topics such as marketplace lending and distributed ledger  technology. Several regulators have also issued publications on various  fintech topics, which are posted to the dedicated webpages for those  agencies with innovation offices.\nSome regulators from other jurisdictions also facilitated regular interaction  with firms through their innovation offices. For example, through its  Innovation Hub, the United Kingdom\u2019s (UK) Financial Conduct Authority  offers informal regulatory guidance to individual firms directly and through  posted publications; operates its regulatory sandbox, described below;  and engages with industry participants through various events. Similarly,  through a program called Looking Glass, the Monetary Authority of  Singapore offers fintech firms training and consultation on regulation and  provides a space for fintech firms to give product demonstrations to  regulators and banks. Regulators and fintech firms we interviewed abroad  said that these innovation offices have helped firms better understand  their regulatory obligations and help regulators identify and address risks  early. For example, representatives of a robo-adviser firm we interviewed  in Hong Kong said that their interactions with the Hong Kong Securities  and Futures Commission\u2019s innovation office\u2014known as the Fintech  Contact Point\u2014made identifying and obtaining guidance from the  appropriate regulatory officials easier, which helped the firm more  efficiently develop a product compliant with applicable regulations.\nSome fintech firms and industry observers stated that U.S. regulators\u2019  innovation offices have helped fintech firms by offering a point of contact  for new entrants in the industry. Additionally, in a 2009 report, we created  a framework that identified characteristics of an effective financial  regulatory system. One of the characteristics was that regulators  should oversee new products as they come onto the market to take action  as needed to protect consumers and investors, without unnecessarily  hindering innovation. Figure 5 summarizes efforts that we reviewed by  regulators in the U.S. and abroad to implement initiatives to improve  interactions with fintech firms.\nHowever, FDIC and NCUA have not established innovation offices for  various reasons. For example, FDIC staff said that, although the agency  has not formally evaluated establishing an innovation office, they have  met with fintech firms to discuss deposit insurance applications.  Associated with the deposit application process, the agency has  established central points of contact for all interested parties, not only  fintech firms. NCUA said that its lack of legal authority over third-party  service providers limited the usefulness of an innovation office, since  fintech providers are often third-party service providers. However, by not  dedicating specific staff, as occurs with the establishment of an innovation  office, these regulators could be less able to interact with fintech firms in  their sectors and fintech firms that partner with their regulated entities.  Other regulators who, similar to FDIC and NCUA, generally do not directly  oversee third-party providers, though they may have such authority, have  noted benefits from establishing innovation offices. For example, OCC,  which has a similar mission to these two regulators, has formed such an  office and OCC staff said that the agency has benefited by learning about  industry trends involving fintech and by improving interactions with fintech  firms and banks. Similarly, Federal Reserve officials we interviewed said  that efforts through its innovation office have helped staff better  understand fintech issues and have particularly helped its examiners  better understand banks that partner with fintech companies.  Consideration of establishing innovation offices, as many U.S. regulators  have recently done, could help FDIC and NCUA better enable new firms  to become familiar with regulatory requirements and could better facilitate  interaction between the agencies and fintech service providers.\n\n\t\tRegulators Abroad Use Various Approaches to Learn about and Enable Development of New Fintech Products, and U.S. Regulators Could Consider Taking Similar Steps\n\nInternationally, some regulators have taken various approaches that help  educate their staff on emerging products and help innovators develop  products in limited-risk environments (see fig. 6). Based on interviews  with regulators and firms abroad and a literature review, initiatives that we  studied include regulatory sandboxes, proofs-of-concepts, innovation  competitions or awards, and agency-led accelerators. Regulatory  sandboxes that we studied were agency-led programs that allow firms to  test innovative products; services; business models; or delivery  mechanisms in a live environment, subject to agreed-upon testing  parameters. The proofs of concept that we reviewed were similar to  sandboxes, but for these programs regulators issued a request for  proposals to industry to develop a product that is conceptual; that is, an  idea for a product that is not yet on the market. In the fintech competitions  that we studied, regulators invited firms to develop solutions to problem  statements drafted by agencies or financial institutions. Accelerators that  we reviewed provided funding; access to regulators and mentors;  connections to outside funding sources; potential clients; and working  space to fintech firms and start-ups.\nOne approach regulators abroad were using to learn about fintech  activities was regulatory sandboxes. While a few U.S. regulators have  undertaken efforts that are similar to regulatory sandboxes, most have  not. Two regulators that we interviewed stated that tools already exist,  such as the comment process, to fulfill the role of a sandbox by helping  them better understand innovation and assist in the development of rules  and guidance. However, other U.S. regulators said that creating  regulatory sandboxes by using tools such as No Action Letters could  benefit regulators and firms. Based on our analysis of selected  jurisdictions\u2019 efforts, regulatory sandbox programs generally may include  the following elements:  firms apply to participate;  firms and regulators agree on the parameters of how products or  services will be tested, such as the number of consumers or  transactions included in the test, the required product disclosures, or  the time frame of the test;  firms secure the appropriate licenses, if applicable; and  firms and regulators interact regularly.\nIn some cases, the sandbox may include limited regulatory relief. For  example, UK regulators we interviewed noted that they can waive or  modify a rule, issue a \u201cno enforcement action\u201d letter, or provide a  restricted license for a firm participating in the sandbox. However, these  tools are used on a case-by-case basis for the duration of the sandbox  test, are not used for every participating firm, and would not limit any  consumer protections. Further, UK regulators we interviewed said that  while waiving or modifying rules is possible, they are only used on an  exceptional basis. Similarly, Singapore regulators said that they can relax  specific legal and regulatory requirements, such as capital requirements,  on a case-by-case basis for firms while they are participating in the  sandbox. Also, Hong Kong regulators allow firms to operate without full  regulatory compliance for the limited product offerings within the sandbox.  Similar to UK and Singapore regulators, Hong Kong regulators we  interviewed said that they have put safeguards in place to protect  consumers from and manage the risk of the regulatory relief. For a more  detailed description of the Hong Kong, Singapore, and UK sandboxes,  see appendix III.\nRegulators and market participants we interviewed abroad said that these  fintech sandboxes have helped regulators better understand products and  more effectively determine appropriate regulatory approaches while  limiting the risk that the failure of a fintech firm could pose to consumers.  Some participating firms we interviewed told us they benefited by being  able to test products with customers, make changes to their business  model, and understand how their products would be regulated. Moreover,  two participating firms and a regulator we interviewed said that firms are  able to introduce their products to the market more quickly because they  are able to test their products in the market while becoming compliant  with laws and regulations. One fintech firm that participated in the UK  sandbox pointed out that the UK regulators better understood their firm\u2019s  technology and business model because of interactions in the sandbox.  For example, although the company and regulatory officials had  previously disagreed on whether the firm\u2019s product needed to be  regulated, after gaining a better understanding of the company\u2019s business  model through interactions in the sandbox, the regulatory officials agreed  that the product did not require regulatory oversight. Similarly, Singapore  regulators we interviewed noted that their sandbox provides them a  hands-on approach to learning about new technologies and how the  technologies align with regulatory requirements.\nSome U.S. regulators have programs that share some characteristics with  sandboxes. As shown in figure 6, CFPB, SEC, and CFTC have issued No  Action Letters in which agency staff state that they do not intend to  recommend certain regulatory action against the firms if they offer the  products in the way described in a request letter to the regulator. The  issuance of such letters could assist fintech firms in cases in which the  applicability of existing regulations to their product is unclear. However,  similar to sandboxes abroad, CFPB officials stated that No Action Letters  do not provide safe harbor for companies taking actions that are clearly  not allowed under U.S. consumer regulations. As of March 6, 2018, CFPB  had issued one No Action Letter to Upstart Network, a company that uses  alternative data to assess creditworthiness and underwrite loans. As a  condition of the No Action Letter, Upstart will regularly report lending and  compliance information to CFPB to mitigate risk to consumers and inform  CFPB about the impact of alternative data on lending decisions.\nIn addition, CFPB officials we interviewed said that they can use a similar  tool known as trial disclosure waivers, which allow industry participants to  seek CFPB approval to test an innovative disclosure or way of delivering  a disclosure to consumers that includes a safe harbor provision during  which the industry participant may be exempted from statutory or  regulatory requirements. As of March 6, 2018, CFPB had not issued  any trial disclosure waivers.\nThrough its Project Catalyst, CFPB has also established a research pilot  program where it collaborates with firms that are testing innovative  products to understand consumer use and policy implications of  innovative products. CFPB officials said that research pilots have similar  elements to sandboxes, including participant application, agreement of  testing parameters, and regular meetings between CFPB and the participating firm. Four firms have concluded research pilots with CFPB  and three other firms are currently participating in pilots. Similarly, OCC  officials said that they are considering developing a pilot program, which  will allow banks or fintech firms partnering with banks to test innovative  products with the involvement and interaction of OCC staff. OCC officials  said that they have not set a date for determining whether to go forward  or implement the program.\n\n\t\t\tProofs of Concept\n\nAnother approach regulators abroad were using to learn about fintech  activities was establishing proofs of concept. The proofs of concept that  we studied are similar to sandboxes in that the regulator has regular  interaction with the company to better understand the product or  technology, but the product is not introduced into the market during the  proof of concept period. For example, the Bank of England, through its  Accelerator program, uses proofs of concept to have firms develop  technology that can help the agency improve its operations, according to  agency officials. The Hong Kong Monetary Authority, which, among other  things, regulates banks in its jurisdiction, uses proofs of concept to allow  industry participants to develop products that are conceptual and not  ready for market implementation. A firm we interviewed that participated  in a proof of concept with Hong Kong Monetary Authority said that it  offered the regulator the opportunity to gain a working understanding of  the technology, while providing a test environment for the company to  tailor the technology to adhere to regulatory requirements.\nCFTC officials noted that they are exploring the ability to conduct proofs  of concept through LabCFTC. CFTC officials noted that the agency would  be well positioned to conduct proofs of concept because they already  collect large amounts of market data that could potentially be leveraged  for such projects. However, CFTC officials expressed concerns that  receiving services as part of proofs of concept may violate gift or  procurement laws. The Federal Reserve Bank of Boston participates in  a collaborative effort called Hyperledger, which serves a similar purpose  as a proof of concept for the Federal Reserve Bank. Hyperledger is a  collaborative effort involving public and private entities created to advance the use of blockchain technologies across various sectors. As observers  in the Hyperledger, Federal Reserve Bank staff have gained hands-on  experience with blockchain technology by experimenting with uses of the  technology. None of the other regulators with whom we spoke said that  they planned to conduct proofs of concept.\n\n\t\t\tInnovation Competitions or Awards\n\nAnother approach used by regulators abroad for learning about fintech  activities was establishing fintech competitions or awards to encourage  financial innovation. Winning firms receive recognition, contracts, or cash  prizes. For example, the Monetary Authority of Singapore operated an  international competition called Hackcelerator to crowdsource innovative  solutions to problems that Singaporean financial institutions identified,  including insurance, customer identification, and data analytics, according  to officials. Singapore regulators have also established FinTech Awards,  which provide ex-post recognition to FinTech solutions that have been  implemented. CFTC officials said that they are seeking public input to  establish prize competitions and intend to launch such competitions in  2018. FTC officials said that in 2017, the agency challenged participants  to create a technical solution, or tools, that consumers could use to guard  against security vulnerabilities in software found on the Internet of Things  devices in their homes. FINRA staff noted that the agency holds  internal innovation competitions, called CREATEathons, in which FINRA  staff compete to develop solutions to various problems identified internally  by staff. While external parties do not participate in these competitions,  teams can consult with firms. Some U.S. regulators pointed out that while  some regulators abroad are mandated to promote competition, no such  mandate exists among most U.S. financial regulators.\n\n\t\t\tAgency-led Incubator or Accelerator\n\nTwo governments we studied abroad were also learning about fintech by  establishing incubators or accelerators to encourage the development of  a country\u2019s fintech industry and talent pool. The accelerators provide  funding, access to regulators and mentors, connections to outside funding sources, potential clients, and working space to fintech firms and start- ups. For example, officials we interviewed from SG Innovate, Singapore\u2019s  government led accelerator, said that the agency helps Singaporean  businesses expand overseas, bring companies to Singapore, and  connect start-ups to regulators and funding, among other things. None of  the U.S. regulators we interviewed said that they planned to establish  such accelerator programs. Regulators from the U.S. and abroad pointed  out that the U.S. fintech industry is more developed than those of other  jurisdictions with many fintech firms, large talent pools, and significant  amounts of private funding or privately run accelerators.\nRegulators and market participants we interviewed abroad said that these  knowledge-building initiatives have helped regulators learn about new  products and business models and have allowed firms to test products.  Although CFTC and SEC can issue No Action Letters, those agencies  have not adopted other approaches similar to these knowledge-building  initiatives described above. Further, FDIC, the Federal Reserve, and  NCUA have not adopted any of these approaches. U.S. regulators said  that these initiatives could raise concerns about favoring certain  competitors over others and also noted that they may not have the  authority to initiate these programs. However, despite similar potential  constraints with regard to competition and authority limitations, CFPB and  OCC have formally evaluated undertaking relevant knowledge-building  initiatives, through conversations with regulators abroad, general  research, and documentation of their efforts; and they have begun  developing similar approaches, according to agency officials.\nA characteristic of an effective financial regulatory system we identified in  our 2009 framework was that a regulatory system should be flexible and  forward looking, which would allow regulators to readily adapt to market  innovations and changes. Consideration by U.S. regulators of adopting  approaches taken by regulators abroad, where appropriate, could result  in the implementation of initiatives that help improve their overall ability to  oversee fintech and how it affects the entities they currently regulate.  While constraints may limit the ability or willingness of regulators to fully  adopt these practices, opportunities exist to assess ways to tailor them to  the U.S context.\n\n\t\tRegulators in the U.S. and Abroad Have Adopted Approaches to Facilitate Coordination on Financial Innovation\n\nRegulatory coordination is less of an issue for regulators abroad because  most jurisdictions have fewer financial regulators. For example, the UK  has 3 agencies involved in financial regulation, Singapore has 1 financial  regulator, and Hong Kong has 4 financial regulators, compared to the 10  federal agencies involved in the regulation of fintech in some capacity in  the United States. However, regulators abroad have undertaken efforts to  bolster coordination among domestic regulators\u2014as applicable\u2014as well  as regulators abroad and industry representatives (see fig. 7). These  collaborative efforts include advisory councils and steering committees  dedicated to fintech issues; and fintech-specific cooperation agreements.\nIn the jurisdictions we examined, two agencies have established fintech  advisory councils or steering committees of industry participants and  government officials. Fintech advisory councils and steering committees  may provide a valuable connection to industry, through which U.S.  regulators could gain insight into industry developments. For example, the  Hong Kong securities regulator has established an advisory council  comprised of members with knowledge and experience of various parts of  Hong Kong\u2019s fintech industry. Officials of this agency told us that the  advisory council provides valuable market data, a forum that offers firms a  preliminary check for interpretation of their rules and updates on  emerging issues. Advisory council members said that the council gives  this regulator a cross-functional perspective from industry experts and  enables the agency to learn about emerging issues and related regulatory  challenges early in their development.\nSelected U.S. regulators have established formal advisory committees  dedicated to fintech issues, as shown in figure 7.\nFINRA has established a Fintech Industry Committee through which  FINRA member and nonmember firms are provided a platform for  ongoing dialogue and analysis of fintech developments related to  FINRA\u2019s purview. FINRA officials said that the agency has also  established the FinTech Advisory Group, a forum to identify and  prioritize FinTech topics and coordinate appropriate regulatory  approaches with key stakeholders.\nCFTC staff noted that the agency restarted its Technology Advisory  Committee in late 2017 to explore a range of fintech topics and  augment the work of LabCFTC.\nFDIC officials noted that the agency has a Fintech Steering  Committee, which aims to help FDIC understand fintech  developments by identifying, discussing, and monitoring fintech trends  through reports from the staff working groups that the steering  committee has established. The Fintech Steering Committee had not  made any formal recommendations as of March 13, 2018.\nAs previously mentioned, U.S regulators we interviewed said that they  have coordinated with other regulators and industry through various  mechanisms, as the following examples illustrate. (For additional  information on interagency collaborative efforts, see app. II).\nThe Federal Reserve has coordinated with relevant industry  participants and other regulators including CFPB, FDIC, FTC, NCUA,  OCC, Treasury, and CSBS through its Mobile Payments Industry  Working Group and its Faster Payments Task Force.\nFTC solicits insight from industry participants, observers, and  regulators through its fintech forums.\nRegulators have also coordinated with each other through domestic  and international interagency financial regulatory bodies, as well as a  recently organized interagency collaborative group dedicated to  fintech, the prudential regulators\u2019 Interagency Fintech Discussion  Forum.\n\n\t\t\tCooperation Agreements\n\nSome regulators abroad have cooperation agreements with other  regulators abroad to share information and to help fintech firms begin  operations in other jurisdictions. For example, Singapore regulatory staff  told us that the regulator has 16 such agreements with entities from 15  regions that typically consist of (1) referrals to regulatory counterparts for  firms attempting to operate in a new country, (2) guidance to firms on  regulation in the firm\u2019s new country of operation, and (3) information  exchange among regulators and between regulators and fintech firms. UK  regulators said that these agreements outline how the agencies in each  country pledge to assist each other\u2019s fintech firms seeking to operate in  their country with business-to-business contacts, office space, and other  assistance. For example, regulators can discuss trends related to their  authorities and share information on fintech firms seeking to expand  operations in the other country. A fintech firm we interviewed said that  because much financial innovation is international in scope, sharing  information across borders with cooperation agreements is important for  regulators to understand the new technologies and to be responsive to  risks. On February 19, 2018, CFTC and UK Financial Conduct Authority  signed a cooperation agreement, which, according to CFTC officials, will  focus on information sharing and facilitate referrals of fintech companies  interested in entering the other regulator\u2019s market. None of the other U.S.  regulators that we interviewed had fintech-specific cooperation  agreements with regulators abroad. Most of them said that existing  memoranda of understanding were sufficient to facilitate information  sharing. One regulator we interviewed abroad noted that establishing  fintech-specific cooperation agreements with U.S. regulators is difficult  because no direct regulatory counterpart exists since the U.S. financial  regulatory structure is significantly different from those of other  jurisdictions.\n\n\tConclusions\n\nThe emergence of various fintech products has produced benefits to  consumers and others. Fintech products often pose risks to those of  traditional financial products, although in some cases fintech products  pose additional risks. While existing consumer protection and other laws  apply to some fintech products and services, in some cases fintech  transactions may not be covered by such protections. The extent to which  the activities of fintech providers are subject to routine federal oversight  varies, but fintech firms not overseen by a federal body generally are  subject to oversight by state regulators. While limited evidence of  widespread problems has surfaced to date, as the prevalence of fintech  products grows, risks posed by segments of the industry that regulators  do not routinely examine could correspondingly grow. Therefore, efforts  regulators by regulators to monitor developments and risks posed by  these firms and their financial innovations remains a sound approach.\nWith fintech products spanning across financial sectors and jurisdictions  of the numerous U.S. regulatory bodies, many parties have called for  improved regulatory coordination. While regulators have taken steps to  collaborate, opportunities remain to improve collaboration in line with  GAO\u2019s leading practices. For example, the Interagency Fintech  Discussion Forum and the biennial meetings of the Federal Reserve  Mobile Payments Industry Workgroup do not include NCUA and FCC,  respectively, agencies that could add valuable perspectives. Without  these agencies, these efforts are not fully leveraging relevant agency  expertise, and NCUA and FCC may be precluded from learning about  risks that are relevant to their authorities.\nAmong other consumer protection issues related to financial account  aggregation, market participants do not agree about whether consumers  using account aggregators will be reimbursed if they experience  fraudulent losses in their financial accounts. Until regulators coordinate  and assist the industry in clarifying and balancing the valid interests of  consumers, financial account aggregators, and financial institutions,  consumers could have to choose between facing potential losses or not  using what they may find to be an otherwise valuable financial service.  Although regulators have been reluctant to act too quickly in light of  related industry efforts, they could increase collaboration to address key  issues such as consumer reimbursement for unauthorized transactions.  Aligning ongoing collaborative efforts with leading practices could help  regulators and market participants resolve disagreements over financial  account aggregation and related consumer compliance issues more  quickly and in a manner that balances the competing interests involved.\nWith our past work finding that an effective financial regulatory system  needs to be flexible and forward looking to allow regulators to more  readily adapt and oversee new products, U.S. regulators could potentially  improve their oversight of innovative fintech activities by considering  adoption of some of the efforts already being successfully used by  regulators abroad. While constraints may limit the ability or willingness of  regulators to fully adopt these practices, opportunities exist to assess  ways to tailor them to the U.S. context. Some U.S. regulators have  established innovation offices that can help fintech providers more easily  obtain needed information from relevant regulators; however, FDIC and  NCUA have not established such offices, which could help facilitate these  regulators\u2019 interactions with fintech firms and with the entities they  regulate. Also, initiatives such as regulatory sandboxes or proofs-of- concept that provide fintech firms the opportunity to operate and share  information with appropriate regulators have helped regulators abroad  educate their staff and thereby improve their oversight capacities.  However, the Federal Reserve, CFTC, FDIC, NCUA, and SEC have not  initiated such programs due to concerns about favoring certain  competitors over others or that they may not have the authority to initiate  these programs. While constraints may limit the ability or willingness of  regulators to fully adopt these practices, additional consideration by these  regulators of some of the approaches taken by regulators abroad could  assist U.S. regulators in learning more about new financial technologies  that could provide useful knowledge for their own regulatory activities.\n\n\tRecommendations for Executive Action\n\nWe are making a total of sixteen recommendations.\nThe Chair of the Board of Governors of the Federal Reserve System  should invite NCUA to participate in the Interagency Fintech Discussion  Forum. (Recommendation 1)\nThe Chairman of the Federal Communications Commission (FCC) should  discuss with the Presidents of the Federal Reserve Banks of Atlanta and  Boston whether the topics of the 2018-2019 biennial regulators meeting  of the Federal Reserve\u2019s Mobile Payments Industry Working Group would  make FCC participation beneficial to the FCC or the group, and take  steps accordingly. (Recommendation 2)\nThe President of the Federal Reserve Bank of Atlanta should discuss with  the Chairman of the FCC and the President of the Federal Reserve  Banks of Boston whether the topics of the 2018-2019 biennial regulators  meeting of the Federal Reserve\u2019s Mobile Payments Industry Working  Group would make FCC participation beneficial to the FCC or the group,  and take steps accordingly. (Recommendation 3)\nThe President of the Federal Reserve Bank of Boston should discuss with  the Chairman of the FCC and the President of the Federal Reserve  Banks of Atlanta whether the topics of the 2018-2019 biennial regulators  meeting of the Federal Reserve\u2019s Mobile Payments Industry Working  Group would make FCC participation beneficial to the FCC or the group,  and take steps accordingly. (Recommendation 4)\nThe Director of the Consumer Financial Protection Bureau should engage  in collaborative discussions with other relevant financial regulators in a  group that includes all relevant stakeholders and has defined agency  roles and outcomes to address issues related to consumers\u2019 use of  account aggregation services. (Recommendation 5)\nThe Chair of the Board of Governors of the Federal Reserve System  should engage in collaborative discussions with other relevant financial  regulators in a group that includes all relevant stakeholders and has  defined agency roles and outcomes to address issues related to  consumers\u2019 use of account aggregation services. (Recommendation 6)\nThe Chairman of the Federal Deposit Insurance Corporation should  engage in collaborative discussions with other relevant financial  regulators in a group that includes all relevant stakeholders and has  defined agency roles and outcomes to address issues related to  consumers\u2019 use of account aggregation services. (Recommendation 7)\nThe Chairman of the National Credit Union Administration should engage  in collaborative discussions with other relevant financial regulators in a  group that includes all relevant stakeholders and has defined agency  roles and outcomes to address issues related to consumers\u2019 use of  account aggregation services. (Recommendation 8)\nThe Comptroller of the Currency should engage in collaborative  discussions with other relevant financial regulators in a group that  includes all relevant stakeholders and has defined agency roles and  outcomes to address issues related to consumers\u2019 use of account  aggregation services. (Recommendation 9)\nThe Chairman of the Federal Deposit Insurance Corporation should  formally evaluate the feasibility and benefit of establishing an office of  innovation or clear contact point, including at least a website with a  dedicated email address. (Recommendation 10)\nThe Chairman of the National Credit Union Administration should formally  evaluate the feasibility and benefit of establishing an office of innovation  or clear contact point, including at least a website with a dedicated email  address. (Recommendation 11)\nThe Chair of the Board of Governors of the Federal Reserve System  should formally evaluate the feasibility and benefits to their regulatory  capacities of adopting certain knowledge-building initiatives related to  financial innovation. (Recommendation 12)\nThe Chairman of the Commodity Futures Trading Commission should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 13)\nThe Chairman of the Federal Deposit Insurance Corporation should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 14)\nThe Chairman of the National Credit Union Administration should formally  evaluate the feasibility and benefits to their regulatory capacities of  adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 15)\nThe Chairman of the Securities and Exchange Commission should  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. (Recommendation 16)\n\n\tAgency Comments and Our Response\n\nWe provided a draft of this report to CFPB; CFTC; FCC; FDIC; the  Federal Reserve; FTC; NCUA; OCC; SEC; and Treasury, as well as  CSBS and FINRA. We received written comments from all of these  agencies except for Treasury and FINRA; the comments are reprinted in  appendixes IV through XII, respectively. Agencies to which we directed  recommendations agreed with our recommendations, as detailed below.  All of these agencies except FCC and NCUA also provided technical  comments, which we incorporated as appropriate.\nIn response to our recommendation that CFPB engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, CFPB stated in its  letter that it concurred. CFPB stated that it has taken steps to address  related issues independently. CFPB also noted that it has participated in  related ongoing collaborative discussions and that it would continue to do  so.\nCFTC concurred with our recommendation that it formally evaluate  adopting knowledge-building initiatives related to financial innovation.  CFTC also noted that it is either using or exploring the use of some of the  knowledge-building initiatives identified in the report. However, the  agency also raised concerns that, without targeted legislative changes,  some of those initiatives may violate federal procurement laws and gift  prohibitions.\nIn its letter, FCC agreed with our recommendation that it should discuss  with the Presidents of the Federal Reserve Banks of Atlanta and Boston  whether the topics of the 2018\u20132019 biennial regulator meeting of the  Federal Reserve\u2019s Mobile Payments Industry Working Group would make  FCC participation beneficial to FCC or the group, and take steps  accordingly. FCC noted that it will reach out to the Federal Reserve  Banks of Atlanta and Boston to determine whether FCC participation  would be beneficial.\nRegarding our recommendation that FDIC engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, FDIC stated in its  letter that it recognizes the benefits of engaging in collaborative  discussions with other relevant regulators. It noted that it has been  involved in ongoing collaborative discussions about such issues and that  it would continue to do so, particularly regarding liability for unauthorized  transactions and consumer reimbursement. Regarding our  recommendation that FDIC formally evaluate the feasibility and benefit of  establishing an Office of Innovation or clear contact point, FDIC stated  that it would conduct such an evaluation, and acknowledged that it has a  long history of engaging in open dialogue with any party interested in  discussing matters related to FDIC\u2019s mission and responsibilities.  Regarding our recommendation that it formally evaluate adopting  knowledge building initiatives related to financial innovation, FDIC stated  that it recognizes the importance of knowledge building and has  developed a framework and implemented initiatives to facilitate this. It  also noted that it will continue ongoing efforts to build knowledge related  to financial innovation and will consider other relevant knowledge building  initiatives, as appropriate.\nIn response to our recommendations that the Federal Reserve include  NCUA and FCC in relevant working groups, the Federal Reserve stated  in its letter that its Board staff would seek NCUA\u2019s participation and that  staff from the Reserve Banks in Atlanta and Boston would discuss FCC\u2019s  participation in relevant working groups. Regarding our recommendation  that the Federal Reserve engage in collaborative discussions that  incorporate leading practices with other financial regulators regarding  financial account aggregation issues, the Federal Reserve acknowledged  the importance of working together to ensure that consumers were  protected, and noted a variety of ways it already coordinates on such  issues, and noted that it will continue to engage in such discussions to  address the important issues surrounding reimbursement for consumers  using these services. Regarding our recommendation that it formally  evaluate adopting knowledge-building initiatives related to financial  innovation, the Federal Reserve noted that it recognizes the importance  of such efforts and has recently organized a team of experts to ensure  that fintech-related information is shared across its organization.\nNCUA stated in its letter that it concurred with our recommendations to  engage in collaborative discussions that incorporate leading practices  with other financial regulators on financial account aggregation issues,  formally evaluate the feasibility and benefit of establishing an office of  innovation or clear contact point, and formally evaluate the feasibility and  benefits to their regulatory capacities of adopting certain knowledge- building initiatives related to financial innovation. NCUA noted that  evaluations of fintech activities are challenging for NCUA because it does  not have vendor authority like the other federal banking regulators. We  have previously raised NCUA\u2019s lack of vendor authority as a matter for  congressional consideration. NCUA stated it will continue to monitor risks  posed by fintech firms to the credit union industry by working with the  banking regulators.\nRegarding our recommendation that OCC engage in collaborative  discussions that incorporate leading practices with other financial  regulators on financial account aggregation issues, OCC stated in its  letter that it recognizes the importance of this recommendation. It noted  that it has been involved in ongoing collaborative discussions about such  issues and that it would continue to do so.\nSEC stated in its letter that it concurred with our recommendation to  formally evaluate the feasibility and benefits to their regulatory capacities  of adopting certain knowledge-building initiatives related to financial  innovation. SEC also stated that it will coordinate with other agencies as  appropriate during its assessment.\nIn its letter, CSBS drew connections between steps that state regulators  have taken and those that we are recommending to federal agencies.  CSBS also provided additional information regarding state licensing  requirements, which we incorporated into our report. Additionally, CSBS  expressed support for our recommendations on federal interagency  collaboration and stated that it would support related efforts that  respected the role of state regulators. In addition, CSBS said that these  efforts could benefit from the participation of state regulators and that it  would be willing to participate if invited. Similarly, CSBS expressed  support for our recommendations that certain federal agencies formally  evaluate the feasibility and benefit of establishing an office of innovation  or clear contact point and formally evaluate the feasibility and benefit of  adopting knowledge-building initiatives related to financial innovation.  However, CSBS also cautioned that knowledge-building initiatives should  not preempt state consumer protection and licensing laws for fintech  payment providers or fintech lenders.\nAs agreed with your offices, we are sending this report to the appropriate  members of Congress; CFPB; CFTC; FCC; FDIC; the Board of  Governors of the Federal Reserve; FTC; NCUA; OCC; SEC; and  Treasury, as well as CSBS and FINRA. In addition, the report will be  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines (1) fintech benefits, risks, and extent of legal or  regulatory protections for users; (2) efforts by U.S. regulators to oversee  fintech activities; (3) challenges that the regulatory environment poses to  fintech firms; and (4) the steps taken by domestic and other countries\u2019  regulators to encourage financial innovation within their countries.\nWhile fintech does not have a standard definition, for the purposes of this  report we focused on products and services leveraging technological  advances offered by financial institutions; nonbank financial companies;  and technology companies within the payment, lending, and wealth  management sectors, as well as products or services operating under  distributed ledger technology (DLT). Within these four identified sectors,  we examined particular products and services. In the payments  technologies sector we limited our scope to mobile wallets, peer-to-peer  payments, and peer-to-business payments products and services. To  identify these four sectors, we conducted background research and  reviewed prior GAO reports on fintech, person-to-person lending, and  virtual currencies. In the fintech lending sector, we focused on consumer  lending\u2014including credit card and home improvement loans\u2014and small  business lending services from direct and platform lending models;  however, we did not include mortgage lending in our scope, due to the  significant amount of regulation within the subsector. In the digital wealth  management sector, we examined firms that exclusively offer advice  using algorithms based on consumers\u2019 data and risk preferences to assist  or provide investment recommendations and financial advice directly to  consumers. We also examined issues relating to fintech account  aggregation companies that consolidate and display data from  consumers\u2019 accounts across financial institutions to help consumers more  easily see their overall financial health. For DLT, we focused on providers  that used DLT in payments and securities processing and token sales.  We also included information on the use of DLT in virtual currencies, such  as bitcoin and Ethereum. We also reviewed available data on transaction  volumes for the payments, lending, and robo advising sectors.\nTo identify the benefits provided and risks posed to consumers by fintech  services, we conducted a literature review of agency, industry participant,  and industry observer documents that analyzed developments within  fintech. Using ProQuest, Scopus, SSRN, and Nexis.com databases in the  literature review, we identified over 500 relevant articles out of over 1,100  search results by using search terms associated with the four fintech  subsectors mentioned above. Our search included articles from 2011 to  October 2017. To determine the usefulness of the studies for inclusion,  we conducted a review of search results involving multiple content  reviews by GAO analysts to determine which relevant articles could (1)  provide credible sources of information to help address our researchable  questions, or (2) help identify knowledgeable persons or groups to  interview. We excluded documents based on the following criteria that  eliminated articles that were (1) duplicated; (2) related to countries  outside our review; (3) about virtual currencies; (4) categorized as  \u201cmarginally relevant\u201d by analysts based on the article\u2019s title, publication  date, and source; (5) less recent documents from each author or source;  (6) from news outlets or nonauthoritative sources; or (7) deemed  irrelevant or not useful.\nTo obtain the financial services and fintech stakeholder perspectives on  fintech benefits and risk, we reviewed academic papers, reports, and  studies by other organizations on fintech activities we identified through a  literature search. We also conducted over 120 interviews with financial  regulators; banks; fintech providers; consumer groups; trade  associations; academics; think tanks; and consulting and law firms. We  identified potential interviewees by conducting Internet research;  reviewing literature search results; reviewing recommended interviewees  from our initial interviews; and selecting interviewees based on their  relevance to the scope of our review. We selected fintech firms and  financial intuitions, industry observers, and federal agencies based on the  product or service conducted by the firm, expertise of the industry  observers, and oversight authority of the federal agencies. We identified  fintech benefits and risk by speaking with relevant regulators and other  knowledgeable parties including: the Board of Governors of the Federal  Reserve System (Federal Reserve); the Federal Deposit Insurance  Corporation (FDIC); the National Credit Union Administration (NCUA); the  Office of the Comptroller of the Currency (OCC); the Commodity Futures  Trading Commission (CFTC); the Bureau of Consumer Financial  Protection, known as the Consumer Financial Protection Bureau (CFPB);  the Department of the Treasury (Treasury); the Federal Communications  Commission; Federal Trade Commission (FTC); the Financial Industry  Regulatory Authority (FINRA), the Securities and Exchange Commission  (SEC); and the Small Business Administration.\nTo obtain state-level perspectives we interviewed representatives of the  Conference of State Bank Supervisors (CSBS), National Association of  Attorneys General, Money Transmitter Regulators Association, National  Association of State Credit Union Supervisors, and the North American  Securities Administrators Association. We also interviewed staff from  three state financial regulatory agencies in states with active fintech firms  and regulatory activities: California, Illinois, and New York.\nTo assess the regulatory environment and various challenges faced by  fintech firms, we identified relevant laws and regulations pertaining to  fintech companies within our scope by reviewing prior GAO reports on  financial regulation and fintech, interviewed agency staff and industry  participants, and analyzed relevant agency documents, including relevant  laws and regulations. We also reviewed guidance; final rulemakings;  initiatives; and enforcement actions from agencies. To obtain federal  regulatory perspectives, we interviewed staff from the Federal Reserve,  FDIC, NCUA, OCC, CFTC, CFPB, Treasury, FTC, FINRA, SEC, and  SBA.\nTo determine the steps taken by domestic and other countries\u2019 regulators  to encourage financial innovation in their countries, we conducted  fieldwork\u2014including interviews with regulatory agencies, fintech firms,  and industry observers, as well as, observations of fintech programs\u2014in  the United Kingdom, Singapore, and Hong Kong. We also conducted  interviews with a regulatory organization and fintech firms operating in  Canada. We identified and selected countries for our fieldwork through  criteria that focused on the extent to which these locations had significant  (1) financial services activities, (2) fintech activities, and (3) fintech  regulatory approaches. We conducted Internet research, literature  searches, and interviews to identify relevant foreign regulators within the  selected fieldwork sites. To obtain other countries\u2019 regulator perspectives,  we interviewed and analyzed agency documents on regulatory efforts and  views on fintech innovations within their financial markets from regulators  in Hong Kong, Singapore, and the United Kingdom. To obtain the  perspective of fintech firms operating in the selected fieldwork sites, we  conducted Internet research, literature searches, and interviews to  determine relevant fintech firms and foreign trade associations, including  recommendations from domestic industry participants and observers.\nWe conducted this performance audit from initiation August 2016 to  March 2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix II: Interagency Collaborative Efforts That Have Addressed Fintech Issues\n\nIn this appendix, we present interagency working groups (including task  forces and other interagency collaborative bodies) that have discussed  fintech issues, and in some cases, taken specific actions. This list  includes interagency groups that are dedicated exclusively to fintech as  well as those that may discuss fintech as part of their broader financial  regulatory focus. Also, it includes interagency groups that operate at both  the domestic and international levels (see tables 2 and 3). This list is  based on information we obtained from the federal financial regulatory  agencies we met with and is not intended to be an exhaustive list.\n\nAppendix III: Regulatory Sandbox Examples\n\n\tUK Financial Conduct Authority\u2019s Regulatory Sandbox\n\nAccording to officials, the purpose of the Financial Conduct Authority\u2019s  (FCA) sandbox is to allow firms to test innovative products, services, or  business models in a live market environment, while ensuring that  appropriate protections are in place. FCA has stated that its sandbox has  (1) reduced the time and cost of getting innovative ideas to market; (2)  facilitated access to finance for innovators; (3) enabled products to be  tested and introduced to the market; and (4) helped the agency build  appropriate consumer protection safeguards into new products and  services. The characteristics of the FCA sandbox, according to the  agency, are listed below.\nEligible Participants: Currently regulated firms as well as  unregulated firms.\nEligibility Criteria: Firms submit an application outlining how they  meet the eligibility criteria for testing, which are (1) carrying out or  supporting financial services business in the UK; (2) genuinely  innovative; (3) identifiable consumer benefit; (4) need for sandbox  testing; and (5) ready to test.\nTesting Parameters: If a firm is unauthorized it must obtain  authorization or restricted authorization prior to participation in the  sandbox. Prior to participating in the sandbox a firm must design, and  obtain agreement on, the parameters of the sandbox test, including  the duration; customer selection; customer safeguards; disclosures;  data; and testing plans.\nFCA has four ways that it can help firms operate more easily in its  sandbox. First, it can provide restricted authorizations that are a tailored  authorization process for firms accepted into the sandbox. Any  authorization or registration is restricted to allow firms to test only their  ideas as agreed upon with agency staff, which is intended to make the  process easier for firms to meet requirements and reduce the cost and  time to initiate the test, according to the agency. Second, FCA provides  individual guidance to firms in the sandbox that are unclear on how the  agency\u2019s rules apply, whereby FCA will interpret the regulatory  requirements in the context of the firm\u2019s specific test. Third, in some  cases, FCA may be able to waive or modify an unduly burdensome rule  for the purposes of the sandbox test, but it cannot waive national or  international laws. Finally, FCA can issue no enforcement action letters in  cases where they cannot issue individual guidance or waivers but they  believe regulatory relief is justified for the circumstances of the sandbox.  According to the agency, no enforcement action letters are offered only  during the duration of the sandbox test to firms that keep to the agreed- upon testing parameters and that treat customers fairly. Also, no  enforcement action letters only apply to FCA disciplinary action and do  not limit any liabilities to consumers. Officials we interviewed noted that  rule waivers and no enforcement action letters are rarely used tools. As of  January 2018, FCA had received more than 200 sandbox applications.  Eighteen firms had successfully graduated from the first cohort, 24 firms  were preparing to test in the second cohort, and 18 other firms were  accepted to test in the third cohort.\n\n\tMonetary Authority of Singapore\u2019s Regulatory Sandbox\n\nRecognizing that when lack of clarity over whether a new financial service  complies with legal and regulatory requirements could cause some  financial institutions or start-ups to choose not to implement an  innovation, the Monetary Authority of Singapore\u2019s (MAS) purpose in  establishing its sandbox was to encourage such experimentation so that  promising innovations could be tested in the market and have a chance  for wider adoption, according to the agency. In addition, the agency  stated that sandbox tests include safeguards to contain the  consequences of failure and maintain the overall safety and soundness of  the financial system. The characteristics of the MAS sandbox, according  to MAS, are listed below.\nEligible Participants: Firms that are looking to apply technology in  an innovative way to provide financial services that are regulated by  MAS, including financial institutions, fintech firms, and professional  services firms partnering with such firms.\nEligibility Criteria: Firms submit an application outlining how they  meet the eligibility criteria for testing, which are that (1) the product  uses new technology or existing technology in an innovative way, (2)  the product benefits consumers or industry, and (3) the firm intends to  deploy the product in Singapore on a broader scale after exiting the  sandbox.\nTesting Parameters: Firms must define the following testing  parameters prior to participating in the sandbox: (1) clearly defined  test scenarios and expected outcomes must be established; (2)  boundary conditions that facilitate meaningful experiments while  sufficiently protecting the interests of consumers and maintaining the  safety and soundness of the industry must be in place; (3) the firm  assesses and mitigates significant associated risks; and (4) an  acceptable exit and transition strategy must be defined.\nMAS stated that it will consider relaxing various regulatory requirements  for the duration of the sandbox test. However, they emphasized that their  sandbox is not intended and cannot be used as a means to circumvent  legal and regulatory requirements. MAS staff determines the specific legal  and regulatory requirements that they may be willing to relax on a case- by-case basis. According to MAS, some of the regulatory requirements  that could be relaxed included maintenance of certain levels of financial  soundness, solvency, capital adequacy, and credit ratings as well as  licensing fees, board composition requirements, and management  experience requirements, among others. However, MAS has also laid out  some requirements that it will not consider relaxing, including those  regarding consumer information confidentiality, anti-money laundering,  and countering terrorist financing. MAS officials said that all firms in the  sandbox will receive some form of regulatory relaxation. As of November  2017, MAS had received more than 30 sandbox applications. One firm  had successfully graduated, and a few other firms were testing or were in  the process of initiating a sandbox test.\n\n\tHong Kong Monetary Authority\u2019s Fintech Supervisory Sandbox\n\nAccording to the Hong Kong Monetary Authority (HKMA), the purpose of  the HKMA sandbox is to enable banks and technology firms to gather  data and user feedback so that they can make changes to their  innovations, thereby expediting the launch of new products and reducing  development costs. HKMA officials stated that the sandbox allows banks  and their partnering technology firms to conduct pilot trials of their fintech  initiatives involving a limited number of participating customers without  the need to achieve full compliance with HKMA\u2019s supervisory  requirements. The characteristics of the HKMA sandbox, according to the  agency, are listed below.\nEligible Participants: Regulated banks and their partnering  technology firms.\nEligibility Criteria: Fintech initiatives that are intended to be  launched by banks in Hong Kong are eligible for the sandbox.\nTesting Parameters: Participating firms must (1) define the scope,  phases, timing, and termination of the sandbox test; (2) establish  customer protection measures, including disclosures, complaint  handling, and compensation for consumer loss; (3) establishing risk  management controls; and (4) establish a monitoring program for the  sandbox test.\nSimilar to MAS, HKMA stated that its sandbox should not be used as a  means to bypass applicable supervisory requirements; however, HKMA  will relax regulatory requirements on a case-by-case basis. As of  November 2017, nine banks had participated in 26 HKMA sandbox tests.  Twelve of these tests had been completed and banks collaborated with  fintech firms in 15 of the tests.\n\nAppendix IV: Comments from the Consumer Financial Protection Bureau\n\nAppendix V: Comments from the Commodity Futures Trading Commission\n\nAppendix VI: Comments from the Conference of State Bank Supervisors\n\nAppendix VII: Comments from the Federal Communications Commission\n\nAppendix VIII: Comments from the Federal Deposit Insurance Corporation\n\nAppendix IX: Comments from the Board of Governors of the Federal Reserve System\n\nAppendix X: Comments from the National Credit Union Administration\n\nAppendix XI: Comments from the Office of the Comptroller of the Currency\n\nAppendix XII: Comments from the Securities and Exchange Commission\n\nAppendix XIII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nLawrance L. Evans, Jr., (202) 512-8678 or evansl@gao.gov.\n\n\tStaff Acknowledgements\n\nIn addition to the contact named above, Cody Goebel (Assistant Director);  Chloe Brown (Analyst-in-Charge); Chris Ross; Davis Judson; Ian P.  Moloney; and Bethany Benitez made key contributions to this report. Also  contributing to this report were Joanna Berry; Timothy Bober; Richard  Hung; Pamela Davidson; Tovah Rom; Cynthia Saunders; and Jena  Sinkfield.","output":"Why GAO Did This Study\n\nAdvances in technology and the widespread use of the Internet and mobile communication devices have helped fuel the rise of traditional financial services provided by non-traditional technology-enabled providers, often referred to as fintech.\nGAO was asked to provide information on various aspects of fintech activities. This report addresses fintech payment, lending, wealth management, and other products. GAO assesses 1) fintech benefits, risks, and protections for users; 2) regulatory oversight of fintech firms; 3) regulatory challenges for fintech firms; and 4) the steps taken by domestic and other countries' regulators to encourage financial innovation within their countries. GAO reviewed available data, literature, and agency documents; analyzed relevant laws and regulations; and conducted interviews with over 120 federal and state regulators, market participants, and observers, and regulators in 4 countries with active fintech sectors and varying regulatory approaches.\n\nWhat GAO Found\n\nFintech products\u2014including payments, lending, wealth management, and others\u2014generally provide benefits to consumers, such as convenience and lower costs. For example, fintech robo-advisers offer low cost investment advice provided solely by algorithms instead of humans. Fintech products pose similar risks as traditional products, but their risks may not always be sufficiently addressed by existing laws and regulations. Also, regulators and others noted that fintech activities create data security and privacy concerns and could potentially impact overall financial stability as fintech grows. The extent to which fintech firms are subject to federal oversight of their compliance with applicable laws varies. Securities regulators can oversee fintech investment advisers in the same ways as traditional investment advisers. Federal regulators may review some activities of fintech lenders or payment firms as part of overseeing risks arising from these firms' partnerships with banks or credit unions. In other cases, state regulators primarily oversee fintech firms, but federal regulators could take enforcement actions. Regulators have published consumer complaints against fintech firms, but indications of widespread consumer harm appear limited. The U.S. regulatory structure poses challenges to fintech firms. With numerous regulators, fintech firms noted that identifying the applicable laws and how their activities will be regulated can be difficult. Although regulators have issued some guidance, fintech payment and lending firms say complying with fragmented state requirements is costly and time-consuming. Regulators are collaborating in various ways, including engaging in discussions on financial protections for customers that may experience harm when their accounts are aggregated by a fintech firm and unauthorized transactions occur. Market participants disagree over reimbursement for such consumers, and key regulators are reluctant to act prematurely. Given their mandated consumer protection missions, regulators could act collaboratively to better ensure that consumers avoid financial harm and continue to benefit from these services. GAO has identified leading practices for interagency collaboration, including defining agency roles and responsibilities and defining outcomes. Implementing these practices could increase the effectiveness of regulators' efforts to help resolve this conflict.\nRegulators abroad have taken various approaches to encourage fintech innovation. These include establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use \u201cregulatory sandboxes\u201d that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators. Regulators abroad also established various mechanisms to coordinate with other agencies on financial innovation. While some U.S. regulators have taken similar steps, others have not due to concerns of favoring certain competitors or perceived lack of authority. While these constraints may limit regulators' ability to take such steps, considering these approaches could result in better interactions between U.S. regulators and fintech firms and help regulators increase their understanding of fintech products. This would be consistent with GAO's framework calling for regulatory systems to be flexible and forward looking to help regulators adapt to market innovations.\n\nWhat GAO Recommends\n\nGAO is making numerous recommendations related to improving interagency coordination on fintech, addressing competing concerns on financial account aggregation, and evaluating whether it would be feasible and beneficial to adopt regulatory approaches similar to those undertaken by regulators in jurisdictions outside of the United States. In written comments on a draft of this report, the agencies stated that they concurred with GAO's recommendations and would take responsive steps."}
{"id":"crs_R43590","pid":"crs_R43590_0","input":"\tIntroduction\n\nAccording to the Office of Personnel Management (OPM), the federal workforce is composed of an estimated 2.1 million civilian workers, and several federal agencies collect, compile, and publish statistics about this workforce. Source s may vary in their totals due to differences in how federal workforce statistics are compiled. Some sources rely on \"head counts\" of employees (OPM), some on total hours worked (such as the Office of Management and Budget [OMB]), some on surveys of employing agencies, and others on self-identification by workers surveyed in their homes. \nIn addition, federal civilian employee databases may exclude particular departments, agencies, or branches of government. Some may also account for temporary or seasonal employees (such as those employed by the U.S. Census) depending on the time of year the statistics are generated.\nThis report focuses on differences in methodologies, including exclusions, and the frequency of data collection employed by OMB and OPM to determine the size and scope of the federal workforce. These differences will facilitate the selection of appropriate data for specific purposes.\n\n\tComparing Methodologies: On-Board Personnel Versus Full-Time Equivalents2\n\nOne example of a key methodological distinction is the difference between \"full-time equivalents\" (FTEs) and on-board personnel. The following two examples illustrate how the FTE and on-board methods can be used to derive different federal workforce totals. \n\n\t\tMethod 1: Full-Time Equivalent Employment (OMB)\n\nFull-time equivalent employment is defined as the total number of regular straight-time hours (not including overtime or holiday hours) worked by employees divided by the number of compensable hours applicable to each fiscal year. Work years, or FTEs, are not employee \"head counts.\" One work year, or one FTE, is equivalent to 2,080 hours of work.\n Table 1 offers examples in which there is a difference between the actual number of people and the number of FTEs working the same number of total hours. It also illustrates how measuring employment by hours can substantially change the perception of the number of employees it takes to accomplish the work.\nFTE employment numbers are used by OMB to manage employment in departments and agencies. The requirements for reporting FTE employment in the President's Budget are prescribed in Section 85 of OMB Circular No. A-11 on \"Estimating Employment Levels and the Employment Summary (Schedule Q).\"\nFTE data are published annually in OMB's the Budget of the United States Government under the individual department and agency accounts in the Appendix as well as in the Analytical Perspectives and Historical Tables volumes.\n\n\t\tMethod 2: On-board Employment (OPM)\n\nOPM defines on-board employment as the number of employees in pay status at the end of the quarter. Data for on-board employment provide employee \"head count\" in most departments and agencies as of a particular date, including full-time, part-time, and seasonal employees. OPM's Employment and Trends report and OPM's FedScope database provide on-board employment headcounts.\nWhen calculating on-board personnel, the number of full-time, part-time, and seasonal workers at an agency is relevant. For example, an agency reporting 10 FTEs could conceivably report 20 \"on-board\" employees, depending on employees' work schedules.\nIn addition, the \"on-board\" headcount may result in wide variances in employment numbers, depending on the specific date the employees are counted. For example, the Census Bureau hires 7,000 Census enumerators every 10 years. The federal on-board employees count is likely to be larger during the duration of their employment. \n\n\tOffice of Personnel Management\n\nOPM is an independent agency that functions as the central human resources department of the executive branch. In fulfilling its mission, OPM collects, maintains, and publishes data on a large portion of the federal civilian workforce. \nIn FY2010, OPM established a system called the Enterprise Human Resources Integration-Statistical Data Mart (EHRI-SDM). This automated system provides access to personnel data for 96% of nonpostal federal civilian executive branch employees. The database does have exclusions; for example, not all executive branch agencies submit their personnel data to OPM. These exclusions include some national security and intelligence agencies, and the Postal Service. Even with these exclusions, the EHRI-SDM is widely regarded as the most comprehensive resource available on the size and scope of the federal workforce.\nMore than 100 data elements are collected for each federal employee within the EHRI-SDM. These data are aggregated by OPM and published in the resources described below. \n\n\t\tFedScope\n\nFedScope is a website that provides public access to the EHRI-SDM, covering the most recent five years of employment, accession, and separation data provided by approximately 120 federal agencies. It is available at http:\/\/www.fedscope.opm.gov\/ .\nFedScope data are presented in five subject categories, called \"cubes,\" each covering a different subject and time span. The following are descriptions of the data cubes available through FedScope:\nEmployment . This set of cubes contains the total number of federal employees of the included agencies, as well as other information such as age, gender, length of service, occupation, occupation category, pay grade, salary level, type of appointment, work schedule, agency, and location. Data are published quarterly (March, June, September, and December) for the most recent eight fiscal years. September data, which align with the end of the fiscal year, are available from 1998 to the present. Accession . This set of cubes contains the number of people added to the federal civilian workforce each fiscal year. It includes data elements on employees hired from outside the government and those who transferred from one type of federal service category to another. The most recent 14 fiscal years of data are available. Separation . This set of cubes contains the number of people who leave the federal civilian workforce each fiscal year. It captures data elements on employees who transferred to other agencies, voluntarily resigned, retired, experienced a reduction-in-force (RIF), were terminated, or died while employed. The most recent 14 years of data are available. Employment Trends . This set of cubes displays the most recent five years of employment cube data together in one interface, facilitating workforce data comparisons and trend recognition. Diversity . This set of cubes sorts data by an Ethnicity and Race Indicator. Data elements for 13 categories of racial and ethnic groups are available for the most recent eight years. September data, which align with the end of the fiscal year, are available from 2006 to the present. \n Table 2 provides some of the most commonly requested data available from FedScope.\n\n\t\tEmployment and Trends\n\nEmployment and Trends is an occasional publication from OPM based on on-board employee data. It provides data on executive departments and independent agencies, including the Department of Defense (DOD) civilian employees, Executive Office of the President, legislative branch, and judicial branch. It presents selected data in detailed statistical tables and includes information by government branch, agency, and location. Introductory material in Employment and Trends explains the data presented, time lags in data releases, and caveats to consider when calculating workforce totals. The most recently released version of this resource is available at http:\/\/www.opm.gov\/policy-data-oversight\/data-analysis-documentation\/federal-employment-reports\/#url=Employment-Trends .\n\n\t\tCommon Characteristics of Government\n\nCommon Characteristics of Government is an annual publication that includes a brief outline of OPM's federal employee databases and it includes frequently requested data. The latest edition (FY2017) is available at https:\/\/www.opm.gov\/policy-data-oversight\/data-analysis-documentation\/federal-employment-reports\/common-characteristics-of-the-government\/ccog2017.pdf .\n\n\t\tSizing Up the Executive Branch of the Federal Workforce\n\nSizing Up the Executive Branch of the Federal Workforce is an OPM report that provides access to frequently requested data related to the executive branch. This report includes some information related to the size of the executive branch by month and year, types of employment, and other frequently requested data. The most recent report (FY2017) is available at https:\/\/www.opm.gov\/policy-data-oversight\/data-analysis-documentation\/federal-employment-reports\/reports-publications\/sizing-up-the-executive-branch-2016.pdf .\n\n\tOffice of Management and Budget\n\nOMB is the largest component of the Executive Office of the President. OMB reports directly to the President, and it assists executive departments and agencies in implementing priorities and commitments of the President. OMB produces the Budget of the United States , which includes federal employee statistics created using the FTE counting method. \n\n\t\tBudget of the United States\n\nThe Budget of the United States , sometimes referred to as the President's Budget, is a four-volume set of documents that includes detailed financial information on individual programs and appropriations accounts. Three volumes of the budget include information on direct civilian FTEs. Tables in the President's Budget typically include actual FTE levels for prior fiscal years and estimates for the two most current fiscal years. The U.S. Government Publishing Office website posts budget volumes dating back to FY1996 at https:\/\/www.govinfo.gov\/app\/collection\/BUDGET\/ .\n Table 3 illustrates an example of some commonly requested federal employment data found within the President's Budget.\nThe following volumes of the President's Budget include information on federal employees. The current volumes can be accessed at https:\/\/www.whitehouse.gov\/omb\/budget .\n\n\t\t\tAnalytical Perspectives\n\nThe Analytical Perspectives volume typically includes information on the federal workforce, sometimes including information on occupations, trends, education level, age distribution, and other factors. The most current Analytical Perspectives volume of the President's Budget is available at http:\/\/www.whitehouse.gov\/omb\/analytical-perspectives\/ .\n\n\t\t\tAppendix\n\nThe Appendix volume typically includes an estimate of individual agency FTEs based on the President's proposal along with an estimate and actual FTE count for the prior two years. The most recent Appendix volume of the President's Budget is available at http:\/\/www.whitehouse.gov\/omb\/appendix .\n\n\t\t\tHistorical Tables\n\nThe Historical Tables volume of the President's Budget includes historical data on topics such as budget, receipts, outlays, and deficits. This volume also typically includes historical employment counts. The most recent Historical Tables volume of the President's Budget is available at http:\/\/www.whitehouse.gov\/omb\/historical-tables .\n\n\tConsideration of Sources\n\nThe resources described in this report contain data often requested by Members or congressional staff. The sources covered differ in the methodology, including exclusions, and the frequency of data collection. Users should be aware of these differences when using federal workforce statistics from these sources.","output":"This report describes online tools, reports, and data compilations created by the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) that contain statistics about federal employees and the federal workforce.\nThe report also describes key characteristics of each resource and briefly discusses selected methodological differences, with the intention of facilitating the selection of appropriate data for specific purposes. This report is not intended to be a definitive list of all information on the federal workforce. It describes significant and recurring products that contain specific data often requested by Members or congressional staff."}
{"id":"gao_GAO-18-114","pid":"gao_GAO-18-114_0","input":"\tBackground\n\nForty-five states and the District of Columbia levy sales taxes on the sale  of goods and services. Of these, thirty-seven states also have local sales  taxes at the county or municipal level. Five states do not have statewide  sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.  Tax policy specialists have cited figures as high as 12,000 and as low as  10,000 for the number of tax jurisdictions in the United States\u2014each with  potentially different tax rates, different rules governing tax-exempt goods  and services, different product category definitions, and different  standards for determining whether an out-of-state seller has a substantial  presence (referred to as nexus) in a state.\nOn average, states receive about one-third of their total tax collections  from general sales taxes. However, reliance on sales taxes varies  considerably across states. Five states that do not have a broad-based  individual income tax\u2014Florida, Nevada, South Dakota, Tennessee, and  Texas\u2014collect more than half their tax revenue from general sales  taxes. As of January 1, 2017, most state sales tax rates were about 6  percent, although analysis prepared by the Tax Foundation shows that  five states\u2014Alabama, Arkansas, Louisiana, Tennessee, and  Washington\u2014had average combined state and local tax rates close to or  above 9 percent.\nGenerally, businesses are required to collect sales taxes on goods and  services sold to in-state consumers at the time of the purchase, and remit  those taxes to the state, and sometimes local government, revenue  office. The growth of e-commerce has greatly increased the likelihood of  businesses selling to out-of-state customers. In 1992, the U.S. Supreme  Court ruled in Quill v. North Dakota that a state can only require a  business to collect and remit sales tax if the business has substantial  presence, referred to as nexus, in that state. However, the decision  stated that Congress could pass legislation to overrule the Quill decision.  Legislation has been proposed to expand states\u2019 tax collection authority  to all remote sales, but no bill has received enough support to pass both  the Senate and the House of Representatives. Some of the legislation  has included provisions for small seller exemptions, free software, liability  protection, and transition periods.\nIn general, under present law in states with sales taxes, if the seller does  not have nexus in a state, and is therefore not required to collect tax, then  the consumer is required to pay a use tax in the same amount. Although  functionally similar to a sales tax, the use tax is a tax levied on the  consumer for the privilege of use, ownership, or possession of taxable  goods and services. However, consumer compliance rates for use tax  remittance are estimated to be very low.\n\n\t\tState Activity\n\nWith the growth in e-commerce, states have increased their enforcement  activities to collect sales tax from residents who make purchases from  out-of-state businesses. A few states have passed laws or changed  regulations that directly challenge or test the limits of the 1992 Quill v.  North Dakota decision\u2014most notably, Alabama, Colorado, and South  Dakota\u2014to increase tax collections on remote sales. In reviewing  testimony and tax industry publications, we found that states have also  sought additional revenue through more indirect approaches, such as  asserting jurisdiction on the basis of nexus to include \u201caffiliate nexus\u201d and  \u201cclick-through nexus.\u201d\nColorado for instance enacted a law requiring retailers who do not collect  taxes on sales to Colorado customers to notify those customers of their  use tax obligations and send an annual report on customers\u2019 purchases  to the state revenue agency. The revenue agency could then use this  information to identify which purchasers have a use tax obligation.\nSouth Dakota took a different approach aimed at overturning the Quill  decision. In 2016, the legislature passed a law requiring out-of-state  businesses meeting certain criteria to collect and remit sales tax on  purchases made by South Dakota residents. The state supreme court  ruled on September 13, 2017, that the law violated Quill. On October 2,  2017, South Dakota filed a petition for a writ of certiorari with the U.S.  Supreme Court.\nAlabama promulgated a regulation in September 2015 requiring out-of- state retailers who made $250,000 or more in sales to Alabama residents  annually, or who conducted one or more statutorily defined activities, to  collect and remit sales tax. A suit was filed with the Alabama Tax  Tribunal, but no decision has been made.\nNew York took a different route passing a \u201cclick-through\u201d nexus law in  2008. Some out-of-state retailers enter into agreements with local online  retailers to advertise the local retailer\u2019s merchandise on the out-of-state  retailer\u2019s website. Because the agreement was with an in-state vendor,  the law defined that to be a sufficient nexus to impose sales tax on the  out-of-state-vendor. Several companies unsuccessfully challenged the  statute.\nA few state governments have taken action to increase tax collection from  e-marketplace sellers. As of October 2017, two states (Minnesota and  Washington) had passed laws imposing new requirements on   e-marketplace companies to collect sales taxes on behalf of the sellers  using their e-marketplace platforms. Some states have asserted that the  warehousing of goods and fulfillment of orders from within a state is  enough to create nexus, and therefore a requirement to collect taxes on  sales to customers in that state. To enforce compliance, we found that  at least three state revenue agencies have been seeking sales, shipping  or location data about goods sold through e-marketplaces.\n\n\tTaxes are Collected on Most Remote Sales, but States Could Gain Additional Revenue with the Authority to Require All Businesses to Collect Taxes\n\n\t\tState and Local Governments Are Able to Collect Taxes on More Than Half of Sales\n\nWe estimate that state and local governments can, under current law,  require remote sellers to collect about 75 to 80 percent of the taxes that  would be owed if all remote sellers were required to collect tax on all  remote sales at current rates. We found that the extent to which state  and local governments can, under current law, require businesses to  collect taxes on remote sales varies with the type of remote seller (as  shown in table 1). For business-to-consumer (B2C) remote sales, we  found that the percentage of taxes already being collected by sellers  (which we call the \u201cseller collection rate\u201d) was generally higher for Internet  retailers than for other types of remote sellers like catalog retailers or   e-marketplaces.\nBased on our analysis of nearly 1,000 Internet retail companies, we  estimate that about 80 percent of the potential revenue from requiring all  Internet retailers to collect is already collectible. Many of the largest  Internet sellers are established retail chains or consumer brands with a  physical presence, such as retail stores, in all, or nearly all, of the 45  states (plus the District of Columbia) that have a statewide sales tax. As  noted earlier, under current law, if a remote seller has a substantial  presence (referred to as nexus) in a state, the seller is required to collect  taxes on remote sales into that state. In addition, even without being  required to, some large Internet retailers have entered into agreements  with states to collect applicable taxes on all their Internet sales,  regardless of physical presence.\nThe rise of e-marketplaces, such as eBay, Etsy, and Amazon  Marketplace, has complicated nexus determinations. At these  marketplaces, sellers can access large customer bases and utilize the  marketing and distribution services of the marketplace platform, often for  a fee. Certain states can rely on inventory stored within their borders as  sufficient nexus to impose taxes. This has included sellers using a large  marketplace\u2019s fulfillment services. As a result, to properly collect and  remit taxes, sellers using marketplace fulfillment services need  information on where their inventory is stored.\nWhile we estimated the seller collection rate to be relatively high for the  category of Internet retailers (about 80 percent), we found it to be lower  for other types of B2C remote sellers. For example, we estimate that   e-marketplace sellers are currently collecting 14 percent of the taxes on  their sales, in our highest potential revenue gain estimate, to up to 33  percent, in our lowest potential revenue gain estimate. For other types of  remote retailers, such as mail-order companies, we estimate that they are  currently collecting tax on 58 percent of their sales in our highest potential  revenue gain estimate and up to 64 percent of their sales in our lowest  potential revenue gain estimate (as shown in table 1).\nAlthough business-to-business (B2B) sales account for a larger share of  total e-commerce than B2C sales, potential state and local government  revenue gains from taxing all of these sales is less because fewer B2B  sales are taxable, and seller collection rates are higher (as shown in table  1). We estimate that about half of all wholesale e-commerce purchases  involve businesses purchasing raw materials or other intermediate goods  that are then manufactured or incorporated into a final product. These  purchases of intermediate goods are generally exempt from state and  local government taxes because only the final sale to the end consumer  would be taxable. For the remaining taxable B2B purchases, we  estimate that the seller collection rates are between 85 percent for those  sales in our highest potential revenue gain estimate and 94 percent in our  lowest potential revenue gain estimate.\n\n\t\tPotential Revenue Gain across All States for 2017 is about $8 billion to $13 billion Based on our Low and High Scenario Estimates\n\nBased on the seller collection rates we estimated using high and low  scenarios to illustrate the effect of underlying uncertainties, we  determined that state and local governments could potentially gain about  $8 billion based on our low scenario to about $13 billion, based on our  high scenario, in 2017 if they were given expanded authority to require  sales tax collection from all remote sellers. Table 2 presents our range of  estimates. Appendix II presents our range of estimates for each of the 45  states plus the District of Columbia that have a statewide sales tax. Our  estimates range from more than $1 billion for more populated states like  California and Texas to about $20 million for less populated states like  Vermont and Wyoming. The average gain is about $200 million.\nIn aggregate, our national estimate of about $8 billion (low scenario) to  about $13 billion (high scenario) represents about 2 to 4 percent of total  state and local government general sales tax revenues. According to data  from the U.S. Census Bureau, state and local governments in 2016  collected about $377 billion in general sales and gross receipts taxes.\n\n\t\t\tLarger States Collect Taxes on a Greater Share of Remote Sales than Smaller States\n\nWe found that the extent to which state and local governments can  require remote sellers to collect taxes varies by state. Based on analyses  of remote sellers\u2019 nexus locations, we estimate that some of the largest  states (in terms of population) can currently require sellers to collect  about 80 to 90 percent of the taxes these states could collect with  expanded authority on all remote sales. In contrast, we estimate that  some smaller states can only require sellers to collect and remit about 60  to 70 percent of the taxes they could collect on all remote sales. The  difference is based on the greater likelihood of Internet retailers having a  physical presence in larger states.\nWe researched store locations and sales tax policies for the largest 100  Internet retailers identified by researchers at Internet Retailer. We found  that about 85 percent of these Internet retailers had store locations in, or  stated on their websites that they were collecting sales taxes for,  California and New York. By contrast, about 55 percent of these large  Internet retailers had stores or were collecting in less populated states  like North Dakota and Wyoming.\nFor smaller Internet retailers with only one location, we also found that a  disproportionate share of them were located in larger states. Based on  our analysis of more than 400 Internet retailers with only one location, we  found that 19 percent were located in California and 12 percent in New  York. With Internet retailers and other remote sellers less likely to have a  physical presence in less populated states, smaller states are at a  disadvantage compared to larger states in their ability to require remote  sellers to collect taxes on all sales into their states.\n\n\t\t\tAbout Half of Potential Revenue Gains Could Come from Tax Collections on E-Marketplace Sales\n\nWe estimate that nearly half of potential revenue gains to state and local  governments would result from collecting sales taxes on all e-marketplace  sales. To date, e-marketplaces have not been obligated to collect state  sales taxes on behalf of sellers. Instead, like with all remote sellers,  individual sellers who have title to the goods being sold through an   e-marketplace are required to collect tax on sales to states in which they  have nexus. However, we identified two states that have recently taken  action to attribute a collection obligation to the e-marketplace.\nThrough our review of tax industry publications and interviews with tax  practitioners, we learned that some individual sellers have difficulty  obtaining information from the e-marketplace companies on where their  goods might be stored. While the three large e-marketplaces that we  interviewed offer their sellers additional services that help sellers  calculate and collect sales taxes, not all sellers take advantage of this  service. None of the e-marketplaces that we interviewed could provide us  data on the extent to which their sellers currently collect sales tax. Given  the lack of available data, we made a conservative estimate of potential  revenue gains to states if given the authority to require all e-marketplace  sellers to taxes on all their sales. If e-marketplace sellers are currently  collecting less tax than we assume in our model, the actual potential  revenue gain to states would be higher than the estimate we provide in  this report.\n\n\t\t\tCompliance with Use Tax on Most Remote Purchases is Low for Individual Taxpayers, but High for Businesses\n\nBecause state and local governments currently do not have the authority  to require businesses to collect tax on all remote sales, states generally  require taxpayers who were not charged a tax on their purchases from  out-of-state vendors to pay a use tax on those purchases. However,  with the exception of purchases that are required to be registered with the  state, such as vehicles, voluntary compliance is generally thought to be  extremely low. For those states that permit taxpayers to report use taxes  on their income tax returns, it is estimated that only about 1 to 2 percent  of returns include use tax payments. Unlike estimates for individual  compliance with use tax, estimates for business compliance are high,  ranging from 70 to 90 percent. Some tax practitioners we interviewed  told us that businesses routinely retain records of their taxable and tax- exempt purchases, including remote purchases, and are more likely to be  compliant with any use taxes.\nWe identified at least four states that have begun implementing new laws  intended to increase consumer use tax compliance. Under these \u201cnotice  and reporting\u201d laws, remote sellers not collecting taxes on out-of-state  sales are required to notify customers that they may be liable for use  taxes to their home state. The states are also requiring remote sellers to  send their out-of-state customers an annual summary of all purchases for  which sales tax was not collected. Data from these annual summaries are  shared with state revenue agencies that can use this information for  enforcement purposes. Data were not yet available to estimate the  revenue effects of these new programs. As we have previously reported,  tax compliance is generally much higher when there is third-party  reporting of information to the revenue agency. We expect that state  collection of third-party information will achieve similar results.\n\n\tSome Businesses Would Likely Incur Several Types of Costs If Required to Collect Taxes on All Remote Sales\n\nWe identified various costs associated with typical steps involved in  multistate sales tax collection. We group these costs into three broad  categories: software related costs, audit and assessment compliance  costs, and costs associated with research and liability. We found that  businesses with limited experience in multistate tax collection and those  that lack software systems designed to facilitate multistate tax collection  would incur the highest costs under such a scenario.\nRepresentatives from a large national chain and a trade group  representing retailers told us that, generally speaking, larger retailers and  those that primarily engage in brick-and-mortar retailing believe that  expanded state authority would end the unfair advantage that remote  retailers gain by not collecting sales tax on their out-of-state sales. Those  familiar with multistate collection explained that because the software  used for multistate collection is easily scaled up, retailers already using  such systems, would incur few challenges to adapt to this expanded  authority. Further, larger retailers that already collect in many states  would already have the systems in place for collection under expanded  authority. We also identified state and national efforts for simplifying tax  collection for businesses. These efforts show potential for mitigating the  expected costs, but much depends on the specifics of any legal changes.\nOur research found that a number of commercial software offerings are  available to assist businesses with collecting sales taxes in multiple  states. Two people familiar with the use of tax software told us that  although many standard business software products generally include  some sales tax functionality, these systems do not always fully support  businesses selling in multiple tax jurisdictions. As a result, sellers with  more widespread collection obligations typically use specialized multistate  sales tax software. A representative from a Certified Public Accounting  (CPA) firm explained that costs are incurred both when businesses collect  sales tax from customers, and when they remit the tax to the appropriate  state revenue department. In some instances, there are also start-up  costs that businesses incur prior to tax collection, as well as audit or  assessment costs that occur after tax collection. Figure 1 summarizes  these steps and can help inform the discussion of the specific costs.\n\n\t\tBusinesses Selling Remotely May Incur High Upfront Costs to Establish Software for Multistate Tax Collection\n\nThe cost of both collecting and remitting sales tax rises with increased  exposure to tax jurisdictions. As the number of jurisdictions for which a  business collects taxes increases, the amount of administrative work also  increases. Businesses will have to prepare and file a greater number of  returns, license more functionality from the collection software they use,  and collect tax on a greater number of sales. All of these actions add  additional costs to a business\u2019s operations.\nWhile all sellers would incur these additional costs, costs will be highest  for those that do not already use software for multistate tax collection.  This is especially true for those selling goods treated differently by  different states and those that do not use easily-integrated software.  Costs for collection software include, start-up costs, licensing fees,  administrative costs, and options for premium services, such as preparing  or automatically filing sales tax returns. Start-up costs are the costs  associated with setting up the software for first use.\nTax practitioners told us that software is necessary for multistate  collection because of the complexity created by unstandardized  requirements across jurisdictions. As we note above, tax policy specialists  have cited figures as high as 12,000 and as low as 10,000 for the number  of tax jurisdictions in the United States. In addition to differences that exist  among the tax codes of the 45 states and the District of Columbia with  statewide sales taxes, many local bodies have the power to impose  additional sales taxes on purchases within their jurisdictions.\nSome tax practitioners that we interviewed said that mapping and system  integration related to the necessary software for multistate collection are  the most costly of the start-up activities. Mapping requires coding all of a  business\u2019s product offerings to the taxation categories used by the  software. One software provider told us that generally, these software  products do not require businesses to research the legal categorization in  each state\u2019s laws; however, it does require businesses to categorize  products with sufficient precision for the software to assign its tax status  based on state laws. For example, apparel is treated differently across  states. Pennsylvania exempts clothing, except for formal apparel; items  made of real, imitation, or synthetic fur; and athletic apparel. Across the  border, New York State exempts clothing sold for less than $110;  however, some jurisdictions do not apply these exemptions and charge a  local sales tax on these items.\nThe initial product mapping required before using multistate tax software  can be labor intensive. As such, we expect that businesses setting up  software for the first time, and selling goods which states treat differently  will have more labor-intensive product-mapping work. Some software  providers offer consulting services to assist businesses with mapping  their offerings. Software providers, however, treat these services as a  premium option so businesses will generally incur extra costs for using  these services.\nSeveral people familiar with the use of sales tax software said that errors  in mapping products can expose businesses to liability in the form of  uncollected taxes. Recognizing the wide variations in sales tax laws, a  group of states launched the Streamlined Sales Tax Initiative in 1999.  The initiative was designed to standardize these variations and provide  software assistance to make it easier for businesses to comply with state  and local sales and use tax laws. This initiative sought to shield  businesses from liability by directing software providers participating in  the effort to complete mapping for businesses and assume liability for  errors. However, more recent changes allow software providers to  negotiate these issues directly with their business clients. According to a  representative of the Streamlined Sales Tax Governing Board, 24 states  have passed legislation to conform to the Streamlined Sales and Use Tax  Agreement. These states account for a third of the United States  population, but many of the largest states (in terms of population) are not  fully participating.\nSoftware integration, or establishing a connection between existing  business software and the new multistate tax software, will be required for  businesses that begin to use multistate tax software. Two software  providers we spoke with said that they have already created integration  modules for the most common business software packages in use today.  One explained that integration with these common business systems is  generally the least expensive and may come at no cost to the business.  However, businesses using customized software or software that is not in  common use may see higher costs to integrate these systems. Some  businesses may need to integrate several systems with the collection  software. This integration may be required for transactions such as  processing sales through different retail channels or ensuring that  merchandise returns are removed from existing collections.\nBusinesses will also face additional costs to license the necessary  software functionality from the provider. A public accounting firm told us  that these on-going licensing fees are generally lower in the first year,  than the one-time costs associated with mapping and integration.  Licensing costs generally are a function of the volume of information  requests sent to the tax database maintained by the software provider.\nIn estimating costs to license multistate collection software, online  businesses must consider both the number of completed transactions  they anticipate as well as the browsing behavior of those using their  websites. A CPA firm we interviewed explained how these software  packages work. Whenever a business website calculates a sales tax  amount, it does so by sending an information request to a rate and  address database maintained by the software provider. Importantly, this  process is often an automated function of the \u201cshopping cart\u201d system,  which may calculate a sales tax amount whenever a customer changes  the goods in the shopping cart, even in the absence of a completed sale.  As such, businesses must account for both completed transactions as  well as how often customers change the bundle of goods in the online  shopping cart. For example, customers may use shopping carts while  comparison shopping on different websites. Our market research found  licensing costs as low as $12 per month for up to 30 information requests  each month, and as high as $200,000 per year for unlimited information  requests.\nBusinesses and others familiar with sales tax software told us that  licensing fees are only one of multiple costs required to collect sales  taxes in multiple states. As such, simplification proposals that include  provisions for states to pay these licensing fees may not mitigate  significant costs to businesses transitioning to software assisted  multistate collection. Businesses will still incur start-up costs and  additional administrative costs, even when states pay the licensing fees  on the use of the software. Even under such proposals when software  comes with no licensing fees, mapping can be labor intensive for  businesses selling products that state tax laws treat differently, and  integration can create costs for businesses using custom software or  software that is not widely used. Further, for software to reduce  administrative costs, it must be integrated with more than just a  business\u2019s shopping cart system. However, simplification proposals that  only cover software licensing costs and integration with the shopping cart  system may leave businesses with the costs of a more extensive  integration. Businesses would either have to incur additional costs to  better integrate sales tax software with existing business information  systems (such as a general ledger accounting system), or regularly  reconcile receipts and records manually to prepare sales tax returns for  all states where it makes sales.\nAdditional costs for software include administrative costs associated with  use of the software. These costs are incurred because even automated  software requires some administrative work by staff. The use of optional  premium services offered by software providers may further reduce these  administrative costs, but increase software costs in the process.  Administrative costs tend to be highest, as a proportion of taxes collected,  for the smallest sellers. Some businesses told us that collecting sales tax  in all jurisdictions where they have customers would increase staffing  costs, even when collection is facilitated by software. Premium services  commonly offered by software providers assist businesses with preparing  and filing tax returns. While electing to use these services may save  businesses labor costs, they incur additional fees to use these premium  services.\nWe interviewed several businesses based in states that do not collect a  sales tax. They told us that they are already researching software options  should the need to collect sales tax on all remote sales arise. These  businesses told us that they have little experience with collecting sales  tax. As reported above, in the first year, start-up costs for the software are  much higher than the on-going licensing fees. Businesses that do not  need to collect sales tax in their own state may be less likely to already  have multistate tax collection software or in-house expertise.\n\n\t\tBusinesses May Incur Increased Audit and Assessment Costs as Exposure to Collecting Jurisdictions Grows\n\nIf states are allowed to require businesses to collect tax on all remote  sales, businesses we spoke with expect audit and assessment related  costs to rise because of increased exposure to more tax jurisdictions.  Attorneys told us that state revenue departments also employ other low- cost enforcement tools that create compliance costs. Officials from three  state revenue departments that we spoke with said that they primarily  focus their audits on large businesses because audits are resource  intensive. Officials from one agency acknowledged that other  enforcement tools, such as a letter audit, require fewer resources to use.\nSome businesses told us that they already expend significant resources  responding to audits on sales tax collection and remittance. These costs  include making staff available, developing justification for tax claims, and  complying with document or information requests. A representative from  the tax department of one company with nexus in most states said that  auditors return every few years to audit the company and that they are  currently contending with 8 to 10 audits from different tax authorities.  They expect audit related costs to grow with exposure to more  jurisdictions and that will require hiring additional staff. Another business  we spoke with said they had just dealt with an expensive audit that lasted  3 years. They reported that they do not have the resources to comply with  similar audits from other jurisdictions.\nWe interviewed 11 businesses, attorneys, or representatives from the  business community who said that fear of increased audits, should states  gain expanded authority to tax remote sales, is a legitimate concern for  businesses. Attorneys we spoke with offered several reasons that small-  and medium-sized businesses will be audited should states gain the  authority to tax remote sales. One explained that sales tax audits of small  businesses often identify non-compliance and produce revenue. Another  said that assessments prepared by revenue offices generally carry a  presumption of accuracy. In practice, this places the burden of proof on  the retailer to rebut claims made by revenue offices. However, some state  revenue departments we spoke with said that they do not expect their  audit resources to increase and therefore would be spread more thinly if  states are allowed to require businesses to collect tax on remote sales.  Two state revenue offices explained that this change would mean they  have a much larger universe of businesses from which to select. As such,  it is unknown how frequently businesses might have to contend with  concurrent audits in different states.\nTravel to, and securing counsel in, remote jurisdictions would create  additional costs for audited businesses that would not occur in the current  environment. A business representative explained that the CPAs and  attorneys they employ, or have on retainer, may not be able to represent  the business in an out-of-state venue. As such, businesses would need to  retain counsel qualified to practice in the assessing jurisdiction.\nTwo business representatives also told us that businesses may be less  successful at challenging tax assessments in out-of-state courts. This  may prompt them to settle claims in an out-of-state court that they might  litigate in their home state. Further, the federal Tax Injunction Act restricts  businesses\u2019 ability to seek relief in federal court for matters related to  state taxes.\nIn addition to audits, state revenue departments have many low-cost  enforcement tools at their disposal. One example is the letter audit. An  attorney we spoke with explained that in this process, a revenue office  sends a letter to a business stating that the office suspects they owe  sales taxes. The business incurs costs to prove the state wrong to avoid  the assessment. In some cases, states bypass the assessment process  and sue the business\u2014arguing that the business has nexus in the state  and owes tax. In conducting interviews, we found that states also send  information requests and questionnaires to businesses designed to  uncover whether they have nexus obligations. One representative from a  trade group we spoke with said that a business will normally be  responsive in order to remain in compliance with the law, despite potential  uncertainty about the state\u2019s authority to collect.\nBusinesses we spoke with in states that do not collect a sales tax  generally were not collecting sales taxes for other states, so they had little  experience with a sales tax audit. Further, some businesses in these  states were not tracking the legal requirements on businesses imposed  by out-of-state jurisdictions. Businesses located in states without a sales  tax also may incur costs to alter business practices after initial exposure  to sales tax audits. This might happen because the procedures they  currently use may not withstand the taxing states\u2019 scrutiny.\n\n\t\tBusinesses Incur Costs to Stay Current with Legal Requirements in Multiple Jurisdictions, but are Still Exposed to Risk\n\nIf states gain the authority to require businesses to collect tax on remote  sales, businesses will have to incur costs to understand their new  compliance obligations, which can differ by state or tax jurisdiction. The  related liability cost increases along with an increase in exposure to more  tax jurisdictions. These costs will likely increase the most for businesses  that do not have established legal teams, software systems, or outside  counsel to assist with compliance related questions. We identified three  areas, based on interviews with businesses, where these costs are most  likely to occur. First, businesses expressed concern that changes in legal  precedent could expose businesses to liability for past sales. Second,  some businesses reported paying assessments based on contestable  laws. Third, some businesses reported instances where businesses\u2019  actions created nexus that led to an unforeseen liability.\n\n\t\t\tRetroactive Enforcement\n\nThe U.S. Supreme Court\u2019s 1992 decision in Quill Corp. v. North Dakota  constrained states\u2019 ability to tax sales originating from outside the state.  We identified four states that recently changed their laws in an attempt to  re-litigate this decision. A representative from the business community  told us that the effect of the U.S. Supreme Court potentially overturning  the Quill decision may allow laws that are on the books in many states to  be enforced. For example, Alabama\u2019s Department of Revenue told us that  they have asserted jurisdiction over remote sellers under a previously  unenforced law to further litigation challenging the Quill decision. They  acknowledged that this action has the potential to allow retroactive  enforcement, should the challenge succeed. However, they said the state  was most interested in prospective compliance. Some businesses worry  that, if legal arguments like these prevail, states will not confine  themselves to prospective enforcement efforts. They fear that states  could decide that businesses owe taxes from years when enforcement of  the law did not impose collection obligations on out-of-state businesses.\n\n\t\t\tRisk of Overpayment Due to Compliance Culture\n\nState revenue departments mail assessments, questionnaires, and other  correspondence to out-of-state businesses. These may direct businesses  to provide information, pay taxes, or register to collect sales taxes. In  some cases, the Quill decision protects businesses from obligations to  comply with these directives. Nevertheless, some businesses have  complied. One representative from a trade organization representing  remote businesses said that the natural tendency for a business is toward  compliance. This may lead them to pay or comply without thoroughly  examining the strength of their legal position. He cited a state that mailed  around two hundred demand notices to out-of-state businesses for  unremitted sales tax. Even though he said that these businesses did not  have nexus in the state, more than half of businesses remitted payment.  Another business told us that they registered to collect in a state that was  attempting to challenge the Quill decision because they judged that the  cost of challenging the state\u2019s new law was likely to exceed any increased  compliance costs. This business said that collecting the tax, but waiting to  remit it pending the results of a legal challenge, would expose the  business to penalties and interest.\n\n\t\t\tRisk of Unknown Nexus Obligations\n\nBecause state tax laws are complex and subject to change, businesses  may not always be aware of their obligations under state law. Our  research revealed cases where businesses incurred collection obligations  unknowingly. One lawyer, whose practice represents several businesses  in sales tax related issues, described a business that was contacted by a  nearby state\u2019s revenue office and asked to provide information on its use  of fulfillment services from a popular marketplace provider. The business  downloaded a report from the marketplace provider and sent it to the  revenue office. The business said that the marketplace provider had  formatted the information in a way that made it uninterpretable without  knowledge of the location codes it contained. The state revenue office  was able to use the report to show that the marketplace\u2019s fulfillment  services stored the business\u2019s property in the state. Stored property  suffices to create a nexus obligation and the business received an  assessment for back taxes, interest, and penalties dating back to when  the property was first stored in the state. The lawyer we spoke with has  seen six similar cases since that one and said that the addition of interest  and penalties often doubles the amount of taxes owed.\nActive monitoring of sales tax laws across the country can help  businesses ensure they are compliant with all of their legal obligations.  Businesses we spoke with differed in the way they conducted this  research. Some undertook the research in-house. Others used software  that provides updates when laws change. Some said that they require  outside legal counsel to resolve difficult questions. In all cases, this  research imposed additional costs on businesses.\nFour businesses in states without sales taxes told us that they have  incomplete research or a lack of familiarity with recent changes to state  laws that impose obligations on out-of-state businesses. Businesses like  these may encounter additional costs in the form of unforeseen liabilities  or costs to conduct research.\n\n\t\t\tStrategies Show Some Potential for Containing Risks\n\nIn the course of our research, we identified strategies with the potential to  mitigate the concerns laid out above. However, much would depend on  the specifics of any legal changes. These strategies include: simplification  rules for collection and remittance in multiple states, small business  exemptions for businesses under a certain size, transition periods for  businesses to come into compliance, and limitations on lookback periods.\nSimplification Rules May Help Businesses Understand Collection  Obligations  Simplification rules for remote sellers could provide businesses with a  single compliance requirement instead of varied requirements from the  jurisdictions with the authority to assess sales tax. These rules could  lower research and compliance costs, and leave businesses less  exposed to hidden liabilities. One multistate effort has created a set of  simplified rules for collection and remittance. However, one attorney we  spoke with said that the rationale for including and excluding certain items  in the classification is unclear, and this leaves room for states to interpret  the taxability in different ways. Further, some of the simplifications  proposals we analyzed do not apply to state definitions of nexus. As such,  it is possible that businesses might be aware of and compliant with the  simplification rules, but unclear on how to structure their operations to  avoid the less simple rules that come from acquiring nexus. These cases  might require additional research costs and legal services to resolve and  may expose a business to unforeseen liability.\nSmall Business Exemptions May Help Small Businesses Avoid  Additional Costs  Small business exemptions would ensure that businesses with sales  below a specified threshold would not be liable for taxes to remote  jurisdictions. This could reduce research and liability costs for small  businesses because these businesses would only have to verify that their  sales were below the threshold that requires collection. However, some  business representatives we spoke with said that the thresholds  contained in many proposals were too low.\nThe Small Business Administration defines a small business as one with  $32.5 million in annual sales for electronic shopping retailers, and $38.5  million for mail-order houses. Federal legislation allowing states to tax  remote sales have included a variety of small business exemptions. For  example, one proposal would initially exempt small business with annual  sales below $10 million, but that exemption would decline and eventually  expire after 3 years. Another proposal would set a permanent exemption  of $1 million in annual sales. New state laws and administrative  regulations require out-of-state sellers to collect taxes. We identified small  seller exemptions in some of these laws and regulations as low as  $10,000 and as high as $500,000 in annual sales into the state.  However, one business owner said that $25 million in annual sales is still  a small business. The owner explained that such businesses can quickly  go bankrupt and have little capital to survive downturns in the business  cycle. Business representatives said that business models which  emphasize low margins and high sales volume are common in remote  sales. These businesses may have limited resources for additional  compliance obligations.\nTransition Periods Can Help Businesses Prepare for Collection  Obligations  Transition periods may give businesses time to examine their legal  obligations and secure tools, such as software or legal counsel, to  facilitate compliance but can prompt increased demand for assistance  and services. Our work has shown that sometimes tax system transition  deadlines are likely to prompt a large volume of requests from taxpayers  for compliance assistance from taxing authorities. Because businesses  reported that additional software or legal services would be required to  transition to new collection obligations, we expect demand for such  services to increase before transition deadlines.\nLimits to Lookback Periods May Protect Newly Registered  Businesses  Limited lookback periods restrict how far back a state revenue agency  can examine a business\u2019s records after that business registers to collect  taxes. Attorneys that we interviewed said that registering to collect with a  state can trigger an examination of that business\u2019s records with an eye to  discovering if the business owes taxes for sales prior to the registration.  They explained that if businesses are not protected by limitations to  lookback periods upon registration, this may inhibit registering to collect in  new states. One business owner told us that the risks of additional  scrutiny and unforeseen liability have prevented him from registering to  collect in a nearby state where he would like to do more business.  Limitations to lookback periods would give businesses more confidence in  registering to collect because they would be less likely to incur additional  scrutiny or an unforeseen liability as a result of the registration.\n\n\tStates Generally Do Not Anticipate Major Administrative Costs or Challenges If Given the Authority to Require Businesses to Collect Tax on All Remote Sales\n\nActions by state and local governments to increase tax collections on  remote sales could require additional government resources to administer  sales taxes. State revenue agency officials, as well as representatives  from the Federation of Tax Administrators and other state government  organizations we interviewed, did not identify any major increases in  administrative costs or significant administrative challenges if states were  given the authority to require businesses to collect taxes on all remote  sales.\nIn the absence of congressional action to grant states expanded tax  collection authority on all remote sales, state legislatures have recently  considered, and in some cases enacted, new laws designed to increase  tax collections on remote sales. As these proposals were being  considered, we identified five revenue agencies or legislative budget  offices that had estimated the costs to implement and administer these  new programs. For example, one state\u2019s analysis concluded that  current state revenue agency resources were sufficient to implement and  administer the new program, and another state\u2019s analysis determined that  the program would have only a moderate effect on the state revenue  agency.\nOther state analyses that estimated additional annual costs varied widely,  from a few hundred dollars to up to $4 million. While these estimates  varied widely, we found that this information helped to illustrate potential  challenges and costs state and local governments could face in trying to  collect taxes from all remote sellers. Interviews with three state revenue  agency officials who had already implemented, or were beginning to  implement, new programs also provided us further information on  potential administrative costs and challenges.\nSales Tax Administration Activities  Registration of vendors. States need to  process registration forms from new vendors,  including out-of-state vendors. States also  need information to help identify unregistered  vendors.  Returns processing. States require  resources to process sales tax returns,  including returns from out-of-state vendors.  States typically capture data in information  systems, and identify and process over- or  underpayments.  Enforcement efforts. Audit resources are  needed to verify vendors\u2019 total taxable sales.  When auditing out-of-state vendors, state  revenue departments may face higher travel  costs.  Collections. States send delinquency notices  to vendors for late, miscalculated, or  underpaid collections.  Taxpayer services. States provide education  efforts and taxpayer assistance to improve  voluntary compliance.\nWe previously reported that the following state functions are typically  associated with administering sales taxes: identifying and registering  vendors; returns processing; enforcement; collections; and taxpayer  services (see sidebar titled \u201cSales Tax Administration Activities\u201d).\nIf remote sellers were required to collect state taxes regardless of nexus,  states may need to process an influx of new registration forms from out- of-state vendors. State revenue agency officials as well as  representatives from the Federation of Tax Administrators told us,  however, that they did not anticipate that registering new out-of-state  vendors and processing additional returns would pose major challenges  to state agencies. They explained that state revenue agencies already  process a large volume of registration changes annually as new  businesses are created or existing businesses fail. As a result, they  expected that new registrations from out-of-state sellers would not  represent a significant strain on current resources.\nPotential increases in new out-of-state vendor registrations could be  lessened by states\u2019 small seller exemptions. Some state proposals for  increasing tax collections on remote sales have exempted smaller out-of- state sellers with annual sales less than a certain dollar amount, or  annual transactions less than a certain number, into a state. Recent small  seller exemptions have set annual sales exemption thresholds ranging  from $10,000 in Washington State to $500,000 in Massachusetts. One  revenue agency official from Alabama, which began enforcing a new  remote-seller regulation in 2016 that has a $250,000 small seller  exemption, told us that the approximately 100 newly registered out-of- state sellers is an extremely small share of the state\u2019s total 40,000  registered sellers.\nStates may need additional resources to process new tax returns from  out-of-state vendors and to verify out-of-state vendors\u2019 total taxable  remote sales into a state. However, as tax administrators noted above  with regard to new vendor registrations, any increase in out-of-state  returns processing may be minimal when compared to the volume of  routine in-state returns. When processing new out-of-state returns, states  may need to decide whether to capture the same amount of data from  out-of-state filers as they currently do for in-state filers in order to limit  errors and required resources for follow-up.\nDepending on whether and how some states choose to centralize  registration and reporting for out-of-state vendors, some administrative  costs and burdens associated with these functions might be reduced or  mitigated. For example, a revenue agency official from Alabama told us  that implementation of its new administrative rule (requiring out-of-state  vendors to collect taxes on sales to Alabama customers) has been  facilitated by having its state revenue department serve as a centralized  collection point on behalf of local tax authorities.\nThirty-seven states, like Alabama, have local sales taxes in addition to  statewide sales taxes. Some of these local taxes are already centrally  collected by a state revenue agency, but in some states, local authorities  collect them. States that are members of the Streamlined Sales and Use  Tax Agreement have agreed to allow centralized state registration and  reporting for out-of-state vendors. Louisiana, another state with many  local sales tax jurisdictions, recently enacted a new law creating a sales  tax board for promoting \u201cuniformity and efficiency\u201d of local sales and use  tax administration. The law also created an independent agency within  the state\u2019s Department of Revenue for administering and collecting state  and local taxes related to remote sales.\nWhen allocating enforcement and collections resources, state  administrators may need to weigh trade-offs between pursuing incidences  of noncompliance (typically higher among small filers) against potential  revenue effects (greatest among large filers). Representatives from the  Federation of Tax Administrators did not anticipate significant increases in  enforcement costs because they said most sales tax noncompliance is  detected not through intensive audits but through less costly automated  matching of electronic data such as credit card sales receipts with  business-reported sales. They also said that most noncompliance issues  are resolved via automatically-generated correspondence with taxpayers.  That is, most taxpayers resolve additional amounts owed or other  noncompliance matters after receiving notification letters from state  revenue agencies.\nOne state revenue agency official told us that his agency may experience  higher travel costs associated with audits of out-of-state vendors. The  same official believed, however, that this might merely require re- allocating current travel expenses from in-state audits to out-of-state  audits rather than requiring an increase in travel budgets. The Oklahoma  legislature recently authorized the state revenue agency to create an out- of-state sales tax enforcement division. While the final bill provided the  state agency with flexibility to staff this division using existing resources,  the original proposal would have mandated opening a new office outside  the state and staffing it with a minimum of five employees at an estimated  annual cost of $450,000.\nFinally, state revenue agency officials and representatives from the  Federation of Tax Administrators told us that they anticipated some  additional resources may be needed for taxpayer assistance such as  providing increased telephone assistance or publishing guidance for new  out-of-state vendors. Demand for taxpayer assistance is likely to be  higher from smaller out-of-state vendors with less experience in collecting  and remitting taxes to other states. The complexity of a state\u2019s sales tax  laws, such as rules for when to exempt a certain type of product based on  how it is used, are also likely to affect levels of taxpayer service  requested by new out-of-state vendors.\n\n\t\tStates Implementing Notice and Reporting Requirements May Experience Difficulties Matching Sales Data to Taxpayer Information\n\nWe identified at least four states that have enacted new \u201cnotice and  reporting\u201d laws in attempts to increase tax collections from remote sales.  Under these laws, if an out-of-state seller chooses not to collect taxes on  sales into a state, then the seller is required to notify its customers of  state use tax obligations, send customers annual summaries of their  purchases, and share that information with state revenue agencies. One  state\u2019s fiscal analysis of its new notice and reporting law estimated that  out-of-state retailers will decide to collect the tax rather than comply with  notice and reporting requirements. The handful of new notice and  reporting laws that we identified have only recently become effective, so it  is unclear to what extent this has or will occur.\nWe found two recent estimates of costs to implement and administer  these new notice and reporting laws. The Louisiana Legislative Fiscal  Office estimated that the state revenue agency would incur costs of  $90,000 annually to administer a new notice and reporting law. By  contrast, the Washington Department of Revenue estimated that it would  cost about $4 million annually to administer the state\u2019s new notice and  reporting law. Washington revenue officials told us that most of these  costs come from hiring new staff. They explained that increased costs are  common when they must enforce new provisions of the tax code because  it is not easy to reassign tax staff.\nState revenue agencies implementing new notice and reporting laws may  experience difficulty matching sales information from out-of-state retailers  with taxpayer data. Revenue officials from Colorado told us that the  annual sales reports remote sellers are required to send to their  customers and share with state revenue agencies, will not contain unique  taxpayer identification data like Social Security numbers. Without these  data, these officials explained that revenue agencies will need to use  customers\u2019 names and addresses to match with taxpayer returns. If  buyers with similar names make use of the same delivery address, this  may complicate efforts to identify a taxpayer\u2019s use tax obligation.\nColorado and Washington officials also told us that once their revenue  agencies begin sending letters to taxpayers with estimated use tax  obligations, they anticipate significant increases in phone calls and other  requests for taxpayer assistance. In order to manage expected increases  in call volumes and control costs, Colorado officials said they plan to be  selective about sending notices in the first years.\nOfficials from Washington\u2019s Department of Revenue told us that one part  of their new notice and reporting law applied to e-marketplaces rather  than sellers. Officials told us that it is easier for states to enforce  compliance against one large entity (the e-marketplace company) instead  of the thousands of smaller sellers that sell through the e-marketplace\u2019s  platform. Washington\u2019s notice and reporting law requires e-marketplace  companies to comply with the notice and reporting requirements if the   e-marketplaces choose not to collect and remit taxes on behalf of their  individual sellers.\nIn August 2017, the Multistate Tax Commission began offering a general  sales tax amnesty program for e-marketplace sellers. During the amnesty  period, the commission would accept applications from qualifying remote  sellers. The sellers would affirm in their applications that their only  connection with the participating state or states is through inventory  housed in an e-marketplace\u2019s warehouse or fulfillment center. In  exchange, one group of participating states would agree to waive back  tax liabilities for sales and use taxes, as well as for income and franchise  taxes, including penalties and interest, without regard to any lookback  period. At the time of our report, 24 states and the District of Columbia  were participating. The program was set to end in November 2017.\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 Senate  and House committees. We will also send copies of the report to the  Secretary of the Treasury and other interested parties. In addition, the  report will be available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made contributions to this  report are listed in appendix III.\n\nAppendix I: Methodology for Revenue Gain Estimates\n\nTo address our objective on estimating how much revenue state and local  governments could gain by being able to collect taxes on sales made by  all remote sellers, we updated a model we used to prepare similar  estimates in 2000. The sidebar titled \u201cSteps Involved in Estimating  Potential Revenue Gains\u201d summarizes the steps in our methodology.\nCompared to when we did similar analysis in 2000, there are some areas  where we have better data, but a single point estimate is still not possible  because of uncertainty surrounding estimates of several key inputs to our  model. In our 2000 report, there were few reliable data sources on which  to base our calculations and adjustments. We noted then that projections  of sales were particularly difficult to make given the rapidly changing   e-commerce environment. Today, there are more data sources available  on current and future e-commerce sales.\nIn addition to the past uncertainty regarding the magnitude of remote  sales, we reported in 2000 that there was considerable uncertainty about  the amount of tax that state and local governments were already  collecting from these remote sales. Today, data are more easily available  on where e-commerce companies have a substantial presence (referred  to as nexus) in states. Some research companies track this information,  and more companies are explicitly stating on their websites in which  states they collect sales tax. Still, we had to make several broad  assumptions about the volume of e-marketplace sales, including the  extent to which e-marketplace sellers were already collecting sales taxes.\nAs states continue to research tax losses associated with e-marketplace  sales and pursue increased enforcement actions, we believe that more  data could help improve the accuracy of our estimates. Additional data  from e-marketplace companies about the extent to which their sellers are  collecting sales taxes through the e-marketplace optional tax services  would also help improve further analysis in this area.\n\n\tThe Volume and Composition of Internet and Other Remote Sales\n\nTo obtain sales estimates, we reviewed academic, government, and  private-sector studies. We also contacted these authors and other  specialists in this field to identify other potential sources of sales  estimates. Some state revenue agencies and other researchers who have  estimated tax revenue losses from remote sales have used data from the  U.S. Census Bureau to derive their base estimates of total Internet and  other remote sales. While we did use some Census data in our analyses,  we primarily relied upon data from Forrester Research (a research  company whose data we had used in our 2000 report) to arrive at low and  high scenario estimates for total sales volumes for different types of  remote sales as shown in table 3. We chose not to provide a single point  estimate, because the low and high scenarios illustrate how the numbers  can vary\u2014sometimes non-trivially\u2014depending on reasonable  assumptions about the underlying uncertainties.\nForrester Research\u2019s estimates of business-to-consumer (B2C)   e-commerce sales for the years 2016 to 2021 presented data on 31  different product categories to which we could then apply specific state  sales tax rates and exemptions. By contrast, similar Census data were  more limited in that: the data contained fewer categories (13 merchandise  lines plus non-merchandise receipts); the most recent data were for the  year 2015; and the data did not include e-marketplace sales. Forrester  Research\u2019s total online retail forecast for 2016 was about $400 billion and  nearly $450 billion for 2017. We reduced this total by about $20 billion by  removing sales for two product categories (movie tickets and event  tickets) that were more akin to services industry (rather than retail)  activities.\n\n\t\tBusiness-to-Consumer E-Marketplace Sales\n\nUnlike Census data, Forrester Research included sales from   e-marketplaces in its e-commerce forecasts. Sales tax losses associated  with e-marketplace sales have become an increasing area of focus for  state revenue agencies, and so it was important to include in our analysis.  To separate e-marketplace sales from the sales of other Internet retailers,  we analyzed data from the annual reports of three leading e-marketplace  companies and data we obtained from Internet Retailer. We estimated  the value of merchandise being sold on these three leading   e-marketplaces to be about $110 billion in 2016. However, some of  these are sales by other Internet retailers using the e-marketplaces to sell  their goods. That is, some retailers operate stores and their own websites  but also sell their goods through \u201cstorefronts\u201d on the e-marketplaces. We  adjusted our total e-marketplace sales estimate to avoid double-counting  retailers\u2019 Internet sales in our analysis. In the end, we estimated that   e-marketplace sales (excluding the sales of Internet retailers using   e-marketplaces) accounted for 20-25 percent of total 2017 online retail  sales ($85 billion to $106 billion).\n\n\t\tBusiness-to-Consumer Other Remote Sales\n\nData sources on other remote sales like mail-order catalogs or television  shopping channels are more limited, compared to available data on   e-commerce sales. A representative of catalog companies we interviewed  told us that it is becoming increasingly difficult to attribute retail sales to  particular sales channels. For example, many catalog retailers also have  websites or sell their goods in retail stores or via e-marketplaces. We  decided the best available estimates could be derived by separating out  aggregate Census data on Electronic Shopping and Mail-Order Houses  into separate e-commerce and mail-order components. We first  estimated that the mail-order portion of the top-line Census category to be  about $150 billion in 2016, but then removed about $95 billion in  estimated mail-order prescription drug sales because nearly all states  exempt prescription drugs from sales taxes. Using data on historical  growth rates for the mail-order catalog industry, we then estimated the  range of other remote sales for 2017 to be from $58 billion to $61 billion.\n\n\t\tBusiness-to-Business Internet Sales\n\nForrester Research\u2019s estimates of business-to-business (B2B)   e-commerce wholesale trade for the years 2016 to 2021 presented data  on 11 different product categories to which we could then apply specific  state sales tax rates and exemptions. While similar Census data  included 19 different product categories, the most recent Census data  was only for year 2015. Forrester\u2019s estimates exclude sales via  electronic data interchange networks which accounts for some of the  difference with Census\u2019 larger e-commerce estimate. Forrester  Research\u2019s total B2B forecast was about $825 billion for 2016 and about  $885 billion for 2017. We removed about $125 billion in petroleum and  petroleum products sales because these sales would generally be subject to excise (not sales) taxes and, furthermore, these sales would be taxed  on volume (not dollar value) and we lacked volume data, such as gallons  sold. We also lowered the value of the motor vehicles and parts  category by 40 to 60 percent under the assumption that most vehicles are  taxed when registered with state motor vehicle agencies and sales and  use tax compliance is considered generally high.\n\n\tThe Taxability of Remote Sales\n\nTo estimate the amount of tax due on remote sales, we apportioned a  share of total e-commerce and other remote sales to each state (and the  District of Columbia) and then applied each state\u2019s tax exemptions and  rates to those sales. We allocated sales across states by assuming that  each state\u2019s share of sales to individual consumers is proportionate to the  state\u2019s share of U.S. disposable personal income, and that each state\u2019s  share of sales to businesses is proportionate to the state\u2019s share of U.S.  gross domestic product. We made this allocation for each of the B2C  and B2B product categories. We then determined which categories of  products and services are taxed by state and local governments and at  what rates.\nOur main sources for state and local rates and exemptions were CCH\u2019s  State Tax Guides and Multistate Quick Answer Charts, Federation of Tax  Administrators\u2019 summary tables, and the Tax Foundation\u2019s 2017 State  Business Tax Climate Index. Eight states plus the District of Columbia  do not have additional local sales tax rates levied by cities, counties, or  other special taxing districts. For the other 37 states with both statewide  and local tax rates, we used weighted average local rates as estimated by  the Tax Foundation after first comparing and testing these rates with  similar data published by the Washington State Department of  Revenue.\nFor B2B e-commerce wholesales, we made additional adjustments to  reflect the fact that many B2B sales are exempt from tax based on the  type of purchaser or the type of use. These purchaser and use  exemptions are important for estimating the proportion of B2B sales that  are exempted as raw materials or as inputs incorporated into a final  product. Our sources of sales estimates did not disaggregate them by  type of purchaser or types of use. In order to estimate the percentage of  business-to-business sales that would be exempt, we used input-output  account tables prepared by the Department of Commerce\u2019s Bureau of  Economic Affairs. These tables show the inter-industry transactions of  the U.S. economy for 2015 and provide detailed information on the  composition of inputs and the distribution of outputs of all major U.S.  industries. On the basis of our analysis of the input-output data, we  excluded a range from 50 to 60 percent of all B2B e-commerce  wholesales from our model (see row titled \u201cless exempt intermediate  goods\u201d in table 3).\n\n\tThe Extent to Which Remote Sellers Already Collect Taxes\n\nSeller collection rates represent the share of taxes on remote sales that  state and local governments can currently require remote sellers to collect  due to remote sellers\u2019 substantial presence (referred to as nexus) in a  state. To estimate seller collection rates for selected categories of e- commerce and other remote sales, we followed an approach similar to  that in our 2000 study. We made separate estimates for Internet retailers,  e-marketplaces, other remote retailers, and merchant wholesale e- commerce sales because a different population of firms dominates in  each group. Again, we chose not to use a single point estimate, because  the low and high alternatives illustrate how assumptions made about  collection rates can vary our model output\u2014sometimes non-trivially. The  ranges of our estimates are shown in table 4.\nTo make our estimate for Internet retailers, we analyzed data from  Internet Retailer\u2019s 2017 list of the leading 1,000 U.S. companies to  determine the states in which they collect sales taxes. We first used data  from company financial reports to adjust Internet Retailer\u2019s 2016 global  sales figures for the top 100 companies to reflect only U.S. Internet  sales. We also used company annual reports and a smaller list of  leading Internet retailers from eMarketer to test the accuracy and reliability of Internet Retailer\u2019s data, which we found to be sufficiently  reliable for our purposes.\nWe then verified Internet Retailer\u2019s data on the states where each of the  top 100 companies were collecting sales taxes by comparing it to sales  tax collection policies published on companies\u2019 websites or lists of  companies\u2019 physical locations (such as retail stores, warehouses, or  company headquarters). We performed our research on companies\u2019  collection policies and nexus from May to June 2017. During this period  some companies\u2019 collection policies or nexus changed from the date  when Internet Retailer published its Top 1000 list in April. For example,  the largest Internet retailer completed agreements with the remaining few  states where it was not previously collecting sales tax. As of September  2017, the company stated on its website that it collects taxes on sales of  all its products sold to customers in the 45 states (plus the District of  Columbia) with statewide sales taxes.\nFor 27 of the top 100 companies, Internet Retailer did not report any data  on states where the companies were collecting sales taxes, so we used  the results of our own nexus research. For the remaining states where we  could do comparisons, we found Internet Retailer\u2019s data on companies\u2019  nexus to be sufficiently reliable for our purposes. On the basis of our  nexus research, we found that about 40 percent of the top 100 companies  were collecting in all 45 states (plus the District of Columbia) with  statewide sales taxes, and three-quarters were collecting in at least half  the states. Only 2 of the top 100 companies were only collecting in, or  only had nexus, in one state.\nTo estimate the percent of sales on which Internet retailers were currently  collecting taxes, we first allocated each company\u2019s total sales to states  based on each state\u2019s share of national disposable personal income. We  then multiplied each state\u2019s share of sales by the combined state and  local government weighted average tax rate to estimate the total tax  dollars that could be collected on all sales regardless of nexus. We then  used our nexus data for each company to estimate the tax dollars  companies were already collecting. The ratio of these two estimates (total  taxes collectible under current law, divided by total taxes that could be  collected if states had expanded authority) is our estimated \u201cseller  collection rate.\u201d For the top 100 companies on Internet Retailer\u2019s list, we  estimated this seller collection rate to be from 87 to 96 percent.\nWe then extended our research of companies\u2019 nexus to the remaining  900 companies on Internet Retailer\u2019s top 1000 list. These remaining 900  companies accounted for about 20 percent of the total dollar sales  volume for all 1,000 companies on Internet Retailer\u2019s list (after we had  adjusted global sales to U.S.-only sales for the top 100). For about one- third of these 900 companies, Internet Retailer did not report any nexus  data so we did our own research. For the other two-thirds, we relied on  Internet Retailer\u2019s nexus data because we found it sufficiently reliable  based on our analysis of first 100 companies listed. Compared to the top  100 companies, these remaining 900 companies were far less likely to  have nexus (or said they were collecting) in all or most states. About half  the remaining 900 companies only had nexus (or said they were  collecting) in one state. In terms of tax dollars, we estimated that these  900 Internet retailers were already collecting from 44 to 49 percent of the  potential taxes that states and local governments could require to be  collected if given expanded authority on all remote sales. For all 1000  Internet retailers, we adjusted our estimates of dollars currently being  collected by plus (+) and minus (-) 5 percent, which gave us a range of  overall estimated collection rates from 78 to 86 percent for the category.\n\n\t\tE-Marketplace Sellers Collection Rates\n\nThe wider range of our estimates on seller collection rates for   e-marketplace sales is because less data were available on the extent to  which these types of sellers already collect sales taxes. We could not find  sufficiently reliable data on the physical locations of sellers who use   e-marketplaces. The three major e-marketplaces (that we analyzed to  estimate total e-marketplace sales) offer their sellers additional services  that help sellers calculate and collect sales taxes, but not all sellers take  advantage of this service. None of the e-marketplaces that we  interviewed were able to provide us data on the extent to which their  sellers currently collect sales tax. We found limited data on the extent to  which e-marketplace sales include sales taxes. Two studies estimated  that sales taxes were more likely to be collected by larger sellers like  other retailers using e-marketplaces to sell some of their products. As we  noted above when describing our methods for estimating total e- marketplace sales, we estimated that about 40 percent of Internet  retailers sell their products not only via their own stores and websites, but  also offer their products for sale on e-marketplace sites.\nIn our calculations, we assumed that from 10 to 30 percent of   e-marketplace sales were made by large sellers that collected taxes in  most states (either due to nexus or collection agreements with states).  After allocating those sales to states based on share of disposable  personal income, we assumed that these large sellers collected taxes at  the same rates we had estimated for the top 100 Internet retail  companies. We assumed that the remaining e-marketplace sales (from  70 to 90 percent) were made by smaller sellers with only one nexus, and  that these small sellers were geographically located similar to other  Internet retailers with only one nexus. After allocating those sales to  states, we assumed that these small sellers collected taxes only in their  home state. Our resulting seller collection rates for all e-marketplace  sellers ranged from 14 to 33 percent.\nDue to a lack of sufficiently reliable data, we did not consider what  percentage of e-marketplace sales are used items. According to one   e-marketplace company, about 20 percent of items listed on their site are  used. According to information from one tax software company, the  taxability of used items for sale varies by state.\n\n\t\tOther Remote Retailers Collection Rates\n\nWe could not find data that listed the leading mail-order catalog  companies, and in which states they have nexus and are collecting taxes.  However, 116 of the companies in Internet Retailer\u2019s 2017 Top 1000 list  were classified by Internet Retailer as \u201cCatalog\/Call Center\u201d companies.  These companies had from $5 million to $5 billion in 2016 Internet sales  to U.S. customers and were distributed similarly to the full population of  all 1000 companies. Since we had already estimated their collection rates  as part of our analysis on Internet retailers, we re-calculated an aggregate  collection rate for these 116 companies. We adjusted our estimates of  dollars currently being collected by plus (+) and minus (-) 5 percent, which  gave us a range of overall estimated collection rates from 58 to 64  percent.\n\n\t\tB2B E-Commerce Wholesalers Collection Rates\n\nWe followed a similar approach for estimating seller collection rates for  business-to-business e-commerce wholesalers. We identified 106  companies on the Internet Retailer\u2019s 2017 Top 1000 list with significant  B2B sales. Some of the companies appeared to sell exclusively to  businesses whereas others had both significant consumer and business  sales. These companies had 2016 Internet sales to U.S. customers  ranging from $5 million to $10 billion, and the subpopulation was  distributed similar to the overall Top 1000 population. The 106 companies  were more likely to come from Internet Retailer\u2019s categories of:  automobile parts, computers\/electronics, hardware\/home improvement,  and office supplies. Comparatively fewer were in Internet Retailer\u2019s  categories of apparel\/accessories, food\/drug, health\/beauty, or  housewares\/home furnishings. Because we had already estimated their  collection rates as part of our analysis on Internet retailers, we   re-calculated an aggregate collection rate for these 106 companies. We  adjusted our estimates of dollars currently being collected by plus (+) and  minus (-) 5 percent, which gave us a range of overall estimated collection  rates from 85 to 94 percent.\n\n\tThe Extent to Which Purchasers Already Pay Tax\n\nAccording to data we found, consumer and business use tax compliance  rates have not changed significantly since we did similar analyses in  2000. As we reported then, consumer use tax rates are estimated to be  very low whereas business use tax compliance rates are estimated to be  very high. The most widely-cited study we found on consumer use tax  compliance was prepared by the Minnesota legislature in 2015. The  study reported that for those states that allowed taxpayers to report use  taxes on their state income tax returns, the percentage of returns  including use taxes ranged from a low of 0.2 percent in Rhode Island to a  high of 10.2 percent in Maine. We used the various rates from the study  in our calculations. For those states not listed in the Minnesota legislature  study, we used a default median rate of 1.2 percent. We had more to up- to-date data for California, Mississippi, and Vermont, which we used in  our calculations. We then adjusted the total dollar amount of use taxes  paid by consumers from 0 to 10 percent to provide us a range of inputs  for our model. Making these adjustments had little to no effect on the final  results. For business use tax compliance rates, we found data from five  states that estimated business use tax compliance to be from 70 percent  to 90 percent. In our model, we applied both these figures to give us a  range of estimated use tax dollars paid by businesses.\n\n\tRanges of Potential Revenue Gains\n\nTable 5 shows the potential revenue gains for 2017 that we calculated  using various combinations of low and high estimates for sales and  sellers collections rates described above. Here too, we chose to not  provide a single point estimate because the low and high scenarios for  potential revenue gains illustrate how the many underlying uncertainties  affect potential revenue gains.\nBy adjusting various model inputs we produced some lower estimates  resulting from the following assumptions and adjustments: (1) decreasing  our estimated e-marketplace and other remote retailer sales; (2)  increasing our estimated seller collection rate for all types of remote  sellers; (3) increasing our estimated consumer and business use tax  compliance; and (4) increasing our estimates of tax-exempt business  inputs (intermediate goods). The higher estimate results from: (1)  increasing our estimated e-marketplace and other remote retailer sales;  (2) decreasing our estimated seller collection rates for all types of remote  sellers; (3) decreasing our estimated consumer and business use tax  compliance rates; and (4) decreasing our estimates of tax-exempt  business purchases (intermediate goods).\n\n\t\tIncluding Additional Factors in Our Model Would Likely Lower Our Overall Estimates of Potential Revenue Gains\n\nWe lacked sufficient data on four additional factors that, if we had  included in our model, would likely reduce our estimates of state and local  government revenue gains.\nWe lacked sufficient data on the extent to which requiring all remote  sellers to collect sales taxes on all sales (regardless of a sellers\u2019 nexus)  would raise final prices to consumers and thus lower demand for goods  sold remotely. Facing higher final prices, some online or other remote  shoppers might shop instead at traditional brick and mortar retailers, or  place orders with non-U.S. remote sellers. A representative from one  major Internet retailer we interviewed believed that its customers placed  higher value on the convenience of shopping online and were less likely  to change their shopping behavior if previously untaxed sales now  included sales taxes. Some economists have concluded that consumers  alter buying decisions when remote retailers begin to collect sales  taxes. However, one of the tax policy specialists who reviewed our  report noted a lack of consensus on this topic.\nWe lacked sufficient data on what portion of e-commerce sales included  in our model might be tax exempt digital downloads of software, music,  books, and games. Some states consider digital downloads to be a  service (not a physical good) and therefore exempt from sales taxes. The  variations in state laws governing the taxability of digital downloads were  too numerous for us to reliably include in our model. Assuming that states  do not change their laws to make these purchases taxable, it is likely that  our estimates of potential revenue gains would be lower.\nWe were unable to factor in the extent to which some small remote sellers  might be exempt from sales tax collection requirements even if states had  expanded authority over all remote sales. Recent state laws and  regulations regarding taxes on remote sales have included small seller  provisions that exempt sellers who make less than a specified dollar  amount of sales or a number of transactions annually into a state.  Proposed federal legislation granting states expanded taxing authority on  all remote sales also includes different nationwide dollar amount  exemptions for small sellers. We could not find sufficiently reliable data  to estimate how many businesses or what dollar volume of sales might be  exempt either at the state or federal level. As a result, our final estimates  most likely overstate the total potential revenue gains for some, or all,  states depending on what types of small seller exemptions might be  enacted at either the state or federal level, or both.\nSales to Tax Exempt Entities  We lacked sufficient data on what share of remote sales are made to tax  exempt entities. In our 2000 report, we were also unable to identify any  estimates of sales by taxable versus tax-exempt purchaser. Officials from  one state revenue agency we interviewed estimated that the percent of  purchases made by tax-exempt entities or persons to be extremely low.  Our final estimates of potential tax gains would be lower for states if we  had included an estimate in our model.\n\nAppendix II: State and Local Government Potential Revenue Gains\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nJames R. McTigue, Jr. (202) 512-9110 or mctiguej@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Tara Carter (Assistant Director),  Mark Kehoe (Analyst in Charge), Brett Caloia, and Christine N. Dickason  made key contributions to this report. Anne Stevens, A.J. Stephens,  Cynthia Saunders, JoAnna Berry, Stewart W. Small, Donna Miller,  Andrew Emmons and Andrew Howard also provided key assistance.","output":"Why GAO Did This Study\n\nOver the past two decades, e-commerce sales have grown rapidly, greatly expanding a category of sales known as remote sales. Under current law, states cannot require all businesses to collect taxes on remote sales. Congress has been considering proposals to change this. Little current, nationwide information exists to inform the debate.\nIn this report, GAO (1) estimated revenue states and localities could gain by being able to require businesses to collect taxes on all remote sales, and (2) described what is known about the related compliance costs and challenges to businesses, and administrative costs and challenges to states.\nGAO estimated 2017 revenue gains to state and local governments based on actual and estimated sales data for remote sellers, excluding certain sales that were exempt from taxation or already collected by remote sellers with a substantial presence in a state. Ranges for GAO's estimates were based on a number of key assumptions that were varied based on available data. To describe related costs and challenges to businesses and states, GAO interviewed officials from state revenue agencies, subject matter specialists, and a wide variety of retailers with remote sales and the organizations that represent them.\nGAO provided a draft of this report to subject matter specialists who agreed with the general approach that GAO followed in making its estimates.\n\nWhat GAO Found\n\nForty-five states and the District of Columbia levy taxes on the sale of goods and certain services, including those sold remotely, such as over the Internet. In 1992, the Supreme Court ruled in Quill v. North Dakota that a state can only require a business to collect and remit sales tax if the business has substantial presence, referred to as nexus, in that state. However, the decision stated that Congress could pass legislation to overrule this limitation. In general, under present law, if a seller does not have nexus in a state, and therefore does not collect tax, then a purchaser is required to pay a use tax in the same amount to his or her state government.\nGAO estimated that state and local governments can, under current law, require remote sellers to collect about 75 to 80 percent of the taxes that would be owed if all sellers were required to collect tax on all remote sales at current rates. GAO found that the extent to which state and local governments can require businesses to collect taxes varies with the type of remote seller and by state.\nGAO estimated that state and local governments could gain from about $8 billion to about $13 billion in 2017 if states were given authority to require sales tax collection from all remote sellers. This is about 2 to 4 percent of total 2016 state and local government general sales and gross receipts tax revenues.\nSome businesses would likely see increases in several types of costs if required to collect taxes on all remote sales. These costs would be higher for businesses not currently experienced in multistate tax collection. Officials from state revenue departments told us that they generally do not anticipate major administrative costs or challenges if given the authority to require businesses to collect tax on all remote sales.\n\nWhat GAO Recommends\n\nGAO is not making recommendations in this report."}
{"id":"gao_GAO-18-499","pid":"gao_GAO-18-499_0","input":"\tBackground\n\nU.S. agencies implementing foreign assistance have individually and  jointly developed strategies to guide their efforts. While State\u2019s, USAID\u2019s,  and MCC\u2019s strategies focus exclusively on foreign affairs or foreign  assistance, DOD\u2019s, HHS\u2019s, and USDA\u2019s strategies\u2014as well as those of  other agencies\u2014address foreign assistance as part of larger portfolios of  programs.\nState and USAID, which provide the majority of all foreign assistance,  develop joint foreign assistance-related strategies. The State-USAID  Joint Strategic Plan outlines top-level goals for State and USAID  efforts, including the use of foreign assistance, to inform strategies  developed by State and USAID bureaus, offices, and country teams.  Six joint State-USAID regional strategies (e.g., the State Bureau of  African Affairs\u2013USAID Bureau for Africa Joint Regional Strategy)  identify regional bureau priorities that are intended to align with the  State-USAID Joint Strategic Plan and guide country-level planning for  joint integrated country strategies.\nState, the lead U.S. foreign affairs agency, also develops strategies  for its functional bureaus, which implement foreign assistance  programs, and has participated in the development of a number of  multisectoral and global strategies. State\u2019s Office of U.S. Foreign  Assistance Resources is responsible for coordinating foreign  assistance programs, including providing strategic direction for both  State and USAID. According to State documents, the Office of U.S.  Foreign Assistance Resources strengthens the integration of foreign  assistance with U.S. foreign policy priorities by guiding the  development of coordinated strategic plans for each U.S. overseas  mission at the country level (i.e., integrated country strategies), aiming  for a holistic, whole-of-government approach. It provides tools and  resources to assist bureaus, offices, and country teams in designing  foreign assistance programs, projects, and processes that can help  align with, and advance, broader strategic goals as well as monitoring  and evaluation of progress and results.\nUSAID, the lead U.S. foreign assistance agency, develops global,  regional, and country strategies in the areas of health, democracy and  human rights, water and sanitation, food security, education, poverty,  and the environment, among others.\nMCC has developed one overall strategy document, related to its  mission of reducing poverty through country-led economic growth.  MCC also collaborates with stakeholders in and outside government  to develop and implement foreign assistance programs.\nDOD performs security cooperation strategic planning,  implementation, and oversight to achieve national defense strategy  objectives. DOD also develops country-specific strategies for security  cooperation and other assistance, including humanitarian assistance  and efforts to build foreign partner security capacity.\nHHS has developed, or is a party to, a number of strategies related to  global health, including strategies for specific diseases, such as  HIV\/AIDS, malaria, and Ebola, and for immunization and emergency  preparedness. The Centers for Disease Control and Prevention  (CDC), a component of HHS, develops its own strategies, which  discuss CDC\u2019s plans to combat infectious diseases worldwide.\nUSDA has contributed to jointly issued strategies in food security  related to two food aid programs that it administers\u2014the Food for  Progress program and the McGovern-Dole International Food for  Education and Child Nutrition program.\nIn addition, these agencies implement foreign assistance programs under  the auspices of government-wide foreign assistance strategies developed  by the National Security Council, the Executive Office of the President,  and the Office of Management and Budget. These government-wide  strategies include, for example, the National Security Strategy and the  National Action Plan for Women, Peace, and Security.\nThe geographic focus of these six agencies\u2019 foreign assistance strategies  ranges from country level to regional to global. For example, State,  USAID, and DOD have developed integrated country strategies, country  development cooperation strategies, and country cooperation plans,  respectively, applicable to the countries where they implement foreign  assistance. Similarly, State and USAID have six joint regional strategies  and DOD has strategies focusing on its various geographic areas of  command. In addition, various agencies, working both jointly and  independently, have developed a wide variety of sectoral, multisectoral,  agency-specific, and multi-agency strategies to guide global assistance  efforts.\nForeign assistance strategies are continuously developed and updated.  Some strategies emerge after the launch of a specific initiative, such as  the President\u2019s Emergency Plan for AIDS Relief (PEPFAR), while others  are updated as part of agencies\u2019 strategic management processes. For  example, State\u2019s functional bureau strategies and its joint regional  strategies with USAID are periodically updated as bureau-level  components of State\u2019s planning, budgeting, and performance  management cycle. Planning at the agency level is reflected in the State- USAID Joint Strategic Plan, updated most recently in February 2018, with  which bureau- and country-level strategies are expected to align. As we  have previously reported, strategies that consider relationships among  goals and objectives, interagency collaboration, and performance  assessment can improve federal management. In particular, these  considerations can help identify, eliminate, or better manage  fragmentation, overlap, and duplication in the federal government.\n\n\tMany Selected Foreign Assistance Strategies Addressed Key Elements We Identified That Help Promote Alignment, but Some Did Not\n\nWhile many of the 52 foreign assistance strategies that we reviewed at  least partially addressed the key elements we identified related to  alignment of foreign assistance strategies, some did not address these  elements. Regarding interagency coordination, 40 percent of the  strategies generally identified roles and responsibilities for implementing  the strategies, while 33 percent generally identified interagency  coordination mechanisms; 23 percent and 38 percent, respectively, did  not address these elements. Regarding strategic integration, 58 percent  of the strategies we reviewed described linkages with U.S. foreign  assistance strategies in the same sector and 54 percent generally  described linkages with relevant higher- or lower-level U.S. foreign  assistance strategies; 21 percent and 25 percent, respectively, did not  identify such linkages. Regarding assessment of progress toward  strategic goals, almost all of the strategies generally established desired  results and a framework of goals and objectives and described activities  to achieve results; however, 21 percent did not identify milestones or  performance indicators and 21 percent did not outline plans for monitoring  and evaluation. We also found that the six agencies implementing most  U.S. foreign assistance do not have consistent guidance for strategy  development that could help ensure their strategies address the key  elements we identified.\n\n\t\tWe Identified Nine Key Elements That Help Ensure Strategies Are Aligned and Planning Is Not Fragmented\n\nOn the basis of our prior reporting about U.S. government strategic  planning and interagency collaboration, we identified nine key elements  that are important for helping to ensure that agencies\u2019 foreign assistance  strategies are well aligned in terms of implementation approach and  desired results and that planning among multiple agencies is not  fragmented. The nine elements we identified are associated with (1)  interagency coordination, (2) strategic integration, and (3) assessment of  progress toward strategic goals (see table 1). As we have previously  reported, fragmentation in the U.S. government refers to circumstances in  which multiple federal agencies are involved in serving the same broad  area of national need and opportunities exist to improve service delivery.\n\n\t\tMany Strategies We Reviewed Addressed Elements Related to Interagency Coordination, Strategic Integration, and Assessment of Progress, but Some Did Not\n\n\t\t\tInteragency Coordination\n\nImplementing foreign aid involves the collaborative efforts of multiple U.S.  agencies, each of which brings specific contributions and statutory  authorities and has its own organizational structure, culture, and priorities.  Our prior work has shown that foreign assistance strategies that  consistently address (1) agencies\u2019 roles and responsibilities and (2)  interagency coordination mechanisms can help guide the implementation  of various aspects of a strategy and the identification of agreed-on  processes for effective collaboration to resolve conflicts and better  manage fragmentation. Strategies that do not consistently address  elements related to interagency coordination miss opportunities to ensure  that agencies\u2019 roles and responsibilities are clear and distinct and that  coordination mechanisms are well defined. As figure 1 shows, of the 52  strategies we reviewed, 40 percent generally identified agencies\u2019 roles  and responsibilities and 23 percent did not address this element. In  addition, while 33 percent generally identified interagency coordination  mechanisms, 38 percent did not identify any such mechanisms.\nAgencies\u2019 roles and responsibilities. Forty percent (21 of 52) of the  strategies we reviewed generally defined agencies\u2019 roles and  responsibilities. For example, USAID\u2019s Strategy on Democracy, Human  Rights and Governance identified all agencies involved in its  implementation and laid out the roles and responsibilities of each agency  as well as USAID offices. Thirty-seven percent (19 of 52) of the strategies  partially defined agencies\u2019 roles and responsibilities, which suggests the  potential for improvement in this area. For example, State-USAID joint  regional strategies identified the partners and stakeholders and  enumerated the activities that State and USAID or the embassy and  missions would undertake. However, most of those strategies did not  specify the individual agencies\u2019 roles and responsibilities. Twenty-three  percent (12 of 52) of the strategies contained no information about  agencies\u2019 lead, support, and partner roles.\nInteragency coordination mechanisms. Thirty-three percent (17 of 52)  of the strategies we reviewed generally identified interagency  coordination mechanisms. For example, USAID\u2019s Multi-Sector Nutrition  Strategy identified joint planning, funding, and programming mechanisms  for coordination among development and humanitarian assistance  agencies at country and regional levels in USAID and the U.S.  government as a whole. Twenty-nine percent (15 of 52) of the strategies  partially identified coordination mechanisms. For example, CDC\u2019s Global  Health Strategy and USAID\u2019s Global Health Strategic Framework both  described the agencies\u2019 respective unique roles in global health but did  not specifically discuss how the agencies would work together to achieve  their goals. Thirty-eight percent (20 of 52) of the strategies did not discuss  interagency coordination mechanisms.\n\n\t\t\tIntegration with Other Related Strategies\n\nAs our prior work has shown, agencies that establish strategies that align  with partner agencies\u2019 activities, processes, and resources are better  positioned to accomplish common goals, objectives, and outcomes. Our  prior work has also determined that collaboration among federal agencies  working toward similar results can help ensure consistent goals and  mutually reinforcing program efforts that effectively manage  fragmentation. These agencies can use higher-level strategic plans as a  tool to drive interagency collaboration to ensure complementarities in  goals and objectives. To improve alignment of related strategies, each  strategy should address (1) integration with relevant sectoral strategies  and (2) integration with relevant higher- or lower-level strategies.  Strategies that do not consistently address elements related to strategic  integration do not clearly show whether objectives and activities align with  existing strategic priorities at the government-wide, sectoral, regional, and  country levels. As figure 2 shows, 58 percent of the strategies we  reviewed generally described linkages with at least one relevant sectoral  strategy, while 21 percent did not mention such linkages at all. In addition,  54 percent of the strategies generally described linkages with at least one  higher- or lower-level foreign assistance strategy, while 25 percent did not  describe any such linkages.\nIntegration with relevant sectoral strategies. Fifty-eight percent (30 of  52) of the strategies we reviewed generally identified or described  linkages with other, related U.S. government strategies. For example,  State\u2019s Strategy for Women\u2019s Economic Empowerment discussed how its  activities are designed to complement and reinforce those of the U.S.  National Action Plan on Women, Peace and Security, the U.S. Strategy to  Prevent and Respond to Gender-Based Violence Globally, and the U.S.  Global Strategy to Empower Adolescent Girls. About 21 percent (11 of  52) of the strategies we reviewed partially addressed this element. For  example, the strategy PEPFAR 3.0\u2014Controlling the Epidemic: Delivering  on the Promise of an AIDS-Free Generation explicitly referred to the  PEPFAR Blueprint for Creating an AIDS-Free Generation and stated that  targeting interventions for populations at greatest risk for HIV incidence is  an important activity. However, the strategy did not discuss how its goals  and objectives relate to the strategies of the various agencies  implementing PEPFAR and did not refer to the other strategies pertaining  to PEPFAR. The remaining 21 percent (11 of 52) of strategies did not  mention any other relevant U.S. government strategies. (See app. II for  additional analysis of strategies by sector.)\nIntegration with relevant higher- or lower-level strategies. Fifty-four  percent (28 of 52) of the strategies we reviewed generally described their  relationship to relevant strategies at higher or lower levels of government.  For example, the U.S. Global Strategy to Empower Adolescent Girls  discussed its relationship to a policy framework that, according to the  strategy, is embodied in three higher-level strategies establishing gender  equality as an important element of U.S. foreign policy\u2014the National  Security Strategy, the U.S. Global Development Policy, and the  Quadrennial Diplomacy and Development Review. About 21 percent (11  of 52) of the strategies we reviewed partially addressed this element\u2014 that is, they discussed their relationship with higher- or lower-level  strategies in a limited way. For example, the U.S. Government Approach  on Business and Human Rights discussed priorities outlined in the  National Security Strategy, aligning activities of business with those  priorities, and noted efforts by State\u2019s Bureau of Democracy, Human  Rights, and Labor to discuss human rights with businesses. However, the  U.S. Government Approach on Business and Human Rights did not  reference common goals or activities outlined in other relevant higher- level strategies, such as the U.S. Global Development Policy or the  Quadrennial Diplomacy and Development Review. The remaining 25  percent (13 of 52) of strategies did not address their relationship with  strategies at other levels of government.\n\n\t\t\tAssessment of Progress toward Strategic Goals\n\nOur prior work has shown that effective strategies clearly identify goals  and objectives and a means for assessing progress in achieving them  and that alignment of strategies and other plans can improve the  management of fragmentation. Therefore, our prior work has called for  agencies to develop strategies that identify and describe (1) desired  results, (2) activities to achieve results, (3) a hierarchy of goals and  subordinate objectives, (4) milestones and indicators, and (5) plans for  monitoring and evaluation. Strategies that do not consistently address  elements related to assessing progress may limit agencies\u2019 ability to  specify and assess common goals and objectives and mutually  reinforcing results. As figure 3 shows, most of the strategies we reviewed  generally identified desired results, activities to achieve those results, and  a hierarchy of goals and subordinate objectives. However, fewer  strategies addressed how progress toward those goals and objectives  would be assessed. In particular, 63 percent generally identified  milestones and performance indicators, while 21 percent did not address  this element. In addition, 42 percent of the strategies generally outlined  plans for monitoring and evaluation, while 21 percent did not outline such  plans.\nDesired results, activities to achieve results, and hierarchy of goals  and objectives. Ninety-two percent (48 of 52) of the strategies we  reviewed generally included a statement of desired results, and 90  percent (47 of 52) generally included a description of activities to achieve  these results. For example, MCC\u2019s Next: A Strategy for MCC\u2019s Future  stated the agency\u2019s overall mission of reducing poverty through economic  growth and listed priority actions for each goal, such as exploring new  data sources for accurately identifying countries with high poverty rates.  In addition, about 83 percent (43 of 52) of the strategies generally  included a hierarchy of strategic goals and subordinate objectives. For  example, CDC\u2019s Global Health Strategy included a clear hierarchy of  goals and subordinate objectives (see table 2). Six percent (3 of 52) of  the strategies did not identify desired results, 2 percent (1 of 52) did not  describe activities to achieve these results, and 10 percent (5 of 52) did  not include a hierarchy of goals and objectives.\nMilestones and performance indicators. Sixty-three percent (33 of 52)  of the strategies we reviewed generally included milestones or  performance indicators. These strategies often incorporated milestones or  indicators as discrete components of each goal or subordinate  objective. For example, DOD\u2019s Kenya Country Cooperation Plan  tracked discrete tasks with specific time frames, using color-coding to  designate stages of implementation. Fifteen percent (8 of 52) of the  strategies partially addressed milestones or indicators. For example, the  2016 updated joint State-USAID Strategy to Prevent and Respond to  Gender-Based Violence Globally included an annex listing indicators but  did not link them to the strategic objectives and planned actions. Twenty- one percent (11 of 52) of the strategies did not include any milestones or  performance indicators.\nMonitoring and evaluation plans. Forty-two percent (22 of 52) of the  strategies we reviewed generally outlined monitoring and evaluation  plans. These strategies typically outlined such plans in a specific goal or  in a designated section or appendix. For example, USAID\u2019s Kenya  Country Development Strategy included a section on monitoring and  evaluation planning. In this strategy, USAID committed to host donor  coordination and other stakeholder forums to monitor progress and to  establish a monitoring and evaluation \u201ccore team\u201d to ensure that learning  is incorporated in decision making. Thirty-seven percent (19 of 52) of the  strategies partially addressed monitoring and evaluation planning. Some  of these strategies emphasized the importance of monitoring and  evaluation or made broad statements without outlining more specific  plans. For example, the State-USAID Joint Strategy on Countering  Violent Extremism noted that State and USAID will develop a results  framework for measuring progress that will be accompanied by clear,  well-developed, and well-resourced monitoring and evaluation plans. The  strategy also noted that State and USAID will, to the extent possible,  develop a common set of indicators to measure outputs and outcomes.  However, the strategy provided no additional details. Twenty-one percent  (11 of 52) of the strategies did not outline any monitoring and evaluation  plans.\n\n\t\tAgencies Do Not Have Consistent Guidance for Foreign Assistance Strategy Development That Addresses the Key Elements We Identified\n\nThe six agencies implementing most of U.S. foreign assistance do not  have consistent guidance for strategy development that could help ensure  their strategies address the key elements we identified. For example,  State and USAID guidance for strategy development includes many of  these elements but does not cover all strategies that these agencies are  involved in developing. Additionally, guidance for State\u2019s and USAID\u2019s  joint regional strategies, State\u2019s functional bureau strategies, and  USAID\u2019s country development cooperation strategies does not apply to  other State and USAID strategies, such as the joint State-USAID  integrated country strategies. DOD has also established guidance for  developing security assistance programs that addresses the key  elements we identified. However, DOD\u2019s guidance does not explicitly  apply to the development of foreign assistance strategies. HHS, MCC,  and USDA have not established any guidance on foreign assistance  strategy development. Inconsistent guidance for developing foreign  assistance strategies has contributed to variations in the strategies\u2019  addressing the key elements we identified related to interagency  coordination, strategic integration, and assessing progress toward  strategic goals.\nExisting government-wide guidance requires agencies to address some  of the key elements of assessment of progress toward strategic goals that  we identified as being important for ensuring alignment of agencies\u2019  foreign assistance strategies. In January 2018, the Office of Management  and Budget issued new guidance for agencies that administer foreign  assistance that includes some of the elements we used to assess the  strategies we reviewed. For example, the guidance recommends that  agencies ensure their programs have clear goals and objectives, align  their programs with higher-level strategies or objectives, and plan for  monitoring and evaluation while developing policies and strategies. In  addition, the Government Performance and Results Act, as amended,  requires agencies to submit strategic plans for program activities that  include general goals and objectives for the major functions and  operations of the agency, a description of how the goals are to be  achieved, and a description and schedule of program evaluations. The  act\u2019s provisions were among the sources we used to develop the  desirable characteristics from which we derived the key elements we  identified. However, according to officials of State\u2019s Office of U.S. Foreign  Assistance Resources, there is no government-wide guidance that  incorporates interagency coordination, strategic integration, and  assessment of progress toward strategic goals into the interagency  strategic planning process. In addition, the officials stated that there is no  overarching review mechanism for strategies outside of the core strategic  planning process for joint State-USAID strategies.\nAccording to State officials, State\u2019s Office of U.S. Foreign Assistance  Resources plays a significant role in promoting interagency coordination  by convening roundtables and working groups. By collaborating with the  five other agencies that implement most of U.S. foreign assistance to  establish guidance for developing foreign assistance strategies, the office  could help the agencies ensure that future strategies address the key  elements we identified. Consistent guidance for strategy development  could help the agencies align their strategies and better identify and  manage fragmentation in foreign assistance planning.\n\n\tConclusions\n\nU.S. foreign assistance often involves multiple agencies or a whole-of- government approach. Alignment of related foreign assistance strategies  can help agencies better identify and manage fragmentation. Moreover,  consistently addressing the key elements we identified related to  interagency coordination, strategic integration, and assessment of  progress toward strategic goals can help ensure that strategies provide a  clear and comprehensive picture of alignment.\nSeveral of the six largest providers of U.S. foreign assistance in the three  sectors we reviewed have not issued consistent guidance for foreign  assistance strategy development that incorporates these key elements.  For example, some agencies have issued guidance that addresses many  of the key elements we identified related to interagency coordination,  strategic integration, and assessment of progress toward strategic goals,  but this guidance does not apply to all of these agencies\u2019 strategies.\nState\u2019s Office of Foreign Assistance Resources leads interagency  strategic planning for the implementation of foreign assistance. This  office\u2014which has responsibility for, and experience in, promoting  coordination among agencies involved in foreign assistance\u2014is uniquely  placed to collaborate with other agencies implementing foreign assistance  to establish guidance for developing foreign assistance strategies that  addresses the key elements we identified. Such guidance would improve  the agencies\u2019 ability to align future strategies and to identify and manage  fragmentation in foreign assistance planning.\n\n\tRecommendation for Executive Action\n\nWe are making the following recommendation to the Department of State:  The Secretary of State should ensure that the Director of the Office of  U.S. Foreign Assistance Resources leads an effort to establish, in  collaboration with the five other agencies that implement most of U.S.  foreign assistance, guidance for strategy development that addresses the  key elements we identified related to interagency coordination, strategic  integration, and assessment of progress toward strategic goals.  (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to State, USAID, MCC, DOD, HHS, and  USDA for review and comment. We received substantive comments from  State, USAID, and MCC, which are reprinted in appendixes IV through VI,  respectively. In addition, we received technical comments from HHS,  which we incorporated as appropriate. State, USAID, MCC, USDA, and  DOD did not provide technical comments about our draft report.\nIn their substantive comments, State and MCC concurred with our  recommendation. USAID\u2019s comments expressed support for our goal of  strengthening interagency coordination, strategic integration, and  assessment of progress across the federal departments and agencies  that implement U.S. foreign assistance. However, USAID suggested that  we issue our recommendation to the National Security Council or address  it jointly to State and USAID. We believe that our recommendation is  appropriately addressed to State, given the responsibility of State\u2019s Office  of U.S. Foreign Assistance Resources for coordinating foreign assistance  programs, including providing strategic direction for both State and  USAID.\nWe are sending copies of this report to the appropriate congressional  committees and to the Secretaries of Agriculture, Defense, Health and  Human Services, and State; the Chief Executive Officer of MCC; and the  Administrator of the USAID. In addition, the report will be available at no  charge on GAO\u2019s website at http:\/\/www.gao.gov.\nIf you or your staff have questions about this report, please contact me at  (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines the extent to which foreign assistance strategies  address key elements that we identified related to alignment of agencies\u2019  efforts\u2014specifically, elements related to (1) interagency coordination, (2)  strategic integration, and (3) assessment of progress toward strategic  goals. We focused on the six agencies that administer the largest  amounts of foreign assistance, according to fiscal year 2016 obligations  data: the Departments of Agriculture (USDA), Defense (DOD), Health and  Human Services (HHS), and State (State); the Millennium Challenge  Corporation (MCC); and the U.S. Agency for International Development  (USAID). We limited our review to foreign assistance strategies that were  in effect during 2017. We further focused on strategies relating to health,  security, and democracy assistance, which account for the majority of  total foreign assistance obligations, according to fiscal year 2016 data.  We excluded strategies for other assistance sectors, such as  counternarcotics and other law enforcement activities that require  interagency coordination with domestically focused agencies outside the  scope of our review, such as the Departments of Homeland Security and  Justice.\nTo identify the strategies for this review, we asked the six agencies to  update a list of 63 government-wide, agency, multi-agency, regional,  sector-specific, and multisectoral strategies that they had provided for a  related report that we published in June 2017. We also asked the  agencies to provide country-level strategies for Afghanistan and Kenya,  two of the largest recipients of U.S. security and development assistance,  based on fiscal year 2016 obligations data. We obtained and initially  reviewed 72 strategies, which included the 63 strategies we identified for  the June 2017 report; 6 country-level strategies for Afghanistan and  Kenya; and 3 updated strategies covering national security, the  President\u2019s Emergency Plan for AIDS Relief, and water and sanitation.  We determined that 52 of these 72 strategies incorporated goals or  activities related to health, security, or democracy assistance (see fig. 4).  These 52 strategies, which had been issued by December 2017 and were  current in that year, include 44 of those listed in our June 2017 report and  8 of those subsequently identified by the agencies.\nWe reviewed the 52 strategies to determine the extent to which they  addressed nine key elements we identified relating to the alignment of  multiple strategies. We identified these nine elements by reviewing prior  reports focused on foreign assistance in the security sector that assessed  the quality of various U.S. government strategies; articulated practices for  enhancing collaboration among federal agencies; or discussed  fragmentation, overlap, and duplication among government programs.  Those reports identified six desirable characteristics for government-wide  strategies and practices for enhancing agency collaboration. For the  purposes of this report, we selected three of these characteristics, related  to interagency coordination, strategic integration, and assessment of  progress toward strategic goals. We excluded three characteristics\u2014 purpose, scope, and methodology; detailed discussion of problems, risks,  and threats; and description of future costs and resources needed\u2014 because we did not consider them to be directly related to alignment of  strategies. The three characteristics we included comprised 15 elements,  9 of which we considered to be directly related to the alignment of health,  security, and democracy assistance sector strategies across multiple  agencies. We excluded 6 elements\u2014for example, potential changes to  structure and details on subordinate strategies and plans for  implementation (e.g., enterprise architecture)\u2014that we did not consider to  be directly related to this topic.\nWe reviewed the selected strategies using NVivo, a qualitative data  analysis software package. For each strategy, two reviewers, including at  least one with expertise in the area of foreign assistance addressed by  each strategy, independently identified text related to each of the key  elements we had identified. We used a standardized set of criteria in an  assessment instrument to consistently judge whether each strategy  sufficiently addressed these elements. This instrument contained  evaluative questions intended to gauge the presence of each element\u2014 for example, \u201cTo what extent does the strategy address the agencies  involved and their roles and responsibilities?\u201d. Given the variety of  strategies we reviewed and reviewers\u2019 varying expectations for the detail  and emphasis accorded the key elements we had identified, we rated the  strategies using a three-part scale focused on the presence of these  elements. We rated a strategy as generally addressing an element if the  strategy provided sufficient detail to understand the element in that  strategy; as partially addressing an element if the strategy mentioned it  but lacked sufficient detail; and as not addressing an element if the  strategy did not mention it. The two reviewers for each strategy  independently documented their judgments on the extent to which the  strategy addressed the key elements we had identified. Our initial coding  shows that the reviewers agreed in about 78 percent (363 of 468) of  these initial judgments. The reviewers reconciled their judgments, with  resolution of differences split roughly evenly between accepting the  higher and lower of the initial ratings. A supervisor reviewed each set of  ratings for internal consistency. The supervisor related any identified  issues, as appropriate, to the reviewers, who addressed them before the  supervisor recorded the review as final.\nWe examined these strategies and any appendixes included in the  documents that the agencies submitted, because these strategic  documents should broadly describe objectives and efforts\u2014including  interagency coordination, strategic integration, and assessment of  progress toward strategic goals\u2014needed to achieve them. We did not  review agencies\u2019 efforts to implement the strategies and did not assess  the overall effectiveness of such efforts. Instead, we focused on the  extent to which the strategies we reviewed provided a clear picture of the  organization and management of U.S. foreign assistance efforts.\nTo measure the extent of strategies\u2019 integration with other relevant  sectoral strategies and with higher- and lower-level strategies, we  performed a word search for references to the other selected strategies in  the same sector and to other strategies or sets of strategies (e.g.,  regional or country-level strategies) that we classified as either higher- or  lower-level strategies. We searched for such references in each of the 14  strategies that we classified as covering the health sector, the 12  strategies that we classified as covering the security sector, and the 8  strategies that we classified as covering the democracy assistance  sector. See appendix III for the results of this analysis.\nWe also reviewed agency guidance related to foreign assistance  strategies. We requested current versions of any relevant documentation  from each of the six agencies. State provided us with agency guidance for  developing its functional bureau strategies and joint State-USAID regional  strategies as well as a related template. State also provided guidance  documents related to its monitoring and evaluation policy and  performance management. USAID provided strategic planning and  implementation guidance for its country development and cooperation  strategies. HHS, USDA, and MCC did not provide\u2014and, according to  agency officials, do not have\u2014specific guidance related to what  constitutes a foreign assistance strategy. DOD provided guidance for  developing security assistance programs.\nWe conducted this performance audit from May 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Listing of 52 Selected Foreign Assistance Strategies\n\nThe following list shows the 52 foreign assistance strategies that we  reviewed.  1.  Quadrennial Diplomacy and Development Review: Enduring  Leadership in a Dynamic World (2015)  2.  U.S. Global Development Policy (Sept. 22, 2010)  3.  State-USAID Joint Strategic Plan FY2014-2017 (Mar. 17, 2014)  4.  State Department, Office of U.S. Foreign Assistance Resources (F),  Functional Bureau Strategy (2016)  5.  Millennium Challenge Corporation, NEXT: A Strategy for MCC\u2019s  Future (Feb. 24, 2016)  6.  USAID Multi-Sectoral Nutrition Strategy 2014-2025 (May 2014)\nRegional strategies (not specific to any single sector)  7.  State Bureau of East Asian and Pacific Affairs\/USAID Bureau for Asia  Joint Regional Strategy (approved May 24, 2016)  8.  State Bureau of African Affairs\/USAID Bureau for Africa Joint  Regional Strategy (approved Apr. 5, 2016)  9.  State Bureau of Near Eastern Affairs\/USAID Bureau for Middle East  Joint Regional Strategy, FY 2016-2018  10. State Bureau of European and Eurasian Affairs\/USAID Bureau for  Europe and Eurasia Joint Regional Strategy, FY 2015-2018  (approved April 2015)  11. State Bureau of Western Hemisphere Affairs\/USAID Bureau for Latin  America and the Caribbean Joint Regional Strategy, FY 2015-2018  12. State and USAID Joint Regional Strategy for South and Central Asia,  and Afghanistan and Pakistan, FY 2015-2018 (June 2014)  13. PEPFAR: Strategy for Accelerating HIV\/AIDS Epidemic Control 2017- 2020 (September 2017)  14. 2016-2020 CDC Strategic Framework for Global Immunization (May  2016)  15. \u201cU.S. Government Strategy for Reducing Transmission of the Ebola  Virus Disease in West Africa\u201d (draft strategy, Sept. 30, 2015)  16. President\u2019s Malaria Initiative Strategy 2015-2020 (April 2015)  17. President\u2019s Emergency Plan for AIDS Relief (PEPFAR) Human  Resources for Health Strategy PEPFAR 3.0 (February 2015)  18. CDC Division of Parasitic Diseases and Malaria Strategic Priorities  19. The Global Strategy of the U.S. Department of Health and Human  Services (2015-2019)  20. State Department, Office of the U.S. Global AIDS Coordinator,  21. PEPFAR 3.0 Controlling the Epidemic: Delivering on the Promise of  an AIDS-Free Generation (December 2014)  22. HHS Strategic Plan, 2014-2018 (updated March 10, 2014)  23. HHS Assistant Secretary for Preparedness and Response Strategic  Plan (February 2014)  24. PEPFAR Blueprint: Creating an AIDS-Free Generation (November  2012)  25. USAID\u2019s Global Health Strategic Framework: Better Health for  26. CDC Global Health Strategy 2012-2015 (June 29, 2012)  27. National Security Strategy of the United States of America (December  2017)  28. State Bureau of Political-Military Affairs, Office of Weapons Removal  and Abatement, Conventional Weapons Destruction Strategic Plan,  2017-2019  29. Department of Defense Guidance for Security Cooperation (Aug. 29,  2016)  30. Department of State & USAID Joint Strategy on Countering Violent  Extremism (May 2016)  31. State Department, Arms Control, Verification and Compliance,   Functional Bureau Strategy (approved December 2015)  32. State Bureau of Political-Military Affairs, Office of Plans & Initiatives,  Peace Operations Capacity Building Division, U.S. Global Peace  Operations Initiative Strategy: Strengthening the Effectiveness of  United Nations and Regional Peace Operations (October 2015)  33. National Security Strategy (February 2015)  34. State Department, Bureau of International Security and  Nonproliferation, Functional Bureau Strategy, FY 2015-2018 (January  2015)  35. State Department, Bureau of Political-Military Affairs, Functional  Bureau Strategy, FY 2015-2018 (January 2015)  36. State Department, Bureau of Counterterrorism, Functional Bureau  Strategy, FY 2015-2017 (January 2015)  37. National Strategy for Counterterrorism (June 2011)  38. Security Sector Reform (February 2009)  39. State Department, The Secretary\u2019s Office of Global Women\u2019s Issues,  Functional Bureau Strategy (approved Mar. 27, 2017)  40. United States Strategy to Prevent and Respond to Gender-based  Violence Globally (June 2016)  41. United States National Action Plan on Women, Peace, and Security  (June 2016)  42. U.S. Department of State Strategy for Women\u2019s Economic  Empowerment (June 2016)  43. United States Global Strategy to Empower Adolescent Girls (March  2016)  44. State Department, Bureau of Democracy, Human Rights, and Labor,  Functional Bureau Strategy, FY 2015-2018 (approved 2014)  45. U.S. Government Approach on Business and Human Rights (2013)  46. USAID Strategy on Democracy, Human Rights and Governance  (June 2013)\nCountry strategies (for Afghanistan)  47. Department of Defense, Enhancing Security and Stability in  Afghanistan. Report to Congress in Accordance With Section 1225 of  the Carl Levin and Howard P. \u201cBuck\u201d McKeon National Defense  Authorization Act for Fiscal Year 2015 (P.L. 113-291), as Amended  (June 2017)  48. USAID Afghanistan Plan for Transition 2015-2018 (Jan. 6, 2016)  49. State\/USAID Integrated Country Strategy: Afghanistan (February  2015)\nCountry strategies (for Kenya)  50. State\/USAID Integrated Country Strategy: Kenya (approved Feb. 1,  2017)  51. DOD\/USAFRICOM: Kenya Country Cooperation Plan FY 2017-2021  (Nov. 8, 2016)  52. USAID Kenya Country Development Cooperation Strategy 2014-2018  (May 2014)\n\nAppendix III: Extent to Which Sectoral Strategies Addressed Interagency Coordination, Strategic Integration, and Assessment of Progress toward Strategic Goals\n\nOur analysis of strategies we reviewed in the health, security, and  democracy assistance sectors found inconsistency in the extent to which  the strategies addressed selected, or key, elements that we identified  related to interagency coordination, strategic integration, and assessment  of progress toward strategic goals.\n\n\tInteragency Coordination\n\nAs figure 5 shows, about 30 percent (4 of 14) of the strategies in the  health sector and about 17 percent (2 of 12) in the security sector  generally identified interagency coordination mechanisms, while about 33  percent (4 of 12) in the security sector addressed agencies\u2019 roles and  responsibilities. In contrast, 75 percent (6 of 8) of the strategies in the  democracy assistance sector generally addressed interagency  coordination mechanisms and 63 percent (5 of 8) addressed agencies\u2019  roles and responsibilities.\n\n\tStrategic Integration\n\nAs figure 6 shows, in the health sector, 50 percent (7 of 14) of the  strategies generally addressed their relationship with at least one other  strategy in the same sector and about 43 percent (6 of 14) generally  addressed their relationship with at least one higher- or lower-level  strategy. In the security sector, about 58 percent (7 of 12) of the  strategies generally addressed their relationship with at least one other  strategy in the same sector and their relationship with at least one higher-  or lower-level strategy. In the democracy assistance sector, about 75  percent (6 of 8) of the strategies we reviewed generally addressed their  relationship with at least one other strategy in the same sector, while  about 63 percent (5 of 8) generally addressed their relationship with at  least one higher- or lower-level strategy.\nFigures 7, 8, and 9 show the strategies in the health, security, and  democracy assistance sectors, respectively, that refer to higher- and  lower-level strategies as well as to other strategies in the same sector.\n\n\tAssessment of Progress toward Strategic Goals\n\nAs figure 10 shows, most strategies in the health, security, and  democracy assistance sectors generally identified desired results, a  hierarchy of goals and subordinate objectives, and activities to achieve  results. However, strategies in all three sectors were less consistent in  identifying milestones and performance indicators. Specifically, 57  percent (8 of 14) of health sector strategies, 50 percent (6 of 12) of  security sector strategies, and 50 percent (4 of 8) of democracy  assistance strategies generally addressed this element. In addition, while  71 percent (10 of 14) of strategies in the health sector outlined plans for  monitoring and evaluation, 17 percent (2 of 12) of security sector  strategies and 50 percent (4 of 8) of democracy assistance sector  strategies generally addressed this element.\n\nAppendix IV: Comments from the Department of State\n\nAppendix V: Comments from the U.S. Agency for International Development\n\nAppendix VI: Comments from the Millennium Challenge Corporation\n\nAppendix VII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, James Michels (Assistant  Director), Gergana Danailova-Trainor (Analyst-in-Charge), Timothy  Young, Kay Halpern, Steven Putansu, Mona Sehgal, Drew Lindsey,  Judith Williams, Leslie Holen, Ming Chen, Aniruddha Dasgupta, Mark  Dowling, Giff Howland, Neil Doherty, and Reid Lowe made key  contributions to this report.","output":"Why GAO Did This Study\n\nMore than 20 federal agencies spend billions of dollars on U.S. foreign assistance each year. Six agencies\u2014the Departments of Agriculture, Defense, Health and Human Services, and State; the Millennium Challenge Corporation; and the U.S. Agency for International Development\u2014implement most of this assistance, using multiple strategies. State is responsible for coordinating their efforts. Questions have been raised about potential inefficiencies in implementing multiple foreign assistance strategies.\nGAO was asked to review the alignment of U.S. foreign assistance strategies. This report examines the extent to which strategies include key elements GAO identified, related to interagency coordination, strategic integration, and assessment of progress, that help ensure alignment. These elements are based on GAO's prior work on strategic planning and interagency collaboration. GAO reviewed 52 strategies related to health, security, and democracy assistance that were current in 2017. These included government-wide, agency, multi-agency, and regional strategies as well as strategies for two countries. GAO also reviewed agency guidance and interviewed agency officials.\n\nWhat GAO Found\n\nMany foreign assistance strategies related to health, security, and democracy assistance that GAO reviewed at least partially addressed key elements GAO identified that help ensure the strategies are aligned. Prior work has found that consistently addressing these elements, related to interagency coordination, strategic integration, and assessment of progress, is important for, among other things, better managing fragmentation in strategic planning. However, some strategies did not address these elements (see figure). For example:\nInteragency coordination . Twenty-three percent of the strategies (12 of 52) did not address agencies' roles and responsibilities, and 38 percent (20 of 52) did not identify specific interagency coordination mechanisms.\nStrategic integration . Twenty-one percent of the strategies (11 of 52) did not address linkages with other related strategies, and 25 percent (13 of 52) did not address linkages with higher- or lower-level strategies.\nAssessment of progress toward strategic goals . Twenty-one percent of the strategies (11 of 52) did not include milestones and performance indicators, and 21 percent (11 of 52) did not outline plans for monitoring and evaluation.\nThe six agencies implementing most U.S. foreign assistance do not have consistent guidance for strategy development that could help ensure their strategies address these key elements. Some agencies' guidance addresses many of the elements but does not apply to all of their foreign assistance strategies, while other agencies have no such guidance. The Department of State (State) plays a significant role in interagency coordination. By collaborating with other agencies to establish guidance that addresses the key elements GAO identified, State could help the agencies improve their ability to align future strategies and identify and manage fragmentation in foreign assistance planning.\n\nWhat GAO Recommends\n\nGAO recommends that State lead an effort to establish, in collaboration with the five other agencies, guidance for developing foreign assistance strategies that addresses the key elements GAO identified related to interagency coordination, strategic integration, and assessment of progress. State concurred with GAO's recommendation."}
{"id":"crs_R45478","pid":"crs_R45478_0","input":"T he unemployment insurance (UI) system has two primary objectives: (1) to provide temporary, partial wage replacement for involuntarily unemployed workers and (2) to stabilize the economy during recessions. In support of these goals, several UI programs provide benefits for eligible unemployed workers.\n\n\tOverview of Unemployment Insurance Programs\n\nIn general, when eligible workers lose their jobs, the joint federal-state Unemployment Compensation (UC) program may provide up to 26 weeks of income support through regular UC benefit payments. UC benefits may be extended for up to 13 weeks or 20 weeks by the Extended Benefit (EB) program if certain economic situations exist within the state. As of the date of this publication, although both the UC and EB programs are authorized, no state is in an active EB period. For an overview of EB, see the Appendix .\n\n\t\tUnemployment Compensation Program\n\nThe Social Security Act of 1935 (P.L. 74-271) authorizes the joint federal-state UC program to provide unemployment benefits. Most states provide up to a maximum of 26 weeks of UC benefits. Former federal workers may be eligible for unemployment benefits through the Unemployment Compensation for Federal Employees (UCFE) program. Former U.S. military servicemembers may be eligible for unemployment benefits through the Unemployment Compensation for Ex-Servicemembers (UCX) program. The Emergency Unemployment Compensation Act of 1991 ( P.L. 102-164 ) provides that ex-servicemembers be treated the same as other unemployed workers with respect to benefit levels, the waiting period for benefits, and benefit duration.\nAlthough federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and determination, the specifics regarding UC benefits are determined by each state. This results in essentially 53 different programs. Generally, UC eligibility is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. All states require a worker to have earned a certain amount of wages or to have worked for a certain period of time (or both) within the base period to be eligible to receive any UC benefits. The methods states use to determine eligibility vary greatly. Most state benefit formulas replace approximately half of a claimant's average weekly wage up to a weekly maximum. Additionally, each state's UC law requires individuals to have lost their jobs through no fault of their own, and recipients must be able to work, available for work, and actively seeking work. These eligibility requirements help ensure that UC benefits are directed toward workers with significant labor market experience and who are unemployed because of economic conditions.\n\n\t\t\tUC Financing\n\nThe UC program is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under each state's State Unemployment Tax Act (SUTA). The 0.6% effective net FUTA tax paid by employers on the first $7,000 of each employee's earnings (equaling no more than $42 per worker per year) funds federal and state administrative costs, loans to insolvent state UC accounts, the federal share (50%) of EB payments, and state employment services.\nSUTA taxes on employers are limited by federal law to funding regular UC benefits and the state share (50%) of EB payments. Federal law requires that the state tax be on at least the first $7,000 of each employee's earnings and that the maximum state tax rate be at least 5.4%. Federal law also requires each employer's state tax rate to be based on the amount of UC paid to former employees (known as \"experience rating\"). Within these broad requirements, each state has great flexibility in determining its SUTA structure. Generally, the more UC benefits paid out to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. Funds from FUTA and SUTA are deposited in the appropriate accounts within the Unemployment Trust Fund (UTF). \n\n\tUnemployment Insurance Benefits and the Sequester\n\nThe sequester order required by the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and implemented on March 1, 2013 (after being delayed by P.L. 112-240 ), affected some but not all types of UI expenditures. Regular UC, UCX, and UCFE payments are not subject to the sequester reductions. EB and most forms of administrative funding are subject to the sequester reductions.\n\n\t\tFY2019 Sequester of Unemployment Insurance Benefits\n\nThe FY2019 sequestration order requires a 6.2% reduction in all nonexempt nondefense mandatory expenditures, but no sequestration reductions are applicable to discretionary programs, projects, and activities. As a result, EB expenditures are required to be reduced 6.2% (only on the federal share of EB benefits) for weeks of unemployment during FY2019. As of January 22, 2019, EB has not been activated in any state during FY2019.\n\n\tUnemployment Insurance and the Recent Partial Government Shutdown\n\nThe lapse in federal appropriations that occurred from December 22, 2018, until January 25, 2019, caused a partial government shutdown. As a result, during this lapse in appropriations, agencies without funding furloughed federal employees, and many federal employees excepted from furlough were working without pay. \nFurloughed federal employees may be eligible for UCFE benefits. States are required to operate the UCFE program under the same terms and conditions that apply to regular state UC. Therefore, UCFE eligibility is determined under the laws of the state in which an individual's official duty station in federal civilian service is located. Federal employees who are in furlough status on account of a government shutdown are generally treated by state law as laid off with an expectation of recall. Depending on state laws and regulations, the state may have an option to not require federal employees to search for work given an expected recall.\nHowever, according to guidance from U.S. Department of Labor (DOL), excepted federal employees who are performing services (but working without pay) would generally be ineligible for UCFE benefits based on states' definitions of \"unemployment.\"\nPrivate-sector workers who are furloughed or laid off due to the partial government shutdown because they were employed by government contractors or other businesses may be eligible for regular UC benefits. UC eligibility for these workers would be based on the requirements set out under the state laws in the state where they had worked.\nIn this climate, there has been congressional interest in assisting furloughed and excepted federal employees through the UI system. For example, as described below in the section on \" Unemployment Compensation for Excepted Federal Employees During a Government Shutdown ,\" there are proposals to provide new authority to pay UCFE benefits to excepted federal workers who are working without pay.\nThe most recent lapse in federal appropriations began December 22, 2018, and ended on January 25, 2019, with the enactment of H.J.Res. 28 . Because retroactive pay for furloughed and excepted federal employees was authorized under S. 24 , the Government Employee Fair Treatment Act of 2019 (enacted January 16, 2019), UCFE payments made to federal employee claimants during this lapse in appropriations may be deemed an overpayment, subject to state UC laws regarding overpayment recovery. According to guidance from the Office of Personnel Management on this issue\nThe state UI agency will determine whether or not an overpayment exists and, generally, the recovery of the UCFE overpayment is a matter for state action under its law; however, some state UI laws require the employer to recover such overpayment by collecting the overpayment amount from the employee. The Federal and state agencies will need to coordinate to determine the required action in accordance with the individual state UI law. Federal agencies are encouraged to develop lists or spreadsheets that can be provided to the state(s) containing the employees' names, social security numbers, and the amounts and periods of time covered by the retroactive payment.\n\n\tState UC Loans and Solvency Concerns\n\nIf a recession is deep enough and if state unemployment tax (SUTA) revenue is inadequate for long periods of time, states may have insufficient funds to pay for UC benefits. Federal law, which requires states to pay these benefits, provides a loan mechanism within the UTF framework that an insolvent state may use to meet its UC benefit payment obligations. States must pay back these loans. If the loans are not paid back quickly (depending on the timing of the beginning of the loan period), states may face interest charges, and states' employers may face increased net FUTA rates until the loans are repaid.\nThe U.S. Virgin Islands is the only jurisdiction with an outstanding loan. As of January 18, 2019, it had an outstanding loan of $68.4 million from the federal accounts within the UTF. At the end of 2017, fewer than half of states (24) had accrued enough funds in their accounts to meet or exceed the minimally solvent standard of an average high cost multiple (AHCM) of 1.0 in order to be prepared for a recession.\n\n\tReemployment Services and Eligibility Assessments\n\nBeginning in FY2015, DOL funded state efforts \"addressing individual reemployment needs of UI claimants, and working to prevent and detect UI overpayments\" through the voluntary Reemployment Services and Eligibility Assessment (RESEA) program. RESEA provides funding to states to conduct in-person interviews with selected UI claimants to (1) assure that claimants are complying with the eligibility rules, (2) determine if reemployment services are needed for the claimant to secure future employment, (3) refer the individual to reemployment services as necessary, and (4) provide labor market information that addresses the claimant's specific needs. Section 30206 of P.L. 115-123 codified the authority for DOL to administer a RESEA program. It also set out various requirements for states to use certain types of evidence-based interventions for UI claimants under RESEA and allocated discretionary funding for RESEA across three categories (base funding, outcome payments, and research and technical assistance). State RESEA programs must include reasonable notice and accommodations to participating UI beneficiaries. \nOn April 4, 2019, DOL published a proposed methodology to allocate base RESEA funds and outcome payments. DOL requested state and public comments on this proposal by May 6, 2019. \n\n\tPresident's Budget Proposal for FY2020\n\nThe President's budget for FY2020 proposes changes to several aspects of the UI system. It would create a new required standard for state account balances within the UTF and a new benefit entitlement for paid parental leave financed through state unemployment taxes. The President's FY2020 budget also proposes a set of additional integrity measures, including the required use of certain databases to confirm UC eligibility and requiring Social Security Disability Insurance (SSDI) benefits offset UI benefits. \n\n\t\tNew Minimum Account Balance for State UTF Accounts\n\nThe President's budget proposal for FY2020 would require states to maintain a minimum level of solvency in their UTF account balances to be at least half (0.5) of the state's AHCM. The proposal would alter the rules for calculating the net FUTA rate, requiring a higher net FUTA rate on a state's employers if that state maintained an AHCM of less than 0.5 on January 1 of two or more consecutive years. The additional FUTA revenue would be deposited into the state UTF account and would be terminated once the state met the 0.5 AHCM criteria. \n\n\t\tPaid Family Leave Benefit\n\nThe President's budget proposal for FY2020 would require states to establish a paid parental leave benefit by 2020, using the UC program as its base for an administrative framework. States would be required to provide six weeks of benefits to a worker on leave or otherwise absent from work for the birth or adoption of the worker's child. States would have discretion to determine the parameters of eligibility and financing for this new paid parental leave benefit.\n\n\t\tUI Program Integrity\n\n\t\t\tRequirements to Use Particular Data Sources for Program Integrity\n\nThe President's 2020 budget would require states to use three specific data sources to confirm an individual's eligibility for UC benefits: the State Information Data Exchange System (SIDES, administered by Information Technology Support Center [ITSC] and DOL); the National Directory for New Hires (NDNH, administered by the Department of Health and Human Services); and the Prisoner Update Processing System (PUPS, administered by the Social Security Administration). \n\n\t\t\tAdditional Integrity Proposals\n\nThe proposal would create several additional integrity measures, including\ngiving the Secretary of Labor the authority to implement new corrective action measures in response to poor state administrative performance within the program; allowing states to retain a percentage of UC overpayments for program integrity use; requiring states to deposit all UC penalty and interest payments into a special state fund, with these funds required to be used for improving state UI administration as well as providing reemployment services for UI claimants; and offsetting SSDI benefits to account for concurrent receipt of UI benefits.\n\n\t2018 DOL Proposed Rule on UC Drug Testing\n\nSection 2105 of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ; February 22, 2012) amended federal law to allow states to conduct two types of drug testing. First, it expanded the long-standing state option to disqualify UC applicants who were discharged from employment with their most recent employer (as defined under state law) for unlawful drug use by allowing states to drug test these applicants to determine UC benefit eligibility or disqualification. Second, it allowed states to drug test UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing, to be determined under new regulations issued by the Secretary of Labor.\nAs required by\u00a0 P.L. 112-96 , on August 1, 2016, DOL promulgated\u00a0 20 C.F.R. Part 620 , \u00a0a new rule to implement the provisions of the law relating to the drug testing of UC applicants for whom suitable work (as defined under state law) is available only in an occupation that regularly conducts drug testing.\nAmid concerns voiced by stakeholders about the 2016 DOL rule, Congress repealed this UC drug testing rule using the Congressional Review Act (CRA) via H.J.Res. 42 \/ P.L. 115-17 . On November 5, 2018, DOL published a Notice of Proposed Rulemaking (NPRM)\u00a0to reissue the rule identifying occupations that regularly conduct drug testing for purposes of Section 2105 of\u00a0 P.L. 112-96 . The CRA prohibits an agency from reissuing the rule in \"substantially the same form\" or issuing a \"new rule that is substantially the same\" as the disapproved rule, \"unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.\" Notably, this is the first time an agency has proposed to reissue a rule after the original version was disapproved under the CRA.\nAccording to the 2018 NPRM, DOL has addressed the reissue requirements of the CRA by proposing a substantially different and more flexible approach to the statutory requirements than the 2016 Rule, enabling states to enact legislation to require drug testing for a far larger group of UC applicants than the previous rule permitted. This flexibility is intended to respect the diversity of states' economies and the different roles played by employment drug testing in those economies.\nComments on the proposed 2018 rule were required to be submitted by January 4, 2019.\n\n\tLegislative Proposals in the 116th Congress\n\n\t\tUnemployment Compensation for Excepted Federal Employees During a Government Shutdown\n\nOn January 16, 2019, Senator Richard Blumenthal introduced S. 165 , the Federal Unemployment Compensation Equity Act of 2019. This proposal would amend UCFE law and create a new permanent UCFE eligibility category for excepted federal employees who are unpaid but required to work during a government shutdown due to a lapse in appropriations. During any shutdown beginning on or after December 22, 2018, all excepted federal workers would be deemed eligible for UCFE benefits. Additionally, these employees would not be subject to a one-week waiting period (otherwise often required under state laws) before UCFE benefits were to be paid. \nOn January 23, 2019, Representative Debbie Dingell introduced H.R. 725 , the Pay Federal Workers Act. This proposal would also provide UCFE benefits in a similar manner to S. 165 , including permanently amending 5 U.S.C. Chapter 85 to provide federal authority for these benefits.\nOn January 23, 2019, Representative Anthony Brown introduced H.R. 720 . This proposal would deem excepted federal employees during a government shutdown to be eligible for UCFE during FY2019. The authority to provide UCFE to these excepted workers would expire at the end of FY2019.\nOn February 8, 2019, Representative Katie Hill introduced H.R. 1117 , the Shutdown Fairness Act of 2019. This proposal would deem excepted federal employees and unpaid military servicemembers during a government shutdown to be eligible for UCFE or UCX during FY2019. The authority to provide UCFE to these excepted workers would expire at the end of FY2019.\n\n\t\tSelf-Employment and Relocation Assistance Benefits\n\nOn January 15, 2019, Senator Ron Wyden and Representative Danny Davis introduced S. 136 and H.R. 556 , the Economic Ladders to End Volatility and Advance Training and Employment Act of 2019 (the ELEVATE Act) . Among other provisions, this proposal would establish new self-employment and relocation assistance benefits for unemployed workers to be administered by the Social Security Administration, in consultation with DOL. The self-employment assistance benefits would provide weekly income replacement (half of prior earnings up to the maximum weekly benefit amount in the state) for up to of 26 weeks to individuals. They would be available to individuals who are (1) eligible for any type of UI benefit; or ineligible for any type of UI benefit, but became involuntarily unemployed over the previous 12 weeks; or were previously self-employed, but lost a hiring contract, and (2) have a viable business plan approved by their state department of labor, workforce board, or the Small Business Administration. \nAdditionally, Section 3 of S. 136 and H.R. 556 would provide up to $2,000 (or more, depending on family size) to fund to up to 90% of certain relocation expenses for eligible individuals and their families. In order to be eligible for this relocation assistance, an individual must be a (1)\u00a0dislocated worker, (2) long-term unemployed individual, or (3) underemployed individual and also have filed a claim for relocation assistance and obtained suitable work with an expectation of obtaining such work in a new geographic region.\n\n\t\tDomestic Violence\n\nOn March 7, 2019, Representative Karen Bass introduced H.R. 1585 , the Violence Against Women Reauthorization Act of 2019. Among many other provisions, Section 703 of H.R. 1585 would require states to consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits. The House passed H.R. 1585 on April 4, 2019.\n\n\t\tReemployment Services and Eligibility Assessments\n\nOn March 14, 2019, Representative Stephanie Murphy introduced H.R. 1759 , the Building on Reemployment Improvements to Deliver Good Employment (BRIDGE) for Workers Act. This proposal would extend eligibility to any claimant of unemployment benefits, including those profiled as likely to exhaust benefits (rather than limiting eligibility to those who were profiled as likely to exhaust benefits). The House passed H.R. 1759 on April 9, 2019.\n\n\t\t\tAppendix. Extended Benefit Program\n\nThe Extended Benefit (EB) program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA; P.L. 91-373) (26 U.S.C. \u00a73304, note). EUCA may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic conditions exist within the state. As of the date of this publication, EB is not active in any state.\nExtended Benefit Triggers\nThe EB program is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. States may choose to enact two other optional thresholds. (States may choose one, two, or none.) If the state has chosen one or more of the EB trigger options, it would provide the following:\nOption 1\u2014up to an additional 13 weeks of benefits if the state's IUR is at least 6%, regardless of previous years' averages. Option 2\u2014up to an additional 13 weeks of benefits if the state's TUR is at least 6.5% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years; up to an additional 20 weeks of benefits if the state's TUR is at least 8% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years.\nEB benefits are not \"grandfathered\" (phased out) when a state triggers \"off\" the program. When a state triggers \"off\" of an EB period, all EB benefit payments in the state cease immediately regardless of individual entitlement.\nThe EB benefit amount is equal to the eligible individual's weekly regular UC benefits. Under permanent law, FUTA finances half (50%) of the EB payments and 100% of EB administrative costs. States fund the other half (50%) of EB benefit costs through their SUTA.\n\n\t\tDomestic Violence\n\nOn March 7, 2019, Representative Karen Bass introduced H.R. 1585 , the Violence Against Women Reauthorization Act of 2019. Among many other provisions, Section 703 of H.R. 1585 would require states to consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits. The House passed H.R. 1585 on April 4, 2019.\n\n\t\tReemployment Services and Eligibility Assessments\n\nOn March 14, 2019, Representative Stephanie Murphy introduced H.R. 1759 , the Building on Reemployment Improvements to Deliver Good Employment (BRIDGE) for Workers Act. This proposal would extend eligibility to any claimant of unemployment benefits, including those profiled as likely to exhaust benefits (rather than limiting eligibility to those who were profiled as likely to exhaust benefits). The House passed H.R. 1759 on April 9, 2019.","output":"The 116th Congress has begun to consider several issues related to two programs in the unemployment insurance (UI) system: Unemployment Compensation (UC) and Unemployment Compensation for Federal Employees (UCFE). The lapse in federal appropriations that occurred from December 22, 2018, to January 25, 2019, created a partial government shutdown. As a result, agencies without funding furloughed many federal employees, and many federal employees excepted from furlough were working without pay during the lapse in appropriations. Furloughed federal employees may be eligible for UCFE benefits. Private-sector workers who are furloughed or laid off due to the partial government shutdown because they were employed by government contractors may be eligible for regular UC benefits. But, according to guidance from the U.S. Department of Labor (DOL), excepted federal employees who are performing services (without pay) would generally be ineligible for UCFE benefits based on states' definitions of \"unemployment.\" In this climate, there has been congressional interest in assisting furloughed and excepted federal employees through the UI system.\nUI legislative issues currently facing the 116th Congress include the following:\nthe effects of the FY2019 sequester order on UI programs and benefits, the role of UI in providing temporary income replacement during a government shutdown, state fiscal concerns related to financing UC benefits, reemployment services and eligibility assessments (RESEA), potential consideration of the UI proposals included in the President's FY2020 budget, and congressional oversight related to a proposed UC drug testing rule reissued by DOL after previously being disapproved using the Congressional Review Act.\nIn the 116th Congress, policymakers have introduced legislation related to UCFE benefits in response to the recent partial government shutdown (S. 165, H.R. 720, H.R. 725, and H.R. 1117), legislation to provide self-employment and relocation assistance benefits (S. 136 and H.R. 556), legislation to require that states consider an individual who quit employment because of sexual harassment, domestic violence, sexual assault, or stalking to be eligible for UC benefits (H.R. 1585), and legislation to amend Title III of the Social Security Act to extend RESEA to all UC claimants (H.R. 1759).\nFor a brief overview of UC, see CRS In Focus IF10336, The Fundamentals of Unemployment Compensation."}
{"id":"gao_GAO-19-73","pid":"gao_GAO-19-73_0","input":"\tBackground\n\n\t\tRoles and Responsibilities for DOD Real Property\n\nThe Under Secretary of Defense for Acquisition and Sustainment has  overall responsibility and oversight for DOD\u2019s real property and provides  overarching guidance and procedures for real property management.  The Assistant Secretary of Defense for Energy, Installations, and  Environment, assists with developing policy and guidance for real  property inventory and serves as the focal point for all matters related to  the inventory of real property assets. The military services and WHS are  responsible for implementing policies, programs, and procedures in  accordance with OSD\u2019s guidance to maintain an accurate and complete  real property inventory. They are also responsible for ensuring that real  property requirements are being met when other DOD components, such  as defense agencies and DOD field activities, utilize real property under  their jurisdiction. The defense agencies and DOD field activities are  responsible for confirming that all real property assets that they occupy,  operate, or maintain are contained within the real property inventory and  for reconciling any real property data, when needed, with their supporting  military service or WHS.\n\n\t\tReal Property Inventory Data\n\nReal property inventory data are used at the installation, military service,  and OSD levels for the recording, planning, managing, and reporting of  DOD real property assets, as shown in figure 1.\nInstallation level. Real property officials are to record transactions to  document new acquisitions, changes to existing facilities, and disposals  and to collect information\u2014including physical characteristics, space  usage, and facility condition\u2014on the real property at each installation.  Officials are to enter this information into corresponding military service or  WHS real property data systems. Installation officials stated they use  real property information for a variety of purposes such as prioritizing  facilities for sustainment and restoration projects, preparing installation  master plans, and conducting fire and safety planning.\nService level. Military service headquarters and WHS use inventory  information to oversee and manage their real property needs across their  installations. For example, according to officials, these data inform how  they use property to support their missions and to budget for required  sustainment, restoration, or construction of real property. In addition, this  information is used to account for real property asset holdings that are  included in financial statements prepared to meet federal financial  reporting requirements.\nOSD level. OSD requires that the military services and WHS submit their  real property inventories to be compiled into a department-wide data  set\u2014RPAD. The OSD focal point is responsible for providing  information from the RPAD to assist various OSD offices with  responsibilities for budget and mission planning. For example, the  information is used in budgeting for sustainment of facilities. Additionally,  OSD offices use the information in mission planning for certain DOD  components\u2014defense agencies, DOD field activities, and U.S. Special  Operations Command\u2014and for certain types of facilities, including  sustainable buildings, historic property, and ranges. Moreover, OSD uses  this information to meet reporting requirements outside of DOD. These  include reports to Congress on the utilization of DOD\u2019s facilities. All  executive branch federal agencies are required to annually submit real  property data to the General Services Administration to compile into the  Federal Real Property Profile. DOD also reports information to the Office  of Management and Budget on disposals and square footage of certain  types of purposes to meet report requirements for the National Strategy  for the Efficient Use of Real Property.\nOSD provides annual guidance that gives specific requirements for  content and format for the military services\u2019 RPAD submissions, including  data elements and any associated business rules. For fiscal year 2016,  OSD required 216 data elements to be maintained in RPAD and provided  a data dictionary, called the Real Property Information Model, which  defines these elements. OSD also has a process to verify and validate  the data the military services and WHS submitted annually to the RPAD  that includes OSD using a verification and validation tool to determine  whether each data element has an entry that is in the correct format and  complies with established business rules. When data anomalies are  discovered with the data, OSD provides the data back to the submitting  organization for review and correction as necessary. The military services  and WHS certify annually that the real property information submitted to  OSD accurately reflects each of their inventories.\nSome key real property data elements are significant for planning and  reporting on real property assets:\nOperational status. A code used to identify the current operational  status of the real property asset, such as whether the site location of  the asset is active, the existence of the asset, and the usage of the  asset.\nAsset review. A date used to document any type of review of an  asset. DOD requires that each facility be physically inventoried on a  cycle\u2014every 5 years for non-historic facilities and every 3 years for  historic facilities.\nPlant replacement value. A calculation of the cost to replace the  current physical plant (facilities and supporting infrastructure) using  today\u2019s construction costs (labor and materials) and standards  (methodologies and codes).\nUtilization rate. A percentage (on a scale 0 to 150) used to represent  the extent to which a real property asset is used by the primary user  for the current program based on its design purpose. DOD has not  established cutoff points to determine unutilized, underutilized, and  utilized real property. However, according to OSD officials, DOD  considers a utilization rate of 101 to 150 as over utilized, meaning an  asset\u2019s available space is not sufficient to meet the primary user\u2019s  space requirement.\nFacility condition. A measure of a facility\u2019s physical condition that is  expressed as a percentage (on a scale of 0 to 100). Factors used to  calculate the facility condition include the facility\u2019s estimated deferred  maintenance and repair costs and the facility\u2019s plant replacement  value. DOD guidance states a condition of 0 to 59 is failing; 60 to 79 is  poor; 80 to 89 is fair; and 90 to 100 is good.\nFigure 2 displays these real property data elements.\n\n\t\tReal Property and Financial Management\n\nDOD has undertaken several financial management improvement  initiatives over the years to address deficiencies in business systems,  processes, and controls through its Financial Improvement and Audit  Readiness (FIAR) Plan. The FIAR Plan guidance includes 40 of the  data elements required to be reported to OSD and maintained in RPAD  within the scope of the effort. As part of the department\u2019s FIAR effort,  each of the military services developed individual plans to prepare their  management processes, such as their accountability systems and  procedures for real property, which would be tested during financial audit.  The military services\u2019 real property efforts to prepare for financial audit  have included developing manuals, monitoring activities such as testing  of the implementation of real property procedures, and implementation of  corrective actions to address identified deficiencies in the processes and  procedures.\n\n\tDOD\u2019s Real Property Asset Database Contained Inaccurate Data and Lacked Completeness, Although Certain Data We Reviewed Improved\n\nDOD\u2019s RPAD has data quality issues specific to accuracy of certain data  elements and completeness of the dataset, although certain data we  reviewed improved since fiscal year 2014. Accuracy of data elements and  completeness of RPAD are important to OSD, other federal agencies,  and Congress because they use this information to determine facility  sustainment funding and to understand DOD\u2019s utilization of its real  property as a means to identify potential excess property for disposal,  among other things.\n\n\t\tAccuracy of Certain Data in RPAD Improved but Other Data Did Not Comply with Information Requirements\n\nWe found that accuracy of certain data in the selected set of key data  elements we reviewed improved while other data contained discrepancies  that resulted in inaccuracies in RPAD for fiscal years 2014 through 2016.  For some data we reviewed, the magnitude of such discrepancies  decreased while others increased from fiscal year 2014 to fiscal year  2016. Specifically, we found:\nOperational status. For operational status codes that are not an  active status, such as an asset that was determined to be excess or  surplus, or disposed, OSD\u2019s business rules require a corresponding  date that documents when the status was determined or when a  disposal was completed. If the corresponding date is not provided,  then the operational status cannot be verified as correct. Our analysis  of operational status from fiscal year 2014 through fiscal year 2016  found improvements in data on surplus and disposed facilities. The  percentage of surplus and disposed facilities without a valid date  improved from 37.5 percent to 0 percent and 3.3 percent to 0.3  percent, respectively. However, the percentage of excess facilities  without a valid date increased from 22.7 percent to 47.9 percent.\nAsset review date. All facilities are required to have a date that  documents a physical inventory; these reviews are to be conducted at  least every 5 years, unless a historic asset. The percentage of  facilities with a review date older than 5 years improved from 34.1  percent in fiscal year 2014 to 22.1 percent in fiscal year 2016. RPAD  in fiscal year 2016 indicated that 143,420 facilities had a physical  inventory date that was older than 5 years, which suggests that the  information for these facilities may not be accurate because the  information has not been updated within the required time frame.  According to real property installation officials, overdue dates can  occur because the physical inventory was either not conducted or the  information from the physical inventory was not entered into the  military services\u2019 data systems. The percentage of facilities with a  missing review date increased from 3.4 percent in fiscal year 2014 to  7.2 percent in fiscal year 2016.\nPlant replacement value. All facilities are required to have a plant  replacement value not less than zero, meaning it cannot be a negative  number. For all 3 fiscal years, none of the facilities had a negative  plant replacement value and missing entries were an insignificant  number. The business rules allow for values of zero though these  entries may potentially create problems for other data elements that  use plant replacement value as part of their calculation. For example,  plant replacement value is a denominator in the formula used to  calculate facility condition index. If a plant replacement value is zero,  the facility condition index cannot be determined. The percentage of  facilities with a plant replacement value of zero declined from 3.4  percent in fiscal year 2014 to 2.3 percent in fiscal year 2016.\nUtilization rate. All facilities are required to have a utilization rate  from 0 to 150. The percentage of facilities missing a utilization rate  improved from 23.3 percent in fiscal year 2014 to 2.4 percent in fiscal  year 2015 before increasing to 14.4 percent in fiscal year 2016. As  such, in fiscal year 2016, about 93,600 facilities did not have an  indication of the utilization and this information was not available to  users of RPAD.\nFacility condition index. All facilities are required to have a facility  condition from 0 to 100. The percentage of facilities that had missing  facility condition entries increased from 0.5 percent in fiscal year 2014  to 5.6 percent in fiscal year 2016.\nFigure 3 displays our analysis of discrepancies between the information  requirements and data entries in RPAD.\n\n\t\tRPAD Was Incomplete as It Did Not Include All of DOD\u2019s Existing Real Property Assets\n\nRPAD did not include all of DOD\u2019s existing real property assets in fiscal  years 2014 through 2016, resulting in an incomplete data set.  Specifically, we found (1) the military services have not recorded all  assets that existed and reflected previously disposed facilities that no  longer existed as active in their respective data systems, (2) the military  services did not report all assets in the RPAD submission to OSD that  were recorded in each military service\u2019s data system, and (3) OSD did not  include all assets reported by the military services in RPAD, as shown in  figure 4.\nWe and others found instances of facilities that existed that the military  services did not record in their data systems and of disposed facilities that  no longer existed but were still reflected as active in RPAD. During our 12  site visits, officials at two installations stated that there were real property  assets on their installations that were not recorded in their real property  data system at the time of our visit. For example, real property officials at  an Army installation identified over 2,000 existing assets\u2014primarily linear  structures\u2014that were not in the inventory. Real property officials at a  Marine Corps installation acknowledged that they were aware of assets  that were not recorded in the data system but did not know the quantity of  these. The officials stated they were in the process of reconciling the real  property inventory with the assets in existence on the installation. In May  2018, Marine Corps Headquarters officials stated they plan to send real  property officials to this location from other installations to assist with  entering identified assets into the inventory. With the additional support,  the officials expect the reconciliation to be completed in fiscal year 2019,  3 years earlier than initially planned.\nMoreover, in our review of 120 facilities during site visits, we found that 6  of the facilities had been disposed of but were recorded as active in the  fiscal year 2015 RPAD data of the Air Force and Army. For example, all  four of the Army\u2019s disposals occurred previous to fiscal year 2015 but  were not entered into the data system until fiscal year 2016. The changes  were made and reflected in the inventory submission for fiscal year 2016.  Also, one of the Air Force\u2019s assets, fencing, had been disposed of years  ago with the housing project that it enclosed, but was not included in the  original disposal documentation. The real property installation officials  had identified this omission when reviewing the list of assets that we  selected for our review and began documenting the disposal prior to our  site visit.\nDOD reported in its 2017 Agency Financial Report that material  weaknesses in its internal controls over real property resulted in, among  other things, that the department could not substantiate that all existing  assets were recorded in the military services data systems. Similar to  our site visit results, the Navy Office of Financial Operations also reported  in June 2017 that 15 of 650 real property assets tested from a non- generalizable sample were reported to have been disposed of, but were  not recorded as disposed of or removed from the Navy\u2019s data system.\nAdditionally, we found RPAD did not include some facilities that were in  the military services\u2019 data systems. The number and total plant  replacement value across these three data sets should be identical, but  were not in each of the 3 years that we reviewed. This means information  on the excluded real property was not available to users of RPAD or to  the Federal Real Property Profile. Specifically,\nThe military services did not report all facilities in their data  systems to OSD for inclusion into RPAD. Our analysis found the  Army, Navy, and Marine Corps did not report to OSD between  approximately 40,900 facilities (6.1 percent) and 103,600 facilities  (15.9 percent) of the facilities included in their data systems in fiscal  years 2014 through 2016. If all of these facilities still existed during  those years, these unreported facilities had a total plant replacement  value that ranged from $12.8 billion to $56.5 billion during the 3 fiscal  years. We could not include the Air Force in this analysis because it  was not able to provide its end-of-year real property inventory for  fiscal years 2014 through 2016. Air Force officials stated that their  contractor did not archive copies of the end-of-year real property  inventory for these years but would begin to do so for fiscal year 2017.\nOSD did not include all facilities reported by the military services  and WHS in RPAD. Additionally, our analysis showed that the  number of facilities OSD did not include in RPAD ranged from about  3,300 facilities (0.5 percent) to 19,400 facilities (2.6 percent) of the  facilities reported by the military services and WHS in fiscal years  2014 through 2016. If all of these facilities still existed during those  years, the total plant replacement value of the unreported facilities  ranged from $3.4 billion to $21.6 billion.\nOSD and military service officials agreed that accuracy and completeness  issues with real property have been a long standing issue, but stated  recent audit efforts associated with FIAR should result in some  improvements of the data. For example, military service installations  officials stated that they are working to reconcile differences between  existing real property and information in their data systems to include  adding existing assets that are not in the data system and correcting  information on disposed assets. Moreover, military service officials stated  that they have emphasized conducting timely physical inventories and  require installations to report on the currency of their physical inventories.  According to officials, when reporting real property to OSD and when  OSD consolidates this information into RPAD, assets with significant  errors in their records are excluded to improve the accuracy of the  information in the data set. The officials explained as the accuracy of the  data improves through physical inventories, fewer assets will be excluded  in the reporting process, which will improve completeness of RPAD.\nHowever, as we describe further in this report, the audit efforts will not  correct all identified accuracy and completeness issues.\n\n\tDeficiencies Exist in DOD\u2019s Processes for Recording and Reporting Real Property Data\n\nDOD\u2019s processes for recording and reporting real property data have  deficiencies that contribute to inaccuracies and incompleteness in the  RPAD data. Specifically, we identified inconsistencies in the military  services\u2019 recording of real property transactions and physical inventories  of assets. In addition, we found the military services have not corrected  identified discrepancies in their real property data reported to OSD in the  annual RPAD submissions.\n\n\t\tDOD Has Processes for Recording and Reporting Real Property Data\n\nAccording to a DOD instruction, OSD must establish, issue, and maintain  data requirements for DOD\u2019s real property inventory. As such, DOD  requires that the military services maintain an accurate and complete  record of their real property, regardless of the organization using or  funding the real property. The real property accountable officers at each  installation must implement processes to ensure that all real property  transactions are auditable and that information recorded, including  physical inspections, is accurate, complete and retained in accordance  with applicable laws and regulations. OSD also requires that the military  services report their real property data for RPAD following OSD  requirements and that they utilize OSD\u2019s verification and validation tool to  identify discrepancies between data entries and DOD\u2019s real property  information requirements.\nOSD and the military services have developed some procedures to  implement these policies. For example, OSD established an annual  reporting process, to include defining the specific content and format for  the submission of information. Moreover, the military services have  developed written procedures that clarify how specific transactions should  be conducted. For example, the Marine Corps has developed detailed  guidance on control processes for appropriately documenting disposed  assets. The Navy has developed procedures for conducting physical  inventories. The Army has defined roles and responsibilities for  accounting for real property, including changes to facility function (i.e.,  category code). Lastly, the Air Force has developed overall policies and  procedures for accounting for real property that defines the roles and  responsibilities of accountable officials.\n\n\t\tMilitary Services Did Not Consistently Record Real Property Data\n\nThe processes for recording real property information include  documenting and entering into the data system when transactions\u2014 acquisition of, change to, and disposal of a real property asset\u2014or  physical inventories occur. To document a transaction or physical  inventory, real property installation officials are expected to complete the  required supporting records. According to Standards for Internal Control  in the Federal Government, appropriately designed control activities could  include requiring documentation should be completed within a reasonable  time frame after the event occurs. Then, the officials are to promptly  enter the updated information into the real property data system.\nDOD also requires a review of each real property asset record, including  a physical inventory of each real property asset every 5 years for non- historic assets or every 3 years for historic assets. Physical inventories  help ensure current and accurate information on assets are reflected in  the military services\u2019 data systems. Furthermore, the Standards for  Internal Control in the Federal Government require agencies to design  control activities to achieve objectives, to monitor activities, and to  remediate identified deficiencies on a timely basis. Such activities could  include appropriately documenting and accurately and timely recording  transactions, and implementing procedures to help ensure that processes  are monitored and evaluated for deficiencies on an ongoing basis,  corrective actions are determined for any identified deficiencies, and these actions are completed and documented to correct deficiencies on a  timely basis.\n\n\t\t\tReal Property Transactions\n\nWe and the military services identified that transactions were not being  consistently documented with required supporting records or entered into  the military services\u2019 data systems within reasonable time frames.  Specifically, during our site visits to 12 military services\u2019 installations,  officials at 5 installations stated that they were experiencing delays with  documenting and entering into the data system some transactions.  According to the officials, this occurred due to challenges with obtaining  required information from contractors, heavy workloads, and staff  shortages.\nMoreover, the military services found through testing in 2017 that they did  not consistently document transactions with required supporting records  or enter real property transactions into the data system. The military  services conducted these tests as part of their preparation for financial  statement audits to identify deficiencies in the recording of real property  transactions. The military services were then to develop corrective  action plans and remedy any identified deficiencies prior to the  department\u2019s audit of the fiscal year 2018 financial statements.  Specifically,\nThe Air Force conducted tests in March 2017 and reported that of 271  assets tested, 171 did not have appropriate supporting records. The  Air Force also reported in a separate test of 27 assets that 17 of these  were not timely or accurately recorded.\nThe Army conducted tests in October 2017 and reported that more  than half of the assets selected did not pass its testing for one or more  of the 9 key data elements associated with plant replacement value.  Lack of adequate supporting records was the most common reason  for test failure.\nThe Navy conducted tests in October 2017 and identified  documentation issues or key elements that were not timely or  accurately entered into its data system for 11 out of 58 assets  tested.\nThe Marine Corps conducted tests in July 2017 and identified  documentation issues or key elements that were not timely or  accurately entered into its data system for 20 of 55 assets tested.\n\n\t\t\tPhysical Inventories\n\nWe and the military services have identified that real property installation  officials do not consistently document or enter physical inventory  information into the military services\u2019 data systems.\nWe found during our site visits to 12 military service installations that for  21 facilities out of 106 facilities tested, real property installation officials  had not entered physical inventory information in the military services\u2019  data system within the last 5 years. The 21 facilities we reviewed  included 16 from the Air Force (with 2 reflected as being last inventoried  in January 1934 or October 1992), 4 from the Army, and 1 from the  Marine Corps (which showed as being been last inventoried in November  2003).\nThe military services also identified similar inconsistencies with recording  physical inventories in testing of their real property assets as part of their  preparation for financial statement audits:\nThe Air Force conducted tests in March 2017 and reported that  installation officials, for 89 out of 281 assets tested, did not have  complete supporting records or did not timely provide the most recent  physical inventory checklist that reconciled with the Air Force\u2019s data  system.\nThe Army conducted tests in September 2016 and reported 1 of the 5  installations tested did not have adequate supporting records for asset  changes identified in physical inventories.\nThe Navy conducted tests in June 2017, and reported 5,918 of the  34,104 assets tested had not had a physical inventory for more than 5  years. Furthermore, in October 2017, the Navy reported that 9 of 41  assets it tested did not have supporting records that the inventory was  performed per DOD requirements for timeliness.\nThe Marine Corps had an external auditor conduct tests in September  2017 and reported that installation officials could not support the last  physical inventory performed for 83 of 998 assets tested.\nThe military services did not fully monitor recording processes on an  ongoing basis, including evaluating whether or the extent to which  activities are being carried out and remediating any identified  deficiencies. We found that this occurred in part due to the military  services not being required to conduct ongoing monitoring of the  processes used for recording real property transactions and physical  inventories. According to military service officials, they conduct monitoring  of recording and have begun developing corrective action plans as part of  the recent audit readiness effort that are based on the Financial  Improvement and Audit Readiness Guidance. However, this guidance  aimed principally at improving financial reporting addresses 40 of the 216  data elements required to be maintained in RPAD. DOD has not  determined to what extent the remaining data elements are a priority for  other management purposes beyond financial reporting. Accordingly, the  remaining 176 data elements, or approximately 80 percent, are not  required to be monitored. For example, the recording of RPAD-required  data elements for dates that support an operational status of excess,  surplus, and disposed or document when a facility was built are not  included in current monitoring efforts. The monitoring of the recording of  only about 20 percent of the required data elements in RPAD results in  inaccurate and incomplete data not being systemically evaluated and  corrective actions not being taken to resolve the issues. Unless the  military services are required to monitor on an ongoing basis the  processes used for recording all required real property information, DOD  will continue to have data quality issues related to accuracy and  completeness in the military services\u2019 data systems that will be reflected  in RPAD.\n\n\t\tMilitary Services Have Not Corrected Identified Discrepancies Reported in Their RPAD Submissions\n\nThe military services have not corrected identified discrepancies in their  real property data reported to OSD in the annual RPAD submissions.  OSD provided the military services with a verification and validation tool  to identify data that does not comply with information requirements.  Specifically, from fiscal years 2014 through 2016, the military services  used OSD\u2019s verification and validation tool to identify discrepancies and  submitted reports summarizing the results to OSD, but have not corrected  all discrepancies identified by the tool. According to real property  installation officials, they have not been directed by headquarters to  correct discrepancies in their data systems that were identified in their  annual RPAD submission. Our review of 120 assets during the 12  installation site visits confirmed that 61 assets with discrepancies in five  key data elements tested in the fiscal year 2015 RPAD data set continued  to have these discrepancies in 2017.\nBased on our analysis, the military services have not corrected identified  discrepancies in part because OSD\u2019s guidance for annual RPAD  reporting does not define which data elements were most significant to  the department\u2019s decision making and should be a priority for correction.  Furthermore, we found that the guidance does not require the military  services to develop and implement corrective action plans to remediate  discrepancies in significant data elements in their data systems that are  identified by OSD\u2019s verification and validation tool. According to OSD and  military service officials, identifying significant data elements could assist  with streamlining and prioritization of efforts to improve data quality. In  addition, OSD officials agreed that requiring the services to develop and  implement corrective action plans would benefit data quality, but stated  there are challenges with the verification and validation tool that would  need to be addressed to leverage its full potential. By OSD not defining  significant data elements and coordinating corrective action plans to  remediate discrepancies, the military services may continue to submit  information with discrepancies from year to year in some data elements  and will miss an opportunity to improve the accuracy of inventory data.\n\n\tDOD Has Not Addressed Risks to Its Ability to Use Information to Manage Its Real Property\n\nDOD has not addressed three risks\u2014unfilled real property positions to  manage its data, lack of a department-wide approach to improving data  quality, and a limited plan for the implementation of its expanded data  platform\u2014that diminish its ability to use real property information to  manage its real property.\n\n\t\tUnfilled Real Property Positions\n\nWe found that DOD has not addressed how it will overcome unfilled real  property positions throughout the department, which poses a risk to data  quality. For example, real property installation officials at 10 of 12  installations we visited told us that they had unfilled real property  positions, including real property accountable officers, engineers, realty  specialists, planners, and space management analysts. Real property  installation officials told us that their unfilled real property positions  contributed to workload backlogs and prevented them from sufficiently  maintaining their real property data. The Army, Marine Corps, and Navy  completed various workforce plans that found they did not have a  sufficiently sized workforce to adequately maintain their real property  data:\nArmy: In March 2015, the Army completed a workforce analysis that  found current authorized manning documents are short 223 real  property positions of the total 495 positions required to perform these  functions, which include real property accountable officers and realty  specialists.\nMarine Corps: In August 2016, the Marine Corps identified that it had  an immediate need for 20 real property accountable officer positions  to effectively maintain its real property data. According to Marine  Corps officials, they have since filled 19 of the 20 positions.\nNavy: For its fiscal year 2018 planning, the Navy identified a need for  63 real property positions\u2014ranging from real property accountable  officers to geospatial specialists\u2014to meet real property requirements.\nThe Air Force has not identified the workforce it needs to maintain quality  data on its real property, but Air Force officials told us in May 2018, that  they are beginning efforts to better understand their workforce needs.\nOSD and military service officials stated that they continually face  challenges due to unfilled real property positions. However, they do not  expect to fill all of their authorized positions because senior leadership  has prioritized staffing at other offices and military service officials stated  that they face challenges in finding qualified applicants for open positions.  Despite the recognized needs, DOD has not outlined how it plans to  overcome challenges related to its unfilled real property positions.  According to an OSD official, OSD cannot direct the military services to fill  their real property positions; however, OSD has not coordinated with the  military services to identify opportunities to overcome unfilled positions.  Potential opportunities may include using available staff more efficiently  or evaluating opportunities to better address how they will manage  unfilled positions.\n\n\t\tLack of a Department-wide Approach to Improving Data Quality\n\nAbsent a department-wide approach to improving data at various levels  within DOD, military service headquarters have individually initiated  actions to improve data quality for certain data elements. These efforts  are largely uncoordinated and result in inconsistent approaches to  address similar data quality risks and may contribute to inefficient use of  resources and accuracy issues in the real property data. For example,  military service headquarters officials told us they have taken action to  improve data quality when they do not receive specific guidance from  OSD, including communicating priorities to installations and developing  contracts to improve select data elements. We found instances where the  military services took different actions to improve their information on  utilization rates prior to OSD issuing a memorandum to have a  standardized approach to determine this information. For example, the  Army developed a database to record space authorization information for  each asset. The Marine Corps used a contract to obtain space utilization  information at certain installations. Moreover, a Marine Corps  headquarters official stated in some cases that after Marine Corps  headquarters implemented its own policy and provided guidance to the  installations to fill a gap that OSD issued guidance with a different  approach. The official stated that the Marine Corps had spent financial  resources on a contract to improve a data element that they later had to  categorize in a different way due to OSD guidance. Also, real property  installation officials at a Marine Corps installation stated that their  headquarters had made large-scale changes to the records of their  housing assets due to a new approach to determine specific data  elements for those assets, which resulted in inaccuracies. Officials noted  that headquarters later retracted that approach and restored the records.\nIn addition, we observed in our review of real property records during the  site visits that real property installation officials did not apply the same  criteria for determining an asset\u2019s operational status for the codes of  disposed, closed, and nonfunctional that resulted in inaccuracies. Navy  regional command officials provided written guidance and a decision  support tool for determining appropriate codes for operational status to  help improve accuracy within this data element. However, according to  real property installation officials, the Air Force and Army did not have  similar guidance. OSD and military service officials agreed that better  coordination among OSD and the military services would assist their  effort to improve data quality.\n\n\t\tLimited Plan for Implementation of OSD\u2019s Expanded Data Platform\n\nOSD has not fully identified how it will complete implementation of a new  module for real property within its expanded data platform, known as the  Data Analytics and Integration Support platform, and DOD faces a risk to  information accessibility as it may not fully realize the anticipated benefits  of the effort. OSD currently uses the platform for generating unique  identification numbers for its real property assets and as a dashboard for  tools related to military construction planning. However, OSD has neither  outlined how it will accomplish its stated objectives and goals for  expansion of this platform as OSD\u2019s new data system for real property, nor has it set time frames for the expansion. In September 2017, OSD  modified its contract for updating the Data Analytics and Integration  Support platform, but that contract does not specify when full  implementation of the expansion to include a new module for real  property will occur.\nOSD is planning to expand the use of the Data Analytics and Integration  Support platform to make it a near real-time, department-wide information  source of required real property information accessible to a greater  number of users who manage real property. If implemented, this  expanded platform would replace DOD\u2019s annual data call to the military  services for end-of-year real property information to compile into the  RPAD. Further, the expanded platform would interface daily with the  military service data systems. This would provide near real-time  information to users for the department-wide management of DOD\u2019s real  property. According to OSD officials, users could also access real  property information themselves and run their own data analyses when  OSD expands this platform to replace the annual data call to the military  services. Figure 5 displays a comparison of RPAD to the proposed  expansion of the Data Analytics and Integration Support platform.\nOSD officials told us that the military services will need to ensure their  data systems can fully interface with the Data Analytics and  Implementation Support platform for full integration to occur. Specifically,  the officials stated that the Army\u2019s data system can fully interface with  OSD\u2019s expanded platform, but the Navy wants to test how its data system  would interface with the platform before it can fully connect. In addition,  officials noted that the Air Force\u2019s current data system is the least  compatible with OSD\u2019s expanded data platform because it is currently  working to design and implement a new data system for real property.  OSD and Air Force, Marine Corps, and Navy officials noted that they are  aware the military service data systems are not fully integrated with  OSD\u2019s expanded data platform.\nGuidance from DOD and the Office of Management and Budget note that  risk management is integral to effective program management. The  Standards for Internal Control in the Federal Government states  management should define objectives clearly such as through specific  and measurable terms that allow for the assessment of performance  toward achieving those objectives and that management should identify,  analyze, and respond to risks related to achieving defined objectives.  The office of the Assistant Secretary of Defense for Energy, Installations,  and Environment is responsible for providing the guidance and  procedures for implementing real property management policy, including  ensuring the information is available to determine if an asset is used  effectively. One way an organization can manage risk is by developing a  risk management strategy that identifies risks to program objectives, and  includes time frames and performance metrics for addressing those risks.\nDOD has taken some actions that when fully implemented should result in  some improvements to select data elements and the potential to enhance  information accessibility. However, in part, DOD\u2019s weaknesses with  quality information on real property and accessibility to this information  continue to exist because DOD has not developed a strategy that  identifies and addresses risks, such as those previously described, and  includes time frames and performance metrics. OSD and military service  officials agreed that a strategy for addressing risks would help the  department to further its effort to improve the quality and accessibility of  the information. Developing and implementing such a strategy would allow the department to take key steps toward improving its information  for managing its real property. Without a strategy for improving the quality  of the data and information used to manage its real property, DOD,  Congress, the Office of Management and Budget, and the General  Services Administration will not have information needed for effective  decision making and do not have reasonable assurance that risks to data  quality and information accessibility are being managed appropriately.  Specifically, information would be limited in decision making related to  improving space management at installations, to adequately sustaining  DOD\u2019s real property assets, and to accurately generating financial  statements.\n\n\tConclusions\n\nDOD\u2019s efforts to reform its real property management is complicated by  not having quality data on its large inventory of assets\u2014over 568,000  facilities with an estimated combined plant replacement value of about $1  trillion. An accurate and complete inventory of its assets is essential for  DOD to make informed management decisions about its real property.  The department has taken action to improve data quality of some data  elements through financial improvement and audit readiness efforts.  However, deficiencies in the processes for recording and reporting real  property data continue to lead to inaccurate and incomplete information.  The military services do not require monitoring of the recording of all  required real property information, to include evaluating on an ongoing  basis whether or to what extent these activities are carried out and  remediating any identified deficiencies. In addition, OSD has not defined  which data elements were significant to the department\u2019s decision making  and which should be a priority for correction. Also, the military services do  not have plans to correct the discrepancies in significant data elements in  their data systems that are identified by OSD\u2019s verification and validation  tool. Without taking actions to address these deficiencies, DOD will  continue to have inaccurate and incomplete real property data and  unreliable information in RPAD.\nDOD also has not developed a strategy that establishes time frames and  performance metrics to address risks to data quality and information  accessibility. Specifically, DOD faces risks related to unfilled real property  positions, a lack of a department-wide approach to improving data, and a  limited plan for implementation of OSD\u2019s expanded data platform. Without  a strategy to address these risks, DOD is missing an opportunity to  ensure that the information needed for effective decision making, such as  budget decisions and oversight by Congress, is available to meet real  property accountability and reporting objectives and to avoid inefficient  and potentially costly workarounds, such as additional data calls to  installations.\n\n\tRecommendations for Executive Action\n\nWe are making a total of 6 recommendations to the Department of  Defense:  The Secretary of the Army should require monitoring of its processes  used for recording all required real property information\u2014to include  evaluating on an ongoing basis whether or to what extent these activities  are being carried out\u2014and remediating any identified deficiencies.  (Recommendation 1)\nThe Secretary of the Navy should require monitoring of Navy and Marine  Corps processes used for recording all required real property  information\u2014to include evaluating on an ongoing basis whether or to  what extent these activities are being carried out\u2014and remediating any  identified deficiencies. (Recommendation 2)\nThe Secretary of the Air Force should require monitoring of its processes  used for recording all required real property information\u2014to include  evaluating on an ongoing basis whether or to what extent these activities  are being carried out\u2014and remediating any identified deficiencies.  (Recommendation 3)\nThe Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, defines and documents which data elements within the RPAD  submissions are most significant for decision-making. (Recommendation  4)\nThe Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, coordinates on corrective action plans to remediate  discrepancies in significant data elements in its real property data system  that are identified by OSD\u2019s verification and validation tool.  (Recommendation 5)\nThe Secretary of Defense should ensure that the Undersecretary of  Defense for Acquisition and Sustainment, in collaboration with the military  services, develops a strategy that identifies and addresses risks to data  quality and information accessibility. At a minimum, this strategy should  establish time frames and performance metrics for addressing risks  related to (1) unfilled real property positions, (2) a lack of a department- wide approach to improving its data, and (3) implementation of OSD\u2019s  expanded data platform. (Recommendation 6)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD for comment. In written  comments, DOD concurred with four recommendations and partially  concurred with three recommendations. DOD\u2019s comments are  summarized below. DOD also provided technical comments, which we  incorporated as appropriate.\nIn written comments, DOD stated that Recommendations 2 and 3 should  be combined to more appropriately align with authority and responsibility  of the U.S. Navy and U.S. Marine Corps as a single Military Department  and DOD concurred with the combination of the two recommendations.  Based on these comments, we combined the draft recommendations for  separate actions by the Secretary of the Navy and the Commandant of  the Marine Corps into one recommendation. In our final report, the action  is addressed to the Secretary of the Navy in Recommendation 2 and our  total number of recommendations is decreased to six.\nDOD partially concurred with our recommendation that the  Undersecretary of Defense for Acquisition and Sustainment collaborate  with the military services to develop a strategy that identifies and  addresses risks to data quality and information accessibility  (Recommendation 6). We recommended that the strategy, at a minimum,  include timeframes and performance metrics for addressing risks and  include other specific information. However, DOD stated that it plans to  collaborate with the military services on separate service strategies that  reflect each military service\u2019s operating environment. We continue to  believe that DOD would benefit from one department-wide strategy to  improve data quality and information accessibility. For example, we found  that the military services\u2019 efforts to improve data quality have been largely  uncoordinated and had led to inconsistent approaches, which may have  contributed to data inaccuracies. Further, we found that OSD has not fully  identified how it will complete implementation of a data platform  expansion to include real property information and may not realize the  anticipated benefits of the effort. The platform is an effort managed by  OSD and would benefit from a single DOD strategy addressing key points  noted in our recommendation. Accordingly, we believe our  recommendation remains warranted.\nDOD\u2019s comments are reprinted in their entirety in appendix II.\nWe are sending copies of this report to the appropriate congressional  committees and to the Secretary of Defense; the Under Secretary of  Defense for Acquisition and Sustainment; the Under Secretary of Defense  (Comptroller); and Secretaries of the Departments of Air Force, Army,  and Navy, the Commandant of the Marine Corps, and the Director of  Washington Headquarters Services. In addition, the report is available at  no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov or William J.  Cordrey at (404) 679-1873 or cordreyw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are listed on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.\n\nAppendix I: Physical Inventory\n\nFor the military services and Washington Headquarters Services\u2019 real  property inventories, DOD requires that the data elements shown below  in table 1 be validated through a physical inventory of each real property  asset. Physical inventories are to be performed every 5 years or every 3  years for historic assets.\n\nAppendix II: Comments from the Department of Defense\n\nAppendix III: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contacts named above, Gina Hoffman (Assistant  Director), Paul Kinney (Assistant Director), Susan Langley (Analyst-in- Charge), Scott Bruckner, Vincent Buquicchio, Josh Edelman, Chad  Hinsch, Brad Johnson, Amie Lesser, Carol Petersen, Sam Portnow,  Richard Powelson, Michael Silver, and John Yee made key contributions  to this report.\n\nRelated GAO Products\n\nDOD Financial Management: The Navy Needs to Improve Internal  Control Over Its Buildings, GAO-18-289. Washington, D.C.: May 10,  2018.\nHigh-Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others, GAO-17-317. Washington, D.C.: February 15,  2017.\nDefense Facility Condition: Revised Guidance Needed to Improve  Oversight of Assessments and Ratings, GAO-16-662. Washington, D.C.:  June 23, 2016.\nDOD Financial Management: Greater Visibility Needed to Better Assess  Audit Readiness for Property, Plant, and Equipment, GAO-16-383.  Washington, D.C.: May 26, 2016.\nDefense Infrastructure: More Accurate Data Would Allow DOD to Improve  the Tracking, Management, and Security of Its Leased Facilities,   GAO-16-101. Washington, D.C.: March 15, 2016.\nUnderutilized Facilities: DOD and GSA Information Sharing May Enhance  Opportunities to Use Space at Military Installations, GAO-15-346.  Washington, D.C.: June 18, 2015.\nDefense Infrastructure: DOD Needs to Improve Its Efforts to Identify  Unutilized and Underutilized Facilities, GAO-14-538. Washington, D.C.:  September 8, 2014.\nDefense Infrastructure: Army Brigade Combat Team Inactivations  Informed by Analyses, but Actions Needed to Improve Stationing  Process, GAO-14-76. Washington, D.C.: December 11, 2013.\nFederal Real Property: Greater Transparency and Strategic Focus  Needed for High-Value GSA Leases, GAO-13-744. Washington, D.C.:  September 19, 2013.\nMilitary Bases: Opportunities Exist to Improve Future Base Realignment  and Closure Rounds, GAO-13-149. Washington, D.C.: March 7, 2013.\nMilitary Base Realignments and Closures: Updated Costs and Savings  Estimates from BRAC 2005, GAO-12-709R. Washington, D.C.: June 29,  2012.\nExcess Facilities: DOD Needs More Complete Information and a Strategy  to Guide Its Future Disposal Efforts, GAO-11-814. Washington, D.C.:  September 19, 2011.\nDefense Infrastructure: The Enhanced Use Lease Program Requires  Management Attention, GAO-11-574. Washington, D.C.: June 30, 2011.\nFederal Real Property: Progress Made on Planning and Data, but  Unneeded Owned and Leased Facilities Remain, GAO-11-520T.  Washington, D.C.: April 6, 2011.\nMilitary Base Realignment and Closures: DOD Is Taking Steps to Mitigate  Challenges but Is Not Fully Reporting Some Additional Costs,   GAO-10-725R. Washington, D.C.: July 21, 2010.\nDefense Infrastructure: Continued Management Attention Is Needed to  Support Installation Facilities and Operations, GAO-08-502. Washington,  D.C.: April 24, 2008.\nFederal Real Property: Progress Made Toward Addressing Problems, but  Underlying Obstacles Continue to Hamper Reform, GAO-07-349.  Washington, D.C.: April 13, 2007.\nDefense Infrastructure: Issues Need to Be Addressed in Managing and  Funding Base Operations and Facilities Support, GAO-05-556.  Washington, D.C.: June 15, 2005.\nDefense Infrastructure: Changes in Funding Priorities and Strategic  Planning Needed to Improve the Condition of Military Facilities,  GAO-03-274. Washington, D.C.: February 19, 2003.\nDefense Infrastructure: Military Services Lack Reliable Data on Historic  Properties, GAO-01-437. Washington, D.C.: April 6, 2001.\nMilitary Infrastructure: Real Property Management Needs Improvement,  GAO\/NSIAD-99-100. Washington, D.C.: September 7, 1999.","output":"Why GAO Did This Study\n\nDOD manages a portfolio of real property assets that as of fiscal year 2016 reportedly included about 568,000 facilities with a combined plant replacement value of about $1 trillion and 27.2 million acres of land. DOD requires the military services and Washington Headquarters Services to collect and maintain information about each of the assets in their inventories to assist the department with management decision making.\nIn May 2017, the House Armed Services Committee, Subcommittee on Readiness, asked GAO to review DOD's management and use of its real property data. This report evaluates (1) how accurately and completely RPAD reflects DOD's real property assets, (2) DOD's processes to ensure accuracy and completeness in recording and reporting real property data, and (3) DOD's actions to ensure it has addressed risks that may affect the use of real property information for managing its assets. GAO analyzed the RPAD and military services' data for fiscal years 2014-2016; reviewed documentation; conducted site visits; and interviewed DOD officials.\n\nWhat GAO Found\n\nGAO found that the Department of Defense's (DOD) Real Property Assets Database (RPAD) contained inaccurate data and lacked completeness, although certain data that GAO reviewed had improved their accuracy since fiscal year 2014. RPAD is a department-wide database of real property data annually compiled by the Office of the Secretary of Defense from the inventories of the military services and DOD's Washington Headquarters Services, which manages real property in the National Capital region. DOD uses RPAD to report on DOD's real property to Congress and other federal agencies, such as the Office of Management and Budget and the General Services Administration to assist in managing federal real property.\nDOD has weaknesses in its processes for recording and reporting real property data that have led to inaccurate and incomplete information. GAO and others found military services have not consistently recorded real property transactions (i.e., acquisition of, change to, and disposal of a real property asset) and physical inventories of assets. GAO also found that the military services have not corrected identified discrepancies in their data systems, such as missing entries for utilization and facility condition and overdue asset reviews. GAO reviewed records of 120 facilities with identified discrepancies in fiscal year 2015 RPAD data and compared them to the records in the respective data system in 2017 and found that 61 discrepancies remained. The military services had corrected the data in the remaining 59 reviewed facilities in their data systems. DOD's efforts to prepare for an upcoming financial audit have helped identify issues and improve accuracy of some data. However, if DOD does not require the military services to fully monitor recording processes and implement corrective actions to resolve data discrepancies, the department will continue to have incomplete and inaccurate real property data and unreliable RPAD information.\nDOD has not addressed three risks that can adversely affect its ability to use its information to manage its real property. Specifically, DOD (1) has unfilled real property positions limiting its capacity to manage its data, (2) lacks a department-wide approach to improving its data quality, and (3) has not identified how it will complete implementation of an effort to improve access to data. These risks exist, in part, because DOD has not developed a strategy that identifies and addresses risks with accompanying time frames and performance metrics. If DOD does not develop a strategy that identifies and addresses risks to data quality and information accessibility, DOD may miss the opportunity to reasonably ensure that the information needed for effective decision making by DOD, Congress, and other federal agencies is available to meet real property accountability and reporting objectives.\n\nWhat GAO Recommends\n\nGAO is making six recommendations to improve DOD's real property data, including fully monitoring recording processes; developing and implementing corrective actions for identified data discrepancies; and developing a strategy to address risks associated with data quality and information accessibility. DOD concurred or partially concurred with all draft recommendations. In response, GAO agreed to combine two recommendations."}
{"id":"crs_R43325","pid":"crs_R43325_0","input":"\tIntroduction\n\nEstablished by Congress as an amendment to the Clean Air Act, the Renewable Fuel Standard (RFS) mandates that U.S. transportation fuels contain a minimum volume of biofuel. The mandated minimum volume increases annually and must be met using both conventional biofuel (e.g., corn starch ethanol) and advanced biofuel (e.g., cellulosic ethanol). For a renewable fuel to be applied toward the mandate, it must be used for certain purposes (i.e., transportation fuel, jet fuel, or heating oil) and meet certain environmental and biomass feedstock criteria. \nA variety of factors, such as infrastructure, technology, and limited federal assistance, have led to challenges in meeting the total volume requirement established by Congress. These challenges have included a lack of cellulosic biofuel production and delays by the U.S. Environmental Protection Agency (EPA) in approving fuel pathways. Further, it is not clear how changes in gasoline consumption in response to fluctuating crude oil and gasoline prices impact the biofuel or conventional fuel industries. It is also uncertain how the program will fare once EPA implements the \"reset\" provision of the statute, which allows the agency to modify the volumes required for future years (starting in 2016) if certain conditions are met. In addition, some stakeholders have expressed concern about the transparency of the market wherein credits are traded to demonstrate compliance with the mandate. Lastly, there is concern by some biofuel producers that the Trump Administration's issuance of multiple small refinery exemptions has adversely affected, or will adversely affect, biofuel demand. Small refiners may petition the EPA Administrator for an exemption from the RFS mandate if they can prove disproportionate economic hardship.\nThere are, however, two fuel categories that have consistently met their statutory targets: conventional biofuel and biomass-based diesel. Also, since 2014, two advanced biofuel pathways\u2014renewable compressed natural gas and renewable liquefied natural gas\u2014have constituted the majority of the cellulosic biofuel volume target established by EPA.\nChallenges in implementing the RFS have led to scrutiny of the program in Congress and to litigation about EPA's regulations. Largely due to concerns about the implementation and feasibility of the RFS, some Members of Congress have expressed their perspectives on EPA's proposed and final rules as well as EPA's implementation of the program. They also have questioned whether to amend or repeal the RFS or whether to maintain the status quo. This report provides a basic description of the RFS, including some of the widely discussed policy issues related to it. \n\n\tThe Statute\n\nThe Renewable Fuel Standard (RFS) was established by the Energy Policy Act of 2005 ( P.L. 109-58 ; EPAct05) and expanded in 2007 by the Energy Independence and Security Act ( P.L. 110-140 ; EISA). The RFS mandate requires that transportation fuels sold or introduced into commerce in the United States contain an increasing volume of a predetermined suite of renewable fuels. The statute required 4.0 billion gallons of renewable fuel in 2006, ascending to 36.0 billion gallons required in 2022, with EPA determining the volume amounts after 2022 in future rulemakings. The statute centers on four renewable fuel categories\u2014conventional biofuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel\u2014each with its own target volume. \nThe total renewable fuel requirement under the RFS is met with the combination of fuels from two renewable fuel categories: conventional biofuel and advanced biofuel. The requirement for advanced biofuel, in general, can be met with the combination of three types of advanced biofuel: cellulosic biofuel, biomass-based diesel, and other advanced biofuels. To date, the total annual volumes required have been met mostly with conventional biofuel (e.g., corn starch ethanol). Beginning in 2015, the mandate capped the conventional biofuel volume amounts while increasing the requirement for advanced biofuels. For instance, the statutory RFS total advanced biofuel requirement increases over time from approximately 7% of the RFS in 2010 to 58% of the RFS in 2022. \nA key part of the statutory definition of each fuel category is whether the fuel achieves certain greenhouse gas (GHG) reductions relative to gasoline and diesel fuel. Each fuel is assigned a lifecycle GHG emission threshold (in proportion to baseline lifecycle GHG emissions for gasoline and diesel). For example, a fuel must achieve at least a 50% GHG reduction to be considered an advanced biofuel , at least a 60% reduction to be considered a cellulosic biofuel , and at least a 50% reduction to be considered biomass-based diesel . Similarly, biofuel from new facilities\u2014those built after enactment of the 2007 law\u2014must achieve at least a 20% GHG reduction to qualify as a conventional renewable fuel.\n\n\tStatutory Compliance\n\nEPA regulates compliance with the RFS using a tradable credit system. Obligated parties (generally, refiners) submit credits\u2014called renewable identification numbers (RINs)\u2014to EPA that equal the number of gallons in their annual obligation. This annual obligation, referred to as the renewable volume obligation (RVO), is the obligated party's total gasoline and diesel sales multiplied by the annual renewable fuel percentage standards announced by EPA. RINs are valid for use in the year they are generated and the following year. Obligated parties may carry a deficit from one year to the next, but in the year following the deficit, the obligated party must meet compliance for that year's renewable fuel volume requirement and purchase or generate enough credits to satisfy the deficit from the previous year. RINs may be used by the party that generates them or they may be traded with other parties. The EPA Moderated Transaction System (EMTS) is used to register RIN transactions. \nDifferent biofuels are not treated equally within the RFS. The categories are nested within each other, such that some fuels qualify for multiple categories (e.g., cellulosic ethanol), while others (mainly corn starch ethanol) may only be used to meet the overall RFS but not the advanced category or its nested subcategories. For example, a gallon of cellulosic biofuel may be used to meet the cellulosic biofuel mandate, the advanced biofuel mandate, and the total renewable fuel mandate, possibly making it a more highly valued fuel.\nIn addition, some biofuels generate more RINs per volume than others because of the difference in the fuel's energy content. This difference is accounted for by a metric referred to as the equivalence value (EV) of the biofuel. The EV of a renewable fuel represents the number of gallons that can be claimed for compliance purposes for every physical gallon of renewable fuel used, and it is generally the ratio of the energy content of a gallon of the fuel to a gallon of ethanol. For example, because biodiesel has an EV of 1.5 when being used as an advanced biofuel, 1,000 physical gallons of biodiesel would equal 1,500 RIN gallons of advanced biofuels. \n\n\tThe 2019 Final Rule\n\nEPA released the final rule for the RFS for 2019 on November 30, 2018. The rule calls for 19.92 billion gallons of total renewable fuel for 2019\u2014a 1% increase from the 19.29 billion gallons required in 2018 (see Table 1 ). The conventional biofuel volume requirement remains at 15.00 billion gallons. The volume requirements set by EPA for 2019 for total renewable fuel, advanced biofuel, and cellulosic biofuel are all less than the volumes called for in statute but greater than the previous year's volumes\u2014an annual occurrence that started in 2014. EPA used the cellulosic waiver authority to reduce the statutory volumes. EPA reduced the statutory targets for both advanced biofuel and total renewable by the same amount as the reduction for the cellulosic biofuel (i.e., 8.08 billion gallons). EPA reports that the advanced biofuel statutory target of 13.0 billion gallons \"cannot be reached in 2019 \u2026 primarily due to the expected continued shortfall in cellulosic biofuel.\" EPA estimates there are 2.59 billion carryover RINs available. In its response to comments regarding the rule, EPA mentions a forthcoming reset rulemaking.\nEPA set the biomass-based diesel 2020 volume requirement at 2.43 billion gallons. Biomass-based diesel is the predominant biofuel used to satisfy the advanced biofuel portion of the mandate. Previously, it has been used to backfill the overall advanced biofuel requirement if another advanced biofuel fell short (e.g., cellulosic biofuel). EPA reports \"the advanced biofuel volume requirement is driving the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD [biomass-based diesel] standard\" and that the 2020 volume requirement \"provides sufficient incentive to producers of 'other' advanced biofuels.\" EPA acknowledges that it took into consideration the unavailability of the biodiesel tax credit for 2019, the tariffs on imports of biodiesel from Argentina and Indonesia, the tariffs on soybeans exported to China, and more in its assessment of the biodiesel requirement for 2020.\n\n\tRFS Implementation Issues\n\nImplementation of the RFS has been complex, and compliance with some of its parts has been challenging, according to some stakeholders. This section briefly explains some of the general concerns and challenges with implementing the RFS.\n\n\t\tAdministering Agency\n\nEPA administers the RFS. This responsibility includes evaluating renewable fuel pathways eligible for the RFS. In addition, EPA is required to evaluate the ability of the biofuel industry to produce enough fuel to meet the annual volume standard, release an annual volume standard based on its research findings, and ensure that annual compliance by obligated parties is met. All of the above must be completed annually, taking into consideration comments from other government agencies, the public, and, recently, court decisions. These responsibilities could be viewed as an addition to EPA's regulatory workload and have required EPA to develop new capabilities to carry them out. \nFor several years following the 2010 issuance of the amended RFS final rule, EPA has had difficulty projecting certain volume requirements (e.g., cellulosic biofuels) which have led EPA to use its waiver authority to set annual volume requirements for cellulosic biofuel, total advanced biofuel, and total renewable fuel different from what was stated in the statute. Legal challenges have been brought against the EPA regarding some of these annual fuel volume projections. For instance, the American Petroleum Institute objected to EPA's 2012 cellulosic biofuel production projection, among other things, and challenged it in court. The federal court vacated the 2012 cellulosic biofuel standard and provided principles for EPA to apply to future annual projections. Likewise, Americans for Clean Energy and other petitioners challenged various aspects of the final rule that set the volume requirements and projections for 2014-2016 and 2017 for biomass-based diesel, including EPA's interpretation of \"inadequate domestic supply\" in exercising its general waiver authority to reduce the total volume requirements. The D.C. Circuit Court vacated EPA's 2016 total renewable fuel volume requirement and remanded the 2015 final rule to EPA for reconsideration consistent with the court's decision.\nIn some instances the timing of EPA's RFS regulatory actions, such as the annual announcement of the renewable fuel volume requirements, has not met statutory deadlines. The most recent final rules, including the 2019 final rule, adhere to the statutory schedule. However, some of the earlier final rules did not meet the statutory deadline. A lack of timely rulemaking combined with inaccurate volume projections could affect private investment, according to some advanced biofuel producers. Regardless, they lead to uncertainty in compliance for obligated parties. The amount of time it takes the agency to approve new fuel pathways and register new facilities has been raised in public comments to proposed RFS rules. Slow approval could stifle investment and production of new fuels. Further, prolonged processing time for some program enhancement rules\u2014such as the Proposed Renewables Enhancement and Growth Support Rule (REGS rule)\u2014may impede the growth of the program.\nLastly, the final rule for 2014 through 2016 triggered the \"reset\" provision of the RFS for the advanced biofuel and cellulosic biofuel categories. The 2019 final rule triggered the \"reset\" provision for total renewable fuel. Thus, three of the four renewable fuel categories identified in statute are subject to being \"reset\" by the EPA Administrator. The reset provision gives the EPA Administrator authority to adjust the applicable volumes of the RFS for future years starting in 2016 if certain conditions are met. How EPA implements this provision will affect renewable fuel production and compliance with the overall program. EPA reports that it will issue a rulemaking in early 2019 that proposes to reset the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022.\n\n\t\tQualifying Biofuels\n\nAs noted above, there are a number of nested categories within the RFS; a fuel may qualify as a biofuel for one or more portions of the mandate. Difficulty by some advanced biofuel producers in understanding which advanced biofuels qualify for the RFS can lead to challenges in determining how compliance is being met. \nNot all fuels from a renewable source are eligible under the RFS. The RFS operates as a biofuel standard, with priority assigned to liquid transportation fuels from biomass feedstocks. Other renewable sources (e.g., wind) do not qualify. Before a fuel can generate RFS RINs, however, that fuel pathway must be approved by EPA; according to advanced biofuel producers that process can take a considerable amount of time for some fuels.\nLastly, some may view the RFS as a biofuel production mandate. The statutory language does not mandate the production of biofuels; rather, it mandates the use of biofuel. However, it could be argued that it is difficult to use a fuel that is not being produced and that the RFS therefore indirectly creates a demand for certain biofuels and thus stimulates their production. \n\n\t\tCellulosic Biofuel Production\n\nBy statute, cellulosic biofuel is targeted to comprise approximately 44% of the total renewable fuel mandate in 2022. However, the annual cellulosic biofuel production volume established by Congress is not being met. Actual cellulosic biofuel production volumes (e.g., cellulosic ethanol) are below the expectations set when the law was passed. For instance, in 2019, the statute requires 8.5 billion gallons of cellulosic biofuel. EPA set the 2019 target volume at 418 million gallons for 2019. This shortfall is due to several factors, including lack of private investment, technology setbacks, and uneven support from the federal government. These factors, coupled with the fact that annual volumes in the statute were established when market conditions for raising investment capital for new biofuel technologies were more favorable, may suggest unrealistic targets for some advanced biofuels for the near future. These production limitations have raised questions about whether the statutory cellulosic biofuel volumes are attainable.\n\n\t\tBlend Wall\n\nThe \"blend wall\"\u2014the upper limit to the total amount of ethanol that can be blended into U.S. gasoline and still maintain automobile performance and comply with the Clean Air Act\u2014has been viewed by many to be in direct conflict with the biofuel volumes mandated in the RFS. Thus far, the largest volume being met under the RFS is for the nonadvanced (conventional) biofuel segment of the mandate, met mainly with corn starch ethanol blended into gasoline. Due to a variety of factors, ethanol content in gasoline is generally limited to 10% (E10). With a relatively fixed supply of gasoline, the amount of ethanol that can be supplied this way is also limited. If the ethanol content of gasoline for the majority of vehicles remains at 10%, and given current fuel consumption rates, the conventional biofuel portion of the RFS is requiring slightly more ethanol than can technically be blended into gasoline. \nWhile the blend wall remains a concern, it may not be as significant an impediment to immediate fuel consumption as previously considered by some. Indeed, EPA reports \"the E10 blendwall is not the barrier that some stakeholders believe it to be.\" Had the RFS mandates\u2014for both conventional biofuel and advanced biofuel\u2014come to fruition in the form of mostly ethanol, or had fuel consumption decreased further, the blend wall potentially could have led to more discussion about the volume mandates. However, primarily due to the lack of cellulosic biofuel production, more time has been granted to address the blend wall and the scheduled levels of biofuels in the RFS. \nSome possible approaches could alleviate blend wall concerns in the near term. One option suggested by some is to blend higher levels of ethanol into conventional gasoline. In 2010 EPA granted a Clean Air Act waiver that allows gasoline to contain up to 15% ethanol for use in model year 2001 and newer light-duty motor vehicles. However, limited demand, infrastructure and automobile warranty concerns, and the lack of a waiver to sell E15 during the summer months, have precluded widespread offering and purchase of E15, gasoline blended with 10.5% to 15% ethanol. Widespread use of E15 could potentially postpone the blend wall for a few years. \nAnother option to address the blend wall would be an aggressive push for the use of ethanol in flexible-fuel vehicles capable of using E85, a gasoline-ethanol blend containing 51% to 83% ethanol. However, there are infrastructure constraints with the use of E85. For example, the number of E85 fueling stations is limited. To help address these infrastructure issues, the U.S. Department of Agriculture (USDA) announced $100 million in matching grants in 2015 under its Biofuel Infrastructure Partnership. The grants may be used for blender pumps, dedicated E15 or E85 pumps, and new storage tanks and related equipment associated with new facilities or additional capacity.\n\n\t\tOther Factors\n\nThe RFS is not a stand-alone policy. It interacts with many factors that are not easily controlled. For example, cellulosic biofuel production, at a minimum, requires conversion technology, which itself requires technical expertise and time to ramp up to commercial scale. The large quantity of biomass feedstocks needed to produce such biofuels requires factors such as appropriate weather conditions and an expectation of stable markets for feedstock commodities. Further, some types of biofuel production thus far have been sensitive to the availability of tax incentives in order to be economically feasible (e.g., biodiesel). Unexpected occurrences (e.g., drought, failed technology, tax incentive expiration) could potentially impact an entire industry, especially for some advanced biofuels in nascent industries compared to conventional transportation fuels.\n\n\tCongressional Issues\n\nThe RFS was established in 2005 at a time when Congress foresaw the need to diversify the country's energy portfolio, strengthen the economy of rural communities that could contribute to biofuel production, bolster U.S. standing in an emerging segment of the energy technology market, and protect the environment, among other objectives. The RFS was then subsequently expanded in 2007. Over the past decade some components of the RFS have progressed steadily toward meeting statutory requirements and other components have not. \nThe RFS is a program with ambitious objectives. Policy questions surrounding future consideration of the RFS might include \nWhat should be the purposes of the RFS? Is the RFS properly designed to achieve those purposes? What happens when, and if, the RFS achieves its purposes?\nAt the outse t, some would argue that the first question may seem straightforward; the RFS exists to introduce more biofuels into the transportation fuel market to achieve a number of transportation fuel supply and environmental objectives. However, the statute does not list any specific purposes or objectives. Some stakeholders argue that the RFS exists primarily to find another market for biomass feedstocks or to promote the economy of rural America (e.g., the construction of biofuel facilities that create jobs). To the extent the RFS was designed to reduce U.S. dependence on foreign oil, and to the extent that hydraulic fracturing and the growth of unconventional oil and gas production have contributed to achieving that objective, some stakeholders have questioned whether the RFS is still needed for energy security purposes. Likewise, the environmental impact of the RFS could be challenged, as the advanced biofuel component of the RFS\u2014set to yield greater greenhouse gas emission reduction benefits\u2014has missed the statutory targets by a large margin.\nIn examining whether the RFS is well designed to realize its general purpose, some have inquired about the challenges in achieving the ambitious RFS targets, given concerns about the slow development of some advanced biofuel supplies. Additionally, past delays in announcing final annual standards by EPA have led to uncertainty for biofuel producers, feedstock growers, and refiners. Whether the RFS should be eliminated, amended to address the current challenges in the program, or maintained in its current form is an ongoing question for Congress. A related question is whether the current provisions for EPA to waive various portions of the RFS mandates and to reset the RFS are sufficient to address the current supply challenges or whether the use of these waivers runs counter to the goals of the program. Some Members of Congress have proposed alternatives to the RFS, such as transitioning to an octane standard.\nOther Members of Congress have expressed interest in modifying or eliminating the conventional biofuel (e.g., corn starch ethanol) portion of the mandate. Some contend that the conventional biofuel segment of the biofuels industry is well established, so it should not require a use mandate. In addition, it has been argued that a demand for conventional biofuels exists regardless of congressional involvement. Others counter that the RFS is needed to help lower GHG emissions and to assure that the biofuels industry continues to have access to a fuel distribution infrastructure that is largely controlled by petroleum interests.","output":"The Renewable Fuel Standard (RFS) requires U.S. transportation fuel to contain a minimum volume of renewable fuel. The RFS\u2014established by the Energy Policy Act of 2005 (P.L. 109-58; EPAct05) and expanded in 2007 by the Energy Independence and Security Act (P.L. 110-140; EISA)\u2014began with 4 billion gallons of renewable fuel in 2006 and aims to ascend to 36 billion gallons in 2022. The Environmental Protection Agency (EPA) has statutory authority to determine the volume amounts after 2022.\nThe total renewable fuel statutory target consists of both conventional biofuel and advanced biofuel. Since 2014, the total renewable fuel statutory target has not been met, with the advanced biofuel portion falling below the statutory target by a large margin since 2015. Going forward, it is unlikely that the United States will meet the total renewable fuel target as outlined in statute.\nEPA administers the RFS and is responsible for several tasks. For instance, within statutory criteria EPA evaluates which renewable fuels are eligible for the RFS program. Also, EPA establishes the amount of renewable fuel that will be required for the coming year based on fuel supply and other conditions although waiver authority in the statute allows the EPA Administrator to reduce the statutory volumes if necessary. Further, the statute requires that the EPA Administrator \"reset\" the RFS\u2014whereby the fuel volumes required for future years are modified by the Administrator if certain conditions are met. EPA monitors compliance for the RFS using a system of tradable credits referred to as renewable identification numbers (RINs).\nCongress has expressed ongoing interest in the RFS, particularly as the mandate relates to other legislative efforts (e.g., Reid Vapor Pressure requirements for ethanol-gasoline fuel blends containing greater than 10% ethanol, a national octane standard) and about oversight of the RIN market, among other things. Some assert it is time to amend or repeal the RFS, while others contend the best course of action is to maintain the status quo. For instance, some Members contend the RFS hurts consumers by creating an artificial market for ethanol. Others see ethanol as a part of a competitive energy strategy.\nCongress may also express interest in how the EPA Administrator applies the RFS \"reset\" authority. EPA reports that in early 2019 it will issue a rulemaking that proposes to modify\u2014or \"reset\"\u2014the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022."}
{"id":"crs_R45539","pid":"crs_R45539_0","input":"\tIntroduction\n\nIllegal aliens have exploited asylum loopholes at an alarming rate. Over the last five years, DHS has seen a 2000 percent increase in aliens claiming credible fear (the first step to asylum), as many know it will give them an opportunity to stay in our country, even if they do not actually have a valid claim to asylum. \n\u2014Department of Homeland Security (DHS) press release, December 20, 2018\nThe increased number of Central Americans petitioning for asylum in the United States is not because more people are \"exploiting\" the system via \"loopholes,\" but because many have credible claims\u2026. There is no recorded evidence by any U.S. federal agency showing that the increased number of people petitioning for asylum in the United States is due to more people lying about the dangers they face back in their country of origin.\n\u2014Washington Office on Latin America (WOLA) commentary, March 14, 2018\nThese statements and the conflicting views about asylum seekers underlying them suggest why the asylum debate has become so heated. Policymakers have faced a perennial challenge to devise a fair and efficient system that approves legitimate asylum claims while deterring and denying illegitimate ones. Changes in U.S. asylum po licy and processes over the years can be seen broadly as attempts to strike the appropriate balance between these two goals. Periods marked by increasing levels of asylum-seeking pose particular challenges and may elicit a variety of policy responses. Faced with an influx of Central Americans seeking asylum at the southern U.S. border, the Trump Administration has put forth policies to tighten the asylum system (see, for example, the \" 2018 Interim Final Rule \" and \" DHS Migrant Protection Protocols \" sections of this report); these policies typically have been met with court challenges. This report explores the landscape of U.S. asylum policy through an analysis of current asylum processes, available data, legislative and regulatory history, recent legislative and presidential proposals, and selected policy questions.\n\n\tWhat is Asylum?\n\nIn common usage, the word asylum often refers to protection or safety. In the immigration context, however, it has a narrower meaning. The Immigration and Nationality Act (INA) of 1952, as amended, provides for the granting of asylum to an alien who applies for such relief in accordance with applicable requirements and is determined to be a refugee . The INA defines a refugee, in general, as a person who is outside his or her country of nationality and is unable or unwilling to return to, or to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution based on one of five protected grounds: race, religion, nationality, membership in a particular social group, or political opinion. Asylum can be granted by the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS) or the Department of Justice's (DOJ's) Executive Office for Immigration Review (EOIR), depending on the type of application filed (see \" Asylum Application Process \"). \nThe INA distinguishes between applicants for refugee status and applicants for asylum by their physical location. Refugee applicants are outside the United States, while applicants for asylum are physically present in the United States or at a land border or port of entry. After one year as a refugee or asylee (a person granted asylum), an individual can apply to be become a U.S. lawful permanent resident (LPR).\n\n\tOverview of Current Asylum Provisions\n\nWith some exceptions, aliens who are in the United States or who arrive in the United States, regardless of immigration status, may apply for asylum. This summary describes the asylum process for an adult applicant. \nAs discussed in the next section of the report, asylum may be granted by a USCIS asylum officer or an EOIR immigration judge. There are no numerical limitations on asylum grants. In order to receive asylum, an alien must establish that he or she meets the INA definition of a refugee, among other requirements. Certain aliens, such as those who are determined to pose a danger to U.S. security, are ineligible for asylum. An asylum applicant who is not otherwise eligible to work in the United States may apply for employment authorization 150 days after filing a completed asylum application and may receive such authorization 180 days after the application filing date. \nAn alien who has been granted asylum is authorized to work in the United States and may receive approval to travel abroad. A grant of asylum does not expire, but it may be terminated under certain circumstances, such as if an asylee is determined to no longer meet the INA definition of a refugee. After one year of physical presence in the United States as an asylee, an alien may be granted LPR status, subject to certain requirements. There are no numerical limitations on the adjustment of status of asylees to LPR status.\nSpecial asylum provisions apply to certain aliens without proper documentation who are determined to be subject to a streamlined removal process known as expedited removal. To be considered for asylum, these aliens must first be determined by a USCIS asylum officer to have a credible fear of persecution. Those determined to have a credible fear may apply for asylum during standard removal proceedings. (See \" Inspection of Arriving Aliens .\")\n\n\tAsylum Application Process\n\nApplications for asylum are either defensive or affirmative. A different set of procedures applies to each type of application. \n\n\t\tAffirmative Asylum\n\nAn asylum application is affirmative if an alien who is physically present in the United States (and not in removal proceedings) submits an application for asylum to DHS's USCIS. An alien may file an affirmative asylum application regardless of his or her immigration status, subject to applicable restrictions. There is no fee to apply for asylum. \n Figure 1 shows the number of new affirmative asylum applications filed with USCIS since FY1995, the year filings reached their historical high point. The years included in this figure and in the subsequent figures and tables differ due to the availability of data from the relevant agencies. The data displayed in Figure 1 are for applications, not individuals; an application may include a principal applicant and dependents. Figure 1 reflects the impact of various factors. For example, reforms in the mid-1990s, which made the asylum system more restrictive, contributed to the decline in applications in the earlier years shown. A contributing factor to the application increases in the later years depicted in Figure 1 was the influx of unaccompanied alien children from Central America seeking asylum. (See Appendix A for underlying data and data on the top 10 nationalities filing affirmative asylum applications.) \nThe INA prohibits the granting of asylum until the identity of the asylum applicant has been checked against appropriate records and databases to determine if he or she is inadmissible or deportable, or ineligible for asylum. As part of the affirmative asylum process, applicants are scheduled for fingerprinting appointments. The fingerprints are used to confirm the applicant's identity and perform background and security checks. \nAsylum applicants are interviewed by USCIS asylum officers. In scheduling asylum interviews, the USCIS Asylum Division is currently giving priority to applications that have been pending for 21 days or less. According to USCIS, \"Giving priority to recent filings allows USCIS to promptly place such individuals into removal proceedings, which reduces the incentive to file for asylum solely to obtain employment authorization.\"\nUnder DHS regulations, the asylum interview is to be conducted in \"a nonadversarial manner.\" The applicant may bring counsel or a representative to the interview, present witnesses, and submit other evidence. After the interview, the applicant or the applicant's representative can make a statement.\n\n\t\t\tUSCIS Decisions on Affirmative Asylum Applications\n\nAn asylum officer's decision on an application is reviewed by a supervisory asylum officer, who may refer the case for further review. If an asylum officer ultimately determines that an applicant is eligible for asylum, the applicant receives a letter and form documenting the grant of asylum.\nIf the asylum officer determines that an applicant is not eligible for asylum and the applicant has immigrant status, nonimmigrant status, or temporary protected status (TPS), the asylum officer denies the application. If the asylum officer determines than an applicant is not eligible for asylum and the applicant appears to be inadmissible or deportable under the INA, however, DHS regulations direct the officer to refer the case to an immigration judge for adjudication in removal proceedings. In those proceedings, the immigration judge evaluates the asylum claim independently as a defensive application for asylum. \n Figure 2 presents data on affirmative asylum applications considered by USCIS since FY2009. It shows four separate outcome categories. Closures are cases administratively closed for reasons such as abandonment or lack of jurisdiction. A closure in one fiscal year in Figure 2 could have been refiled or reopened in a subsequent year. Figure 2 shows that a majority of cases were referred to an immigration judge each year. These referrals included both applicants who were interviewed by USCIS and applicants who were not (e.g., they did not appear for the interview). (See Table B-1 for underlying data and additional detail. )\n\n\t\tDefensive Asylum\n\nAn asylum application is defensive when the applicant is in standard removal proceedings in immigration court and requests asylum as a defense against removal. Figure 3 provides data on defensive asylum applications filed since FY2009. The data include both cases that originated as defensive cases as well as cases that were first filed as affirmative applications with USCIS, as described in the preceding section. (See Table C-1 for underlying data and additional detail.) \nThere are different ways that an alien can be placed in standard removal proceedings. An alien who is living in the United States can be charged by DHS with violating immigration law. In such a case, DHS initiates removal proceedings when it serves the alien with a Notice to Appear before an immigration judge. \nAnother way to be placed in standard removal proceedings relates to the statutory expedited removal and credible fear screening provisions discussed more fully below (see \" Inspection of Arriving Aliens \"). Under the INA, an individual who is determined by DHS to be inadmissible to the United States because he or she lacks proper documentation or has committed fraud or willful misrepresentation of facts to obtain documentation or another immigration benefit (and thus is subject to expedited removal) and expresses the intent to apply for asylum or a fear of persecution is to be interviewed by an asylum officer to determine if he or she has a credible fear of persecution. Credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" If the alien is found to have a credible fear, the asylum officer is to refer the case to an immigration judge for a full hearing on the asylum request during removal proceedings. \n Figure 4 provides data on USCIS credible fear findings since FY1997. For each year, it shows the number of credible fear cases referred to and completed by USCIS and the outcomes of the completed cases. Closed cases are cases in which a credible fear determination was not made. (See Table B-2 and Table B-3 for underlying data and additional detail.) \n\n\t\t\tEOIR Decisions on Defensive Asylum Applications\n\nDuring a removal proceeding, an attorney from DHS's Immigration and Customs Enforcement (ICE) presents the government's case for removing the alien, the alien or their representative may present evidence on the alien's behalf and cross examine witnesses, and an immigration judge from EOIR determines whether the alien should be removed. An immigration judge's removal decision is generally subject to administrative and judicial review.\n Figure 5 presents data on EOIR decisions in defensive asylum cases since FY2009. (See Appendix D for underlying data and data for defensive cases that began with a credible fear claim. ) Figure 5 shows a sharp drop in administrative closures since FY2016. Administrative closing \"allows the removal of cases from the immigration judge's calendar in certain circumstances\" but \"does not result in a final order\" in the case; cases that are administratively closed can be reopened. Administrative closure has been used, for example, when an alien has a pending application for relief from another agency. In May 2018, Attorney General Jeff Sessions ruled that immigration judges and the BIA do not have general authority to administratively close cases. \n\n\tEvolution of U.S. Asylum Policy\n\nThe INA, as originally enacted, did not contain refugee or asylum provisions. Language on the conditional entry of refugees was added by the INA Amendments of 1965. The 1965 act authorized the conditional entry of aliens, who were to include those who demonstrated to DOJ's Immigration and Naturalization Service (INS) that\n(i) because of persecution or fear of persecution on account of race, religion, or political opinion they have fled (I) from any Communist or Communist-dominated country or area, or (II) from any country within the general area of the Middle East, and (ii) are unable or unwilling to return to such country or area on account of race, religion, or political opinion, and (iii) are not nationals of the countries or areas in which their application for conditional entry is made.\nIn 1968, the United States acceded to the 1967 United Nations Protocol Relating to the Status of Refugees (Protocol). The Protocol incorporated the 1951 United Nations Convention Relating to the Status of Refugees (Convention), which the United States had not previously been a party to, and expanded the Convention's definition of a refugee. The Convention had defined a refugee in terms of events occurring before January 1951. The Protocol eliminated that date restriction. It also provided that the refugee definition would apply without geographic limitation, while allowing for some exceptions. With the changes made by the Protocol, a refugee came to be defined as a person who \"owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country.\"\nThe Protocol retained other elements of the Convention, including the latter's prohibition on refoulement (or forcible return), a fundamental asylum concept. Specifically, the Convention prohibited states from expelling or returning a refugee \"to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.\"\nIn the 1970s, INS issued regulations that established procedures for applying for asylum in the United States and for adjudicating asylum applications. For example, a 1974 rule provided that an asylum applicant could include his or her spouse and unmarried minor children on the application and that INS could deny or approve an asylum application as a matter of discretion.\n\n\t\tRefugee Act of 1980\n\nDespite the U.S. accession to the 1967 U.N. Protocol, the INA did not include a conforming definition of a refugee or a mandatory nonrefoulement provision until the enactment of the Refugee Act of 1980. As noted, the 1965 conditional entry provisions incorporated a refugee definition that was limited by type of government and geography. A 1999 INS report explained a goal of the Refugee Act as being \"to establish a politically and geographically neutral adjudication for both asylum status and refugee status, a standard to be applied equally to all applicants regardless of country of origin.\"\nThe definition of a refugee, as added to the INA by the 1980 act, reads, in main part:\n(A) any person who is outside any country of such person's nationality ... and who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.\n(This first part of the definition of a refugee has not changed since enactment of the Refugee Act.)\n\n\t\t\tAsylum Process\n\nAs explained by INS Acting Commissioner Doris Meissner at a 1981 Senate hearing, the primary focus of the Refugee Act of 1980 was the refugee process. According to Meissner's written testimony, \"The asylum process was looked upon as a separate and considerably less significant subject.\" In keeping with this secondary status, the asylum provisions added by the 1980 act to the INA (as INA \u00a7208) comprised three short paragraphs. The first directed the Attorney General to establish asylum application procedures for aliens physically present in the United States or arriving at a land border or port of entry, regardless of immigration status, and gave the Attorney General discretionary authority to grant asylum to aliens who met the newly added INA definition of a refugee. The second paragraph allowed for the termination of asylum status if the Attorney General determined that the alien no longer met the INA definition of a refugee due to \"a change in circumstances\" in the alien's home country. The third paragraph provided for the granting of asylum status to the spouse and children of an alien granted asylum. \n\n\t\t\tAdjustment of Status\n\nSeparate language in the Refugee Act added a new Section 209 to the INA on refugee and asylee adjustment of status. Adjustment of status is the process of acquiring LPR status in the United States. The asylee provisions granted the Attorney General discretionary authority to adjust the status of an alien who had been physically present in the United States for one year after being granted asylum and met other requirements, subject to an annual numerical limit of 5,000.\n\n\t\t\tWithholding of Deportation\n\nThe Refugee Act amended an INA provision on withholding of deportation, making it consistent with the nonrefoulement language in the Convention. The INA provision in effect prior to the enactment of the Refugee Act \"authorized\" the Attorney General to withhold the deportation of an alien in the United States (other than an alien involved in Nazi-related activity) to \"any country in which in his opinion the alien would be subject to persecution on account of race, religion or political opinion.\" The Refugee Act revised this language to prohibit the Attorney General from deporting or returning any alien to a country where the Attorney General determines the alien's life or freedom would be threatened because of the alien's race, religion, nationality, membership in a particular social group, or political opinion. It also added exclusions beyond the one for participation in Nazi-related activity. Specifically, the new provision made an alien ineligible for withholding if the alien had participated in the persecution of another person based on race, religion, nationality, membership in a particular social group, or political opinion; the alien had been convicted of a \"particularly serious crime\" and thus was a danger to the United States; there existed \"serious reasons for considering that the alien had committed a serious nonpolitical crime outside the United States,\" or there existed \"reasonable grounds\" for considering the alien a danger to national security. (For subsequent changes to this provision, see \" Withholding of Removal .\") \n\n\t\t1980 Interim Regulations\n\nINS published interim regulations in June 1980 to implement the Refugee Act's provisions on refugee and asylum procedures. The asylum regulations included the following:\nINS district directors had jurisdiction over all requests for asylum except for those made by aliens in exclusion or deportation proceedings. An alien whose application for asylum was denied by the district director could renew the asylum request in exclusion or deportation proceedings. The applicant had the burden of proof to establish eligibility for asylum. The asylum applicant would be examined in person by an immigration officer or an immigration judge. The district director (or the immigration judge) would request an advisory opinion on the asylum application from the Department of State's (DOS's) Bureau of Human Rights and Humanitarian Affairs (BHRHA). The district director could grant work authorization to an asylum applicant who filed a \"non-frivolous\" application. The district director's decision on an asylum application was discretionary. The district director would deny an asylum application for various reasons, including that the alien had been firmly resettled in another country; the alien had participated in the persecution of another person based on race, religion, nationality, membership in a particular social group, or political opinion; the alien had been convicted of a \"particularly serious crime\" and thus was a danger to the United States; there existed \"serious reasons for considering that the alien had committed a serious non-political crime outside the United States;\" or there existed \"reasonable grounds\" for considering the alien a danger to national security. An initial grant of asylum was for one year and could be extended in one-year increments. Asylum status could be terminated for various reasons, including changed conditions in the asylee's home country.\n\n\t\t1990 Final Rule\n\nThere was much discussion and debate about asylum in the 1980s, as related legislation and regulations were proposed, court cases were litigated, and the number of applications increased. In addition, in a 1983 internal DOJ reorganization, EOIR was established as a separate DOJ agency to administer the U.S. immigration court system. It combined the Board of Immigration Appeals (BIA) with the INS immigration judge function. With the creation of EOIR, the immigration courts became independent of INS.\nIt was not until July 1990 that INS published a final rule to revise the 1980 interim regulations on asylum procedures. According to the supplementary information to the 1990 rule, the asylum policy established by the rule reflected two core principles: \"A fundamental belief that the granting of asylum is inherently a humanitarian act distinct from the normal operation and administration of the immigration process; and a recognition of the essential need for an orderly and fair system for the adjudication of asylum claims.\"\nThe 1990 final rule created the position of asylum officer within INS to adjudicate asylum applications. As described in the supplementary information to a predecessor 1988 proposed rule, asylum officers were intended to be \"a specially trained corps\" that would develop expertise over time, with the expected result of greater uniformity in asylum adjudications. Under the 1990 rule, asylum applications filed with the district director were to be forwarded to the asylum officer with jurisdiction in the district. \nUnder the 1990 rule, comments on asylum applications by DOS\u2014a standard part of the adjudication process under the 1980 interim regulations\u2014became optional. (In an earlier, related development, DOS announced that as of November 1987 it would no longer be able to provide an advisory opinion on every asylum application due to budget constraints and would focus on those cases where it thought it could provide input not available from other sources. )\nThe 1990 rule distinguished between asylum claims based on actual past persecution and on a well-founded fear of future persecution. To establish a well-founded fear of future persecution, the rule required, in part, that an applicant establish that he or she fears persecution in his or her country based on one of the five protected grounds and that \"there is a reasonable possibility of actually suffering such persecution\" upon return. The rule further detailed the \"burden of proof\" requirements for asylum applicants. It provided that the applicant's own testimony alone may be sufficient to prove that he or she meets the definition of a refugee. It also stated that an applicant could show a well-founded fear of persecution on one of the protected grounds without proving that he or she would be persecuted individually, if the applicant could establish \"that there is a pattern or practice\" of persecution of similarly situated individuals in his or her home country and that he or she is part of such a group. \nThe 1990 rule provided that a grant of asylum to a principal applicant would be for an indefinite period. It also provided that the grant of asylum to a principal applicant's spouse and children would be indefinite, unless the principal's asylum status was revoked. \nUnder the 1990 rule, an application for asylum was also to be considered an application for withholding of deportation; in cases of asylum denials, the asylum officer was required to decide whether the applicant was entitled to withholding of deportation. A 1987 proposed rule would have made asylum officers' decisions on asylum and withholding of deportation applications binding on immigration judges. That change was not retained in the 1990 final rule, however, which preserved immigration judges' role in adjudicating asylum and withholding of deportation claims in exclusion or deportation proceedings. Regarding eligibility for withholding of deportation, the 1990 rule stated, in part, \"The applicant's life or freedom shall be found to be threatened if it is more likely than not that he would be persecuted on account of race, religion, nationality, membership in a particular social group, or political opinion.\"\nThe 1990 rule directed the asylum officer to grant an undetained asylum applicant employment authorization for up to one year if the officer determined that the application was not frivolous; frivolous was defined as \"manifestly unfounded or abusive.\" The employment authorization could be renewed in increments of up to one year. The asylum officer had to provide an applicant with a written decision on an asylum or withholding of deportation application, and had to provide an explanation in the case of a denial. The 1990 rule also granted specified officials in INS and DOJ the authority to review the decisions of asylum officers but did not grant applicants any right to appeal to these officials.\n\n\t\tActs of 1990 and 1994\n\nThe Immigration Act of 1990 and the Violent Crime Control and Law Enforcement Act of 1994 made several changes to the asylum-related provisions in the INA. The 1990 act amended INA \u00a7209 to increase the annual numerical limitation on asylee adjustment of status from 5,000 to 10,000. It also added new language to INA \u00a7208, making an alien who had been convicted of a crime categorized as an aggravated felony under the INA ineligible for asylum. The 1994 act further amended INA \u00a7208 to state that an asylum applicant was not entitled to employment authorization except as provided at the discretion of the Attorney General by regulation.\n\n\t\t1994 Final Rule\n\nIn March 1994, INS published a proposed rule to streamline its asylum procedures that included a number of controversial provisions. The agency characterized the problem the proposal sought to address as follows: \"The existing system for adjudicating asylum claims cannot keep pace with incoming applications and does not permit the expeditious removal from the United States of those persons who[se] claims fail.\"\nThe 1994 final rule, published in December 1994, made fundamental changes to the asylum adjudication process. Under the rule, INS asylum officers were no longer to deny asylum applications filed by aliens who appeared to be excludable or deportable, or to consider applications for withholding of deportation from such applicants, with limited exceptions. Instead, officers were to either grant such applicants asylum or immediately refer their claims to immigration judges, where the claims would be considered as part of exclusion or deportation proceedings. Asylum officers were to continue to issue approvals and denials in cases of asylum applications filed by aliens with a legal immigration status.\nThe 1994 rule also made changes to the employment authorization process for asylum applicants that were intended to \"discourage applicants from filing meritless claims solely as a means to obtain employment authorization.\" Under the rule, an alien had to wait 150 days after his or her complete asylum application had been received to apply for employment authorization. INS then had 30 days to adjudicate that employment authorization application. (These 150-day and 30-day time frames remain in regulation. ) According to the supplementary information accompanying the rule, the goal was to make a decision on an asylum application before the end of 150 days: \"The Immigration and Naturalization Service (INS) and the Executive Office for Immigration Review (EOIR) would strive to complete the adjudication of asylum applications, through the decision of an immigration judge, within this 150-day period.\" \nSome of the provisions in the proposed rule were not adopted in the final rule. These included proposals to make asylum interviews discretionary and to charge fees for asylum applications and initial applications for employment authorization.\n\n\t\tIllegal Immigration Reform and Immigrant Responsibility Act and Implementing Regulations\n\nThe Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 significantly amended the INA's asylum provisions and made a number of other changes to the INA relevant to asylum policy. Many of the IIRIRA changes remain in effect. \nOne set of changes, which had broad implications for the immigration system generally, concerned the INA grounds of exclusion. Applicable to aliens outside the United States, these provisions enumerated classes of aliens who were ineligible for visas and were to be excluded from admission. IIRIRA amended these provisions and replaced the concept of an excludable alien with that of an inadmissible alien\u2014the latter being a person who, whether outside or inside the United States, has not been lawfully admitted to the country. In general, with the enactment of IIRIRA, an alien became ineligible for a visa or admission if he or she was described in the reconfigured grounds of inadmissibility.\n\n\t\t\tAsylum Provisions\n\nIIRIRA added restrictions to the general policy set forth in the 1980 Refugee Act and incorporated into the INA that an alien who is present in the United States or who arrives in the United States, regardless of immigration status, can apply for asylum. In general, under the IIRIRA amendments, which remain in effect, an alien is not eligible to apply for asylum unless the alien can show that he or she filed the application within one year of arriving in the United States. An alien is also generally ineligible to apply if he or she has previously had an asylum application denied. There is an exception to both restrictions if an alien can show \"changed circumstances which materially affect the applicant's eligibility for asylum,\" and an additional exception to the time limit requirement if the alien can show \"extraordinary circumstances\" related to the filing delay . IIRIRA also made an alien ineligible to apply for asylum if the Attorney General determined that the alien could be removed, pursuant to a bilateral or multilateral agreement, to a safe third country where the alien would be considered for asylum or equivalent temporary protection (see \" Safe Third Country Agreements \").\nIIRIRA amended the INA to authorize, but not require, the Attorney General to impose fees on asylum applications and related applications for employment authorization. Among other new asylum provisions it added to the INA were a requirement to check the identity of applicants against \"all appropriate records or databases maintained by the Attorney General and by the Secretary of State\" and a permanent bar to receiving any immigration benefits for aliens who knowingly file frivolous asylum applications after being notified of the consequences for doing so. IIRIRA also put asylum processing-related time frames in statute, including a requirement that \"in the absence of exceptional circumstances,\" administrative adjudication of an asylum application be completed within 180 days after the filing date. All these provisions are still in statute. \nIIRIRA modified and codified some existing and prior asylum regulations. It amended an existing INA provision on employment authorization by adding language prohibiting an asylum applicant who is not otherwise eligible for employment authorization from being granted such authorization earlier than 180 days after filing the asylum application. It further amended the INA asylum provisions to add grounds for denying asylum. Similar to the mandatory denial language in the 1980 interim regulations, these grounds included an applicant's conviction for a \"particularly serious crime,\" \"serious reasons for believing the alien has committed a serious nonpolitical crime outside the United States,\" \"reasonable grounds\" for considering the alien a danger to national security, and the applicant's firm resettlement in another country prior to arrival in the United States. IIRIRA also added, as a new asylum denial ground, being inadmissible to the United States on certain terrorist-related grounds. In addition, IIRIRA provided that the Attorney General could establish additional ineligibilities for asylum by regulation that were consistent with the INA asylum provisions. These IIRIRA amendments remain a part of the INA, although the provision on terrorist-related grounds of inadmissibility has been revised. \nIIRIRA amended the INA language on termination of asylum to state that the granting of asylum \"does not convey a right to remain permanently in the United States.\" It also added new termination grounds to the existing ground of no longer meeting the INA definition of a refugee. IIRIRA provided that asylum could be terminated if the Attorney General determined that the asylee met one of the grounds for denying asylum noted in the preceding paragraph. Among IIRIRA's other new grounds for terminating asylum was a determination by the Attorney General, analogous to the \"safe third country\" determination described above, that the alien could be removed, pursuant to a bilateral or multilateral agreement, to a safe third country where the alien would be eligible for asylum or equivalent temporary protection. The IIRIRA asylum termination provisions remain part of the INA.\n\n\t\t\tDefinition of a Refugee\n\nIIRIRA amended the INA definition of a refugee to cover individuals subject to \"coercive population control.\" It provided that for purposes of meeting the definition of a refugee, an individual who had been forced to have an abortion or undergo sterilization or had been persecuted for resistance to a coercive population control program would be considered to have been persecuted on the basis of political opinion. Similarly, an individual with a well-founded fear that he or she would be forced to undergo a procedure or would be persecuted for resistance to a coercive population control program would be considered to have a well-founded fear of persecution on the basis of political opinion. This language remains part of the INA definition of a refugee.\n\n\t\t\tInspection of Arriving Aliens\n\nIIRIRA amended the INA provisions on the inspection of aliens by immigration officers to establish a new immigration enforcement mechanism known as expedited removal. In general, under expedited removal an alien who is determined by an immigration officer to be inadmissible to the United States because the alien lacks proper documentation or has committed fraud or willful misrepresentation of facts to obtain documentation or another immigration benefit may be removed from the United States without any further hearings or review, unless the alien indicates either an intention to apply for asylum or a fear of persecution. \nUnder the INA, as amended by IIRIRA, this expedited removal procedure was to be applied to all arriving aliens , a term that includes aliens arriving at a U.S. port of entry. (An exception for Cuban citizens arriving at U.S. ports of entry by aircraft is no longer in effect. ) It also could be applied to any (or all) aliens in the United States, as designated by the Attorney General at his or her discretion, if an alien has not been admitted or paroled into the United States and \"has not affirmatively shown, to the satisfaction of an immigration officer, that the alien has been physically present in the United States continuously for the 2-year period immediately prior to the date of the determination of inadmissibility.\" Using this statutory authority, the application of expedited removal has been expanded to classes of aliens beyond arriving aliens (see \" Implementing Regulations \").\nUnder the IIRIRA amendments, an alien who is subject to expedited removal and expresses the intent to apply for asylum or a fear of persecution is to be interviewed by an asylum officer to determine if the alien has a credible fear of persecution. (Special procedures apply to aliens arriving in the United States at a U.S.-Canada land port of entry in accordance with a U.S.-Canada agreement; see \" Safe Third Country Agreements .\") Under the INA, credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" If an alien is found to have a credible fear, the asylum officer is to refer the case to an immigration judge for full consideration of the asylum request during standard removal proceedings. If an alien is found not to have a credible fear, the alien may request that an immigration judge review the negative finding. To ultimately receive asylum, however, an alien must meet the higher standard of showing past persecution or a well-founded fear of future persecution. \n\n\t\t\tWithholding of Removal\n\nAs part of a larger set of changes to the INA replacing the concept of deportation with removal, IIRIRA added a withholding of removal provision (INA \u00a7241(b)(3)) to replace the existing INA withholding of deportation provision. The new withholding of removal provision stated, and continues to state, in main part, that \"the Attorney General may not remove an alien to a country if the Attorney General decides that the alien's life or freedom would be threatened in that country because of the alien's race, religion, nationality, membership in a particular social group, or political opinion.\" The IIRIRA provision retained language on ineligibility for withholding that had been enacted in 1980. It also included language on treatment of aggravated felonies for purposes of ineligibility for withholding of removal. The IIRIRA amendments on ineligibility for withholding of removal remain in current law. \nSome of the same ineligibility grounds apply to applicants for withholding of removal and applicants for asylum. As noted, however, asylum is also subject to a second set of restrictions, under which certain individuals are ineligible to apply for this form of relief. These restrictions include the requirement to apply for asylum within one year after arrival in the United States. Withholding of removal is not subject to an analogous set of restrictions. Another difference between withholding of removal and asylum concerns adjustment to LPR status. The INA provides for the adjustment of status of aliens granted asylum but not those granted withholding of removal (for further comparison of withholding of removal and asylum, see \" Implementing Regulations ,\" below).\n\n\t\t\tImplementing Regulations\n\nIn March 1997, DOJ issued an interim rule, effective April 1, 1997, to amend existing regulations to implement the IIRIRA provisions on asylum, withholding of removal, expedited removal, and other immigration procedures. In December 2000, DOJ published a final rule on asylum procedures, which addressed jurisdiction, asylum application procedures, and withholding of removal, among other issues. \nThe December 2000 rule included language on eligibility for asylum and eligibility for withholding of removal under INA \u00a7241(b)(3). Regarding eligibility for asylum based on a well-founded fear of future persecution, the 2000 regulations stated, in part, \"An applicant has a well-founded fear of persecution if: (A) The applicant has a fear of persecution in his or her country of nationality \u2026 on account of race, religion, nationality, membership in a particular social group, or political opinion; (B) There is a reasonable possibility of suffering such persecution if he or she were to return to that country.\" This language was similar to that in the 1990 rule. Unlike the earlier rule, however, the 2000 regulations also provided that an applicant would not be considered to have a well-founded fear of persecution if he or she could relocate within his or her home country \"if under all the circumstances it would be reasonable to expect the applicant to do so.\"\nRegarding eligibility for withholding of removal under INA \u00a7241(b)(3) based on a future threat to one's life or freedom, the 2000 regulations, like the earlier 1990 regulations on withholding of deportation, stated that an applicant could demonstrate a future threat \"if he or she can establish that it is more likely than not that he or she would be persecuted on account of race, religion, nationality, membership in a particular social group, or political opinion upon removal to that country.\" As with the regulations on asylum eligibility, the 2000 regulations on eligibility for withholding of removal provided that an applicant could not demonstrate a threat to life or freedom upon a finding that the applicant could avoid the threat by relocating within his or her home country if it were reasonable to expect him or her to do so. \nThe December 2000 regulations on eligibility for asylum and withholding of removal under INA \u00a7241(b)(3) remain in effect. Comparing the above-cited standards for providing these two forms of relief in cases involving claims of future persecution, the threshold for granting withholding of removal ( more likely than not ) is higher than that for granting asylum ( reasonable possibility ).\nRegarding expedited removal, DOJ stated in the supplementary information to the March 1997 interim rule that for the time being, it would only apply the expedited removal provisions to arriving aliens (i.e., aliens arriving at ports of entry and certain others). At the same time, it reserved \"the right to apply the expedited removal procedures to additional classes of aliens within the limits set by the statute, if, in the [INS] Commissioner's discretion, such action is operationally warranted.\"\nBeginning in 2002, DOJ and then DHS, which assumed primary responsibility for immigration under the Homeland Security Act, acted to apply the expedited removal procedures to additional classes of aliens. In November 2002, DOJ extended expedited removal to aliens arriving by sea who are not admitted or paroled and who have not been continuously present in the United States for the prior two years. In August 2004, DHS authorized the placing in expedited removal proceedings of aliens who are present in the United States without having been admitted or paroled, and are found inadmissible due to lack of proper documentation or to commission of fraud or willful misrepresentation to obtain documentation or another immigration benefit, in certain circumstances. These circumstances were that the aliens \"are encountered by an immigration officer within 100 air miles of the U.S. international land border\" and \"have not established to the satisfaction of an immigration officer that they have been physically present in the United States continuously for the fourteen-day (14-day) period immediately prior to the date of encounter.\" \n\n\t\tConvention Against Torture Protection and Implementing Regulations\n\nSeparate from asylum and withholding of removal under the INA, protection from removal is available to aliens in the United States who are more likely than not to be tortured in the country of removal, in accordance with the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (Convention Against Torture, or CAT), which entered into force for the United States in November 1994. Under Article 3 of the CAT, \"No State Party shall expel, return (\"refouler\") or extradite a person to another State where there are substantial grounds for believing that he would be in danger of being subjected to torture.\" Under current DHS and DOJ regulations, torture is defined, in part, as \"any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person \u2026 when such pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity.\" In February 1999, DOJ published an interim rule establishing procedures to implement U.S. obligations under Article 3 of the CAT in the removal process. These regulations have since been revised. \nDHS regulations set forth procedures for handling cases in which an alien subject to expedited removal expresses a fear of torture. In a process analogous to that for aliens subject to expedited removal who express a fear of persecution, DHS regulations provide that such an alien is to be interviewed by an asylum officer to determine if he or she has a credible fear of torture. To establish a credible fear of torture, an alien must show that \"there is a significant possibility that he or she is eligible for\" protection under the CAT. Eligibility for CAT protection, unlike for asylum, does not require the showing of a nexus between the torture claim and a protected ground (such as race). If the asylum officer makes an affirmative credible fear finding, the officer is to refer the case to an immigration judge for full consideration of the CAT application during standard removal proceedings. If the officer makes a negative finding, the alien may request a review of that determination by an immigration judge. If during removal proceedings the immigration judge determines that \"the alien is more likely than not to be tortured in the country of removal,\" the alien is entitled to CAT protection. That protection is to be granted in the form of either withholding of removal or deferral of removal depending on the circumstances of the case.\nThe February 1999 CAT rule also established another screening process\u2014for reasonable fear of persecution or torture. Modeled on but separate from the credible fear of persecution or torture screening processes, reasonable fear screening applies to certain aliens who are not eligible for asylum (these are aliens ordered removed under INA \u00a7238(b) for the commission of certain criminal offenses or aliens whose deportation, exclusion, or removal is reinstated under INA \u00a7241(a)(5)). Under current DHS and DOJ regulations, if an alien in this category expresses a fear of returning to the country of removal, USCIS is to make a reasonable fear determination, subject to review by an immigration judge. To establish a reasonable fear of persecution, an alien must establish \"a reasonable possibility that he or she would be persecuted on account of his or her race, religion, nationality, membership in a particular social group or political opinion\"; this is the same standard used to establish eligibility for asylum. To establish a reasonable fear of torture, an alien must establish \"a reasonable possibility that he or she would be tortured in the country of removal.\" \nIf the alien receives a positive reasonable fear finding, the case is referred to an immigration judge to determine whether the alien is eligible for withholding of removal under INA \u00a7241(b)(3) or withholding of removal or deferral of removal under the CAT. DHS and DOJ regulations further state, however, that the granting of such withholding of removal or deferral of removal would not prevent the United States from removing the alien to a third country.\n\n\t\tPost-1996 Statutory Provisions\n\nWhile the IIRIRA amendments to the INA asylum provisions remain largely in place, subsequent laws have made further changes to the INA provisions. For example, the Real ID Act of 2005 amended the INA language on the conditions for granting asylum to add \"burden of proof\" provisions, which had previously been in regulations. These burden of proof provisions remain in law. They require an asylum applicant to show that \"race, religion, nationality, membership in a particular social group, or political opinion was or will be at least one central reason for persecuting the applicant\" to meet the definition of a refugee. The provisions further set forth standards for making determinations about an applicant's credibility and about the need for corroborating evidence to sustain an applicant's burden of proof. In addition, among its other asylum-related provisions, the Real ID Act eliminated the annual caps on asylee adjustment of status. The 2008 William Wilberforce Trafficking Victims Protection Reauthorization Act (TVPRA) added language to the INA asylum provisions that addressed asylum applications by unaccompanied alien children in the United States. This new language made certain statutory restrictions on applying for asylum inapplicable to these children and provided that a USCIS asylum officer would have initial jurisdiction over any asylum application filed by an unaccompanied child, even if the child was in removal proceedings.\n\n\t\t2018 Interim Final Rule\n\nOn November 9, 2018, DHS and DOJ jointly issued an interim final rule to govern \"asylum claims in the context of aliens who are subject to, but contravene, a suspension or limitation on entry into the United States through the southern border with Mexico that is imposed by a presidential proclamation or other presidential order.\" That same day, President Donald Trump issued a proclamation to suspend immediately the entry into the United States of aliens who cross the Southwest border between ports of entry (see \" Presidential Action \"). According to the supplementary information accompanying the interim rule, the rule would serve to \"channel inadmissible aliens to ports of entry, where such aliens could seek to enter and would be processed in an orderly and controlled manner.\"\nThe interim rule, which is not in effect due to legal challenges, would bar an alien who enters the United States in contravention of the proclamation from eligibility for asylum. Under the rule, an asylum officer would make a negative credible fear of persecution determination in the case of such an alien. As explained in the supplementary information to the rule, however, aliens who enter the United States at the Southwest border without inspection would continue to be eligible for consideration for forms of protection from removal other than asylum\u2014namely, withholding of removal under INA \u00a7241(b)(3) and protections under the CAT . The interim final rule addresses eligibility for asylum and screening procedures for aliens who enter the United States in contravention of the proclamation. Regarding claims for withholding of removal under the INA or withholding or deferral of removal under the CAT, the rule establishes that such claims would be assessed under the reasonable fear standard (see \" Convention Against Torture Protection and Implementing Regulations \"). The supplementary information includes the following summary of the two-stage screening protocol the rule would institute: \nAliens determined to be ineligible for asylum by virtue of contravening a proclamation, however, would still be screened, but in a manner that reflects that their only viable claims would be for statutory withholding or CAT protection\u2026. After determining the alien's ineligibility for asylum under the credible-fear standard, the asylum officer would apply the long-established reasonable-fear standard to assess whether further proceedings on a possible statutory withholding or CAT protection claim are warranted.\nThis rule is being challenged in federal court. On December 19, 2018, a federal district court judge in California granted a nationwide preliminary injunction against it. \n\n\t\tDHS Migrant Protection Protocols\n\nOn December 20, 2018, DHS announced the Migrant Protection Protocols (MPP), under which \"individuals arriving in or entering the United States from Mexico\u2014illegally or without proper documentation\u2014may be returned to Mexico for the duration of their immigration proceedings.\" The U.S. government notified the Mexican government about the MPP that same day. The MPP is separate and distinct from a safe third country agreement (see \" Safe Third Country Agreements \").\nThe DHS press release announcing the Migrant Protection Protocols characterized them as \"historic measures\" to address the \"illegal immigration crisis.\" In the words of the press release:\nAliens trying to game the system to get into our country illegally will no longer be able to disappear into the United States, where many skip their court dates. Instead, they will wait for an immigration court decision while they are in Mexico. 'Catch and release' will be replaced with 'catch and return.' In doing so, we will reduce illegal migration by removing one of the key incentives that encourages people from taking the dangerous journey to the United States in the first place. This will also allow us to focus more attention on those who are actually fleeing persecution.\nAccording to DHS, the U.S. government will invoke INA \u00a7235(b)(2)(C), which permits the return of certain aliens arriving in the United States on land from a foreign contiguous territory to that foreign territory pending standard removal proceedings. An alien potentially subject to this return provision under the INA is an applicant for admission who \"is not clearly and beyond a doubt entitled to be admitted\" and thus is \"detained for a [standard removal] proceeding.\" INA \u00a7235(b)(2)(C) is explicitly inapplicable to aliens who are determined to be subject to expedited removal.\nOn January 28, 2019, USCIS and DHS's Customs and Border Protection (CBP) issued memoranda on MPP implementation. The CBP memorandum announced that the agency would begin implementing the MPP that day. According to the memorandum, \"MPP implementation will begin at the San Ysidro port of entry [in California], and it is anticipated that it will be expanded in the near future.\" Also on January 28, 2019, CBP issued \"MPP Guiding Principles,\" which included the following: \"To implement the MPP, aliens arriving from Mexico who are amenable to the process \u2026 and who in an exercise of discretion the officer determines should be subject to the MPP process, will be issued [a] Notice to Appear (NTA) and placed into Section 240 removal proceedings. They will then be transferred to await proceedings in Mexico.\" Among the aliens identified as \" not amenable to MPP\" in the CBP guiding principles document are unaccompanied alien children, citizens or nationals of Mexico, aliens processed for expedited removal, and aliens who are more likely than not to face persecution or torture in Mexico. The MPP is in effect as of the date of this report, but it remains unclear how DHS is making decisions about which aliens to process under the protocols. The MPP is being challenged in federal court.\n\n\tRecent Legislative and Presidential Action\n\n\t\tLegislation in the 115th Congress\n\nAsylum-related legislation was considered in the 115 th Congress. Two immigration bills that were the subjects of unsuccessful House floor votes in June 2018\u2014the Securing America's Future Act of 2018 ( H.R. 4760 ) and the Border Security and Immigration Reform Act of 2018 ( H.R. 6136 )\u2014contained similar provisions on asylum. A third asylum-related House bill (the Asylum Reform and Border Protection Act of 2017 ( H.R. 391 )) that included some of the same provisions as the above measures was ordered to be reported by the House Judiciary Committee. In addition, the House and the Senate acted on several other measures containing more limited language on asylum.\n\n\t\t\tH.R. 4760 and H.R. 6136\n\nH.R. 4760 and H.R. 6136 , as considered on the House floor, included various provisions related to asylum. Both bills would have amended the INA \"safe third country\" asylum provision, under which an alien is ineligible to apply for asylum if it is determined that he or she can be removed to a safe country \"pursuant to a bilateral or multilateral agreement\" (see \" Safe Third Country Agreements \"). H.R. 4760 and H.R. 6136 would have eliminated the \"pursuant to a bilateral or multilateral agreement\" language.\nBoth bills would have added a new provision to the INA stating that an alien's asylum status would be terminated if the alien returned to his or her home country (from which the alien sought refuge in the United States) absent changed country conditions. Both bills would have given DHS discretionary authority to waive this provision in individual cases. H.R. 4760 also included an exception to this provision for certain Cubans.\nBoth bills would have amended the INA provisions on frivolous asylum applications (see \" Frivolous or Fraudulent Asylum Claims \"). Current INA provisions make an alien permanently ineligible for immigration benefits if he or she knowingly files a frivolous asylum application after receiving notice of the consequences for doing so. The bills would have changed the notification process. They would have required that a written notice appear on the asylum application advising the applicant of the consequences of filing a frivolous application. The bills would also have added language to the INA explaining that an application is frivolous if \"it is so insufficient in substance that it is clear that the applicant knowingly filed the application solely or in part to delay removal from the United States, to seek employment authorization as an applicant for asylum\" or \"any of the material elements are knowingly fabricated.\"\nH.R. 4760 and H.R. 6136 also would have changed the INA definition of credible fear of persecution, which an alien in expedited removal has to show to be able to pursue an asylum claim. The bills would have added a new requirement to the definition\u2014that \"it is more probable than not that the statements made by, and on behalf of, the alien in support of the alien's claim are true.\" The bills would also have required audio or audio\/visual recording of expedited removal and credible fear interviews.\n\n\t\t\tH.R. 391\n\nH.R. 391 , as ordered to be reported by the House Judiciary Committee, would have amended the INA provisions on safe third country removals, termination of asylum upon return to the home country, frivolous asylum applications, and credible fear similarly to H.R. 4760 and H.R. 6136 . In addition, this bill would have made a number of other changes to the asylum-related language in the INA. Among its asylum-related provisions, H.R. 391 would have clarified the INA definition of a refugee (which asylum applicants also have to satisfy), specifically the \"membership in a particular social group\" ground. It would have defined particular social group , which is not currently defined in statute, to mean a group that is \"defined with particularity,\" is \"socially distinct,\" and has members who share \"a common immutable characteristic.\" \nH.R. 391 would have explicitly provided that the \"membership in a particular social group\" ground would cover individuals who fail or refuse \"to comply with any law or regulation that prevents the exercise of the individual right of that person to direct the upbringing and education of a child of that person (including any law or regulation preventing homeschooling).\" At the same time, the bill sought to prohibit the application of this ground to asylum cases involving criminal gang membership or activity.\nH.R. 391 also included language related to the INA asylum provisions that enumerate certain determinations about an alien that preclude the granting of asylum. One of these determinations is that the alien was \"firmly resettled in another country\" before coming to the United States and requesting asylum. H.R. 391 would have considered the \"firmly resettled\" criterion to be satisfied \"by evidence that the alien can live in such country (in any legal status) without fear of persecution.\"\n\n\t\t\tOther Bills\n\nOther bills that saw action in the 115 th Congress included more limited language on asylum. For example, the Criminal Alien Gang Member Removal Act ( H.R. 3697 ), as passed by the House, would have added a new item to the INA list of determinations that preclude the granting of asylum. It would have made an alien ineligible for asylum if he or she was inadmissible or deportable based on new INA criminal gang membership or criminal gang-related activity grounds that the bill would have established. Under H.R. 3697 , such an alien would also have been exempt from the INA restriction on removing an alien to a country where his or her life or freedom would be threatened based on race, religion, nationality, membership in a particular social group, or political opinion.\nAsylum-related provisions similar to those in H.R. 3697 were included in two other measures\u2014the Michael Davis, Jr. and Danny Oliver in Honor of State and Local Law Enforcement Act ( H.R. 2431 ), as ordered to be reported by the House Judiciary Committee, and the SECURE and SUCCEED Act ( S.Amdt. 1959 to H.R. 2579 ), which failed on a Senate floor vote in February 2018. In addition, these two measures would have made further changes to the INA's asylum-related provisions. They would have made aliens ineligible for asylum if they were inadmissible on a broader array of terrorist-related grounds and would have exempted aliens who were inadmissible on this larger set of terrorist grounds from the general INA restriction on removing an alien to a country where his or her life or freedom would be threatened.\nH.R. 2431 and S.Amdt. 1959 would also have amended the INA provisions on asylee adjustment of status to LPR status. Current INA provisions generally require that applicants for adjustment be admissible to the United States as immigrants, but they grant the Secretary of Homeland Security or the Attorney General broad authority to waive applicable inadmissibility provisions for humanitarian purposes. While there were significant differences among the asylee adjustment of status amendments in S.Amdt. 1959 and H.R. 2431 , both measures would have limited existing DHS\/DOJ inadmissibility waiver authority and added new deportability-related requirements to the INA asylee adjustment of status provisions. \n\n\t\tPresidential Action\n\nCiting constitutional and statutory authority, President Trump issued a presidential proclamation on November 9, 2018, to immediately suspend the entry into the United States of aliens who cross the Southwest border between ports of entry. The proclamation indicates that its entry suspension provisions will expire 90 days after its issuance date or on the date that the United States and Mexico reach a bilateral safe country agreement, whichever is earlier. Also on November 9, 2018, DHS and DOJ jointly issued an interim final rule to bar an alien who enters the United States in contravention of the proclamation from eligibility for asylum. The proclamation and the rule are being challenged in federal court (see \" 2018 Interim Final Rule \"). On February 7, 2019, President Trump renewed the proclamation with the issuance of a new proclamation with the same name.\n\n\tSelected Policy Issues\n\nAsylum is a complex area of immigration law and policy. Much of the recent debate surrounding it has focused on efforts by the Trump Administration to tighten the asylum system. Several key policy considerations about asylum are highlighted below. Some, such as the grounds for granting asylum, have been long-standing issues for policymakers, while others, such as safe third country agreements, have been garnering attention more recently.\n\n\t\tAsylum Backlog\n\nThere has been much discussion about an increasing backlog of asylum applications. The term asylum backlog may suggest that there is a single queue of pending asylum cases. In fact, as discussed above, USCIS and EOIR separately adjudicate affirmative asylum cases and defensive asylum cases, respectively. ( Backlog as used in this report is synonymous with pending caseload .)\nThe numbers of pending USCIS affirmative asylum applications and EOIR defensive asylum cases have varied over the years, impacted by factors including international developments, changes to U.S. immigration laws, and agency resources. In the case of affirmative applications, there have been significant fluctuations in the size of the backlog over the history of the asylum program. Since FY2009, however, backlogs of both USCIS affirmative asylum applications and EOIR cases have increased annually. At the end of FY2009, there were about 6,000 pending affirmative asylum applications at USCIS ; that number stood at about 320,000 at the end of FY2018. \nDuring this same period, the number of pending cases before EOIR increased from about 224,000 at the end of FY2009 to about 786,000 at the end of FY2018. Not all the EOIR cases necessarily involve an asylum claim, however. According to EOIR, as of June 18, 2018, it had about 720,000 pending cases, and some 325,000 of those (about 45%) included asylum applications. \nA variety of arguments are made for prioritizing the reduction of the asylum backlog. These include the need to preserve the integrity of the asylum process and to provide protection in a timely manner to legitimate asylum seekers. More controversial arguments for addressing the backlog center on the perceived need to eliminate an incentive for unauthorized aliens without valid asylum claims to enter the United States and file frivolous applications (see \" Frivolous or Fraudulent Asylum Claims \").\nRegarding the affirmative asylum backlog, USCIS described its January 2018 decision to interview more recent asylum applications before older filings as \"an attempt to stem the growth of the agency's asylum backlog.\" There is debate about whether this is an effective and judicious strategy. While some point to signs that this processing change is reducing the backlog, others argue that it is a wrongheaded approach and that USCIS should instead be dedicating more resources to adjudicating asylum cases. Those in the latter group argue that individuals with older, valid asylum claims will face even longer waits for relief under the last in-first out system. \nDHS efforts to reduce the asylum backlog are also impacting other humanitarian admissions programs. According to the report Proposed Refugee Admissions for Fiscal Year 2019 , \"DHS in FY 2017 and FY 2018 shifted a significant proportion of its refugee officers to processing affirmative asylum applications and conducting credible fear and reasonable fear screenings. This reduced the number of refugee interviews that could be conducted abroad in those years.\" The report also indicates that the Administration plans to \"continue to shift some refugee officers to assist the Asylum Division\" in FY2019 to address the asylum backlog.\nRegarding the backlog of immigration court cases, the director of EOIR testified at an April 2018 Senate hearing that the agency was addressing challenges that had contributed to the backlog. In his prepared testimony, he cited the challenges of \"declining case completions, protracted hiring times for new immigration judges, and the continued use of paper files.\" \nIn June 2018 remarks at EOIR, Attorney General Sessions characterized the large and growing backlog of immigration court cases as unacceptable and outlined steps being taken to reduce it. In his prepared remarks, he asked each EOIR judge to complete at least 700 cases annually, which he described as \"about the average.\" He said, \"Setting this expectation is a rational management policy to ensure consistency, accountability, and efficiency in our immigration court system.\" He also explained that additional immigration judges were being hired and that DOJ was working with DHS to \"deploy judges electronically and by video-teleconference.\" \nSome question whether the approach being taken by DOJ to reduce the EOIR backlog\u2014particularly the annual case completion goal\u2014is advisable and will succeed. For example, Ashley Tabaddor, president of the National Association of Immigration Judges, has expressed concern about the ability of immigration judges to adjudicate asylum cases within the time frame dictated by that yearly goal.\n\n\t\tGrounds for Asylum\n\nThe INA definition of a refugee identifies five persecution grounds as the bases for receiving refugee status or asylum: race, religion, nationality, membership in a particular social group, and political opinion. It provides no definitions of these terms. As noted, however, it does state that an individual who has been forced to have an abortion or undergo sterilization or has been persecuted for resistance to a coercive population control program is to be considered to have been persecuted on the basis of political opinion. Legislation considered in the 115 th Congress would have further amended the INA refugee definition to provide that an individual who has been persecuted for failure to comply with or resistance to any law or regulation that prevents homeschooling is to be considered to have been persecuted on the basis of membership in a particular social group (see \" H.R. 391 \").\nIn June 2018, Attorney General Sessions issued a decision regarding the adjudication of asylum claims based on the \"membership in a particular social group\" ground. In the past, asylum had been granted to certain victims of domestic violence based on a finding of persecution or a well-founded fear of persecution on account of \"membership in a particular social group.\" Attorney General Sessions vacated a Board of Immigration Appeals' 2016 decision in one of these cases and remanded the case to the immigration judge for further proceedings, arguing that the appropriate legal standards had not been applied. He reached the following conclusion about asylum cases involving private criminal activity (footnotes excluded):\nGenerally, claims by aliens pertaining to domestic violence or gang violence perpetrated by non-governmental actors will not qualify for asylum. While I do not decide that violence inflicted by non-governmental actors may never serve as the basis for an asylum or withholding application based on membership in a particular social group, in practice such claims are unlikely to satisfy the statutory grounds for proving group persecution that the government is unable or unwilling to address. The mere fact that a country may have problems effectively policing certain crimes\u2014such as domestic violence or gang violence\u2014or that certain populations are more likely to be victims of crime, cannot itself establish an asylum claim.\nThe decision further noted that because claims by aliens pertaining to domestic violence or gang violence perpetrated by nongovernmental actors generally will not qualify for asylum, they would also generally not meet the threshold for a finding of a credible fear of persecution (see \" Inspection of Arriving Aliens \").\nIn July 2018, USCIS issued a policy memorandum to provide guidance to its asylum officers in light of the Attorney General's decision. Highlighting required findings about the home government in cases involving private violence, the memorandum stated:\nFew gang-based or domestic-violence claims involving particular social groups defined by the members' vulnerability to harm may merit a grant of asylum or refugee status\u2014or pass the \"significant possibility\" test in credible fear screenings \u2026\u2014because an applicant must prove, or establish a significant possibility that, his or her government is unable or unwilling to protect him or her\u2026. Again, the home government must either condone the behavior or demonstrate a complete helplessness to protect victims of such alleged persecution.\nFollowing issuance of the Attorney General's decision, immigration advocates expressed worry that the decision and the related USCIS policy memorandum could have wide-sweeping consequences, particularly for asylum seekers from Central America. In a letter to the New York Times , a counsel with the Tahirih Justice Center, which advocates for immigrant women and girls fleeing gender-based violence, wrote, \"As a result of that ruling, and the subsequent policy guidance, immigration officers may now feel emboldened to deny asylum to women fleeing domestic violence, even under the most life-threatening circumstances.\"\nOn December 19, 2018, a federal district court judge in Washington, DC, ruled on a case challenging the policies regarding credible fear of persecution determinations set forth in former Attorney General Sessions' decision and the USCIS policy memorandum. The judge permanently enjoined the U.S. government from continuing some of the new policies.\nS ome who a re concerned about the potential impact of the former Attorney General's decision on women seeking asylum have discussed the possibility of amending the underlying INA definition of a refugee to explicitly address gender-based asylum claims. Among the l egislative options that have been put forward a re to add \"gender\" to the list of persecution gro unds or \"to define the phrase ' particular social group' by amending the law to include a non-exclusive list of (currently) common gender-based asylum claims, including domestic violence.\"\n\n\t\tCredible Fear of Persecution Threshold\n\nSeparate from the 2018 decision by former Attorney General Sessions and the related USCIS policy memorandum discussed in the preceding section, the credible fear of persecution threshold has been a focus of attention recently as the number of individuals being screened for and found to have a credible fear has grown. Individuals who are found to have a credible fear may remain in the United States while their court case proceeds.\nAs noted, the INA asylum provisions define credible fear of persecution to mean \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" House bills considered in the 115 th Congress would have added a new requirement to this definition\u2014that \"it is more probable than not that the statements made by, and on behalf of, the alien in support of the alien's claim are true.\"\nUSCIS Director Francis Cissna has endorsed a tightening of the credible fear of persecution standard. In prepared testimony for a May 2018 House hearing on border security, he stated, \"The simple reality is that those who wish to gain access to or remain in the United States know they can likely effect that access and then delay their removal by simply saying the 'magic words' of 'fear' or 'asylum.' The standard for credible fear screenings at the border has been set so low that nearly everyone meets it.\"\nOthers disagree that the credible fear standard should be raised. In a 2018 policy brief, the American Immigration Lawyers Association (AILA) argues that \"the lower threshold for credible fear determinations is necessary precisely because asylum seekers arriving at the border are typically detained, traumatized, and have limited access to counsel and documentation to support their claims.\"\n\n\t\tFrivolous or Fraudulent Asylum Claims\n\nThere have been concerns about frivolous asylum applications since the establishment of the U.S. asylum program. As noted, the 1980 interim regulations made reference to \"non-frivolous\" applications, and IIRIRA amended the INA to permanently bar an individual who knowingly files a frivolous asylum application from receiving immigration benefits. Under current regulations, an asylum application is considered \"frivolous\" for purposes of the INA benefit bar \"if any of its material elements is deliberately fabricated.\" These regulations also provide that for purposes of the bar, \"a finding that an alien filed a frivolous asylum application shall not preclude the alien from seeking withholding of removal.\"\nThe issue of frivolous asylum claims was highlighted by Attorney General Sessions in 2017 remarks, in which he described the asylum system as being \"subject to rampant abuse and fraud.\" He further said, \"And as this system becomes overloaded with fake claims, it cannot deal effectively with just claims.\" Similarly, in his May 2018 House testimony, USCIS Director Cissna stated, \"The integrity of our entire immigration system is at risk because frivolous asylum applications impede our ability to help people who really need it.\" \nSeveral House bills considered in the 115 th Congress sought to tighten language in the INA on frivolous asylum claims. In his May 2018 testimony, USCIS Director Cissna called for legislation to address the problem of frivolous claims that would, among other provisions, \"impos[e] and enforce[e] penalties for the filing of frivolous asylum applications.\"\nA key point of contention in the current debate about frivolous or fraudulent asylum claims is the scope of the problem. According to a researcher at the immigration-restrictionist Center for Immigration Studies, \"Most asylum claims nowadays, whether in Europe or the United States, are not genuine. Migrants are more and more using the asylum ticket to gain entry into a country and stay.\"\nOther experts, such as Law Professor Lindsay M. Harris, reach different conclusions about the prevalence of fraud in recent asylum applications: \"One of the humanitarian crises producing refugees happens to be south of our border, in Central America, and this accounts for the exponential increase in asylum claims and individuals seeking protection in the U.S. through the credible fear system, rather than a sudden increase in fraudulent claims.\"\n\n\t\tEmployment Authorization\n\nUnder current law, an asylum seeker who is not otherwise eligible for employment authorization cannot be granted such authorization until 180 days after filing an application for asylum. In general, under DHS regulations, an asylum applicant cannot submit an application for employment authorization and an employment authorization document (EAD) until 150 days after a complete asylum application has been received. There is no fee for an asylum applicant's initial application for employment authorization. Renewal applications are subject to standard fees.\nAlthough there seems to be general agreement that asylum seekers should be eligible for employment authorization at some point, aspects of this policy have long been debated. For example, for more than 20 years, some have argued that the availability of employment authorization creates an incentive for individuals to apply for asylum solely to be able to work legally in the United States. In his prepared testimony for the May 2018 House hearing on border issues, USCIS Director Cissna stated, \"While the number of mala fide claims is difficult to estimate, experience from the 1990s indicates that a significant amount of the growth in receipts since FY 2014 may be linked to individuals pursuing work authorization and not necessarily asylum status.\"\nOthers dismiss the idea that asylum seekers act in response to particular U.S. policies, arguing that they are motivated by desperate circumstances. Commenting on Central American asylum seekers, a spokesperson for the U.N. High Commissioner for Refugees said, \"People are leaving because they are suffering from high levels of violence from gangs and other organized criminal groups.\u2026 This flow of families from Central America will not stop because if the root causes are still there these people will keep coming to the U.S. or to other countries.\"\nThe complex system set up to track when an asylum seeker has reached the 180-day point for employment authorization purposes\u2014known as the asylum EAD clock \u2014has also been controversial. There are various events that stop the asylum EAD clock. USCIS and EOIR characterize these as \"delays requested or caused by an applicant while his or her asylum application is pending with USCIS and\/or EOIR\" (e.g., the applicant's \"failure to appear at an interview or fingerprint appointment\" or \"the applicant or his or her attorney asks for additional time to prepare the case\"). Over the years, immigration advocacy groups have been critical of clock-related USCIS and EOIR policies and actions.\n\n\t\tVariation in Immigration Judges' Asylum Decisions\n\nIn November 2017, the Transactional Records Access Clearinghouse (TRAC) published the report Asylum Outcome Continues to Depend on the Judge Assigned , which examined asylum decisions of judges on the same immigration court. It was based on combined data from FY2012 through FY2017 for judges who decided at least 100 asylum cases during this six-year period. Among its findings, the report identified the Newark and San Francisco Immigration Courts as having the greatest judge-to-judge differences in asylum cases decided during that time. For the San Francisco court, for example, it stated that \"the odds of denial varied from only 9.4 percent all the way up to 97.1 percent depending upon the judge.\" The TRAC analysis assumes that \"when individual judges [on the same court] handle a sufficient number of asylum requests, random case assignment will result in each judge being assigned a roughly equivalent mix of 'worthy' cases.\" It, thus, posits, \"any large differences in the denial rates of individual judges are unlikely to be the result of differences in the nature of the incoming cases. Instead, they are likely to reflect the personal perspective that each judge brings to the bench.\"\nTRAC first reported on differences in asylum decisions by immigration judges nationwide based on an analysis of asylum cases decided by judges from FY1994 through early FY2005. Published in July 2006, this TRAC report found a \"great disparity in the rate at which individual immigration judges declined the applications.\" Seemingly taking issue with the TRAC analysis but not mentioning it by name, a November 2007 EOIR fact sheet, \"Asylum Variations in Immigration Court,\" stated:\nAsylum adjudication does not lend itself well to statistical analysis. Each asylum application is adjudicated on a case-by-case basis, and each has many variables that need to be considered by an adjudicator. It is therefore important that any statistical analysis acknowledge these variables and not draw comparisons between substantially different cases.\nThe U.S. Government Accountability Office (GAO) examined variations in the outcomes of asylum cases in reports issued in 2008 and 2016. The 2008 report, which was based on an analysis of asylum case data from FY1994 through April 2007, found that \"within immigration courts, there were pronounced differences in grant rates across immigration judges.\" While acknowledging the limits of its analysis, GAO concluded that \"the size of the disparities in asylum grant rates creates a perception of unfairness in the asylum adjudication process within the immigration court system.\"\nGAO analyzed EOIR data for FY1995 through FY2014 for its 2016 follow-up report. Although it was unable to control for \"the underlying facts and merits of individual asylum applications,\" GAO maintained that the available data allowed it to compare asylum outcomes across immigration courts and immigration judges. It estimated that for the May 2007-FY2014 period since its 2008 report, \"the affirmative and defensive asylum grant rates would vary by 47 and 57 percentage points, respectively, for the same representative applicant whose case was heard by different immigration judges.\"\n\n\t\tSafe Third Country Agreements\n\nUnder the INA, an alien is ineligible to apply for asylum in the United States if he or she can be removed, pursuant to a bilateral or multilateral agreement, to a third country where the \"alien's life or freedom would not be threatened on account of race, religion, nationality, membership in a particular social group, or political opinion, and where the alien would have access to a full and fair procedure for determining a claim to asylum or equivalent temporary protection.\" \nThe United States and Canada signed a safe third country agreement in 2002, which went into effect in 2004. Under the agreement, asylum seekers must request protection in the first of the two countries they arrive in, unless they qualify for an exception. Under DHS regulations, a USCIS asylum officer must determine whether an alien arriving in the United States at a U.S.-Canada land border port of entry seeking asylum is subject to removal to Canada in accordance with the U.S.-Canada safe third country agreement.\nThe Trump Administration has had preliminary discussions with Mexico about a possible safe third country agreement. According to an unidentified senior DHS official, \"We believe the flows [of Central Americans into the United States] would drop dramatically and fairly immediately\" if a U.S.-Mexico safe country agreement went in effect. \nHuman Rights First, an advocacy organization, opposes such an agreement. The group found that Mexico was not a safe third country in 2017 and indicated in a July 2018 press release that that was still the case: \"Since [last year], the dangers facing refugees and migrants in Mexico have escalated. Recent reports confirm that Mexican authorities continue to improperly return asylum seekers to their countries of persecution and that the deficiencies in the Mexican asylum system have grown.\"\nTaking a different approach, House bills considered in the 115 th Congress would have amended the INA safe third country asylum provision to eliminate the \"pursuant to a bilateral or multilateral agreement\" language, presumably to provide for removals to a third country without a bilateral agreement.\n\n\tConclusion\n\nThe asylum provisions in the INA are unusual in providing a standard mechanism for eligible unauthorized aliens in the United States to apply for a legal immigration status. This aspect of asylum also serves to make this form of relief particularly controversial, especially at times when large numbers of asylum seekers are arriving in the United States. The high volume of asylum cases has elicited policy responses from the Trump Administration, as described in this report. In October 2018 remarks at an immigration conference, USCIS Director Cissna offered context for DHS's and DOJ's asylum-related actions from the Administration's perspective when he referenced \"challenges associated with surges at the U. S. southern border, where migrants know that they can exploit a broken system to enter the U.S., avoid removal, and remain in the country.\" While the Administration maintains that its policies adhere to the INA and are necessary to preserve the integrity of the immigration system, others argue that it is tightening the asylum process in contravention of the law. It remains to be seen whether the Administration will continue to try to reshape U.S. asylum policy and whether Congress will take action, as it has at times in the past, to make legislative changes to the asylum system.\nAppendix A. Affirmative Asylum Applications\n Table A-1 provides the underlying data for Figure 1 on new affirmative asylum applications filed annually with USCIS since FY1995. \n Table A-2 expands on the data in Table A-1 to show the top 10 nationalities filing new affirmative asylum applications annually since FY2007. For each of the top 10 nationalities for each year, Table A-2 provides a rank and a percentage of all applications that were filed by applicants of that nationality. The table also includes annual data on the total number of applications filed by all applicants (the latter totals match the data in Table A-1 ). \nAs shown in Table A-2 , the top four nationalities filing new affirmative asylum applications in FY2007 (China, Haiti, Mexico, and Guatemala) remained in the top 10 throughout the period, with China holding the top spot in all years except FY2017 and FY2018. Between FY2009 and FY2012, Chinese nationals filed one-third of all new affirmative asylum applications each year. In FY2017 and FY2018, however, China's rank fell to 2 nd and 4 th , respectively. In each of those two years, Venezuelans filed more new affirmative asylum applications than nationals of any other country, accounting for one-fifth of all applications filed in FY2017 and more than a quarter of the total in FY2018. Since FY2015, nationals of Venezuela and four other Latin American countries (Guatemala, El Salvador, Mexico, and Honduras) have accounted for five of the top six nationalities filing new affirmative asylum applications each year.\nAppendix B. USCIS Asylum Decisions and Credible Fear Findings \n Table B-1 provides the underlying data for Figure 2 on USCIS decisions on affirmative asylum applications issued annually from FY2009 through FY2017. It also includes an additional small outcome category (Cases Dismissed). These are cases where the applicant did not appear for fingerprinting\/ biometrics collection. For the cases referred to an immigration judge (which involve applicants without lawful status), Table B-1 distinguishes among three mutually exclusive subcategories: cases that were interviewed by USCIS; cases that were interviewed by USCIS where the applicant did not meet the filing deadline; and cases that were not interviewed by USCIS. (The Referrals \"Total\" column in Table B-1 matches the Referrals data displayed in Figure 2 .)\nIn addition to deciding affirmative asylum cases, USCIS is tasked with assessing the credible fear of persecution claims made by individuals in expedited removal. Table B-2 and Table B-3 provide the underlying credible fear-related data for Figure 4 . Table B-2 contains data on referrals of credible fear claims to USCIS and USCIS completions of these cases.\n Table B-3 provides breakdowns of the Table B-2 \"Completions\" data by case outcome. It also provides the percentage of the completed cases in which credible fear was found.\nAppendix C. Defensive Asylum Applications\nThe \"Total Applications\" column in Table C-1 provides the underlying data for Figure 3 on defensive asylum applications filed annually since FY2008. In addition, Table C-1 provides data on the two components of that total: (1) asylum applications originally filed as affirmative applications with USCIS (column 2), and (2) asylum applications originally filed as defensive applications with EOIR (column 3) (see \" Defensive Asylum \"). As shown in Table C-1 , the growth in the total number of defensive asylum applications filed in recent years prior to FY2018 has been driven mainly by an increase in asylum applications first filed in immigration court.\nAppendix D. EOIR Asylum Decisions\nEOIR immigration judges decide defensive asylum cases. An asylum application is defensive when the applicant is in standard removal proceedings in immigration court (see \" Defensive Asylum \"). Table D-1 provides the underlying data for Figure 5 on defensive asylum cases decided annually since FY2009. \n Table D-2 provides data on a subset of EOIR asylum decisions involving credible fear claims. It is limited to decisions in defensive asylum cases that originated with an individual receiving a positive credible fear of persecution finding from USCIS.","output":"Asylum is a complex area of immigration law and policy. While much of the recent debate surrounding asylum has focused on efforts by the Trump Administration to address asylum seekers arriving at the U.S. southern border, U.S. asylum policies have long been a subject of discussion.\nThe Immigration and Nationality Act (INA) of 1952, as originally enacted, did not contain any language on asylum. Asylum provisions were added and then revised by a series of subsequent laws. Currently, the INA provides for the granting of asylum to an alien who applies for such relief in accordance with applicable requirements and is determined to be a refugee. The INA defines a refugee, in general, as a person who is outside his or her country of nationality and is unable or unwilling to return to that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.\nUnder current law and regulations, aliens who are in the United States or who arrive in the United States, regardless of immigration status, may apply for asylum (with exceptions). An asylum application is affirmative if an alien who is physically present in the United States (and is not in removal proceedings) submits an application to the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS). An asylum application is defensive when the applicant is in standard removal proceedings with the Department of Justice's (DOJ's) Executive Office for Immigration Review (EOIR) and requests asylum as a defense against removal. An asylum applicant may receive employment authorization 180 days after the application filing date.\nSpecial asylum provisions apply to aliens who are subject to a streamlined removal process known as expedited removal. To be considered for asylum, these aliens must first be determined by a USCIS asylum officer to have a credible fear of persecution. Under the INA, credible fear of persecution means that \"there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.\" Individuals determined to have a credible fear may apply for asylum during standard removal proceedings.\nAsylum may be granted by USCIS or EOIR. There are no numerical limitations on asylum grants. If an alien is granted asylum, his or her spouse and children may also be granted asylum, as dependents. A grant of asylum does not expire, but it may be terminated under certain circumstances. After one year of physical presence in the United States as asylees, an alien and his or her spouse and children may be granted lawful permanent resident status, subject to certain requirements.\nThe Trump Administration has taken a variety of steps that would limit eligibility for asylum. As of the date of this report, legal challenges to these actions are ongoing. For its part, the 115th Congress considered asylum-related legislation, which generally would have tightened the asylum system. Several bills contained provisions that, among other things, would have amended INA provisions on termination of asylum, credible fear of persecution, frivolous asylum applications, and the definition of a refugee.\nKey policy considerations about asylum include the asylum application backlog, the grounds for granting asylum, the credible fear of persecution threshold, frivolous asylum applications, employment authorization, variation in immigration judges' asylum decisions, and safe third country agreements."}
{"id":"crs_R45529","pid":"crs_R45529_0","input":"\tOverview of Recent Tariff Actions\n\n\t\tWhat are tariffs and what are average U.S. tariff rates?\n\nTariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the President to modify tariffs and other trade restrictions under certain circumstances. To date, President Trump has proclaimed increased tariffs under three different authorities. The President has also proclaimed other import restrictions, including quotas and tariff-rate quotas under these authorities, but the majority of the actions are in the form of ad-valorem tariff increases.\nThe United States played a prominent role in establishing the global trading system after World War II and has generally led and supported global efforts to reduce and eliminate tariffs since that time. Through both negotiated reciprocal trade agreements and unilateral action, countries around the world, including the United States, have reduced their tariff rates over the past several decades, some by considerable margins. According to the World Trade Organization (WTO), U.S. most-favored-nation (MFN) applied tariffs, the tariff rates the United States applies to members of the WTO\u2014nearly all U.S. trading partners\u2014averaged 3.4% in 2017. Globally tariff rates vary, but are also generally low. For example, the top five U.S. trading partners all have average tariff rates below 10%: the European Union (EU) (5.1%), China (9.8%), Canada (4.0%), Mexico (6.9%), and Japan (4.0%). Despite these low averages, most countries apply higher rates on a limited number of imports, often agricultural goods.\n\n\t\tWhat are the goals of the President's tariff actions and why are these actions of note?\n\nAs discussed below (see \" What are Section 201, Section 232, and Section 301? \") the authorities under which President Trump has increased tariffs on certain imports allow for import restrictions to address specific concerns. Namely, these authorities allow the President to take action to temporarily protect domestic industries from a surge in fairly traded imports (Section 201), to protect against threats to national security (Section 232), and to respond to unfair trade practices by U.S. trading partners (Section 301). In addition to addressing these specific concerns, the President also states he is using the tariffs to pressure affected countries into broader trade negotiations to reduce tariff and nontariff barriers, such as the announced trade agreement negotiations with the EU and Japan, and to lower the U.S. trade deficit.\nPresident Trump's recently imposed tariff increases are of note because\nthey are significantly higher than average U.S. tariffs (most of the increases are in the range of 10-25%), and have resulted in retaliation of a similar magnitude by some of the countries whose exports to the United States have been subject to the tariff increases; they affect approximately 12% of annual U.S. imports and 8% of U.S. exports, magnitudes that could grow if additional proposed or pending actions are carried out, or decrease if additional negotiated solutions are achieved; they represent a significant shift from recent U.S. trade policy as no President has imposed tariffs under these authorities in nearly two decades; and they have potentially significant implications for U.S. economic activity, the U.S. role in the global trading system, and future U.S. trade negotiations. \n\n\t\tWhat are Section 201, Section 232, and Section 301?\n\nSection 201, Section 232, and Section 301 refer to U.S. trade laws that allow presidential action, based on agency investigations and other criteria. Each allows the President to restrict imports to address specific concerns. The focus of these laws generally is not to provide additional sources of revenue, but rather to alter trading patterns and address specific trade practices. The issues the laws seek to address are noted in italics below.\n\n\t\tWhat tariff actions has the Administration taken or proposed to date under these authorities?\n\nThe Trump Administration has imposed import restrictions under the three authorities noted above, affecting approximately $282 billion in U.S. annual imports, based on 2017 import values ( Figure 1 ). In addition, the President has initiated Section 232 investigations on U.S. imports of motor vehicles and uranium, which could result in increased tariffs on up to $361 billion and $2 billion of U.S. imports, respectively. The President has also suggested he may increase tariffs under Section 301 authorities on an additional $267 billion of U.S. imports from China, depending on the results of ongoing bilateral talks.\n\n\t\tWhich countries are affected by the tariff increases?\n\nThe import restrictions imposed under Section 201 and Section 232 apply to U.S. imports from most countries. The Section 301 tariffs apply exclusively to U.S. imports from China.\n\n\t\tWhy is China a major focus of the Administration's action?\n\nChina is a major focus of a Section 301 investigation and related tariff measures largely due to concerns over its intellectual property rights (IPR) and forced technology transfer practices, and the size of its bilateral trade deficit with the United States. China's government policies on technology and IPR have been longstanding U.S. concerns and are cited by U.S. firms as among the most challenging issues they face in doing business in China. Moreover, China is considered to be the largest global source of IP theft. On March 22, 2018, President Trump signed a presidential memorandum on U.S. actions related to the Section 301 investigation. Described by the White House as a response to China's \"economic aggression,\" the memorandum identified four broad Chinese IP-related policies to justify U.S. action under Section 301, stating\nChina uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies; China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies; China directs and facilitates investments and acquisitions, which generate large-scale technology transfer; and China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information. \nThe USTR estimated that such policies cost the U.S. economy at least $50 billion annually. During his announcement of the Section 301 action, President Trump also stated that China should reduce the bilateral trade imbalance (which at $376 billion in 2017 for goods trade was the largest U.S. bilateral trade imbalance) and afford U.S. \"reciprocal\" tariff rates.\n\n\t\tHas the Administration engaged in negotiations with other countries with regard to these measures?\n\nYes. The Administration negotiated quota arrangements rather than imposing Section 232 tariffs on steel imports from Brazil and South Korea, and Section 232 tariffs on both steel and aluminum imports from Argentina. Although the steel and aluminum tariffs were not addressed in the proposed modifications to the North American Free Trade Agreement (NAFTA), renamed the U.S.-Mexico-Canada Agreement (USMCA), USTR Robert Lighthizer stated the three countries are discussing alternative measures. Side agreements to the USMCA include specific language exempting light trucks and 2.6 million passenger vehicle imports annually each from Canada and Mexico from future U.S. import restrictions under Section 232, as well as $32.4 billion and $108 billion of auto parts imports, respectively.\nThe Administration also informally agreed not to move forward with additional Section 232 import duties on U.S. motor vehicle and parts imports from the European Union (EU) and Japan while broader bilateral trade negotiations are ongoing. Discussions on the steel and aluminum tariffs are also to be part of both negotiations.\nAdditionally, the Administration has participated in talks with China regarding the trade practices that are the subject of the Section 301 tariffs. Negotiations in May 2018 initially appeared to resolve the trade conflict, but were ultimately unsuccessful. After further tariff actions by both sides, on December 1, 2018, Presidents Trump and Xi met at a private dinner during the G-20 Summit in Argentina. According to a White House statement, the two leaders agreed to begin negotiations immediately on \"structural changes\" with regard to IP and technology issues (related to the Section 301 case). The leaders also agreed to address agriculture and services issues. The parties set a goal of achieving an agreement in 90 days. In addition, the White House reported that President Xi agreed to make \"very substantial\" purchases of U.S. agricultural, energy, and industrial products. In exchange, President Trump agreed to suspend the planned Stage 3 Section 301 tariff rate increases that were scheduled to take effect on January 1, 2019, but stated that the increases would be implemented if no agreement was reached in 90 days (by March 1, 2019). High level talks continue, and on January 30-31, 2019, Chinese Vice Premier Liu met with President Trump and other U.S. officials, during which China pledged to purchase 5 million metric tons of U.S. soybeans. On January 31, President Trump indicated that a final resolution of the trade dispute would not be achieved until he met with President Xi. Reports suggest the trade talks may be extended beyond the March deadline.\nPresident Trump has made clear that the Administration is using these various import restrictions as a tool to get countries to negotiate on other issues. At the announcement of the proposed USMCA, the President stated \"without tariffs, we wouldn't be talking about a deal, just for those babies out there that keep talking about tariffs. That includes Congress\u2014'Oh, please don't charge tariffs.' Without tariffs, you wouldn't be standing here.\"\nThe United States has also engaged or will engage in consultations at the WTO with some trading partners affected by the tariffs. Such consultations are a required first step in dispute settlement proceedings, which U.S. trading parties and the United States in turn, have initiated in response to the U.S. actions and trading partner retaliations. (See \" What dispute-settlement actions have U.S. trading partners taken? \" and \" What dispute-settlement actions has the United States taken? \")\n\n\t\tHave U.S. trading partners taken or proposed retaliatory trade actions to date?\n\nYes. Some U.S. trading partners subject to the additional U.S. import restrictions have taken or announced proposed retaliations against each of the three U.S. actions. Since April 2018, a number of retaliatory tariffs have been imposed on U.S. goods accounting for $126 billion of U.S. annual exports, using 2017 export values ( Figure 2 ).\n\n\t\tHas Congress responded to the Administration's tariff actions?\n\nYes. The tariffs impact various stakeholders in the U.S. economy, prompting both support and concern from different Members of Congress. To date, Congress has conducted oversight hearings on the Section 232 and 301 investigations and examined the potential economic and broader policy effects of the tariffs. Many Members have expressed concern over what they view as an expansive use of the delegated tariff authority under Section 232, and some Members have introduced legislation in the 115 th and 116 th Congresses that would amend the current authority in a number of ways, including requiring a greater congressional role before tariffs may be imposed. All actions continue to be actively debated, as some other Members see a need for expanded presidential authority to ensure more reciprocal tariff treatment by U.S. trading partners and have introduced legislation in the 116 th Congress to that effect. Senator Grassley, chairman of the Senate Finance Committee announced that he intends to \"review the President's use of power under Section 232 of the Trade Act of 1962\" during the 116 th Congress. \n\n\t\tHas the United States entered into a \"trade war\" and how does this compare to previous U.S. trade disputes?\n\nThere is no set definition of what may constitute a trade war. Beginning in 2017, the United States and some of its major trading partners imposed escalating import restrictions, particularly tariffs, on certain traded products. Some contend that with these actions\u2014or threat thereof\u2014the United States has embarked upon a full-scale \"trade war.\" Although the scale and scope of these recent unilateral U.S. tariff increases are unprecedented in modern times, tensions in international trade relations are not uncommon. Over the last 100 years, the United States has been involved in a number of significant or \"controversial\" trade disputes. Past disputes, however, were more narrowly focused across products and trading partners, and generally temporary. Most were settled, and when unresolved, they were contained or defused through bilateral and multilateral negotiations. From the early 20 th century until this year, one dispute resulted in a worldwide tit-for-tat escalation of tariffs: the trade dispute ignited by the U.S. Tariff Act of 1930, commonly known as the \"Smoot-Hawley\" Tariff Act.\nThe United States has imposed unilateral, restrictive trade measures in the past, but rarely before attempting to resolve its trade-related concerns through negotiations. The United States has, for the most part, engaged with trading partners in bilateral and multilateral fora to manage frictions over such issues and to achieve expanded market access for U.S. firms and farms and their workers. In particular, the United States has generally sought dispute resolution through the multilateral forum provided by the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO. As part of the dispute settlement process, WTO members may seek authorization to retaliate if trading partners maintain measures determined to be inconsistent with WTO rules.\n\n\t\tWhen was the last time a President acted under these laws?24\n\nPresidential action under these trade laws has varied since Congress enacted them in the 1960s and 1970s, but since 2002 past Presidents generally declined to impose trade restrictions under these laws. The use of Sections 201 and 301, which address some issues also covered by trade rules established at the WTO, has decreased since the creation of that institution in 1995 and its dispute-settlement system, considered more rigorous and effective than the dispute-settlement system under its predecessor, the GATT. The use of Section 232, which focuses on national security concerns and was created during the Cold War, has also declined and has been infrequently used over several decades.\n\n\t\tHave the tariff measures resulted in legal challenges domestically or with regard to existing international commitments?\n\nYes. The President's actions have resulted in legal challenges in the U.S. domestic court system and in the dispute settlement system at the WTO. Specifically, the Section 232 actions on steel and aluminum have been challenged in cases before the U.S. Court of International Trade. Severstal Export Gmbh, a U.S. subsidiary of a Russian steel producer, has challenged whether the Administration's actions were appropriately based on national security considerations, as required by statute. The American Institute for International Steel (AIIS), a trade association opposed to tariffs, has challenged the constitutionality of Congress' delegation of authority to the President under Section 232. Most recently, U.S. importers of Turkish steel have initiated a case arguing that the President's increase of the Section 232 steel tariffs from 25% to 50% on U.S. imports from Turkey did not have a sufficient national security rationale, did not follow statutory procedural mandates, and violates a due process law. At the WTO, U.S. trading partners have initiated dispute settlement proceedings with regard to the President's actions under Section 201, Section 232, and Section 301. For more information, see the section on \" What dispute-settlement actions have U.S. trading partners taken? \"\n\n\t\tDo these actions have broader economic and policy implications?\n\nMany analysts are concerned that the U.S. measures threaten the rules-based global trading system that the United States helped to establish following World War II. The Trump Administration argues that the unilateral measures are justified under existing multilateral trade rules and as a response to violations of existing commitments under the WTO by other trading partners, particularly China. In contrast, U.S. trading partners contend that the Administration's unilateral actions undermine these existing commitments. They argue that the United States should make use of existing multilateral dispute settlement procedures to address concerns in the trading system rather than resorting to unilateral action. Supporters of the Administration's tariff actions argue that the tariffs and other import restrictions are a useful tool to protect domestic U.S. industries and incentivize U.S. trading partners to enter negotiations, in which they would otherwise have little interest in engaging. Some, including the Administration, also argue that the Section 301 actions address issues not adequately covered by existing WTO rules. \nSome observers also raise concerns over the scale of the Administration's actions, which have led to import restrictions imposed on nearly all U.S. trading partners, including some close allies such as Canada, Japan, Mexico, South Korea, and the EU. These groups agree with the U.S. concerns over specific trade practices by China, but support a more targeted approach that includes cooperation between the United States and other countries that share U.S. concerns over violations to and shortcomings of the existing international trading system. While the United States is involved in multilateral discussions at various levels on potential reforms to the global trading system, specifically the WTO, some analysts argue ongoing tension resulting from the U.S. unilateral actions could hamper these efforts.\nThe complex nature of international commerce, including its highly integrated global supply chains, makes difficult the accurate prediction of the effects of broad tariff actions on specific industrial sectors or individual companies. For example, the Administration imposed Section 201 safeguard tariffs on washing machines to support domestic manufacturers of washing machines, but these same domestic manufacturers now argue that subsequent Section 232 tariffs on steel and aluminum have led to increases in their input costs and caused further economic harm. U.S. domestic auto production, which the Trump Administration may seek to encourage through additional Section 232 tariffs now under investigation, is similarly negatively affected by the existing steel and aluminum tariffs. Retaliation in the form of increased tariffs on U.S. exports further complicates the economic outcome of the unilateral U.S. actions. Many companies also report that uncertainty resulting from the unpredictable nature of the U.S. and retaliatory actions has made long-term planning difficult; this may be putting a drag on U.S. and global economic activity. Others, including some domestic producers, argue that action was needed to prevent more injurious trade practices from occurring and to eventually achieve broader agreement on reducing tariff barriers and establishing new trading rules.\n\n\t\tIs further escalation and retaliation possible?\n\nYes. Two pending Section 232 investigations on U.S. motor vehicle and parts imports and uranium are underway, which could lead to future import restrictions. Additionally, the scheduled increase in the tariff rate on the third tranche of Section 301 tariffs on U.S. imports from China could occur in the near future, as well as potential new tariffs on additional U.S. imports from China, absent a trade agreement to resolve the core issues that are the subject of current bilateral trade discussions.\nU.S. motor vehicle and parts imports totaled $361 billion in 2017, according to the U.S. Census Bureau. These goods are among the top U.S. imports supplied by a number of U.S. trading partners, including Canada, Mexico, Japan, South Korea, and the EU, making an increase in U.S. tariffs that applies to these countries economically significant and likely to result in retaliatory action. Canada and Mexico are currently exempt from future auto 232 tariffs for a limited amount of imports under the proposed USMCA agreement. With respect to the EU and Japan, the Administration has notified Congress of its intent to negotiate bilateral trade agreements and informally agreed to refrain from imposing new auto tariffs while those talks progress. South Korea is the only major U.S. auto supplier without a formal or informal assurance from the Trump Administration that it will be exempt from Section 232 auto tariffs, despite recently implemented modifications to the U.S.-South Korea (KORUS) free trade agreement (FTA). A delay in ratification and implementation of the proposed USMCA, or a breakdown in talks with the EU and Japan could make an escalation on this front more likely.\nAs noted, President Trump has warned that he will follow through with his threat to increase Section 301 tariffs on $200 billion worth of products from China from 10% to 25% if a trade agreement is not reached by March 1, 2019, or potentially soon thereafter. He has also threatened increased tariffs on an additional $267 billion worth of imported Chinese products. China imports far less from the United States than it exports and therefore could not match U.S. tariffs on a comparable level of U.S. products, but it could increase the level of the tariffs on products that have already been impacted by retaliatory Section 301 tariffs, in addition to raising tariffs on U.S. products that have not yet been subject to retaliatory tariffs. Further, the Chinese government could take other retaliatory action, calling on its citizens to boycott the purchase of American goods and services in China, curtailing the operations of U.S. manufacturing firms in China, ordering Chinese firms to halt purchases of certain high-value U.S. products (e.g., Boeing aircraft) or restricting its citizens from traveling to, or investing in, the United States. The Chinese government could also choose to halt purchases of U.S. Treasury securities and possibly sell off some of its holdings.\n\n\tScale and Scope of U.S. and Retaliatory Tariffs\n\n\t\tWhat U.S. imports are included in the tariff actions?\n\nThe Administration has imposed tariffs on U.S. goods accounting for $282 billion of U.S. annual imports, using 2017 trade values. Section 301 actions currently account for the greatest share (83%) of affected imports. U.S. annual imports of products covered under the Section 301 actions currently total $235 billion, compared with $40 billion (14%) under Section 232, and $7 billion (3%) under Section 201 ( Figure 3 ). The potential Section 232 actions on motor vehicles and uranium could cover an additional $361 billion and $2 billion, respectively in U.S. imports, depending on the countries and products included.\nThe scope of U.S. imports affected vary across the three different actions. Section 201 actions cover U.S. imports of washers, washing machine parts, and solar cells and modules. Section 232 actions cover U.S. imports of steel and aluminum products. Section 301 actions cover a broad range of U.S. imports from China. To date, the Administration has imposed increased tariffs under Section 301 on nearly 7,000 products at the 8-digit harmonized tariff schedule (HTS) level. Figure 4 below lists the top 15 products subject to the Section 301 import tariffs classified according to 5-digit U.S. end-use import codes. The major categories are telecommunications equipment, computer accessories, furniture, and vehicle parts.\n\n\t\tWhat U.S. exports face retaliatory tariff measures?\n\nTo date, U.S. trading partners have retaliated against U.S. Section 232 and Section 301 actions. China, Japan, and South Korea have also announced planned retaliation to U.S. Section 201 actions, but in line with WTO commitments on safeguard retaliations, they are not to be imposed until 2021. The total actions to date affect approximately $126 billion of annual U.S. exports, using 2017 trade values.\nThe retaliations against U.S. Section 232 actions affect U.S. exports to six trade partners: Canada, Mexico, the EU, China, Turkey, and Russia. The retaliation is similar to the U.S. actions both in terms of the tariff rates (most are in the range of 10%-25%) and the products covered (steel or aluminum are among the top products targeted). Other major products targeted include food preparations and agricultural products, yachts, motorcycles, whiskies, and some heavy machinery ( Figure 5 ). In total, approximately $25 billion of U.S. annual exports are potentially affected by trade partner retaliations against the U.S. Section 232 actions.\nRetaliatory tariffs imposed by China in response to U.S. Section 301 actions affect approximately $101 billion of U.S. annual exports, accounting for about 80% of U.S. exports subject to retaliatory tariffs currently in effect ( Figure 6 ). Like the retaliation in response to U.S. Section 232 actions, agricultural products are a main target. Soybeans, which accounted for $14 billion of U.S. exports to China in 2017, are the top overall export affected. Motor vehicles were the second-largest category of exports under the Section 301 retaliation, but these retaliatory tariffs have been temporarily suspended as part of the recent efforts at bilateral U.S.-China negotiations to resolve the trade conflict. The Chinese retaliatory tariffs, like the U.S. Section 301 tariffs, range from 10%-25% and cover thousands of tariff lines.\n\n\t\tHow do the U.S. tariff actions and subsequent retaliation compare?\n\nU.S. and retaliatory tariffs differ in both scale and scope of products covered. The United States has placed increased tariffs on products accounting for approximately $282 billion of annual U.S. imports, while retaliatory tariffs cover approximately $126 billion of annual U.S. exports, using 2017 trade values. China, which is subject to the largest share of new U.S. tariffs and has imposed the largest share of new retaliatory tariffs, imports far less from the United States than the United States imports from China, limiting the amount of retaliatory tariffs China can impose on U.S. exports. (See discussion on \" Is further escalation and retaliation possible? \")\nIn terms of the products covered, the largest categories of U.S. imports affected by the tariffs are capital goods and industrial supplies ( Figure 7 ). This suggests that, to date, U.S. tariffs are concentrated on products primarily used as inputs in the production of other goods rather than on final consumption goods; therefore the effects of the tariffs may be most pronounced in increased costs for U.S. producers. Among U.S. exports, food and beverages is the second-largest category of goods facing retaliatory tariffs, suggesting that U.S. agriculture producers are among the groups most negatively affected by the retaliatory actions.\n\n\t\tWhat share of annual U.S. trade is affected or potentially affected by the U.S. and retaliatory actions?\n\nAs a share of overall U.S. trade, approximately 12% of annual U.S. goods imports ($282 billion of $2,342 billion total imports) are subject to increased U.S. tariffs under the Trump Administration's actions ( Figure 8 ). Approximately 8% of annual U.S. goods exports ($126 billion of $1,546 billion total exports) are subject to increased tariffs under partner country retaliatory actions. If the United States moves forward with additional tariffs under the two pending Section 232 investigations on U.S. imports of motor vehicles\/parts and uranium, the share of affected U.S. imports could increase up to nearly 30%. U.S. motor vehicle and parts imports totaled $361 billion in 2017.\n\n\t\tWhat factors affect the products selected for retaliation?\n\nA variety of factors likely go into a country's decision regarding which products to target for retaliation. Retaliatory tariffs are explicitly targeted to encourage the United States to remove its Section 232 and Section 301 tariffs, whereas the Trump Administration's enacted and proposed tariffs aim both to alter U.S. trading partners' practices more broadly, including reducing existing tariff and nontariff barriers, and to protect domestic industries. Retaliatory tariffs can have negative effects on both the exporting country (the United States) and the importing country imposing the retaliation. Therefore, retaliating countries are likely to target products that create the most pressure on the United States to change its policy while minimizing any negative effects on themselves. Some factors that may create greater pressure for U.S. policy change include (1) demand for the targeted product is price sensitive (i.e., demand is price elastic), therefore a small tariff increase will lead to a sharper decline in exports; (2) the retaliating country is a major world market for the product, in which case the exports may not be easily diverted to other markets; and (3) the producers of the targeted products in the United States (i.e., those negatively affected by the tariffs) have high levels of political influence (e.g., the product is made in congressional districts with Members on key committees). \nFactors that would decrease the negative effects on the importer (retaliating country) include (1) other countries competitively produce the product allowing for alternate sourcing; and (2) importers can easily substitute a different product for the targeted import (e.g., substituting wheat for corn for animal feed). Retaliating countries might also seek to impose similar tariffs as those against which they are retaliating (e.g., steel and aluminum are the top products subject to retaliation in response to the Administration's Section 232 steel and aluminum tariffs). Retaliating countries may also seek to lessen the negative impacts of the tariffs on certain segments of the population (e.g., a country might target luxury goods consumed by higher income groups rather than basic food and apparel products that account for a larger share of low-income household consumption).\n\n\t\tOnce the President imposes tariffs, can the President change them?\n\nYes. The President has the authority to reduce, modify, or terminate import restrictions imposed under Sections 201, 232, and 301. Certain limitations on the President's authority to modify the tariffs apply as specified in the relevant statutes. The President has adjusted several tariff increases since they were initially proclaimed. For example, the President increased the tariff on U.S. steel imports from Turkey under Section 232 from 25% to 50%. However, certain U.S. importers of Turkish steel have brought a challenge to this tariff increase at the U.S. Court of International Trade. Similarly, the President has modified actions taken under Section 301 by increasing the scope of imports from China that are subject to new tariffs. Some products have also received exemptions from the tariff measures, explained below.\n\n\t\tWhat exemptions are allowed from the tariffs imposed to date?\n\n\t\t\tSection 201\n\nIn Presidential Proclamation 9693, announcing the Section 201 action on solar products, the President gave the USTR 30 days to develop procedures for exclusion of particular products from the safeguard measure. On February 14, 2018, the USTR published a notice establishing procedures to consider requests for the exclusion of particular products. Based on that notice, the USTR received 48 product exclusion requests and 213 subsequent comments responding to these requests by the deadline, March 16, 2018. On September 19, 2018, the USTR announced a limited number of solar product exclusions, and indicated that additional requests received by the March 16, 2018 deadline remained under evaluation. \nCanada is excluded from the additional duties on washers. Certain developing countries were excluded, provided that they account for less than 3% individually or 9% collectively of U.S. imports of solar cells or large residential washers, respectively. All other countries are covered by the Section 201 trade actions.\n\n\t\t\tSection 232\n\nIndividual countries and products may be exempted from the Section 232 tariffs. \n\n\t\t\t\tCountry Exemptions\n\nAccording to the initial presidential proclamation, countries with which the United States has a \"security relationship\" may discuss \"alternative ways\" to address the national security threat posed by imports of steel and aluminum and gain an exemption from the tariffs. To date four countries have reached agreements with the United States exempting them from part or all of the Section 232 tariffs:\n1. South Korea agreed to an absolute annual quota for 54 separate subcategories of steel in place of the steel tariffs. South Korea did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since May 1, 2018. 2. Brazil was permanently exempted from the steel tariffs, having reached final quota agreements with the United States on steel imports. Brazil, like South Korea, did not negotiate an agreement on aluminum and has been subject to the aluminum tariffs since June 1, 2018. 3. Argentina was permanently exempted from the steel and aluminum tariffs and agreed to absolute quotas for each. 4. Australia gained a permanent exemption from the tariffs without any quantitative restrictions. \n\n\t\t\t\tProduct Exclusions\n\nThe 232 product exclusion process is administered by the Department of Commerce's Bureau of Industry and Security (BIS). Thousands of requests have been filed to date and the exclusion process has been the subject of criticism and scrutiny by several Members of Congress and other affected stakeholders. To limit potential negative domestic impacts of the tariffs on U.S. consumers and consuming industries, Commerce published an interim final rule for how parties located in the United States may request exclusions for items that are not \"produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.\" The rule went into effect the same day as publication to allow for immediate submissions. \nRequesters must complete the official response form spreadsheets for each steel and aluminum exclusion and submit the forms on regulations.gov, where both requests for exclusions and objections to requests are posted. There is no time limit for submitting an exclusion request. Each requester must complete a separate application for each product to be considered for exclusion. Exclusion determinations are to be based on national security considerations, but the specific nature of these considerations remain undefined. To minimize the impact of any exclusion, the interim rule allows only \"individuals or organizations using steel articles ... in business activities ... in the United States to submit exclusion requests,\" eliminating the ability of larger umbrella groups or trade associations to submit petitions on behalf of member companies. A parallel requirement applies for aluminum requests. Any approved product exclusion will be limited to the individual or organization that submitted the specific exclusion request. Parties may also submit objections to any exclusion within 30 days after the exclusion request is posted. The review of exclusion requests and objections will not exceed 90 days. Exclusions will generally last for one year. \nCompanies and some Members of Congress have criticized the intensive, time-consuming process to submit exclusion requests, the lengthy waiting period for a response from Commerce, what some view as an arbitrary nature of acceptances and denials, and the fact that all exclusion requests to date have been rejected when a U.S. steel or aluminum producer has objected to it. (See \" Have Members of Congress and other stakeholders raised issues regarding the product exclusion process? \") In response, Commerce announced a new rule to allow companies to rebut objections to petitions. The new rule, published September 11, 2018, includes new rebuttal mechanisms, more information about the exclusion submission requirements and process, and the criteria Commerce uses in deciding whether to grant an exclusion request.\nIn September, Commerce provided revised estimates of the anticipated number of exclusion requests (96,954) and objections (38,781). To streamline and increase the transparency of the process, Commerce developed an online portal for users to submit requests for exclusions, objections, rebuttals, or surrebuttals. Commerce began testing the portal in December 2018 with the goal of implementing it in early 2019.\n\n\t\t\tSection 301\n\nDuring the Section 301 notice and comment period on proposed Section 301 tariff increases, the USTR heard from a number of U.S. stakeholders who expressed opposition and\/or concern about how such measures could impact their businesses, as well as U.S. consumers. In response, the USTR created a product exclusion process, whereby firms could petition for an exemption from the Section 301 tariff increases for specific imports. The USTR stated that product exclusion determinations would be made on a case-by-case basis, based on information provided by requesters that showed \nWhether the particular product is available only from China; Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests; and Whether the particular product is strategically important or related to ''Made in China 2025'' or other Chinese industrial programs.\nTo date, USTR has only created this product exclusion process for the first two stages of tariff increases under Section 301. Several Members of Congress have sent letters to the USTR calling for an exclusion process for stage three tariffs as well. The joint explanatory statement to the FY2019 appropriations law ( P.L. 116-6 ), enacted February 15, 2019, directs USTR to establish a product exclusion process for stage three tariffs within 30 days.\n\n\t\tHow many product exclusion requests have been made?57\n\n\t\tHave Members of Congress and other stakeholders raised issues regarding the product exclusion process?\n\nSeveral Members of Congress have raised concerns about the Section 232 exclusion process. For example, in a letter to Commerce Secretary Wilbur Ross, and at a June 2018 hearing, then-Chairman of the Senate Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden urged improvements to the product exclusion procedures on the basis that the detailed data required placed an undue burden on petitioners and objectors. They also suggested that the process appeared to bar small businesses from relying on trade associations to consolidate data and make submissions on behalf of multiple businesses. The letter further stated that Commerce had not instituted a clear process for protecting business proprietary information. In a follow-up letter to the Secretary of Commerce in December, Senators Hatch and Wyden recognized that some improvements had been made to the exclusion process but identified further issues raised by stakeholders and U.S. businesses. They asked Commerce to address the concerns by adhering to the published timelines for reviewing requests and making specific changes to how the agency handles requests with technical defects.\nSome Members have used multiple channels to continue to raise issues. A bipartisan group of House Members articulated concerns about the speed of the review process and the significant burden it places on manufacturers, especially small businesses. The Members' letter included specific recommendations, such as allowing for broader product ranges to be included in a single request, allowing trade associations to petition, grandfathering existing contracts to avoid disruptions, and regularly reviewing the tariffs' effects and sunsetting them if they have a \"significant negative impact.\" In September 2018, during an oversight hearing, multiple Senators raised concerns directly to the Assistant Secretary for Export Administration, Bureau of Industry and Security at Commerce, about agency management of the Section 232 exclusion process, including staffing and funding levels, and the need for greater transparency, among other issues.\nSome Members have questioned the Administration's processes and ability to pick winners and losers through granting or denying exclusion requests. On August 9, 2018, Senator Ron Johnson requested that Commerce provide specific statistics and information on the exclusion requests and process and provide a briefing to the Committee on Homeland Security and Governmental Affairs. Senator Elizabeth Warren requested that the Commerce Inspector General investigate the implementation of the exclusion process, including a review of the processes and procedures Commerce has established, how they are being followed, and if exclusion decisions are made on a transparent, individual basis, free from political interference. She also requested evidence that the exclusions granted meet Commerce's stated goal of \"protecting national security while also minimizing undue impact on downstream American industries,\" as well as evidence that the exclusions granted to date strengthen the national security of the United States. In response to a formal request by Senators Pat Toomey and Tom Carper, the Government Accountability Office (GAO) announced on December 12, 2018, it will investigate the Section 232 product exclusion process in early 2019. Congress authorized additional funds for the Section 232 product exclusion process in the FY2019 appropriations law ( P.L. 116-6 ), and in the accompanying joint explanatory statement, stipulated that Commerce provide quarterly reports to Congress on its administration of the process.\nThe Section 301 exclusion process managed by USTR and effective for the first two tranches of Section 301 tariffs has not attracted the same level of attention from Congress as the Section 232 exclusion process. A bipartisan group of more than 160 Representatives, however, have urged the Administration to allow product exclusions on the third and largest tranche of Section 301 tariffs, and the joint explanatory statement to P.L. 116-6 , directs USTR to establish such an exclusion process within 30 days of the law's enactment.\n\n\tEconomic Implications of Tariff Actions\n\n\t\tWhat are the general economic dynamics of a tariff increase and who are the economic stakeholders potentially affected?\n\nChanges in tariffs affect economic activity directly by influencing the price of imported goods and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (foreign producers of the goods subject to the tariffs, producers of domestic substitutes, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. Retaliatory tariffs, which U.S. trading partners have imposed in response to U.S. Section 232 and Section 301 tariffs, also affect U.S. exporters. The following outcomes (summarized in Table 1 ) are generally expected at the level of individual firms and consumers:\nU.S. consumers: Higher tariff rates generally lead to price increases for consumers of the goods subject to the tariffs and for consumers of downstream products as input costs rise. Higher prices in turn lead to decreased consumption depending on consumers' price sensitivity for a particular product. As one example, the monthly price of washing machines in the United States, which are currently subject to tariff increases under Section 201, has increased by as much as 12% compared to January 2018 before the tariffs became effective ( Figure 9 ). U.S. producers of domestic substitutes: U.S. producers competing with the imported goods subject to the tariffs (e.g., domestic steel and aluminum producers) may benefit to the degree they are able to charge higher prices for their domestic goods. However, in the short run, U.S. producers' ability to increase production may be limited. A broad index of U.S. steel producer prices was up 14% in December relative to March, when the Section 232 tariffs first took effect. A similar price indicator for aluminum refining and primary aluminum production shows more volatile prices, with the index down 6.2% between March 2018 and December 2018. U.S. producers in downstream industries: U.S. producers using goods subject to the additional tariffs as inputs may be harmed because the tariffs may cause their costs to increase. U.S. motor vehicle producers may be among the industries most hurt since they face: (1) higher input costs for steel; (2) tariffs on parts accounting for $20 billion of annual imports; and (3) retaliatory tariffs on assembled motor vehicle exports to China accounting for $13 billion of annual exports ( Figure 10 ). \nU.S. exporters subject to retaliatory tariffs: U.S. exporters facing retaliatory tariffs may be at a price disadvantage in export markets relative to competitors from other countries, which may decrease demand for U.S. exports to those markets. Since Section 232 retaliatory tariffs took effect in the EU, Canada, and Mexico in July, U.S. average monthly exports of the products subject to retaliation have been below their pre-tariff monthly 2018 average by 37%, 23%, and 10%, respectively ( Figure 11 ). China purchases such a large share of certain U.S. agricultural exports\u2014China accounted for 57% of all U.S. soybean exports in 2017\u2014its retaliatory tariffs and the subsequent decline in export sales may have contributed to depressed U.S. prices for some commodities. Foreign producers of the goods subject to the tariffs: Foreign producers can also be affected by tariff increases if consumer demand falls in response to rising prices. In some instances, typically when demand is very price sensitive, or highly elastic, foreign producers may choose to lower their prices and absorb a portion of the tariff increase. The degree to which foreign producers change their prices in response to tariff changes is known as the tariff pass-through rate. Over a longer time horizon, production may shift to other countries to avoid the increased tariffs imposed on products manufactured in the countries affected.\nIn addition to these microeconomic effects, tariffs can also affect macroeconomic variables. With regard to the value of the U.S. dollar, as demand for foreign goods may fall in response to higher tariffs, U.S. demand for foreign currency may also fall, putting upward pressure on the relative exchange value of the dollar. This in turn would reduce demand for U.S. exports and increase demand for foreign imports, partly offsetting the effects of the tariffs. Tariffs may also affect national consumption patterns, depending on how the shift to higher cost domestic substitutes affects consumers' discretionary income and therefore aggregate demand. In the current tight labor environment tariffs may have less impact on overall U.S. employment levels, but may result in some movement of workers between industries and potential industry-specific unemployment as labor demand rises in domestic industries benefitting from the tariffs and falls in industries harmed by increased input costs or retaliatory tariffs. Economists generally agree that a reallocation of resources, including capital and labor, based on price distortions such as tariffs reduces efficiency and productivity over the long run. \n\n\t\tWhat do economic studies estimate as the potential impacts of the tariff actions on the U.S. economy?\n\nU.S. government and international institutions, think tanks, and consulting groups have prepared estimates of the potential impacts of the tariffs by projecting trade values using historical trade data and various modeling techniques ( Table 2 ). These studies have produced a range of estimates, but generally suggest a moderately negative impact. The Congressional Budget Office, for example, estimates a 0.1% decline in the annual U.S. GDP growth rate resulting from the tariffs currently in place, while the International Monetary Fund (IMF) estimates approximately a 0.2% decline in the annual U.S. GDP growth rate. Most studies show slight employment gains and production increases in U.S. industries competing with the imports subject to additional tariffs and declines in sectors facing retaliation and heavily reliant on inputs subject to additional tariffs. \nThe net estimated effects are relatively modest, because approximately 10.5% of U.S. annual trade (12% of imports and 8% of exports) is affected by the tariff actions to date and trade represents a moderate share of total U.S. economic activity (27% of U.S. GDP in 2017). However, the effects may be substantial for individual firms reliant either on imports subject to the U.S. tariffs or exports facing retaliatory measures, as well as consumers for whom the affected products account for a large share of consumption. \nThe effects could grow if U.S. tariff actions and retaliation escalates. The IMF, for example, estimates that U.S. GDP growth could fall by approximately 1% and global growth could fall by 0.8% if the United States goes forward with an additional 25% tariff on imports from China and on motor vehicle imports from a number of countries, and partner countries retaliate. For context, in 2017 U.S. GDP was $19.5 trillion, making a 1% decline equivalent to a reduction in GDP of $195 billion. Staff from the Federal Reserve Board of Governors, recently noted that \"trade policies and foreign economic developments could move in directions that have significant negative effects on U.S. economic growth.\" Part of this decline in economic growth reflects concern that the tariff escalation also creates a general environment of uncertainty. Economic research on uncertainty suggests it may lead to lower investment and generally restrain economic activity, including trade .\nThese estimates, however, should be interpreted with caution because (1) they require various assumptions that can affect the predicted outcomes; (2) the extent of the U.S. tariffs and retaliation has fluctuated significantly in recent months and is subject to change; and (3) some of the studies were produced or sponsored by stakeholders advancing specific interests. Economists from the Federal Reserve Bank of Atlanta also note that because tariffs have decreased significantly over the past several decades, there is a dearth of recent empirical evidence to inform models on tariff increases.\n\n\t\tWhat are some potential long-term effects of escalating tariffs between countries?\n\nMost economists agree that the U.S. and global economies have benefitted significantly from the major reduction in global tariff rates that has taken place since the 1940s. If tariff rates were to increase for a significant period of time it could insulate domestic producers from foreign competition, and potentially lead to less efficient and competitive production. This in turn could lead to lower overall economic growth in the United States and abroad, since more closed economies are generally less dynamic, with less innovation and productivity growth. Furthermore, retaliatory tariffs are particularly damaging to U.S. exporters in foreign markets because, unlike multilateral tariffs, the retaliatory tariffs only target U.S. imports. Therefore, exporters from other countries that compete with U.S. firms are likely to be more competitive in the retaliatory markets. Recent trade agreements involving major U.S. trade partners, but not the United States, such as the new EU-Japan FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) agreement, which consists of the 11 countries remaining in the TPP following the U.S. withdrawal, may likely compound this competitive disadvantage for U.S. exporters. Some argue it may be difficult for U.S. exporters to regain lost export opportunities in the future once importers establish relationships with suppliers from other countries. \nAnother potential long-term effect of the tariffs is a shift in the U.S. role in international economic policymaking. While some stakeholders question the benefits of the dominant U.S. role in global rules-setting, others argue this has generally been of benefit to the United States, allowing U.S. priorities to feature prominently in existing international trade obligations. There are also concerns over the potential geopolitical aspects of tariff escalation. Some argue that the highly integrated nature of the global economy today acts as a deterrent to military conflict. Conversely, if tariff escalation creates a more fragmented global economy or imposes significant costs on a particular economy, it may lessen this deterrent. \n\n\t\tAre there examples of U.S. producers benefitting or being harmed by the tariffs?\n\nIn addition to studies on the potential macroeconomic effects of the tariffs, a variety of anecdotal information on the tariffs' impact on specific businesses can be found in press reports or quarterly or annual company reporting. The President's tariff actions and subsequent retaliatory tariffs are only one of many factors influencing economic conditions for U.S. companies, making it difficult to assess the tariffs' direct effects.\nIn general, this anecdotal information largely conforms to the theoretical effects of the tariffs outlined in this report. Companies stating they have benefitted from the tariffs are producers competing with the imported products subject to the tariffs, while many downstream manufacturers and retailers assert they have been harmed. Many U.S. exporters subject to retaliatory tariffs also argue that these trade policy actions have negatively affected their operations. For some U.S. producers, the effects of the tariffs have been more complex, including companies that are both benefitting from higher domestic prices due to the tariffs while also being harmed by higher input costs. Companies with major overseas operations argue they have been indirectly harmed through lower sales abroad resulting from an economic slowdown in the countries subject to the Administration's tariff actions. The text box below provides selected examples of companies in each of these four broad categories.\n\n\t\tHow are Section 301 tariffs affecting global supply chains?\n\nChina plays an important role for many U.S. multinational firms that rely on global supply chains to manufacture their products. In some cases, U.S. firms source production of parts and components around the world and use China as a final point of assembly for products (e.g., Apple Corporation's iPhone), which are then largely exported. In other instances, firms import parts and components from China to use them in manufacturing products domestically. The use of global supply chains often enables firms to concentrate more of their activities on higher value-added activities. Such factors enable firms to lower costs (making them more globally competitive) and reduce prices for consumers (increasing their purchasing power), which should boost economic growth. The extensive use of global supply chains also result in U.S. imports from China containing foreign-made intermediates, including from the United States. A study by the Organization for Economic Cooperation and Development (OECD) estimated that 40.2% of the value of China's manufactured gross exports in 2011 came from foreign inputs. Many U.S. firms have argued that imposing increased tariffs on imports from China will disrupt global supply chains and could undermine the competitiveness of U.S. firms. To illustrate in a July 27, 2018, letter to USTR Robert Lighthizer, forty-nine members of the Congressional Semiconductor Caucus stated that while the signers supported the Administration's goals of improving China's practices on intellectual property rights, forced technology transfer, and innovation, they opposed using tariff increases to obtain such results:\nTariffs on semiconductors will not impact Chinese companies since they export almost no semiconductors to the U.S. market. Instead these tariffs would harm U.S. companies and innovators. Most U.S. imports of semiconductors from China are designed and manufactured by U.S. firms, largely in the United States, then shipped to China for final assembly, test, and packaging. This step in the semiconductor manufacturing process comprises approximately 10 percent of the final value of the product and does not result in the transfer of valuable IP. Similarly, imports of finished semiconductor tools are essentially non-existent. Rather, imports of relatively low-value\/low-IP components are incorporated into the high value-added tools made by the U.S. equipment makers and sold around the world.\n\n\t\tAre there estimates of economic implications at the state level?\n\nThe U.S. Chamber of Commerce and the Brookings Institut ion have examined how the retaliatory tariffs could affect state and metropolitan economies by tallying the total exports subject to retaliation by location. The Chamber's website allows users to select a specific state for more information, while Brookings' website includes a downloadable dataset searchable by specific metropolitan area. According to Brookings, although major metropolitan areas Houston, Chicago, Los Angeles, Dallas, Seattle, and Detroit export the largest overall value of products subject to retaliatory tariffs, with over $2 billion of annual exports affected from each metropolitan area, some rural communities have a much larger share of their total exports subject to retaliation as their exports may be concentrated in certain industries.\nState-level trade data are also accessible directly from the Census Bureau at usatrade.census.gov.\n\n\t\tAre there programs to aid farmers potentially harmed by the tariffs?\n\nThe U.S. Department of Agriculture (USDA) is making available about $12 billion in financial assistance to farmers and ranchers affected by the retaliatory tariffs in the form of direct payments, food purchases, and export promotion assistance. USDA expects that about $9.6 billion will be used for direct payments to qualifying agricultural producers of soybeans, corn, cotton, sorghum, wheat, hogs, dairy, fresh sweet cherries, and shelled almonds. Of those funds, more than three-fourths ($7.3 billion) of the payments are likely to go to soybean producers. To be eligible, a producer must have an ownership share in the commodity, be actively engaged in farming, and be in compliance with adjusted gross income restrictions and conservation provisions. Payments are capped on a per-person or per-legal-entity basis. The sign-up period to request assistance ended on February 14, 2019.\nThe Administration has also created a Food Purchase and Distribution Program that is to undertake $1.2 billion in government purchases of excess food supplies. USDA has targeted an initial 29 commodities for purchase and distribution through domestic nutrition assistance programs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. The smallest piece of the trade aid package is an allocation of $200 million to boost the trade promotion efforts at USDA. U.S. trade partners have reportedly raised questions over the overall U.S. aid package at WTO Agriculture Committee meetings and are closely monitoring U.S. compliance with related WTO obligations on subsidies.\n\n\t\tHow will the tariff actions affect the U.S. trade balance?\n\nPresident Trump has repeatedly raised concerns over the size of the U.S. goods trade deficit (i.e., the amount by which total U.S. goods imports exceed total U.S. goods exports), including making trade deficit reduction a stated objective in new U.S. trade agreement negotiations. While tariffs are expected to reduce imports initially, they are unlikely to reduce the overall trade deficit due to at least two indirect effects that counteract the initial reduction in imports. One indirect effect is a potential change in the value of the U.S. dollar relative to foreign currencies. A reduction in imports reduces demand for foreign currency, putting upward pressure on the foreign exchange value of the U.S. dollar, thereby making U.S. exports more expensive abroad and imports less expensive in the United States. Another potential effect of U.S. import tariffs is retaliatory tariffs, which are likely to reduce demand for U.S. exports. Recent empirical research studying tariff adjustments in a panel of countries supports this theoretical framework and finds no significant evidence of tariffs improving a country's trade balance. \nEconomists generally also argue that while tariffs placed on imports from a limited number of trading partners may reduce the bilateral U.S. trade deficit with those specific countries, this is likely to be offset by an increase in the trade deficit or reduction in the trade surplus with other countries, leaving the total U.S. trade deficit largely unchanged. This is because the trade deficit generally reflects a shortfall in national saving relative to investment, which tariffs do not address.\nThe U.S. goods trade deficit grew in 2018. From January to November 2018, the latest month for which trade data are available, the U.S. goods trade deficit totaled $806 billion, increasing from $731 billion for the same period in 2017. In every month except May, the goods trade deficit was larger in 2018 compared to the same month in 2017 ( Figure 12 ). This may reflect broader positive economic conditions: when the U.S. economy grows demand for both domestic and imported goods rises. It may also, in part, be a result of importers front-loading purchases of foreign goods in an attempt to avoid potentially higher tariffs in the future. Meanwhile, a trade-weighted index of the exchange value of the U.S. dollar against the currencies of a broad group of major trading partners increased by about 10% throughout 2018. The strengthening dollar counteracts the effect of the tariffs by making imports less costly in the United States and U.S. exports more costly in foreign markets.\n\n\tPresidential Trade Authorities and Congress\n\n\t\tWhat are the steps involved in imposing increased tariffs pursuant to the current authorities?\n\nThrough Section 201, 232, and 301, Congress has delegated to the President some of its constitutional authority to enact import restrictions, including certain tariff changes. Each of the authorities require an investigation and recommendations of appropriate actions by a key agency; the Department of Commerce and USTR have primary roles in Section 232 and 301 investigations, respectively, while the International Trade Commission (ITC), an independent agency with an equal number of Democratic and Republican commissioners, oversees Section 201 investigations.\n\n\t\tWhat legislation has been introduced to alter the President's current authority and how would it do so?\n\nMultiple proposals have been introduced in both the 115 th and 116 th Congress to amend the President's trade authorities, particularly with respect to Section 232. The majority of these proposals would expand the role of Congress in determining whether or not to impose tariffs.\nIn the 116 th Congress, debate over congressional and executive powers to regulate tariffs has generated multiple proposals to limit the President's trade authorities, along with other reforms (see Table 3 ). Examples include measures that would\n1. Require congressional approval before certain Presidential trade actions would go into effect; 2. For the purposes of Section 232 investigations, explicitly define national security and related imports, and task the independent ITC with administering a product exclusion request process; 3. Transfer primary responsibility for Section 232 investigations to the Secretary of Defense from the Secretary of Commerce; 4. Provide an option for Congress to nullify Section 232 actions, by passing a joint disapproval resolution; and 5. Stall the current Section 232 investigation into auto imports. \nIn contrast to proposals to limit the President's trade authority, the White House is actively supporting a measure introduced by Representative Sean Duffy ( H.R. 764 ), that seeks to expand the President's authorities. H.R. 764 would grant the President additional authority to increase tariff rates to match the rates of foreign trading partners, on a country-by-country and product-by-product basis. \nIn the 115 th Congress, proposals to amend trade authorities varied, though most focused on potential modifications to Section 232. Some proposals sought to require additional consultations with Congress or require congressional approval or disapproval of certain trade actions. Other proposals sought to override or suspend specific trade actions by the Trump Administration. A nonbinding motion calling for a congressional role in Section 232 actions passed the Senate, but no other bills to amend the President's trade authorities passed in the 115 th Congress.\n\n\tTariff Revenue Questions\n\n\t\tWhat additional U.S. revenue has been collected from the tariffs?\n\nU.S. Customs and Border Protection (CBP) assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the President's tariff actions. According to information provided by CBP, the following revenue was assessed from the additional duties imposed by the President's tariff actions as of February 21, 2019 (note the tariffs were imposed at different times during 2018 and therefore the collected revenue does not represent a full calendar year):\n\n\t\tWhat happens to the revenue collected from the tariffs?\n\nThe tariffs collected are put in the general fund of the U.S. Treasury and are not allocated to a specific fund, but are available for appropriations. \nIn other more historical cases, revenue from duties on U.S. imports has been dedicated to specific uses. Examples include\nSection 32 of The Agriculture Adjustment Act provides for a permanent annual fiscal year appropriation to the U.S. Department of Agriculture (USDA) equal to 30% of \"the gross receipts from [all] duties collected under the customs laws\" during the calendar year preceding the beginning of the fiscal year for which they were appropriated. Section 203 of the Emergency Wetlands Resources Act of 1985 requires that quarterly payments of an amount equal to the amount of all import duties collected on arms and ammunition (HTSUS chapter 93) be used to partially fund a Migratory Bird Conservation Fund (MBCF), administered by the Department of the Interior. Section 3 of the Recreational Boating Safety and Facilities Act of 1980, as amended ( P.L. 96-451 ; 16 U.S.C. \u00a7 1606a), requires the Secretary of the Treasury to transfer, \"at least quarterly,\" to the Reforestation Trust Fund (RT) \"an amount equal to the sum of the tariffs received\" on imports of forest and wood articles classified under specified headings of the HTSUS, subject to a cap of $30 million each fiscal year. The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, (Title X of P.L. 106-387 ) known as the \"Byrd Amendment,\" amended existing antidumping and countervailing duty (CVD) laws by requiring that duties assessed pursuant to an AD or CVD order were to be deposited by CBP into special accounts and then distributed to \"affected parties\" (defined as a manufacturer, producer, farmer, rancher, worker representative, or association involved in or in support of an AD or CVD investigation) for certain \"qualifying expenditures\" (such as manufacturing facilities and equipment), as outlined in the act. In 2003, however, WTO dispute settlement and Appellate Body panels determined that the law violated U.S. obligations under the WTO Antidumping and Subsidies Agreements. Congress repealed CDSOA on February 8, 2006.\n\n\t\tHow does additional tariff revenue compare to the U.S. national debt?\n\nOn August 5, 2018, President Trump announced that the increased tariffs his Administration has imposed on steel, aluminum, washing machines, solar panels, and a variety of imported Chinese goods will begin to generate sufficient revenue to reduce the federal debt. The U.S. federal debt represents an accumulation of government borrowing over time, including as a result of annual budget deficits (i.e., when federal government outlays exceed revenue). In FY2018, the federal budget deficit was $779 billion and is projected by the Congressional Budget Office (CBO) to total $897 billion in FY2019, thus contributing to an increasing federal debt. The cumulative publicly held federal debt totaled $15.8 trillion at the end of FY2018, and is projected to increase to $16.6 trillion by the end of FY2019. To reduce the federal debt, the President's tariff actions would have to generate enough revenue to turn the projected budget deficit into a surplus, which could then be used to pay down the federal debt. \nAccounting for the additional tariffs imposed by the Administration to date, CBO projects that customs duties could generate additional revenue of approximately $34 billion in FY2019, or less than 4% of the projected FY2019 budget deficit. This suggests that at current levels, the President's tariff actions may slightly reduce the annual U.S. budget deficit, but will not generate a budget surplus and therefore will not reduce the annual U.S. debt, though they may result in the debt increasing at a slightly slower rate than would otherwise occur.\nMoreover, dynamic effects of the tariffs would be likely to reduce these revenues over time as price increases resulting from the tariffs are likely to shift consumption patterns toward less expensive alternatives (i.e. goods not subject to the tariffs). If the tariffs have a negative effect on economic growth, as most economists and CBO predict, they could also result in lower tax revenues more broadly as economic activity declines. In recent history, customs duties resulting from tariffs have not been a significant source of U.S. government revenue. In FY2018, individual income taxes generated more than half (50.6%) of U.S. government revenue, while tariffs or custom duties accounted for less than 2% of total receipts.\n\n\t\tWhat are the economic implications of raising revenue through tariffs?\n\nTaxes create a distortion from market-based signals by altering the price of various economic activities. These altered prices can in turn alter economic outcomes more broadly as market actors make consumption and production decisions in response. Economists generally argue in favor of policies that minimize market distortions as much as possible, especially when they affect production and the allocation of resources. Tariffs or duties are a tax on imports, which raise the price of imports relative to domestic goods, encouraging consumption of domestic goods relative to foreign goods, and thereby potentially shifting production and diverting resources away from relatively efficient economic activities towards less efficient ones. Although there are instances in which economic theory suggests markets may not produce an optimal outcome, economists generally assert that tariffs are not the best tool to address these market failures.\nGovernments, however, must collect revenue in order to fund their services. From an economist's viewpoint, the best source of revenue is one that creates the least distortion of economic activity. Tariffs are generally not viewed as the least distortionary tax. A potential benefit of tariffs as a source of revenue for some countries is the relative simplicity of their collection, which may explain why they remain significant as a share of government revenue in some least developed countries. Economists, however, generally urge developing countries to lessen their reliance on tariffs as a revenue source due to concerns that tariffs may lead to an inefficient allocation of resources. Until the 1910s, custom duties or tariffs were the main source of revenue for the U.S. government; since the creation of the current federal income tax system in 1913, tariff revenue has become an increasingly smaller share of the federal government's total budget receipts, accounting for less than 2% of total receipts in FY2018.\nIn addition to tariffs possibly distorting the allocation of resources, they may also represent a less progressive form of taxation. As with other taxes, the burden of tariffs does not fall uniformly across goods or demographic groups; instead, it falls more heavily on traded goods and the populations that purchase them. Studies generally have found that, in the United States, tariffs harm low- and middle-income households more than high-income households, in large part because lower-income households spend more\u2014as a proportion of their total expenditures\u2014on tradable goods like food and apparel.\n\n\tRelation to WTO and U.S. Trade Agreements\n\n\t\tHow do the Administration's unilateral tariff actions and other countries' retaliatory actions relate to existing commitments at the WTO and in bilateral and regional trade agreements?\n\nThrough multilateral (WTO) and bilateral and regional trade (FTA) agreements, the United States and its trading partners have committed not to raise tariffs above certain levels with limited exceptions. These exceptions include specific tariffs in response to unfairly traded goods that may cause or threaten to cause material injury, such as imports dumped on U.S. markets at below-production prices (anti-dumping duties) or imports benefitting from government subsidies (countervailing duties) as well as time-limited safeguard actions when a surge in fairly traded imports injures or threatens to injure a domestic industry. U.S. trade agreements also generally include broad exceptions for actions deemed necessary for \"essential security interests.\" The United States argues that its recent tariff actions are allowed under WTO and FTA rules, while U.S. trading partners allege the U.S. actions are inconsistent with these rules and have responded with retaliatory tariffs and initiated dispute settlement actions to resolve their concerns. The United States meanwhile alleges that these retaliatory tariffs are likewise inconsistent with WTO and FTA rules and has similarly initiated WTO dispute settlement procedures in response.\n\n\t\tWhat dispute-settlement actions have U.S. trading partners taken?\n\nSeveral countries allege that U.S. actions are inconsistent with WTO rules and have initiated complaints under the WTO dispute settlement system, over tariffs imposed under Section 201 (safeguards), Section 232 (national security), and Section 301 (\"unfair\" trading practices) ( Table 4 ). The first step in the dispute settlement process is to request consultations, which provides WTO parties the opportunity to discuss the complaint and seek to reach a negotiated resolution without proceeding to litigation. If consultations fail to resolve the dispute (or if a party denies the request for consultations), the complainant country may request adjudication of the dispute by a WTO panel. The panel issues a ruling on whether the offending measure is consistent with the relevant provisions under WTO agreements; panel decisions can be appealed.\n\n\t\tWhat dispute-settlement actions has the United States taken?\n\nOn July 16, 2018, the United States filed its own WTO complaints over the retaliatory tariffs imposed by five countries (Canada, China, the EU, Mexico, and Turkey) in response to U.S. tariffs on steel and aluminum imports under Section 232. In late August, the United States filed a similar case against Russia. The United States has invoked the so-called national security exception in GATT Article XXI in defense of the tariffs, stating that the tariffs are not safeguards as claimed by the other WTO members in their consultation requests. As of the end of January 2019, all of the disputes are in the panel phase ( Table 5 ).\n\n\t\tDo the Administration's tariff actions potentially affect ongoing or proposed U.S. trade agreement negotiations?\n\nThe Administration's tariff actions have likely affected U.S. trade agreement negotiations in a number of ways. On one hand, existing and threatened tariffs may have adverse economic implications for certain U.S. trading partners (e.g., new motor vehicle tariffs on the EU and Japan) and may have encouraged those countries to enter negotiations with the United States to remove this threat of new tariffs as part of broader FTA negotiations. The tariffs, however, may have created a more contentious and unpredictable environment for U.S. trade agreement negotiations, since trade agreement partners may be concerned new tariffs could be imposed after they have entered into new agreements with the United States. Perhaps as a result, the Administration has begun negotiating specific language in its trade agreements regarding exemptions from new potential tariffs. For example, the proposed USMCA (renegotiated NAFTA) provides a specific exemption from potential new Section 232 motor vehicle tariffs for a limited amount of auto trade among the parties. Other countries may seek similar assurances in future U.S. FTA negotiations, including the proposed U.S. FTA negotiations with the EU, Japan, and the United Kingdom. Such language is unprecedented in U.S. FTAs. Concerns over the Section 232 steel and aluminum tariffs, which were not addressed in the USCMA, may also affect congressional approval of the renegotiated agreement.\n\n\t\tWhy have some observers raised concerns over the potential impact of the Administration's actions on the global trading system?\n\nThe United States was a chief architect of the post-World War II global trading system, including the WTO's dispute settlement mechanism. Critics have expressed concerns that the unilateral tariff actions will cause the United States to lose its standing as the predominant global leader of an open and rules-based trading system and chief supporter of more liberalized trade. With regard to the Section 301 actions, China, in particular, may see this shift in U.S. approach as an opportunity to take a more prominent role in setting global trade rules and standards that benefit or promote its interests and that may undermine those of the United States. China's media increasingly touts its economic system as a model for other countries to follow. In addition, U.S. Section 301 tariffs could harm a number of economies that depend on trade with China, either directly or as part of global supply chains, thus damaging relations with the United States.\nRetaliatory actions may also heighten concerns over the potential strain the Section 232 tariffs place on the international trading system. Many U.S. trading partners view the Section 232 actions as protectionist and in violation of U.S. commitments at the WTO and in U.S. FTAs, while the Trump Administration views the actions within its rights under those same commitments. Others have followed suit with retaliatory actions, which may violate their WTO commitments. If the dispute settlement process in those agreements cannot satisfactorily resolve this conflict, it could lead to further unilateral actions and a tit-for-tat process of increasing retaliation. This potential strain comes at a time when the United States has called for broader reforms of the WTO dispute settlement process, specifically with regard to the appellate body mechanism.\n\n\tAdditional Sources of Information\n\n\t\tWhat other CRS products provide further information on these issues?\n\n\t\tWhat official sources of information are publicly available regarding the U.S. and retaliatory tariff actions?\n\nOfficial sources of information regarding the U.S. tariff actions are publicly available through the government agencies responsible for investigating imports or enforcing tariff laws. The following resources include embedded links to agency documents as well as footnotes with official links. \n\n\t\t\tThe Department of Commerce (Section 232 Investigations)\n\nThe Department of Commerce is the agency responsible for investigating Section 232 cases. Commerce's Bureau of Industry and Security (BIS) has published investigation reports and relevant FAQs on its website. Notices and submitted public comments are available in the Federal Register and on Regulations.gov .\nFinal Investigation Reports on Section 232 Investigations (1981-2018) Compilation of BIS documents related to the steel and aluminum investigations and imposed tariffs FAQ on Product Exclusions for Section 232 Steel and Aluminum Tariffs Find Objections, Rebuttals, and Surrebuttals for Section 232 Product Exclusion Requests Commerce has published Federal Register notices announcing investigations, requesting public comment, and outline product exclusion procedures. Commerce has solicited and published public comments and product exclusion requests through Regulations.gov. The following dockets compile comments and related documents: Aluminum (Docket: BIS-2018-0002 ) Steel (Docket: BIS-2018-0006 ) Auto and auto parts (Docket: DOC-2018-0002 ) Uranium (Docket: BIS-2018-0011 )\n\n\t\t\tU.S. International Trade Commission (ITC) (Section 201 Investigations)\n\nITC, the agency responsible for investigating Section 201 cases, has compiled lists of relevant documents concerning the investigations into imports of solar panels and washing machines . These resources include investigation documents, final reports by the Commission, and the primary Federal Register notices. ITC also maintains the U.S. Harmonized Tariff Schedule (HTS), which provides tariff rates for all merchandise imported into the United States. The tariff actions currently imposed under Section 201, Section 232, and Section 301 are noted within Chapter 99 of the HTS, which documents temporary modifications to the tariff schedule.\nITC documents on safeguard investigation into solar panels ITC documents on safeguard investigation into washing machinesThe U.S. Harmonized Tariff Schedule (HTS) : Chapter 99 \n\n\t\t\tOffice of the U.S. Trade Representative (USTR) (Section 301 Investigations)\n\nUSTR , the agency responsible for investigating Section 301 cases, has compiled relevant documents about the Section 301 tariffs against Chin ese intellectual property practices on its website. The following USTR resources include the official notices, hearing transcripts, final lists of products subject to additional tariffs, and information on product exclusions. \nFindings of the Investigation into China's Acts, Policy, and Practices (March 22, 2018) Section 301 Investigations and Related Documents Section 301 Hearings into Proposed Tariffs Section 301: How to Request an Exclusion USTR has solicited and published public comments and product exclusion requests on Regulations.gov . The following dockets compile comments on proposed regulations and related documents, by trade action: Stage 1 Tariffs Notice and comments ( Docket: USTR-2018-0005 )Product exclusions ( Docket: USTR-2018-0025 ) Stage 2 Tariffs Notice and comments ( Docket: USTR-2018-0018 )Product exclusions ( Docket: USTR-2018-0032 ) Stage 3 Tariffs Notice and comments ( Docket: USTR-2018-0026 )\n\n\t\t\tThe White House\n\nThe President has announced these tariff actions through proclamation and presidential memorandum. Presidential documents are published in the Federal Register:\nPresidential proclamations on Section 201 (Donald J. Trump) Presidential proclamations on Section 232 (Donald J. Trump) Presidential documents on Section 301 (Donald J. Trump) Other presidential statements regarding tariff actions are posted on WhiteHouse.gov.\n\n\t\t\tCustoms and Border Protection (CBP)\n\nCBP is the agency responsible for enforcing customs laws and collecting tariff revenue. The CBP website includes guidance on recent tariff actions for importers.\nDuty on Imports of Steel and Aluminum Articles under Section 232 of the Trade Expansion Act of 1962Section 301 Trade Remedies \u2013 Frequently Asked QuestionsQuota Bulletins , which track certain imports that are subject to quotas or quantitative limits.","output":"The Constitution grants Congress the sole authority over the regulation of foreign commerce. Over the past several decades, Congress has authorized the President to adjust tariffs and other trade restrictions in certain circumstances through specific trade laws. Using these delegated authorities under three trade laws, President Trump has imposed increased tariffs, largely in the range of 10% - 25%, on a variety of U.S. imports to address concerns related to national security, injury to competing industries, and China's trade practices on forced technology transfer and intellectual property rights, among other issues. Several U.S. trade partners argue that these tariff actions violate existing U.S. commitments under multilateral and bilateral or regional trade agreements and have imposed tariffs on U.S. exports in retaliation. Congress continues to actively examine and debate these tariffs, and several bills have been introduced either to expand, limit, or revise existing authorities.\nU.S. Trade Laws Authorizing the President's Tariff Actions\nThe President's recent tariff actions raise a number of significant issues for Congress. These issues include the economic effects of tariffs on firms, farmers, and workers, and the overall U.S. economy, the appropriate use of delegated authorities in line with congressional intent, and the potential implications and impact of these measures for broader U.S. trade policy, particularly with respect to the U.S. role in the global trading system.\nThe products affected by the tariff increases include washing machines, solar products, steel, aluminum, and numerous imports from China. Retaliatory tariffs are affecting several U.S. exports, including agricultural products such as soybeans and pork, motor vehicles, steel, and aluminum. Using 2017 values, U.S. imports subject to the increased tariffs accounted for 12% of annual U.S. imports, while exports subject to retaliatory tariffs accounted for 8% of annual U.S. exports. A pending Section 232 investigation on motor vehicle and parts imports could result in increased tariffs on more than $360 billion of imports, and the President has stated that additional tariffs could be imposed on imports from China absent a negotiated agreement to address certain Chinese trade practices of longstanding concern to the United States.\nAlthough the consensus among most economists is that the tariffs are likely to have a negative effect on the U.S. economy overall, they may have both costs and benefits across different market sectors and actors. Import tariffs are effectively a tax on domestic consumption and thus increase costs for U.S. consumers and downstream industries that use products subject to tariffs. Retaliatory tariffs create disadvantages for U.S. exports in foreign markets, and can lead to fewer sales of U.S. products abroad and depressed prices. However, domestic producers who compete with affected imports can benefit by being able to charge higher prices for their goods. The Administration also argues the tariffs may have an indirect benefit if they result in tariff reductions by U.S. trading partners and lead to resolution of U.S. trade concerns affecting key sectors of the U.S. economy. Economic analyses of the tariff actions estimate a range of potential effects, but generally suggest a 0.1%-0.2% reduction in U.S. gross domestic product (GDP) growth annually owing to the actions to date. The economic effects of the President's actions are likely to be central to ongoing congressional debate on legislation to alter the President's tariff authority."}
{"id":"crs_R44389","pid":"crs_R44389_0","input":"\tBackground\n\nThe Constitution provides Congress with broad powers over the Armed Forces, including the power \"to raise and support Armies,\" \"to provide and maintain a Navy,\" and \"to make Rules for the Government and Regulation of the land and naval Forces.\" It also provides the Senate with the authority to provide \"Advice and Consent\" on presidential nominations of \"all other Officers of the United States,\" which includes military officers. On the basis of its constitutional authority, Congress has passed a number of laws which govern important aspects of military officer personnel management, including appointments, assignments, grade structure, promotions, and separations. \nThe most senior officers in the Army, Air Force, and Marine Corps are known as general officers. The most senior officers in the Navy are known as flag officers. The phrase \"general and flag officers\" or \"GFO\" refers to all officers in paygrades O-7 through O-10, thereby including one-star, two-star, three-star, and four-star officers. At the highest level, O-10, GFOs hold the most visible and important military positions in the Department of Defense, including the Chairman of the Joint Chiefs of Staff, the chiefs of the four military services, and the combatant commanders. At the lowest level, O-7, they hold positions that span an array of roles, including commanders, deputy commanders, and key staff roles in large organizations. \nThis report provides an overview of active duty GFOs in the United States Armed Forces\u2014including authorizations, duties, and compensation\u2014historical trends in the proportion of GFOs relative to the total force, criticisms and justifications of GFO to total force proportions, and statutory controls. National Guard and Reserve GFOs are not addressed in this report, unless they are serving on active duty in a manner that counts against the active duty caps on GFOs.\nGiven the authority granted to general and flag officers, Congress has developed a statutory framework applicable to this elite group, and considers changes to these laws as it deems appropriate. Congress also periodically reviews the number, duties, and compensation of GFOs. A frequent tension during these reviews has been DOD requests for additional GFOs versus congressional concerns that there are too many GFOs. As one senior DOD official noted during a 1997 congressional hearing:\nthroughout our history there has been a dialogue, just as is going on now, that has ebbed and flowed between the Congress and the military on the number of general and flag officers we need.... I think it is fair to say that over the years, the Congress has consistently taken the view that we have needed fewer general and flag officers, and that we have taken the opposite view, that we needed more than the Congress would allow. These debates tended to intensify during periods of major downsizing and restructuring of our forces, such as after World War II, the Korean War, the Vietnam War, and now after the cold war.\nReferences in this report to specific grades (ranks) within the general and flag officer corps will use the appropriate capitalized title, insignia, or paygrade as indicated in Table 1 .\n\n\t\tCurrent Number of General and Flag Officers\n\nAs of November 1, 2018, there were 920 active duty GFOs, of which 891 were subject to the statutory caps and 29 were exempt from the statutory caps. Distribution by grade and service is summarized in Table 2 . The 891 GFOS subject to the statutory caps is lower than the maximum of 963 authorized in statute (see \" Current Grade Limits \" later in this report). This is in accord with an intentional decision made by DOD in 2011 as part of an efficiency initiative directed by then-Secretary of Defense Robert Gates. By keeping GFO numbers substantially below the maximum authorized, this policy provides DOD flexibility to respond to new requirements for GFOs without the delays caused by the need to find an \"offset\" by downgrading or eliminating another GFO position.\n\n\t\tResponsibilities of General and Flag Officer Positions\n\nWhile Congress has specified functions or duties for some key positions\u2014such as members of the Joint Chiefs of Staff, the Combatant Commanders, the top two officers of each service, the Commander of U.S. Special Operations Command, and the Chief of the National Guard Bureau \u2014the great majority of GFO positions are not defined in statute. In these instances DOD uses the following criteria for determining whether a position should be filled by a general or flag officer:\nNature, characteristics, and function of the position; Grade and position of superior, principal subordinates, and lateral points of coordination; Degree of independence of operation; Official relations with other U.S. and foreign governmental positions; Magnitude of responsibilities; Mission and special requirements; Number, type, and value of resources managed and employed; Forces, personnel, value of equipment, total obligation authority; Geographic area of responsibility; Authority to make decisions and commit resources; Development of policy; National commitment to international agreements; Impact on national security and other national interests; and Effect on the prestige of the nation or the armed force\n\n\t\tHistorical Changes in General and Flag Officer Levels\n\nA summary of the number of active duty GFOs and the proportion of GFOs relative to the total force over the past five decades is provided in Table 3 . A review of GFO levels indicates an 11% increase in the number of four-star officers (36 on September 30, 1965 vs. 40 on September 30, 2018) and a 24% increase in the number of three-star officers (119 vs. 147). At the same time, the number of one-star and two-star officers has decreased by about 35% (1,129 vs. 734). \nHowever, during this time period, the size of the total force was cut roughly in half, dropping from 2.66 million on September 30, 1965, to 1.32 million on September 30, 2018. Thus, a more salient measure may be the proportion of GFOs to the total force. Looking at the data from this perspective, it is clear that while GFOs have always made up a very small percentage of the total force, the general and flag officer corps has increased as a percentage of the total force over the past five decades. GFOs made up about one-twentieth of one percent (0.048%) of the total force in 1965, while they made up about one-fifteenth of one percent (0.070%) of the total force in 2018, indicating that the share of the total force made up of GFOs increased by 46%. This historical trend is more pronounced with respect to four-star officers (which grew from 0.0014% of the total force to 0.0030%, a 114% increase) and three-star officers (which grew from 0.0045% of the total force to 0.0112%, a 149% increase). One- and two-star officers as a percentage of the total force increased less rapidly (from 0.0425% of the total force to 0.0557%, a 31% increase). \nThese increases occurred at the same time that the size of the officer corps in general was increasing as a percentage of the total force. As indicated in the last column of Table 3 , between 1965 and 2018, the officer corps increased from 12.76% of the total force in 1965 to 17.51% in 2018, indicating that the share of the total force made up of officers increased by 37%. \n\n\t\tCriticisms of the Increasing Proportion of GFOs\n\nThere have been two principal criticisms raised against the increasing proportion of GFOs relative the total force. The first criticism revolves around the increased cost of employing a GFO in comparison to a lower ranking officer. The second relates to the belief that too many GFOs slow down decisionmaking processes. Each point is explained in more detail below.\nCost . GFOs cost more to employ than officers of a lower rank. In part, this is due to the higher compensation they receive. For example, the average GFO in paygrade O-7 receives $204,405 in regular military compensation 14 in 2019, while the average officer in paygrade O-6 receives $180,709. Additionally, there can be other costs associated with GFOs, particularly at higher grades, such as the costs of larger staffs, official travel, security details, and aides. An example of this perspective was provided by a witness at a 2011 congressional hearing, who stated \"The progression towards a more top-heavy force is not without its consequences.... The cost of officers increases markedly with their rank, so taxpayers are overpaying whenever a G\/FO is in a position that could be filled by a lower ranking officer.\" Decision making . Another criticism is that an increasing proportion of GFOs slows down decisionmaking by adding additional layers of management between the highest echelons of command and the lowest. In a 2010 speech, former Secretary of Defense Robert Gates criticized the impact of an increase in GFOs and senior civilians in making the Department of Defense a top-heavy and overly bureaucratic organization:\nDuring the 1990s, the military saw deep cuts in overall force structure\u2014the Army by nearly 40 percent. But the reduction in flag officers\u2014generals and admirals\u2014was about half that. The Department's management layers\u2014civilian and military\u2014and numbers of senior executives outside the services grew during that same period. Almost a decade ago, Secretary Rumsfeld lamented that there were 17 levels of staff between him and a line officer. The Defense Business Board recently estimated that in some cases the gap between me and an action officer may be as high as 30 layers.... Consider that a request for a dog-handling team in Afghanistan\u2014or for any other unit\u2014has to go through no fewer than five four-star headquarters in order to be processed, validated, and eventually dealt with. This during an era when more and more responsibility\u2014including decisions with strategic consequences\u2014is being exercised by young captains and colonels on the battlefield.\n\n\t\tJustifications for Increasing Proportion of GFOs\n\nThe increasing proportion of GFOs in comparison to the total force has been a topic of particular interest during past congressional hearings. During these hearings, and particularly during a 1997 congressional review of GFO authorizations, witnesses from the Department of Defense put forth a number of rationales for this growth, including the following:\nJoint requirements . One frequently cited cause of the increasing ratio of GFOs during past congressional hearings has been the increase in \"joint\" requirements that followed enactment of the Goldwater-Nichols Act (GNA) in 1986. While removing the Chairman of the Joint Chiefs of Staff from the chain of command, GNA enhanced the authority of the Chairman in other ways; significantly increased the roles and authorities of commanders of the joint Combatant Commands; and emphasized joint duty assignments for officers. These new institutional arrangements led to the creation of more joint GFO positions and powerful career incentives to serve in those positions. Testifying before Congress in 1997, the Vice Director of the Joint Staff emphasized how the growth of joint organizations affected the proportion of GFOs to the total force: \"There is really no law of proportionality here when you talk about joint growth. If you think about it, sir, where we have been since 1980, we stood up CENTCOM, SOCOM, Space Command; we have reorganized to form ACOM, TRANSCOM, [and] STRATCOM.\" Since then, additional joint headquarters have been established, to include U.S. Northern Command (established in 2002), Joint Task Force Guantanamo (established 2002), Combined Joint Task Force Horn of Africa (established 2002), U.S. Africa Command (2007), and U.S. Cyber Command (2009). Coalition Operations . Another rationale used to explain the increased proportion of GFOs has been an increased emphasis by the United States on forging coalitions with other nations to achieve common security objectives. This has, in turn, generated a demand for senior military leaders to conduct coordinated planning, training, and operations with their peers from foreign nations. The argument is also linked to the number of contingency operations the U.S. military has conducted since the end of the Cold War, which have often involved forces from dozens of countries, including the forces of the nation in which the operations take place. Examples of these coalition operations include Iraq and Afghanistan as well as smaller-scale contingencies such as Bosnia, Haiti, and Kosovo (ongoing). Contingency operations such as these are commanded by a GFO, who usually has additional GFOs as subordinate commanders and senior staff officers. Both their experience and the authority inherent in their grade can be considered important elements to the success of complex operations. Political and diplomatic considerations can also be a factor, as the officers leading these operations are normally expected to interact with the senior military and civilian leadership of the foreign nation where the operations are occurring. Organizational structure . As noted previously, the increase in the proportion of GFOs over the past 50 years has not been due to an increase in the number of GFOs, which has gone down in this time period, but to the much larger decrease in the size of the Armed Forces in general. In part, this slower reduction is due to the organizational structure of the Armed Forces, which includes certain GFO positions whether the Armed Forces are comparatively large or small. For example, there was a Chief of Staff of the Air Force at the peak of the Vietnam War, when the Air Force had about 900,000 airmen, and there is one today, when the Air Force has approximately 325,000 airmen. A similar case can be made for many of the GFOs who serve on the Joint Staff, the Service Staffs, the Combatant Commands, and certain defense agencies. Given the organizational structure of the Armed Forces\u2014some of which is required by law\u2014the amount of management \"overhead\" does not necessarily change in direct proportion to the size of the force. Another way of illustrating this is to consider what would happen if an Army division were disestablished: doing so would eliminate about 15,000 soldiers, but only three of them would be general officers. Technological changes . A fourth justification for increased GFO ratios is that technological advances have changed the way the United States fights its wars. Modern weapons systems, much more powerful and accurate than their predecessors, require fewer personnel to deliver greater firepower. Thus, while the number of personnel a GFO commands may decline as more sophisticated equipment is substituted for manpower, the lethality of those forces may increase. From this perspective, the lethality of the weapons systems, rather than the number of people, provides the justification for an organization to be led by a very senior military officer. Additionally, the advent and development of new domains of warfare\u2014such as space and cyber\u2014has led to the creation of new organizations to exploit advantages and defend against vulnerabilities in those environments.\n\n\tRegular Military Compensation for General and Flag Officers\n\nThere are three main ways in which military personnel, including general and flag officers, are compensated: cash compensation (pay and allowances), non-cash compensation (benefits), and deferred compensation (retired pay and benefits). In this report, only the compensation elements which make up r egular m ilitary c ompensation will be discussed. \n\n\t\tAn Overview of Regular Military Compensation\n\nRegular Military Compensation (RMC) is a statutorily defined measure of the major compensation elements which every servicemember receives. It is widely used as a basic measure of military cash compensation levels and for comparisons with civilian salary levels. RMC, as defined in law, is \"the total of the following elements that a member of the uniformed services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay, basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing to the aforementioned allowances because they are not subject to Federal income tax.\" These elements are described in more detail in the Appendix . Certain GFOs receive a \"personal money allowance\" as well. This is not part of RMC, but is described in a footnote below. Congress included provisions in recent National Defense Authorization Acts to deny GFOs any increase in basic pay during calendar years 2015 and 2016. \n\n\t\tRegular Military Compensation for General and Flag Officers\n\n Table 4 provides the average RMC that general and flag officers received in 2019. It assumes that all GFOs receive BAH, rather than living in government provided housing. \n\n\tStatutory Controls on GFOs\n\nCongress has established a statutory framework for GFOs which limits their numbers by grade, requires presidential determination of many three-star and four-star positions, and specifies the grade and\/or duties of certain key positions. This framework provides for greater congressional control over the most senior GFO positions, while providing substantial latitude to the executive branch in the management of the remaining GFOs. \n\n\t\tCurrent Grade Limits\n\nSections 525 and 526 of Title 10 establish the number of general and flag officers that may be on active duty in the Army, Navy, Air Force, and Marine Corps. The two provisions establish separate caps for each service and for the joint community. There are certain circumstances under which a general or flag officer does not \"count\" against these caps. Additionally, the President has authority under 10 U.S.C. \u00a7527 to suspend the operation of the caps in time of war or national emergency declared by the Congress or the President. \n Table 5 summarizes the statutory limitations by grade for GFOs for service-specific positions. Table 6 summarizes the statutory limitations for GFOs service in Joint positions. Combining the maximum number of service and joint GFO authorizations, the maximum number of GFO positions authorized is currently 963. The current number of active duty GFOs subject to the statutory caps is 891. There are another 29 active duty GFOs who are not subject to the statutory caps. (See \" Current Number of General and Flag Officers \" earlier in the report.)\n\n\t\tGrade Limits after December 31, 2022\n\nThe FY2017 National Defense Authorization Act included a provision, codified at 10 U.S.C. \u00a7526a, to reduce the number of GFOs authorized to be on active duty. The conference report that accompanied the bill highlighted congressional concerns that the military departments had not demonstrated a willingness to implement GFO reductions directed by then-Secretary of Defense Robert Gates in 2011 and, furthermore, noted the context of significant reductions in personnel strength that occurred in the 2011-2016 time frame. Starting in 2023, \u00a7526a will lower the number of GFOs that may be on active duty to a maximum of 620 for Service positions and 232 for Joint positions, a reduction of 111 from the current number of GFO positions authorized by 10 U.S.C. \u00a7526. \n\n\t\tPresidential Determination for Three-Star and Four-Star positions\n\nSection 601 of Title 10 provides that \"[t]he President may designate positions of importance and responsibility to carry the grade of general or admiral or lieutenant general or vice admiral.... An officer assigned to any such position has the grade specified for that position if he is appointed to that grade by the President with the advice and consent of the Senate.\" Thus, with the exception of those so designated in statute, all three-star and four-star positions must be designated as such by the President. Congress can review the rationale for this designation as part of its oversight function, and the Senate retains the power to confirm or reject the nomination of an individual to fill such a position. The authority of the President to designate such positions is also limited by the strength caps on general and flag officers found in 10 U.S.C. \u00a7\u00a7525 and 526. \n\n\t\tStatutorily Defined Positions\n\nCongress has established a number of GFO positions in law which carry designated grades, designated duties, or both. \n\n\t\t\tStatutory Grades\n\nCongress has specified the grade for a number of key positions. For example, 10 U.S.C. \u00a7152 specifies that the Chairman of the Joint Chiefs of Staff holds the rank of General or Admiral. Similar language also exists for the Vice Chairman of the Joint Chiefs of Staff, the top two officers of each service, the Commander of U.S. Special Operations Command, and the Chief of the National Guard Bureau. Table 7 highlights some positions with statutorily required grades. Congress sometimes changes these statutory grades. For example, in 2008, Congress increased the grade of the Chief of the National Guard Bureau from Lieutenant General to General. Additionally, Section 502 of the FY2017 National Defense Authorization Act amended various statutory provisions to eliminate the statutory grade for 54 positions. As explained in the report that accompanied the Senate version of the FY2017 National Defense Authorization Act, where the provision originated: \nThe Committee determined that in order to effectively manage the reduction in the number of general and flag officers prescribed elsewhere in this Act, that the Secretary of Defense must be given the flexibility to assign appropriate officer grades to positions. The provision would not prohibit the position from being filled by an officer with the same, or a higher, or lower grade than the law currently requires.\n\n\t\t\tStatutory Duties\n\nPositions with statutorily required grades typically have statutorily required duties as well. Table 7 provides excerpts of the statutorily required responsibilities, duties, or functions of certain GFO positions. Congress sometimes changes these duties. For example, in 2011, Congress changed the law to specify that the Chief of the National Guard Bureau was a member of the Joint Chiefs of Staff whose duties included \"the specific responsibility of addressing matters involving non-Federalized National Guard forces in support of homeland defense and civil support missions.\"\n\n\tConsiderations for Congress\n\nCongress has a long-standing interest in the military officer corps in general, and has periodically focused additional attention on its most senior officers. Should Congress elect to address GFO authorizations, duties, compensation, or other related topics in more detail, it may wish to consider the following:\nWhat is the most appropriate way to determine how many GFOs the Department of Defense should have? How closely should this be linked to total force size? What other factors would be useful in determining what the right number of GFOs is? How do advances in information technology and decisionmaking tools impact the need for GFOs? Could use of these technologies result in flattened management structures and decrease the need for GFOs? Should Congress modify the current statutory framework that governs GFOs? Should it modify the caps set out in 10 U.S.C. \u00a7\u00a7525, 526, and 526a? To what extent do other statutory requirements, such as the Goldwater-Nichols Act (GNA), drive GFO requirements? Should GNA be revised to alter this effect? Could organizational restructuring of the Joint Staff and Service Staffs decrease the need for GFOs, or allow positions to be held by lower graded GFOs? Could certain organizations be merged to reduce the requirements for GFOs? Could military relations with international partners be restructured so as to lessen the need for GFO representation? How important is rank equivalence when senior U.S. military personnel work with their allied peers? Could National Guard and Reserve GFOs be used to reduce the need for active duty GFOs? Are there GFO positions that could be eliminated or \"downgraded\" to a lower rank? Are there GFO positions that could be replaced by civilian employees? What are the costs and benefits associated with these actions? How might this impact military effectiveness? Can the direct and indirect costs associated with GFOs be reduced? For example, could compensation or staff costs be reduced without significantly affecting the ability of GFOs to carry out their duties?\n\n\t\tAppendix. Elements of Regular Military Compensation\n\nRegular Military Compensation (RMC), as defined in law, is \"the total of the following elements that a member of the uniformed services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay, basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing to the aforementioned allowances because they are not subject to Federal income tax.\" Each of these elements is described below. \nBasic Pay\nAll members of the Armed Forces receive basic pay, although the amount varies by pay grade (rank) and years of service (also called longevity). For most servicemembers, basic pay is the largest element of the compensation they receive in their paycheck and typically accounts for about two-thirds of an individual's RMC. It is roughly analogous to civilian salary.\nBasic Allowance for Housing\nAll servicemembers living in the United States are entitled to either government-provided housing or a housing allowance, known as basic allowance for housing (BAH). About 17% of GFOs living in the United States receive government-provided housing with the remainder receiving BAH to offset the costs of the housing they rent or purchase in the civilian economy. The amount of BAH a servicemember receives is based on three factors: paygrade (rank), geographic location, and whether or not the servicemember has dependents. However, there is no increase in BAH after paygrade O-7. Therefore, the amount of BAH for GFOs does not vary by rank, but only by locality and dependency status.\nPaygrade and dependency status are used to determine the type of accommodation\u2014or \"housing profile\"\u2014that would be appropriate for the servicemember (for example, one-bedroom apartment, two-bedroom townhouse, or three-bedroom single family home). Geographic location is used to determine the average costs associated with each of these housing profiles. The average costs of these housing profiles are the basis for BAH rates. As a result of this methodology, BAH rates are much higher in some areas than others, but servicemembers of similar paygrade and dependent status should be able to pay for roughly comparable housing regardless of their duty location. \nBasic Allowance for Subsistence\nNearly all servicemembers receive a monthly payment to defray their personal food costs. This is known as basic allowance for subsistence (BAS). BAS is provided at a flat rate, with separate rates for officers and enlisted personnel. In 2019, all officers, including GFOs, received $254.39 a month.\nFederal Tax Advantage\nMilitary allowances are generally not considered part of gross income and are not subject to federal income tax, thus generating a tax benefit for servicemembers. RMC considers only the federal income tax advantage provided by the exemption of housing and subsistence allowances from gross income. The precise value of the federal tax advantage for an individual servicemember will vary depending on his or her unique tax situation.","output":"In the exercise of its constitutional authority over the Armed Forces, Congress has enacted an array of laws which govern important aspects of military officer personnel management, including appointments, assignments, grade structure, promotions, and separations. Some of these laws are directed specifically at the most senior military officers, known as general and flag officers (GFOs). Congress periodically reviews these laws and considers changes as it deems appropriate. Areas of congressional interest have included the number of GFOs authorized, the proportion of GFOs to the total force, compensation levels of GFOs, and duties and grades of certain GFOs.\nAs of November 1, 2018, there were 891 active duty GFOs subject to statutory caps, which is 72 less than the maximum of 963 authorized by law. There were also another 29 exempt from the statutory caps. The current number is about average for the post-Cold War era, though substantially lower than the number of GFOs in the 1960s-1980s, when the Armed Forces were much larger in size than they are today. However, while always very small in comparison to the total force, the general and flag officer corps has increased as a percentage of the total force over the past five decades. GFOs made up about one-twentieth of one percent (0.048%) of the total force in 1965, while they made up about one-fifteenth of one percent (0.069%) of the total force in 2018, indicating that the share of the total force made up of GFOs increased by 44%. Some argue that this increased proportion of GFOs is wasteful and contributes to more bureaucratic decisionmaking processes. Others counter that the increased proportion is linked to the military's greater emphasis on joint and coalition operations, core organizational requirements, and the increasing use of advanced technologies.\nCompensation for GFOs varies. One commonly used measure of compensation, known as regular military compensation (RMC), includes basic pay, basic allowance for housing, basic allowance for subsistence, and the federal tax advantage associated with allowances, which are exempt from federal income tax. In 2019, the lowest-ranking GFOs make about $204,000 per year in RMC, while the highest-ranking GFOs make about $238,000 per year.\nCongress has also used its authority to specify the grade and duties of certain GFO positions. For example, Congress increased the grade of the Chief of the National Guard Bureau (CNGB) from Lieutenant General to General in 2008. Three years later, Congress again changed the law to specify that the CNGB was a member of the Joint Chiefs of Staff whose duties included \"the specific responsibility of addressing matters involving non-Federalized National Guard forces in support of homeland defense and civil support missions.\" In 2016, Congress removed the statutory grade requirement from 54 GFO positions.\nThis report provides an overview of active duty GFOs in the United States Armed Forces\u2014including authorizations, duties, and compensation\u2014historical trends in the proportion of GFOs relative to the total force, criticisms and justifications of GFO to total force proportions, and statutory controls. National Guard and Reserve GFOs are not addressed in this report, unless they are serving on active duty in a manner that counts against the active duty caps on GFOs."}
{"id":"gao_GAO-18-513","pid":"gao_GAO-18-513_0","input":"\tDOD Has Established 10 Cross-Functional Teams That Are in Various Stages of Implementation\n\nDOD has established 10 cross-functional teams that OCMO officials  consider responsive to section 911, and these teams are in various  stages of implementation. The Secretary of Defense established a cross- functional team to manage the transfer of background investigations for  DOD personnel security clearances from the Office of Personnel  Management to DOD. This team is required to report directly to the  Secretary. In addition, the Deputy Secretary of Defense established 9  additional cross-functional teams to implement reform initiatives for  improving DOD\u2019s business operations. These teams report to the CMO.\n\n\t\tDOD Is in the Early Stages of Establishing a Cross-Functional Team to Manage the Transfer of Background Investigations to DOD\n\nIn August 2017, the Secretary of Defense issued a memorandum  authorizing its first cross-functional team in response to section 911 to  address challenges with personnel vetting and background investigation  programs. The memorandum notes that a backlog of background  investigations affects DOD\u2019s mission readiness, critical programs, and  operations. According to the memorandum, this cross-functional team will  conduct a full review of current personnel vetting processes to identify a  redesigned process for DOD\u2019s security, suitability and fitness, and  credential vetting. The cross-functional team\u2019s objectives are to develop  options and recommendations to mitigate shortcomings, ensure  necessary resourcing, and transform the personnel vetting enterprise.  The Office of the Under Secretary of Defense for Intelligence and the  Defense Security Service are leading the efforts to establish the team.\nSince we last reported on DOD\u2019s efforts to establish the team, DOD has  taken some steps, such as assigning some team members, but has not  completed other key steps to staff and establish a direction for the team.  In February 2018, we reported that DOD had selected an interim leader  for the team. As of May 2018, this person, a non-Senior Executive  Service individual from the Defense Security Service, was still serving as  the interim leader. Section 911 requires DOD to assign a senior qualified  and experienced individual as the leader of the team. According to Office  of the Under Secretary of Defense for Intelligence officials, the  department plans to seek nominations from DOD components for a  permanent leader from the Senior Executive Service, but does not have a  specific timeframe for doing so. DOD also assigned seven full-time  personnel to the team, who are now co-located, in accordance with  requirements under section 911. These personnel are from the Army,  Defense Civilian Personnel Advisory Service, DOD Consolidated  Adjudications Facility, OCMO, Office of the Under Secretary of Defense  for Intelligence, and MITRE Corporation. Office of the Under Secretary of  Defense for Intelligence officials estimated that the team may have 20  members when it is fully staffed, but they did not have an estimate of  when DOD will assign the remaining team members.\nIn addition, the Office of the Under Secretary of Defense for Intelligence  has established priorities for the cross-functional team. For example, the  team is required to prepare a project plan incorporating all key  components for a DOD enterprise vetting mission\u2014including key  milestones, specific objectives, performance metrics, a resourcing plan,  and an action plan for tracking key initiatives\u2014which are key steps for  establishing the team\u2019s direction. According to Office of the Under  Secretary of Defense for Intelligence officials, as of May 2018, the interim  leader was outlining a project plan. Filling key leadership and staff  positions will be important for ensuring that the team has the knowledge  and expertise from components across the department to effectively  develop and implement the plan.\n\n\t\tDOD Has Established 9 Cross-Functional Teams to Improve DOD\u2019s Business Operations\n\nThe Deputy Secretary of Defense has established 9 additional cross- functional teams since October 2017 to implement reform initiatives  intended to improve the quality and productivity of the department\u2019s  business operations, including moving toward more use of enterprise  services. According to the memoranda appointing the team leaders,  these teams support the Secretary of Defense\u2019s focus on creating a more  lethal and effective force by allowing the department to reallocate  resources from business operations to readiness and to recapitalization of  the combat force. OCMO officials stated that they consider these teams  to be responsive to section 911 of the NDAA for Fiscal Year 2017.\nSection 911 requires DOD to assign senior qualified and experienced  individuals to lead the teams, and the Deputy Secretary of Defense  generally appointed senior DOD officials as leaders. Seven leaders  were appointed in October 2017, one in November 2017, and one in  January 2018. According to OCMO officials, these leaders report to the  CMO. As of May 2018, the size of the teams ranged from 5 to 12  members; OCMO officials stated that the size of the teams can vary  based on the knowledge and expertise the team needs to implement its  initiatives. The teams include representatives from the military  departments, functional organizations relevant to the reform topic, and  external experts. According to OCMO officials, the team leaders chose  their team members from candidates proposed by the military  departments and functional organizations. In addition, the members may  be assigned on a full-time or part-time basis, and all of the teams have  co-located space. Figure 1 provides additional details on the structure of  these 9 teams.\nOCMO officials stated that these 9 teams are in various stages of  implementing their initiatives. For example, the Human Resources team  was the most recent team to be established, and OCMO officials stated  the team is in the process of finalizing the identification and beginning the  implementation of its reform initiatives. Other teams, such as the  Financial Management and Information Technology and Business  Systems teams, have identified and are in the process of implementing  initiatives related to their reform areas.\nDOD established the Reform Management Group to identify opportunities  for reform and provide support to these 9 cross-functional teams. Chaired  by the Deputy Secretary of Defense and facilitated by the CMO and  Director of Cost Assessment and Program Evaluation, the Reform  Management Group provides oversight and guidance, makes decisions  on team recommendations, and monitors the teams\u2019 progress, according  to OCMO officials. These officials also told us that the Reform  Management Group holds weekly meetings to discuss the status of the  reform teams\u2019 efforts and provides monthly comprehensive reports on  these efforts to the Secretary of Defense.\n\n\tDOD Has Not Issued Its Organizational Strategy That Outlines Steps for Advancing a Collaborative Culture\n\nOCMO has drafted an organizational strategy, but DOD has not issued  the strategy, which section 911 required to be completed by September 1,  2017. OCMO officials told us that they have not completed the strategy  because they want to align it with the National Defense Strategy, which  was issued in January 2018, and the National Defense Business  Operations Plan, which was issued in May 2018. OCMO officials told us  that, once the organizational strategy is reviewed internally to align with  the National Defense Strategy and the National Defense Business  Operations Plan, the CMO plans to coordinate the review and approval of  the strategy across components within the department. We previously  recommended, and DOD concurred, that the CMO should obtain input on  the development of the strategy from key stakeholders, such as the  military departments and defense agencies. The officials estimated that  DOD components would have about 2 to 3 weeks to provide input on the  strategy and that the strategy could be issued as early as July 2018.\nWe found that, consistent with our recent recommendations, a revised  version of the draft organizational strategy addresses the requirements in  section 911, including outlining steps for advancing a collaborative culture  within the department. In February 2018, we found that the August 2017  version of the draft organizational strategy that we reviewed addressed  the two required elements under section 911, but did not outline how it  would achieve several future outcomes that advance a collaborative  culture within the department, as required by the NDAA. We  recommended, and DOD concurred, that the CMO should revise the  organizational strategy to outline how it would achieve these outcomes  and, in doing so, should consider our nine leading practices on mergers  and organizational transformations.\nBased on our review of a February 2018 version of the draft  organizational strategy, we found that OCMO officials have taken steps to  address our recommendation, including identifying potential action steps  for the department that align with each of the nine leading practices. For  example, consistent with the leading practice for establishing a coherent  mission and integrated strategic goals to guide the transformation, OCMO  officials revised the draft strategy to propose that the CMO, in  coordination with stakeholders, could develop an implementation plan  with detailed initiatives for increasing collaboration and information  sharing across the department. According to the draft strategy, this plan  could include goals and milestones for these initiatives, and the CMO  could report periodically on the achievement of the goals. Further,  consistent with the leading practice to involve employees to obtain their ideas and gain their ownership for the transformation, OCMO officials  proposed that a representative from OCMO could chair an action officer- level governance body to plan and share performance information related  to this effort. According to the draft strategy, this governance body would  solicit feedback about the related changes, propose changes to new  policies and procedures based on the feedback, and manage the  implementation and tracking of the established goals. Issuing the  organizational strategy\u2014in accordance with section 911 and our prior  recommendation\u2014will better position DOD to advance a collaborative  culture.\n\n\tDOD Has Not Implemented Training or Issued Guidance for Its Cross- Functional Teams or Provided Training to Presidential Appointees\n\nDOD has not fulfilled three related requirements of section 911 to guide  the implementation of its cross-functional teams, namely to (1) provide  training to cross-functional team members and their supervisors, (2) issue  guidance on cross-functional teams, and (3) provide training to  presidential appointees. OCMO officials stated that they plan to send the  guidance and training curricula to the Secretary of Defense for review and  approval after the organizational strategy is issued. Table 1 shows the  three requirements of section 911, the due dates, and the status of DOD  actions, if any, as of May 2018.\n\n\t\tDOD Has Not Implemented Training or Issued Guidance for Its Cross-Functional Teams\n\nAs of May 2018, OCMO had developed a draft training curriculum for  cross-functional team members and their supervisors, but had not  provided the required training. In February 2018, we reported that the  draft training curriculum addressed all requirements in section 911.  OCMO officials stated that after the Secretary of Defense reviews and  approves the training curriculum, which will occur after the organizational  strategy is issued, they will provide training to the members of the cross- functional team on personnel vetting for background investigations and to  the 9 teams implementing reform initiatives.\nOCMO has also drafted guidance on cross-functional teams, but DOD  has not issued the guidance and did not meet the statutorily-required date  of September 30, 2017. Section 911 requires the guidance to address  areas such as the decision-making authority of the teams and key  practices that senior leaders should follow with regard to leadership,  organizational practice, collaboration, and the functioning of cross- functional teams. In February 2018, we reported that OCMO had  developed draft guidance for cross-functional teams that addressed six of  seven statutorily-required elements and incorporated five of eight leading  practices for effective cross-functional teams that we identified in prior  work. We recommended, and DOD concurred, that the CMO should  fully address all requirements in section 911 and incorporate these  leading practices into the guidance. DOD has taken steps to address our  recommendation. For example, consistent with the practice for open and  regular communication, OCMO revised the guidance to state that the  cross-functional team leaders and OCMO will encourage and facilitate  continuous communication and information sharing. According to the  revised guidance, the team leaders and OCMO will accomplish this  through co-location of team members, management practices by cross- functional team leaders that promote a unified team culture and trust, and  use of collaborative information technology tools maintained by OCMO.  However, as of May 2018, DOD had not issued the guidance. As we  reported in February 2018, without initial guidance that fully addresses  the required statutory elements in section 911 and incorporates our  leading practices, DOD\u2019s cross-functional teams may not be able to  consistently and effectively pursue the Secretary of Defense\u2019s strategic  objectives or further promote a collaborative culture within the  department.\n\n\t\tOver Two-Thirds of Presidential Appointees in the Office of the Secretary of Defense Have Been Appointed, but None Have Received Required Training or Waivers\n\nOCMO has developed a draft training curriculum for individuals filling  presidentially-appointed, Senate-confirmed positions in the Office of the  Secretary of Defense. However, as of May 2018, DOD had filled 26 of 36  such positions, and none had received the training or been granted a  training waiver. Further, section 911 requires these individuals to  complete the training within 3 months of their appointment, but 22 have  been in their positions longer than 3 months, as shown in figure 2.\nIn February 2018, we reported that the draft curriculum addressed only  one of the four required elements in section 911. Specifically, we found  that the draft curriculum addressed the required statutory element for  training on the operation of cross-functional teams, but did not incorporate  the required statutory elements for leadership, modern organizational  practice, or collaboration. We recommended, and DOD concurred, that  the CMO should either (1) provide training that includes all of the required  elements in section 911 or (2) develop criteria for obtaining a waiver and  have the Secretary of Defense request such a waiver from the President  for these required elements if the individual possesses\u2014through training  and experience\u2014the skill and knowledge otherwise to be provided  through a course of instruction. Once the training curriculum is reviewed  and approved by the Secretary of Defense, which will occur after the  organizational strategy is issued, OCMO officials plan to provide the  training on the operation of cross-functional teams to the presidential  appointees. These officials stated that DOD plans to develop criteria for  presidential appointees who are eligible for a waiver from the training on  leadership, modern organizational practice, and collaboration, and to  recommend that the Secretary of Defense approve these waivers. Until  DOD finalizes actions on this recommendation, the department may have  difficulty advancing a collaborative culture, as top leadership commitment  is a key practice for a successful organizational transformation.\n\n\tAgency Comments\n\nWe are not making recommendations in this report. We provided a draft  of this report to DOD for review and comment. DOD concurred with our  report. In addition, DOD provided technical comments, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and DOD\u2019s Chief Management  Officer. In addition, the report is available at no charge on our website at  http:\/\/www.gao.gov.\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 III.\n\nAppendix I: Prior GAO Reports on the Department of Defense\u2019s Implementation of Section 911 of the National Defense Authorization Act for Fiscal Year 2017\n\nSection 911 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 included a provision for us\u2014every 6 months after the date of  enactment on December 23, 2016, through December 31, 2019\u2014to  submit to the defense committees a report setting forth a comprehensive  assessment of the actions that DOD has taken pursuant to section 911  during each 6-month period and cumulatively since the NDAA\u2019s  enactment. We issued our first report in June 2017, and did not make  recommendations. We issued our second report in February 2018, and  made four recommendations to improve DOD\u2019s implementation of section  911. Table 2 identifies the two prior GAO reports on DOD\u2019s  implementation of section 911 and the status of the four  recommendations from our February 2018 report.\n\nAppendix II: Summary of Requirements in Section 911 of the National Defense Authorization Act for Fiscal Year 2017\n\nSection 911 of the National Defense Authorization Act for Fiscal Year  2017 requires the Secretary of Defense to take several actions. Table 3  summarizes some of these requirements, the due date, and the date  completed, if applicable, as of May 2018.\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Margaret Best (Assistant  Director), Tracy Barnes, Arkelga Braxton, William Carpluk, Adelle  Dantzler, Michael Holland, William Lamping, Amie Lesser, Ned Malone,  Judy McCloskey, Sheila Miller, Richard Powelson, Terry Richardson, Ron  Schwenn, Jared Sippel, Sarah Veale, and Tina Won Sherman made key  contributions to this report.","output":"Why GAO Did This Study\n\nDOD continues to confront organizational challenges that hinder collaboration. To address these challenges, section 911 of the NDAA for FY 2017 directed the Secretary of Defense to issue an organizational strategy that identifies critical objectives that span multiple functional boundaries and would benefit from the use of cross-functional teams. Additionally, DOD is to establish cross-functional teams to support this strategy, issue guidance on these teams, and provide training to team members and civilian leaders in the Office of the Secretary of Defense.\nThe NDAA also included a provision for GAO to periodically assess DOD's actions in response to section 911. This is GAO's third report on the implementation of section 911. It assesses the status of DOD's efforts to (1) establish cross-functional teams, (2) issue an organizational strategy, and (3) issue guidance on cross-functional teams and provide training to team members and Office of the Secretary of Defense leaders.\nGAO reviewed documentation on DOD's implementation of its cross-functional teams and DOD's draft organizational strategy, draft guidance on establishing cross-functional teams, and draft training curricula. GAO also interviewed DOD officials on efforts to implement section 911.\nGAO is not making new recommendations in this report. DOD concurred and is taking actions to address GAO's previous recommendations on DOD's implementation of section 911. DOD also concurred with the findings in a draft of this report.\n\nWhat GAO Found\n\nThe Department of Defense (DOD) has implemented some statutory requirements in section 911 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, enacted in December 2016, to address organizational challenges. However, senior leadership has not implemented several requirements intended to support cross-functional teams and promote department-wide collaboration (see table).\nDOD has established 10 cross-functional teams, which are in various stages of implementation. Specifically, DOD is in the early stages of establishing one cross-functional team to address the backlog of the department's personnel security clearance background investigations and has assigned an interim leader and seven members to this team. In addition, DOD established 9 cross-functional teams to implement reform initiatives intended to improve the efficiency of the department's business operations. DOD generally appointed senior department officials to lead these teams, and the size of the teams, as of May 2018, ranged from 5 to 12 members.\nDOD has drafted, but not issued, an organizational strategy. DOD officials stated that they have not completed the strategy because they want to align it with two department-wide strategy documents\u2014the National Defense Strategy, which was issued in January 2018, and the National Defense Business Operations Plan, which was issued in May 2018.\nDOD also has not fulfilled three statutory requirements related to guidance and training for cross-functional teams and civilian leaders in the Office of the Secretary of Defense. Specifically, DOD has not (1) provided training to cross-functional team members, (2) issued guidance on cross-functional teams, or (3) provided training to presidential appointees in the Office of the Secretary of Defense. DOD officials stated that they plan to send the guidance and training curricula to the Secretary of Defense for review and approval after DOD issues the organizational strategy. Fully implementing these requirements and GAO's prior recommendations related to the organizational strategy, guidance, and training, will better position DOD to effectively implement its cross-functional teams and advance a collaborative culture as required by the NDAA."}
{"id":"gao_GAO-17-798T","pid":"gao_GAO-17-798T_0","input":"\tBackground\n\nSince January 2017, the Navy has suffered four significant mishaps at  sea that have resulted in serious damage to Navy ships and the loss of  17 sailors (see figure 1). Three of the four at sea mishaps that have  occurred\u2014two collisions and one grounding\u2014have involved ships  homeported overseas in Yokosuka, Japan. Appendix II provides a  summary of major mishaps for Navy ships at sea in fiscal years 2009  through 2017.\nThe Navy currently has 277 ships, a 17 percent reduction from the 333  ships it had in 1998. Over the past two decades, as the number of Navy  ships has decreased, the number of ships deployed overseas has  remained roughly constant at about 100 ships; consequently, each ship is  being deployed more to maintain the same level of presence. We  reported in September 2016 that the Navy, along with the other military  services, had been reporting persistently low readiness levels. The Navy  attributes these, in part, to the increased deployment lengths needed to  meet the continuing high demand for its aircraft carriers, cruisers,  destroyers, and amphibious ships. For example, the deployment lengths  for carrier strike groups had increased from an average of 6.4 months  during the period of 2008 through 2011 to a less sustainable 9 months for  three carrier strike groups that were deployed in 2015. In 2016, the Navy  extended the deployments of the Harry S Truman and Theodore  Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In  addition, the Navy has had to shorten, eliminate, or defer training and  maintenance periods to support these high deployment rates. These  decisions have resulted in declining ship conditions across the fleet and  have increased the amount of time required for the shipyards to complete  maintenance on these ships. Lengthened maintenance periods, in turn,  compress the time that ships are available for training and operations.\n\n\tShips Homeported Overseas Provide Increased Forward Presence but Train Less, Defer More Maintenance, Degrade Faster, and Cost More to Operate\n\nAs we previously reported, to help meet the operational demands using  its existing inventory of ships, the Navy has assigned more of its surface  combatants and amphibious ships to overseas homeports. Since 2006,  the Navy has doubled the percentage of the fleet assigned to overseas  homeports. In 2006, 20 ships were homeported overseas (7 percent of  the fleet); today, 40 ships are homeported overseas (14 percent of the  fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will  be homeported in Yokosuka, Japan in 2018 (see figure 2).\nAccording to the Navy, homeporting ships overseas is an efficient method  for providing forward presence and rapid crisis response. Our prior work  confirms that having ships homeported overseas provides additional  presence, but it comes at a cost. For example, we found in May 2015 that  homeporting ships overseas results in higher operations and support  costs than homeporting ships in the United States. In addition, the  operational schedules the Navy uses for overseas-homeported ships limit  dedicated training and maintenance periods, resulting in difficulty keeping  crews fully trained and ships maintained. In fact, the primary reason that  Navy ships homeported overseas provide more deployed time than ships  homeported in the United States is that the Navy reduces their training  and maintenance periods in order to maximize their operational  availability. Ships homeported overseas do not operate within the  traditional fleet response plan cycles that apply to U.S.-based ships.  Since the ships are in permanent deployment status during their time  homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational  schedules (see figure 3). Navy officials told us that because the Navy  expects these ships to be operationally available for the maximum  amount of time, their intermediate and depot-level maintenance are  executed through more frequent, shorter maintenance periods or deferred  until after they return to a U.S. homeport\u2014generally after 7 to 10 years  overseas.\nIn May 2015, we also found that high operational tempo for ships  homeported overseas limits the time for crew training when compared  with training time for ships homeported in the United States. Navy officials  told us that U.S.-based crews are completely qualified and certified prior  to deploying from their U.S. homeports, with few exceptions. In contrast,  the high operational tempo of ships homeported overseas had resulted in  what Navy personnel called a \u201ctrain on the margins\u201d approach, a  shorthand way to say there was no dedicated training time set aside for  the ships so crews trained while underway or in the limited time between  underway periods. We found that, at the time of our 2015 review, there  were no dedicated training periods built into the operational schedules of  the cruisers, destroyers, and amphibious ships homeported in Yokosuka  and Sasebo, Japan. As a result, these crews did not have all of their  needed training and certifications. We recommended that the Navy  develop and implement a sustainable operational schedule for all ships  homeported overseas. DOD concurred with this recommendation and  reported in 2015 that it had developed revised operational schedules for  all ships homeported overseas. However, when we contacted DOD to  obtain updated information for this testimony, U.S. Pacific Fleet officials  stated that the revised operational schedules for the cruisers and  destroyers homeported in Japan were still under review and had not been  employed. As of June 2017, 37 percent of the warfare certifications for  cruiser and destroyer crews homeported in Japan had expired, and over  two-thirds of the expired certifications\u2014including mobility-seamanship  and air warfare\u2014had been expired for 5 months or more. This represents  more than a fivefold increase in the percentage of expired warfare  certifications for these ships since our May 2015 report. The Navy\u2019s  Surface Force Readiness Manual states that the high operational tempo  and frequent tasking of ships homeported overseas requires that these  ships always be prepared to execute complex operations and notes that  this demand for continuous readiness also means that ships homeported  overseas should maintain maximum training, material condition, and  manning readiness.\nWith respect to the material condition of the ships, we found in May 2015  that casualty reports\u2014incidents of degraded or out-of-service equipment\u2014nearly doubled over the 2009 through 2014 time frame, and  the condition of overseas-homeported ships decreased even faster than  that of U.S.-based ships (see figure 4). The Navy uses casualty reports to  provide information on the material condition of ships in order to  determine current readiness. For example, casualty report data provide  information on equipment or systems that are degraded or out of service,  the lack of which will affect a ship\u2019s ability to support required mission  areas. In 2015, Navy officials acknowledged an increasing number of  casualty reports on Navy ships and a worsening trend in material ship  condition. They stated that equipment casualties require unscheduled  maintenance and have a negative effect on fleet operations, because  there is an associated capability or capacity loss.\nIn our May 2015 report, we recommended that the Navy develop a  comprehensive assessment of the long-term costs and risks to its fleet  associated with the Navy\u2019s increasing reliance on overseas homeporting  to meet presence requirements; make any necessary adjustments to its  overseas presence based on this assessment; and reassess these risks  when making future overseas homeporting decisions. DOD concurred  with this recommendation, but, as of August 2017, it has not conducted  an assessment, even though it has continued to increase the number of  ships homeported overseas.\n\n\tSize and Composition of Ship Crews May Contribute to Sailor Overwork and Create Readiness and Safety Risks\n\nIn the early 2000s, the Navy made several changes to its process for  determining the size and composition of ship crews that may contribute to  sailor overwork and create readiness and safety risks. These changes  were intended to drive down crew sizes in order to save on personnel  costs. However, as we reported in May 2017, these changes were not  substantiated with analysis and may be creating readiness and safety  risks. With fewer sailors operating and maintaining surface ships, the  material condition of the ships declined, and we found that this decline  ultimately contributed to an increase in operating and support costs that  outweighed any savings on personnel (see figure 5). The Navy eventually  reassessed and reversed some of the changes it had made during this  period\u2014known as \u201coptimal manning\u201d\u2014but it continued to use a workweek  standard that does not reflect the actual time sailors spend working and  does not account for in-port workload\u2014both of which may be leading to  sailors being overworked. Additionally, we found that heavy workload  does not end after ships return to port. Crews typically operate with fewer  sailors while in port, so those crew members remaining must cover the  workload of multiple sailors, causing additional strain and potential  overwork.\nIn 2014, the Navy conducted a study of the standard workweek and  identified significant issues that could negatively affect a crew\u2019s  capabilities to accomplish tasks and maintain the material readiness of  ships, as well as crew safety issues that might result if crews slept less to  accommodate workload that was not accounted for. The Navy study  found that sailors were on duty 108 hours a week, exceeding their weekly  on-duty allocation of 81 hours. This on-duty time included 90 hours of  productive work\u201420 hours per week more than the 70 hours that are  allotted in the standard workweek. This, in turn, reduced the time  available for rest and resulted in sailors spending less time sleeping than  was allotted, a situation that the study noted could encourage a poor  safety culture. Moving forward, the Navy will likely face manning  challenges, especially given its current difficulty in filling authorized  positions, as it seeks to increase the size of its fleet by as much as 30  percent over its current size. Navy officials stated that even with  manpower requirements that accurately capture all workload, the Navy  will be challenged to fund these positions and fill them with adequately  trained sailors at current personnel levels. Figure 6 shows the Navy\u2019s  projected end strength and fleet size.\nIn our May 2017 report, we found that the Navy\u2019s guidance does not  require that the factors it uses to calculate manpower requirements be  reassessed periodically or when conditions change, to ensure that these  factors remain valid and that crews are appropriately sized. We made  several recommendations to address this issue, including that the Navy  should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its  manpower requirements process, and (4) update its ship manpower  requirements. DOD concurred with our recommendations, stating that it is  committed to ensuring that the Navy\u2019s manpower requirements are  current and analytically based and will meet the needs of the existing and  future surface fleet. As of August 2017, DOD had not yet taken any  actions to implement these recommendations. We believe that, until the  Navy makes the needed changes, its ships may not have the right  number and skill mix of sailors to maintain readiness and prevent  overworking its sailors.\n\n\tThe Navy\u2019s Inability to Complete Ship Maintenance on Time Hampers Its Efforts to Rebuild Readiness\n\nTo address its persistently low readiness levels, the Navy began  implementing a revised operational schedule in November 2014, which it  referred to as the optimized fleet response plan. This plan seeks to  maximize the employability of the existing fleet while preserving adequate  time for maintenance and training, providing continuity in ship leadership  and carrier strike group assignments, and restoring operational and  personnel tempos to acceptable levels. The Navy\u2019s implementation of the  optimized fleet response plan\u2014and readiness recovery more broadly\u2014is  premised on adherence to deployment, training, and maintenance  schedules.\nHowever, in May 2016, we found that the Navy was having difficulty in  implementing its new schedule as intended. Both the public and private  shipyards were having difficulty completing maintenance on time, owing  primarily to the poor condition of the ships after more than a decade of  heavy use, deferred maintenance, and the Navy\u2019s inability to accurately  predict how much maintenance they would need. We reported that in  2011 through 2014 only 28 percent of scheduled maintenance for surface  combatants was completed on time and just 11 percent was completed  on time for aircraft carriers. We updated these data for the purposes of  this testimony to include maintenance availabilities completed through the  end of fiscal year 2016 and found continued difficulty completing  maintenance on time for key portions of the Navy fleet (see figure 7):\nAircraft Carriers (CVNs): In fiscal years 2011 through 2016,  maintenance overruns on 18 of 21 (86 percent) aircraft carriers  resulted in a total of 1,103 lost operational days\u2014days that ships were  not available for operations\u2014the equivalent of losing the use of 0.5  aircraft carriers each year.\nSurface Combatants (DDGs and CGs): In fiscal years 2011 through  2016, maintenance overruns on 107 of 169 (63 percent) surface  combatants resulted in a total of 6,603 lost operational days\u2014the  equivalent of losing the use of 3.0 surface combatants each year.\nSubmarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011  through 2016, maintenance overruns on 39 of 47 (83 percent)  submarines resulted in a total of 6,220 lost operational days\u2014the  equivalent of losing the use of 2.8 submarines each year.\nNavy officials are aware of the challenges faced by both the public and  private shipyards and have taken steps to address the risks these pose to  maintenance schedules, including hiring additional shipyard workers and  improving their maintenance planning processes. However, Navy officials  have told us that it will take time for these changes to bring about a  positive effect. For example, as of May 2016, data on the public  shipyards\u2019 workforce showed that 32 percent of all employees had fewer  than 5 years of experience. According to Navy officials, this workforce  inexperience negatively affects the productivity of the shipyards, and it will  take several years for them to attain full productivity.\n\n\tNavy Readiness Rebuilding is Part of a Broader DOD Effort\n\nIn September 2016, we found that although DOD has stated that  readiness rebuilding is a priority, implementation and oversight of  department-wide readiness rebuilding efforts did not fully include key  elements of sound planning, and the lack of these elements puts the  overall rebuilding efforts at risk. The Navy states that its overall goal for  readiness recovery is to reach a predictable and sustainable level of  global presence and surge capacity from year to year. The Navy identified  carrier strike groups and amphibious ready groups as key force elements  in its plan for readiness recovery and had set 2020 for reaching a  predictable and sustainable level of global presence and surge capacity  by implementing the optimized fleet response plan. However, we found in  2016 that the Navy faced significant challenges, such as delays in  completing maintenance and emerging demands, in achieving its  readiness recovery goals for carrier strike groups and amphibious ready  groups, and projections show that the Navy will not meet its time frames  for achieving readiness recovery.\nAs a result, we recommended that DOD and the services establish  comprehensive readiness goals, strategies for implementing them, and  associated metrics that can be used to evaluate whether readiness  recovery efforts are achieving intended outcomes. DOD generally  concurred with our recommendations and, in November 2016, issued  limited guidance to the military services on rebuilding readiness; it has  also started to design a framework to guide the military services in  achieving readiness recovery but has not yet implemented our  recommendations. The Navy has since extended its time frame for  readiness recovery to at least 2021, but it still has not developed specific  benchmarks or interim goals for tracking and reporting on readiness  recovery. Navy officials cited several challenges to rebuilding readiness,  chief among them the continued high demand for its forces, the  unpredictability of funding, and the current difficulty with beginning and  completing ship maintenance on time.\nIn January 2017, the President directed the Secretary of Defense to  conduct a readiness review and identify actions that can be implemented  in fiscal year 2017 to improve readiness. DOD and Navy officials told us  that, as part of this readiness review, the Navy prioritized immediate  readiness gaps and shortfalls. These officials added that this review  would guide the Navy\u2019s investment decisions in future budget cycles, with  the intention to rebuild readiness and prepare the force for future  conflicts. However, high demand for naval presence will continue to put  pressure on a fleet that is already stretched thin across the globe.  Looking to the future, the Navy has plans to grow its fleet by as much as  30 percent, but it has not yet shown the ability to adequately man,  maintain, and operate the current fleet. These readiness problems need  to be addressed and will require the Navy to implement our  recommendations\u2014particularly in the areas of assessing the risks  associated with overseas basing, reassessing sailor workload and the  factors used to size ship crews, and applying sound planning and  sustained management attention to its readiness rebuilding efforts. In  addition, continued congressional oversight will be needed to ensure that  the Navy demonstrates progress in addressing its maintenance, training,  and other challenges.\nChairmen Wilson and Wittman, Ranking Members Bordallo and Courtney,  and Members of the Subcommittees, this concludes my prepared  statement. I would be pleased to respond to any questions you may have  at this time.\n\n\tGAO Contact and Staff Acknowledgements\n\nIf you or your staff have questions about this testimony, please contact  John Pendleton, Director, Defense Capabilities and Management at (202)  512-3489 or pendletonj@gao.gov.\nContact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Suzanne Wren, Assistant  Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne  Landesman, Amie Lesser, Tobin McMurdie, Shari Nikoo, Cody  Raysinger, Michael Silver, Grant Sutton, and Chris Watson.\n\nAppendix I: Implementation Status of Prior GAO Recommendations Cited in this Testimony\n\nOver the past three years, we issued several reports related to Navy  readiness cited in this statement. Table 1 summarizes the status of  recommendations made in these reports, which contained a total of 11  recommendations. The Department of Defense generally concurred with  all of these recommendations but has implemented only one of them to  date. For each of the reports, the specific recommendations and their  implementation status are summarized in tables 2 through 4.\n\nAppendix II: Summary of Major Mishaps for Navy Ships at Sea for Fiscal Years 2009 Through 2017, as of August 2017\n\nThe Navy defines a class A mishap as one that results in $2 million or  more in damages to government or other property, or a mishap that  resulted in a fatality or permanent total disability. We analyzed data  compiled by the Naval Safety Center for fiscal years 2009 through 2017  to provide a summary of major Navy mishaps at sea (see table 5).\n\nAppendix III: Related GAO Products\n\nReport numbers with a C or RC suffix are Classified. Classified reports  are available to personnel with the proper clearances and need to know,  upon request.\nDepartment of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.\nMilitary Readiness: Coastal Riverine Force Challenges. GAO-17-462C.  Washington, D.C.: June 13, 2017. (SECRET)\nNavy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.\nMilitary Readiness: DOD\u2019s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.\nNavy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET\/\/NOFORN)\nMilitary Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.\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.\nMilitary Readiness: Navy Needs to Assess Risks to Its Strategy to  Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21,  2012.\nForce Structure: Improved Cost Information and Analysis Needed to  Guide Overseas Military Posture Decisions. GAO-12-711. Washington,  D.C.: June 6, 2012.\nMilitary Readiness: Navy Needs to Reassess Its Metrics and  Assumptions for Ship Crewing Requirements and Training. GAO-10-592.  Washington, D.C.: June 9, 2010.\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":"Why GAO Did This Study\n\nSince January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships.\nThis statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges.\nIn preparing this statement, GAO relied on previously published work since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues; GAO updated this information, as appropriate, based on Navy data.\n\nWhat GAO Found\n\nGAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include:\nDegraded readiness of ships homeported overseas : Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan\u2014including certifications for seamanship\u2014had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented.\nCrew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload\u2014both of which have contributed to some sailors working over 100 hours a week.\nInability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations).\nLooking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations\u2014particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges.\n\nWhat GAO Recommends\n\nGAO made 11 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process."}
{"id":"gao_GAO-18-278","pid":"gao_GAO-18-278_0","input":"\tBackground\n\nARPA-E\u2019s typical funding announcement and award selection process  begins with the agency hiring a program director responsible for  identifying a gap in energy technology research and developing a  program to fill that gap. ARPA-E is required by statute to achieve its  goals through energy technology projects that, among other things,  accelerate transformational technological advances in areas that industry  on its own is not likely to undertake because of technical and financial  uncertainty, while also ensuring that its activities are coordinated with,  and do not duplicate the efforts of, programs and laboratories within DOE  and other relevant research agencies. ARPA-E\u2019s efforts to identify  existing energy technology research gaps and to design a program to  address those gaps involve research; consultation with scientific experts,  including a workshop with outside experts; and internal discussions within  ARPA-E. From this process, program directors develop funding  opportunity announcements that describe the technical requirements  specific to each program\u2019s technology area that applicants have to meet,  as well as the four standard criteria that ARPA-E uses to guide its merit  selection process. Following the issuance of a funding opportunity  announcement, ARPA-E employs the following multi-stage process to  merit review applications, make funding award decisions, and monitor  projects:\nConcept paper. Applicants initially submit a 4- to 7-page abstract of  their projects. Scientific experts from government, industry, and  academia serve as reviewers.\nFull application. After reviewing concept papers, ARPA-E  encourages some applicants to submit full applications. Full  applications are generally quite extensive, requesting information on  the technical and financial aspects of the proposed project, among  other things. ARPA-E officials we interviewed noted that these  applications are frequently more than 100 pages and can take 30 to  45 days for the applicant to develop. Full applications are reviewed  against the selection criteria by leading scientific experts in the  relevant field and assigned numerical scores.\nReply to reviewer comments. After reviewing a full application,  reviewers provide comments and questions to the applicants, who  then have the opportunity to respond.\nSelection. A three- to four-person panel, chaired by the relevant  ARPA-E program director, considers the reviewers\u2019 comments and  numerical scores and recommends applications for an award. The  final decisions on which applicants to select for award negotiations  are made by the selecting official, usually the Director of ARPA-E.\nAward negotiations. Once selections are made, ARPA-E program  directors work closely with selectees to negotiate the terms and  conditions of their award. These negotiations include, among other  things, developing a project plan with technical milestones that are to  be met during the 2 to 3 years that the award is being funded, a  budget and management plan, and an intellectual property and data  management plan. Funds are awarded once negotiations regarding  the terms and conditions of the award are concluded. ARPA-E seeks  to complete negotiations regarding the terms and conditions of an  award within approximately 100 days of sending a letter notifying an  applicant that they have been selected for award negotiations.\nSelectees may be allowed to begin spending money to start work on  their projects up to 90 days prior to the completion of award  negotiations. However, these expenditures are made with the risk that  applicants may not be reimbursed if award negotiations are  unsuccessful and ARPA-E does not fund the award.\nMonitoring. ARPA-E monitors and supports the projects it funds  through quarterly reviews and site visits. At any point during the  award, ARPA-E may decide whether to continue or terminate the  project based on whether agreed-upon project milestones are being  met.\n\n\tDOE Developed and Implemented a New Process to Assess the Department\u2019s Financial Assistance against the Administration\u2019s Priorities\n\nIn 2017, DOE developed and implemented a new review process to  assess DOE financial assistance for new work against the current  administration\u2019s priorities, including financial assistance for which ARPA- E had already made award selections. DOE reviewed and approved  ARPA-E\u2019s opportunities for financial assistance on a rolling basis from  May to September 2017, and nearly all were approved to proceed.\nThe formal review of DOE financial assistance officially began on May 4,  2017, when DOE\u2019s Chief of Staff issued a memorandum stating that  funding opportunity announcements and determinations of non- competitive financial assistance would be reviewed to ensure consistency  with the administration\u2019s priorities. According to the memorandum, DOE  agencies that award financial assistance\u2014referred to in this report as  funding organizations\u2014were to provide information about each  competitively selected funding announcement and determination of non- competitive financial assistance by May 15, 2017. This information  included, for example, a brief description of the financial assistance, the  number and amount of planned awards, and the technology readiness  level of the projects being funded. DOE Office of Management officials  told us that the agency\u2019s financial assistance review lasted through  September 2017, as some DOE organizations continued to submit new  financial assistance for review, but that the review was largely completed  by August 10, 2017. However, while the formal review of DOE financial  assistance began in May, award negotiations for ARPA-E-funded projects  were suspended nearly 1 month earlier. Specifically, according to ARPA- E officials, DOE\u2019s Deputy Chief of Staff verbally directed ARPA-E on April  6, 2017 to stop all ongoing award negotiations. Figure 1 shows the  timeline of DOE\u2019s review of ARPA-E financial assistance.\nPursuant to the DOE Chief of Staff\u2019s May 4th memorandum, ARPA-E and  other DOE funding organizations submitted the requested information to  the DOE review team, which was coordinated and facilitated by the  Director of DOE\u2019s Office of Management. Other members of the financial  assistance review team included DOE\u2019s acting Chief Financial Officer;  deputy assistant secretaries, chiefs of staff, and senior advisors at several  DOE funding organizations; and members of the department\u2019s  congressional affairs and public affairs staff.\nAccording to DOE Office of Management officials we interviewed, the  review team assessed the department\u2019s financial assistance against five  criteria:\nWhether the financial assistance was statutorily mandated;\nWhether the financial assistance was described in congressional\nWhether the financial assistance was consistent with administration  priorities, as identified in budget documents and other statements  from the President and Secretary of Energy, among other things;\nWhat technology readiness level the financial assistance was  intended to fund; and\nWhether the technology encompassed by the project was already  being funded by the private sector or others.\nDOE Office of Management officials stated that the review team did not  use the above criteria to assign quantitative scores to evaluate the  department\u2019s financial assistance; instead, the team collaboratively  discussed each opportunity for assistance. In most cases, the review  team was able to reach consensus on whether the financial assistance  aligned with the administration\u2019s priorities. DOE Office of Management  officials also noted that they met with ARPA-E leadership to obtain  additional information about ARPA-E financial assistance on three  occasions during the course of the review. ARPA-E officials said that, in  addition to those three meetings, they provided written information to  address questions received from the review team and to provide  additional context regarding ARPA-E financial assistance.\nIn total, DOE\u2019s review team assessed 6 ARPA-E fiscal year 2017 or prior- year funding opportunity announcements for which applicants had been  selected for award negotiation, 7 fiscal year 2017 announcements in the  earlier stages of the merit review and selection process, 2 fiscal year  2017 announcements that had not yet been released, and 17  opportunities for financial assistance where ARPA-E funded renewals or  new work under a determination of noncompetitive financial assistance.  According to DOE Office of Management officials, the review team  worked as quickly as possible to review all of DOE\u2019s financial assistance  to minimize potential disruptions for recipients and DOE\u2019s funding  organizations. Once the review team approved an opportunity for financial  assistance, DOE funding organizations were allowed to resume work,  DOE Office of Management officials told us. Figure 2 shows the total  cumulative funds for ARPA-E financial assistance approved by the review  committee at various stages in the review. For example, as shown in  Figure 2, the review team approved roughly $158.3 million (55.6 percent)  of ARPA-E\u2019s proposed financial assistance on May 18, 2017, 3 days after  the deadline for DOE funding organizations to submit information to the  review team. The remaining proposed financial assistance was approved  in several stages from June through August 2017. As of August 25, 2017,  all of ARPA-E\u2019s competitively selected funding opportunity  announcements, renewals, and determinations for noncompetitive  financial assistance, where selectees had been selected for negotiation,  were approved by the review team, representing roughly $265 million, or  93.1 percent, of all ARPA-E funding reviewed by the team.\nDOE Office of Management officials also stated that the financial  assistance review team made a decision early in the course of the review  to honor all existing DOE commitments to fund new work. These officials  said that this extended to commitments made to entities that had been  selected for award negotiations, even though the department does not  officially commit to providing funds until such negotiations are completed  and the award is finalized. However, according to ARPA-E selectees we  interviewed, this message was generally not communicated to them,  which led to uncertainty about whether their projects would be funded. In  contrast, the review team recommended that the DOE Chief of Staff  cancel ARPA-E\u2019s Facsimile Appearance to Create Energy Savings  funding announcement, which had accepted full applications but had not  selected any applicants for award negotiation. This opportunity would  have funded the development of advanced information technology that  could allow for three-dimensional digital representation of a person in a  room nearly indistinguishable from the person being there in real life,  which might allow for increased telecommuting. DOE Office of  Management officials told us that the review team reached this  recommendation in part because this technology was already being  funded by the private sector. As of November 2017, DOE Office of  Management officials said the review team had cancelled 3 other DOE  funding announcements as a result of the review.\nAccording to information we collected, DOE\u2019s review of ARPA-E financial  assistance, as part of the DOE-wide review process, did not require the  President to send a special message under the Impoundment Control  Act. Specifically, the delay in obligating ARPA-E funds for financial  assistance examined through DOE\u2019s review process was for  programmatic reasons. DOE officials explained that the purpose of the  review was to ensure that the agency\u2019s financial assistance aligned with  the priorities of the current administration.\n\n\tDOE\u2019s Financial Assistance Review Created Uncertainty for ARPA-E Selectees, Which Led to Delayed Project Timelines and Staffing Difficulties, among Other Impacts\n\nAccording to the 10 ARPA-E selectees we interviewed, DOE\u2019s financial  assistance review process created uncertainty, which led to a variety of  impacts\u2014the most frequently cited of which were potentially delayed  project timelines and difficulties staffing project teams. Selectees told us  that they received little communication from ARPA-E during the review  process, and they indicated that additional information about review  timelines and potential effects on their awards would have helped them  manage some of the uncertainty they experienced during the review  process. DOE Office of Management officials said the fiscal year 2017  review process helped to better identify and coordinate future financial  assistance department-wide on crosscutting issues. DOE is conducting  the fiscal year 2018 review process prior to publicly issuing funding  announcements. As a result, DOE Office of Management officials said,  the delays and uncertainty that selectees experienced in fiscal year 2017  should be reduced.\nIn our structured interviews with ARPA-E selectees, the most frequently  cited impact of the uncertainty caused by DOE\u2019s financial assistance  review was the potential need to delay project timelines. All of the ARPA- E selectees we interviewed told us that they might need to extend their  project timelines because of uncertainty caused by DOE\u2019s review. Four of  these selectees noted that the delay caused by DOE\u2019s review could  cause additional, cascading delays in their timelines. For example, 1  selectee we interviewed said that it would need to re-issue a hiring  announcement it had publicized prior to the review because the review  prevented it from hiring someone. In addition, the selectee would need to  resubmit the hiring announcement to the university and state human  resources departments for approval, which could take months to process.  Another selectee said that it missed 2 months of a 3-month planting  season because it could not start project work, and had the delay lasted  any longer, the selectee would have missed an entire year of data  collection on the project.\nSelectees also cited challenges to staffing project teams as a result of the  uncertainty caused by the review. Selectees stated that delays caused by  the review affected their ability to hire team members they had planned to  hire based on their original schedule, as potential members moved on to  other projects or took different jobs. For example, 9 selectees told us that  they delayed hiring new project team members while DOE\u2019s review was  occurring. Four selectees we interviewed said that they had difficulty  retaining staff during the review process. For example, 1 selectee had to  lay off 2 of the company\u2019s 15 staff members because of the delay in  receiving funding, and several other staff members left voluntarily.  Furthermore, the selectee said laying off these staff members resulted in  an increase in the company\u2019s unemployment taxes, which was expensive  for a small-sized company. Four other selectees that we interviewed said  they had to assign existing project team members to other funded work or  general activities because they could not begin work on their ARPA-E  project until they received funding.\nSelectees we interviewed cited additional impacts associated with the  uncertainty caused by DOE\u2019s financial assistance review. These impacts  included:\nDelaying equipment purchases. Four selectees reported that they  had to delay purchasing important equipment needed to execute their  project. One selectee noted that the delay caused by the review was  long enough that price quotes it had received from equipment sellers  expired, and that prices could increase in later quotes.\nChanges to project scope. Two selectees told us that they might  need to limit the planned scope of their projects to be able to complete  them in the proposed timeline. For example, 1 selectee said its project  involves helping to scale up three to four different technologies a year,  which it might not be able to do if it has to adhere to its initial  timeframes.\nLoss of advantage against potential competitors. Four of the  selectees we interviewed said that the delay may have caused their  technology to fall behind their potential competitors in some way. For  example, 1 selectee noted that it was working in a competitive  environment for its technology, with ongoing efforts in multiple  countries, and reported that its project might have fallen behind  others\u2019 efforts as a result of delays associated with DOE\u2019s review.  However, 4 other selectees said that the review was not likely to  cause any loss of competitiveness.\nImpacts on external project partners. Three selectees noted that  DOE\u2019s review caused uncertainty for partners on their projects,  including partners that provide external funding. For example, 1  selectee told us that private investors in its technology area are most  active in the fall and that its project team might not be able to seek a  second round of funding if it could not demonstrate the necessary  technical results of the project by then.\nImpacts on pre-award spending reimbursements. One selectee  reported that it had to cease certain pre-award spending. The  selectee said that it spent roughly $10,000 on equipment and 150  hours of labor prior to DOE\u2019s financial assistance review, but it could  not submit invoices for these expenditures to ARPA-E while the  review was ongoing and would not be able to if its project was  ultimately not approved. Furthermore, the selectee said that even if  the award was approved, the delay might result in expenditures falling  outside the 90-day window of allowable pre-award expenditures,  which would require obtaining approval from ARPA-E to be  reimbursed.\nSelectees we interviewed also stated that they received little  communication from ARPA-E during the review, which contributed to the  uncertainty about the status of their projects. Specifically, 6 of the  selectees said that they would have liked additional information from  ARPA-E on a variety of topics related to the review. For example, 4  selectees said they would have liked additional information about the  review timeline and when it was planned to be completed. One of these  selectees told us that a written document from ARPA-E indicating a rough  time frame and next steps would have helped facilitate better planning for  their project team. Two selectees we interviewed wanted additional  information about whether they could renegotiate their timelines once the  review was completed. Three selectees told us that they would have liked  additional information about whether the review would cause them to lose  their funding. ARPA-E officials we interviewed told us that they made  three separate requests to DOE\u2019s Deputy Chief of Staff to learn what they  could communicate to selectees about the April 6, 2017, verbal order and  the review process. ARPA-E officials told us that they were directed by  the Deputy Chief of Staff not to communicate with selectees about the  verbal order until receiving guidance from his office. ARPA-E developed  proposed language to share with selectees but did not receive approval  from the Deputy Chief of Staff to distribute it. DOE Office of Management  officials we interviewed told us that they did not issue guidance to ARPA- E or other DOE funding organizations about how the organizations should  communicate with selectees during the review.\nIn contrast to its fiscal year 2017 review, DOE began its 2018 financial  assistance review in August 2017, prior to publicly issuing funding  announcements. On August 10, 2017, DOE\u2019s Office of Management sent  an email to DOE funding organizations directing them to submit  descriptions of their proposed financial assistance by September 8, 2017.  Because the review will occur prior to publicly issuing funding opportunity  announcements, and thus before any recipients apply or are selected,  DOE Office of Management officials said the delays and uncertainty that  selectees experienced in fiscal year 2017 should be reduced.\nDOE Office of Management officials told us that\u2014aside from changing  the timing of its 2018 financial assistance review\u2014the review team\u2019s  membership and evaluation criteria will be largely the same as for the  fiscal year 2017 review. The officials said that they discussed the review  process with senior leaders in DOE\u2019s funding organizations to help  ensure that they understood the priorities, expectations, and steps of the  review process. The officials also told us that the review team developed  additional guidance to clarify certain issues that arose during the fiscal  year 2017 review. This additional guidance included:\nOn August 17, 2017, funding organization managers were informed  that continuation awards\u2014those where the activity is presently being  funded\u2014would be exempt from submission to the review team and  can continue to move forward.\nOn August 29, 2017, funding organizations were informed that they  should identify financial assistance that falls under one of seven  crosscutting research issue areas. According to DOE Office of  Management officials we interviewed, a key benefit of the fiscal year  2017 review process was that the review team noticed that DOE had  several funding announcements at multiple funding organizations  related to these areas. DOE\u2019s funding organizations may be able to  coordinate to issue a consolidated funding announcement in these  crosscutting research issue areas, to ensure efforts are  complementary and not duplicative. Furthermore, DOE Office of  Management officials we interviewed said that knowing which funding  organizations are funding work in these areas will support DOE  meetings on crosscutting issues.\n\n\tAgency Comments\n\nWe provided a draft of this report for review and comment to the  Secretary of Energy. DOE provided technical comments, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix I.\n\nAppendix I: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, Chris Murray (Assistant  Director), Perry Lusk (Analyst-in-Charge), Antoinette C. Capaccio, John  Delicath, Justin Fisher, Kimberly McGatlin, Dan Royer, Tind Shepper  Ryen, Lauren G. Sherman, and McKenna Storey made key contributions  to the report.","output":"Why GAO Did This Study\n\nARPA-E provides funding for research to overcome long-term and high-risk technological barriers in developing energy technologies. Since 2009, ARPA-E has awarded approximately $1.3 billion to universities, public and private companies, and national laboratories to fund energy research projects. Starting in May 2017, DOE began reviewing its financial assistance department-wide, including ARPA-E's, to determine if it met the administration's priorities.\nGAO was asked to examine this review process as it pertained to ARPA-E. This report describes (1) how DOE implemented the financial assistance review process; and (2) the perspectives of ARPA-E selectees on the impacts of the review process.\nGAO reviewed documents and interviewed officials at ARPA-E and DOE's Office of Management, which coordinated the review. GAO also interviewed a nonprobability sample of 10 of the 68 ARPA-E award selectees whose financial assistance was evaluated under the review. GAO identified selectees to interview based on representation across ARPA-E's recipient types, including universities, private companies, and national laboratories, among other criteria. While the views of selectees GAO interviewed cannot be generalized to all affected ARPA-E selectees, they provide illustrative examples of the effects of DOE's review.\n\nWhat GAO Found\n\nThe Department of Energy (DOE) developed and implemented a new process to review its financial assistance to ensure that all new work funded by the department\u2014including by DOE's Advanced Research Projects Agency-Energy (ARPA-E)\u2014was consistent with the current administration's priorities. The review process covered funding opportunity announcements as well as certain other types of financial assistance. New awards were delayed until the review of the underlying financial assistance opportunity was completed. DOE reviewed and approved ARPA-E's financial assistance on a rolling basis from May through September 2017, and nearly all ARPA-E financial assistance was approved. DOE Office of Management officials met with ARPA-E officials on several occasions to discuss their review of ARPA-E financial assistance. DOE officials GAO interviewed said they wanted to complete the review as quickly as possible to minimize effects on DOE programs. GAO determined that the delay was not reportable under the Impoundment Control Act. The Impoundment Control Act requires the President to notify Congress if an agency wants to withhold the obligation of funds. GAO has separately informed Congress of an impoundment of $91 million in funds that were not allocated to any financial assistance awards, and was not related to DOE's review process.\nAccording to the 10 ARPA-E project selectees GAO interviewed, DOE's financial assistance review process created uncertainty, which led to a variety of project impacts. The impacts most commonly cited by selectees included potentially delayed project timelines, as well as difficulties in staffing their project teams, among other impacts as shown below.\nDOE officials GAO interviewed said that they are reviewing DOE financial assistance in fiscal year 2018. DOE officials said that a key benefit of the fiscal year 2017 review process was an opportunity to better identify and coordinate future financial assistance department-wide on crosscutting issues. However, DOE plans to review fiscal year 2018 financial assistance prior to issuing funding opportunity announcements to the public, and thus before any recipients apply or are selected. As a result, DOE officials said, the uncertainty that ARPA-E selectees experienced during the fiscal year 2017 review process should be reduced.\n\nWhat GAO Recommends\n\nGAO is not making any recommendations. DOE provided technical comments, which GAO incorporated as appropriate."}
{"id":"gao_GAO-19-214","pid":"gao_GAO-19-214_0","input":"\tBackground\n\nThe FMS program, which transfers defense articles and services to  international partners and organizations, is essentially an acquisition  process through which the U.S. government procures military equipment,  training, and other services on behalf of foreign customers. Multiple  organizations have a role in the FMS program. The Department of State  has overall responsibility for the program, including approving what  defense items and services can be sold to specific countries. DOD  administers the FMS program and manages the procurements executed  within the military departments on behalf of foreign governments. Within  DOD, DSCA carries out key functions such as supporting development of  policy for FMS. The military departments carry out the day-to-day  implementation of FMS procurements which can include providing price  and availability data at the customer\u2019s request.\nTypically, defense items\u2014such as weapon systems\u2014made available for  transfer or sale to foreign customers are systems that have completed  operational testing and are entering or have entered full rate production.  In addition, DOD also sells non-standard items, which are defined as  items that DOD does not currently manage and may include items that (1)  are commercially available, (2) DOD previously purchased and have  since been retired, or (3) were purchased in a different configuration for  DOD components. For example, a customer may express interest in  buying tanks that DOD no longer buys for its own needs. A customer may  also express interest in buying a tank that DOD currently procures but  with a radio communications configuration that is different from what DOD  uses.\n\n\t\tFMS Price and Availability Process\n\nA single DOD entity may not have full responsibility for all aspects of  responding to a foreign customer\u2019s request to purchase U.S. defense  items and services. Under DSCA policy, FMS procurements must  generally be managed at \u201cno cost\u201d or \u201cno profit\u201d to the U.S. government.  DOD\u2019s work related to developing price and availability data and other  FMS operations is generally paid for through the administrative charges  collected from foreign customers. Depending on the complexity of the  customer\u2019s request, coordination within and across DOD components  may be necessary to obtain complete information on pricing and  availability. DOD may also need to coordinate with defense contractors  who ultimately develop and provide the equipment or services.\nThe FMS process generally begins when a foreign government submits a  letter of request to the Department of State or DOD to purchase defense  articles or services. In the letter of request, the foreign customer may  express interest in obtaining preliminary price and availability data for the  capabilities it seeks. While DOD describes price and availability data as  rough order of magnitude estimates, DSCA\u2019s guidance does not define  the precision of these estimates. According to DOD, FMS price and  availability data are non-binding estimates for the defense items and  services and are not intended to be budget-quality estimates. Requests  for price and availability data can signal to DOD and defense contractors  the potential for future sales. DOD and contractors may also draw upon  these requests to forecast staffing needs and production line availability.\nDOD security cooperation organizations working in U.S. embassies  around the world can assist potential customers with defining and refining  their requirements prior to submitting a request for price and availability  data. The security cooperation organizations engage in this early  coordination to help customers articulate their capability needs. This early  coordination also gives DOD components advance notice of upcoming  requests so they can initiate technology security and foreign disclosure  processes for the timely release of information.\nRequests for price and availability data represent an optional step in the  process. Customers may forgo the price and availability process and  instead submit a formal assistance request for a letter of offer and  acceptance, which when signed by the customer and U.S. government  becomes an executable FMS case. Figure 1 illustrates where the option  to request price and availability occurs in the overall FMS process.\n\n\t\tDOD Is Reconsidering Options to Implement Recent Legislative Change for FMS Price and Availability Process\n\nThe National Defense Authorization Act for Fiscal Year 2017 required  DOD to establish a process for defense contractors to provide input on  any differences regarding the appropriateness of government price and  availability data prior to delivery of formal responses to customers. In  response, DSCA issued a policy memorandum in October 2018 that was  rescinded 2 months later due to concerns about the sensitivity of  information to be shared with contractors. The policy memorandum had  instructed DOD components to formally request rough order of magnitude  estimates from the prime defense contractor if (1) the total value of the  primary article or service requested exceeds $50 million, and (2) the  customer has a preference for a non-competitive sole source acquisition  or only a single source exists for the primary defense item. Additionally,  the memorandum stated that DOD components will allow the prime  contractor 5 business days to provide feedback on the appropriateness of  the estimate for its items that is included in the price and availability  response prior to the customer receiving this response. The  memorandum had established a formal process to obtain contractor  feedback and resolve issues that may occur, such as differences between  the program office\u2019s and prime contractors\u2019 estimates, and emphasized  the importance of being aware of program deadlines when following the  process to coordinate with contractors. According to a DSCA official, this  new policy would have helped alleviate industry concerns about how  DOD incorporates estimates provided by industry to develop price and  availability responses provided to foreign customers. However, according  to DSCA officials, when implementing the process, DOD found that the  potential level of detail and precision in price and availability estimates  could provide an unfair competitive advantage to contractors coordinating  with DOD on price and availability responses to foreign customers. As  discussed in further detail later in the report, in some instances we found  price and availability estimates DOD offered included more precise  information than rough order of magnitude estimates. According to DSCA  officials, such information could offer the contractor insight into the  government\u2019s pricing methodologies. DSCA subsequently rescinded the  October 2018 policy memorandum. DSCA plans to conduct a 120-day  review to reassess options to find a solution, if any, on what information  can be shared with contractors to satisfy the legal requirement to obtain  contractor input and feedback on price and availability estimates before  DOD responds to customers.\n\n\tDOD Received about 3,000 Requests for Price and Availability Data over the Past 5 Years\n\nFrom fiscal years 2014 through 2018, DOD reported receiving 3,038  requests for price and availability data from foreign customers from 93  countries and the North Atlantic Treaty Organization. Foreign customer  requests included services and items such as training and support  services for weapon systems, missiles and ammunition, aircraft, and  communication equipment. We found that most requests came from the  same foreign customers. Specifically, 10 customers accounted for 56  percent of requests, with one customer accounting for 28 percent of all  requests during the 5-year period within our review. Customers in the  Indo-Pacific region accounted for the largest share of requests, as shown  in figure 2.\nAmong DOD components, the military departments\u2014Army, Navy, and Air  Force\u2014received almost all price and availability requests, as shown in  figure 3. The Army received slightly more requests over the 5-year period,  closely followed by the Navy.\nForeign customers we obtained information from noted that they request  price and availability data to inform their acquisition strategy, obtain a  sense of affordability, and for budget planning. For example, when  considering potential acquisition strategies, some customers may request  data for different options, variants, or quantities of similar items or  services, resulting in multiple requests for price and availability data to  inform a potential purchase. In cases when a customer is interested in  procuring a specific item, the customer may request data to obtain  information about prices and lead times to determine affordability. The  customer may also request the data when considering whether to  purchase from the United States or from foreign countries.\nRequesting price and availability data can also provide foreign customers  with information on whether the U.S. government will make the requested  defense item or service available for sale. While preliminary estimates are  not an official acknowledgement that the item or service will be made  available to the customer, the request can trigger a U.S. government  review that includes application of policies that govern the release of  certain technologies or systems and a discussion with the customer about  the item or service. In some cases, customers can receive responses with  partial information if some requested items are not available for release.\nDOD does not collect data on which customers\u2019 requests for price and  availability data resulted in a formal request to purchase defense items or  services under FMS. Army security assistance officials told us it can take  years between when price and availability data are provided and when a  customer submits a request for a letter of offer and acceptance, if at all.  For their part, customers we obtained information from noted that there  may be numerous reasons for why they might choose not to pursue a  potential sale. For example, the item or service could not be made  available within a timeframe to meet their needs; the overall capability  was not affordable; or price and availability estimates were higher than  estimates from other foreign sources.\nThe military departments do not consistently track information on the  status of responses sent to foreign customers. We found the Navy and  Army generally captured the status of a response in the system,  identifying when a response is in development, has been sent to the  customer, or has been canceled but, according to security assistance  officials, this information may not be entered consistently. In addition, the  Air Force does not generally update the status of a response in the  system. Further, Air Force security assistance officials told us the  department does not update data in the system to reflect that the Air  Force provided price and availability data to the customer. According to  DSCA and military department officials, there is no requirement that DOD  components record when a response is sent to a customer. A DSCA  official told us that DSCA does not have a specific need to monitor the  status of price and availability responses, in part because these are not  formal offers, and DOD prioritizes data collection for formal FMS cases\u2014 cases for which a signed agreement between the U.S. government and  foreign customer is in place.\n\n\tDOD\u2019s Guidance Allows for Flexibility in Developing Price and Availability Data and Reflects Leading Practices for Using Quality Information\n\nDSCA has established DOD-wide guidance\u2014the Security Assistance  Management Manual\u2014for responding to foreign customers\u2019 requests for  information on defense items and services available for purchase through  the FMS program. The manual includes some guidance on developing,  documenting, and communicating price and availability data to foreign  customers, but largely pertains to a customer\u2019s request for a letter of offer  and acceptance with the intent to buy. Security assistance officials from  across the military departments told us they rely on the manual to guide  their efforts throughout the price and availability process, and that  DSCA\u2019s guidance provides a framework for the process and is not always  prescriptive, allowing military departments latitude in how they implement  it. DSCA and military department officials we spoke with said that a  flexible process is needed to account for various circumstances specific  to each request. The price and availability process outlined in guidance  and described by DSCA and military department officials involves input  from numerous organizations within and external to DOD, as shown in  figure 4. The guidance states the process should be completed within 45  days.\nGenerally, we found that DSCA\u2019s guidance reflected attributes conducive  to using quality information as called for by federal internal control  standards. For example, the standards call for agencies to define  information requirements and obtain relevant data from reliable sources.  DOD\u2019s guidance reflects this, stating that price and availability data  should serve as rough order of magnitude estimates of the cost and  availability of defense items or services and are for rough-order planning  purposes. The guidance also  instructs officials to assess whether a foreign customer\u2019s request  contains the necessary information to develop price and availability  data, such as the major item or service, quantity, anticipated delivery  schedule, and other specifications;  suggests that price and availability data also provide customers with  information about costs for not only buying equipment but also the  related operation and sustainment costs; assumes responses will include standard items\u2014nonstandard items  identifies relevant data sources that the military departments can  consult to develop price and availability data, such as last contract  award, stock price, or information from defense contractors;  states that military departments and DSCA should use the Defense  Security Assistance Management System to prepare responses to  price and availability requests;  suggests that data should be itemized by separating main equipment  from training, technical publication, transportation costs, and other  elements, as applicable; and  states that responses should be developed and communicated to  customers within 45 days from when DOD receives the request.\n\n\tIn Selected Examples, DOD Included Comprehensive Data on Ownership Costs When Developing Price and Availability Responses\n\nWhen selling defense items and services to foreign customers, military  department officials indicated that they strive to offer a complete and  sustainable capability, referred to as the total package approach. Using  this approach, DOD takes into account the related support, such as  training, logistics, spare parts, warranties, contractor support, and other  considerations necessary for operating and sustaining the defense items  or services being purchased. The total package approach represents the  initial and follow-on cost of owning and supporting the capability. For  example, a DOD program official may develop a cost estimate for the  capability, including several years of technical support for maintaining it.  DOD may also provide a customer with cost estimates for maintaining the  capability over the course of its expected lifetime.\nSpecifically, in the five examples we reviewed, we found that DOD  officials generally used a total package approach when developing price  and availability data. For example, military department officials developed  price and availability data that not only included the items and services  requested by the customer, but also included rough order of magnitude  estimates for additional costs to reflect the expected ownership costs.  Ownership costs may include development, procurement, operation, and  sustainment costs for the defense item, as part of a total package  approach. The timeframe of ownership costs provided may vary.  According to a DSCA official, ownership costs generally cover the first 2  years. In four of the five cases we reviewed, the customer requested a  capability and, in response, the program office provided estimates for not  only the equipment but also the support needed to achieve the desired  capability ranging from one week of training to five years of technical  support. For example, in one case, a customer requested data for a  complex naval weapon system that they had not previously used. Navy  program officials provided estimates for the system, spare parts, training,  and other items as requested by the customer. Program officials also  included estimates on radio navigation equipment and software that are  essential for the system to function as intended, but were not part of the  customer\u2019s initial request. Officials stated that they included these  additional costs to give the customer a comprehensive view of the costs  to acquire, operate, and maintain the weapon system. In the fifth case,  program officials told us they did not have to include training or support as  this customer was replacing missiles in their inventory, previously  purchased through FMS. However, in considering the foreign customer\u2019s  ownership costs, the officials said they included costs for containers for  storing the missiles.\nFor the selected examples, program officials obtained data from defense  contractors and previous sales, adjusting estimates from data sources to  ensure the price and availability estimate reflected what the customer  could expect to pay for the item or service\u2014initial and follow-on cost of  owning and supporting the capability\u2014if the customer decided to proceed  with the purchase. Defense contractors responsible for providing data for  four of the five examples told us they consider the quantity and specific  requirements of the request, such as training, spares, and support; as  well as inflation and anticipated production and delivery schedules in  some cases. We found that for the selected examples program officials  adjusted estimates from contractors and other data sources for a number  of reasons, such as to account for potential changes in production  schedules and adding program management support provided by the  U.S. government to administer system upgrades. By accounting for these  likely costs, program officials stated that they were providing the customer  with estimates that would more closely reflect expected costs if the  customer proceeded with the sale. For example:  In two of the responses we reviewed for missiles and communication  systems, Navy and Air Force officials increased contractors\u2019  estimates, in part, to account for possible changes to production  plans. In the Navy response, for example, program officials increased  the contractor\u2019s estimate for the missiles by approximately 14 percent.  Officials told us this was to account for possible changes in the  production schedule and quantity. Contractor representatives told us  that their estimate was based on a specific number of missiles being  produced in a certain production lot. Program officials told us that the  customer would not likely have a signed agreement in place to receive  missiles from that specific production lot. According to program  officials, this means the price per missile could be higher than  forecasted in the contractor\u2019s initial estimate because there may be  fewer quantities in production, resulting in fixed production costs  spread among fewer missiles.\nIn an Army response we reviewed for non-standard upgrades to  several hundred tanks, the program official used estimates provided  by the contractor to develop the price and availability data. These tank  upgrades are considered non-standard because the U.S. government  no longer uses these tanks. In light of this, the program official  included costs for program management support provided by the U.S.  government because he said the magnitude of the program would  likely require an Army office to execute and manage the upgrades,  which is projected to last up to 10 years.\nIn an Air Force response we reviewed for a warning system, program  officials considered historical data from similar DOD contracts. The  program officials increased the price by $2.4 million dollars from past  procurements based on the customer\u2019s request to add a new full-time  onsite engineer to support the warning system. This price also  included costs for housing, living allowance, and travel expenses.\nFurther, in our review of selected cases, we found that program officials  may include other charges in price and availability data, such as nonrecurring costs that are unique one-time program-wide  expenditures for certain major defense equipment sold under the FMS  program; a contract administration charge\u2014generally, 1.2 percent of the value  of procured items\u2014for services such as quality assurance and  inspection;  transportation costs for delivery of the item, which are generally  calculated based on rates established by DSCA; and an administrative charge\u2014currently set at 3.2 percent of the total  value of the sale to recover civilian employee salaries and operational  costs for administering the FMS acquisition.\n\n\tVarious Factors Can Influence DOD\u2019s Approach and the Timeliness of DOD\u2019s Responses\n\nMilitary department officials told us that various factors influence the level  of effort and information involved in developing price and availability data,  some of which may also affect how long a response takes and whether  the 45-day timeframe suggested by DSCA\u2019s guidance is achieved. When  a foreign customer requests price and availability data, DOD and defense  contractors, if involved, expend time and resources to provide a  response, all without any certainty that a sale will materialize. As such,  DOD officials and defense contractors determine what level of response  is appropriate, given the nature of the customer\u2019s request and whether it  includes non-standard items or items that require customization, among  other things. DSCA and Navy program officials said customers are  interested in receiving price and availability responses quickly and  recognize that timeliness is an area of concern with the FMS process, in  general. Over half of the 12 foreign customers we obtained information  from noted that they are concerned with the length of time DOD\u2019s  responses can take. Lengthy response times could result in customers  missing opportunities to consider potential requests in upcoming budget  cycles. Several customers communicated that some responses took  considerably longer than 45 days, with some taking anywhere from 6 to  12 months. Among the five examples we reviewed, responses took from  45 to 320 days, as shown in table 1.\nProgram and security assistance officials we interviewed told us they  consider the following factors:\nCustomer interest and commitment. Insight into the degree of  customer commitment to purchase through FMS may influence the  time and resources military departments expend on developing a  price and availability response. For example, Air Force security  assistance officials told us that they may develop a more detailed  response if advised by in-country personnel that a request for price  and availability data will likely become a request for an actual  purchase.\nClarity and completeness of customer\u2019s request. Customers may  submit requests that lack the clarity and details needed to develop  accurate data and estimate delivery timeframes. Several military  department officials told us that when reviewing the customer\u2019s  requests for price and availability data, they often have discussions  with customers to clarify requirements and in some cases estimated  delivery schedules before developing a response. Defining the  customer\u2019s requirement\u2014even at this early stage\u2014can be an iterative  process that requires multiple interactions between the foreign  customer and DOD officials. In one of the examples we reviewed, the  defense contractor was also involved. These discussions to clarify the  customer\u2019s requirements can prolong the process, according to  several program officials.\nExisting policy to release price and availability data. The U.S.  government\u2019s relationship with the foreign customer and the type of  defense item or service being requested\u2014such as a weapon system  with protected critical technologies versus medical evacuation  equipment\u2014can influence the length of time to obtain necessary  approvals for the release of price and availability data, according to  Navy program and Air Force security assistance officials. Requests  for price and availability data may spur the U.S. government to review  the current list of countries that have access to particular critical  technologies, as shown in one Navy response to a request for a  ballistic missile defense system. Initially, the Navy\u2019s Foreign  Disclosure Office determined the system would not be available for  potential release and the Navy program office excluded it from the  price and availability data. About a year later, according to Navy  officials, following a change in U.S. policy, the Foreign Disclosure  Office approved the release of price and availability data for the  system and the Navy included it in a subsequent price and availability  response.\nComplexity of the request. Requests for a non-standard system,  integration with foreign components, or a complex system may cause  program offices to spend additional resources and time to develop  price and availability data. For example, in response to a request for a  complex weapon system to be integrated into a foreign customer\u2019s  ship, Navy program officials said that they needed several months to  develop price and availability data due to the complexity of this  request, which required program officials to work with multiple  contractors and DOD entities to develop price and availability data. In  contrast, Army security assistance officials said that they generally  aim to conserve resources and time by developing price and  availability data based on standard items, even in instances when  customers may request non-standard or complex systems.\nExisting workload. The volume of requests and competing priorities  can also affect the timeliness and the level of effort applied to the  response. For example, Army security assistance officials stated that  they may prioritize a customer\u2019s request for a letter of offer and  acceptance, which initiates an executable FMS case, over a request  for price and availability data because there are not resources  available to do both at the same time.\nAvailability of requested item or service. When obtaining the items  from defense contractors, for example, military department officials  consider production schedule and quantity\u2014both of which require  additional assumptions to estimate unknown costs. For items that are  in DOD\u2019s inventory and will not be replaced, officials are to take into  account the item\u2019s actual value when developing price and availability  data, according to a DSCA publication.\nExternal factors. In cases where a customer is requesting price and  availability data to decide whether to purchase defense items or  services from the United States or another foreign government,  military departments may expend additional resources to develop  detailed price and availability data. For example, a Navy security  assistance official stated that when officials are aware the customer  plans to hold competitions between U.S. and foreign defense  contractors, they solicit more detailed technical and cost information  from defense contractors to present a competitive estimate.\nIndividually and combined, these factors, as well as the overall process,  can influence response times.\n\n\tAgency Comments\n\nWe provided a draft of this report to the Department of Defense (DOD) for  comment. DOD\u2019s response letter is reproduced in appendix II. DOD  separately provided technical comments, which we incorporated as  appropriate.\nWe are sending copies of this report to the appropriate congressional  committees and the Acting Secretary of Defense. In addition, the report is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.\n\nAppendix I: Objectives, Scope, and Methodology\n\nIn this report, we (1) described foreign military sales (FMS) price and  availability requests Department of Defense (DOD) received from fiscal  years 2014 through 2018, (2) assessed DOD\u2019s guidance on developing  price and availability data, (3) described how DOD develops price and  availability data for the requested capability, and (4) identified factors that  can influence the timeliness for DOD to provide price and availability data  to the customer.\nTo describe requests for price and availability data DOD received from  foreign customers, we analyzed data from the Defense Security  Cooperation Agency (DSCA). We reviewed data for fiscal years 2014  through 2018, the most recent 5-year period available. DSCA and other  DOD components, including the military departments, use the Defense  Security Assistance Management System as a workflow resource to  process price and availability data requests, among other things. The  system does not track which of the estimates result in a letter of offer and  acceptance. To assess the reliability of Defense Security Assistance  Management System data, we tested for missing data, duplicates,  inconsistent coding, and compared data for five examples to price and  availability documentation we received from the Army, Navy, and Air  Force. We interviewed DSCA officials responsible for the data system to  identify the quality controls in place to help ensure the data are accurate  and reliable and discussed military department practices for using the  system with security assistance officials. We found that generally the  documentation for the five selected preliminary estimates matched the  data DSCA provided and requests matched across multiple datasets we  received from DSCA. Based on these steps, we determined the data  were sufficiently reliable to report examples of the types of items and  services requested and the number of requests DOD received by region,  DOD component, and foreign customer. We did not report the number of  responses DOD provided for these requests or how long it took DOD to  provide a response to foreign customers using this data because military  departments do not consistently update information in the Defense  Security Assistance Management System to track the status of responses  or dates when a response is provided to the customer.\nTo assess available guidance, we reviewed DSCA and Army, Navy, and  Air Force guidance for developing preliminary estimates in response to  requests for price and availability data. We compared the DOD-wide  guidance\u2014the Security Assistance Management Manual\u2014to the  Standards for Internal Control in the Federal Government, which call for  agencies to use quality information collected from relevant and reliable  sources. Specifically, we reviewed the guidance to determine if it  contained attributes that contribute to quality information such as  identifying the information requirements and relevant data sources  needed to develop the price and availability data.\nTo describe factors that DOD considers when developing price and  availability data and illustrate how these factors influence the process, we  selected a non-generalizable sample of five responses from fiscal year  2017 data provided by the military departments. Fiscal year 2017  represented the last complete year of data available when we selected  this sample. Because the sample is not generalizable, we cannot report  whether practices used among the responses are used across DOD for  all price and availability responses. However, these examples provide  useful insight into the process and the assumptions used when  developing price and availability data. We selected the five examples\u2014 one from Army, two from Navy, two from Air Force\u2014to obtain a variety of  responses, including median and large case values and a median  response time. We determined there were inconsistencies in the data  provided, but that the data were sufficient for our purposes of selecting a  non-generalizable sample from across the military departments.\nFor each selected example, we collected and analyzed the letter of  request, price and availability data, DOD\u2019s response to the customer,  supporting documentation if provided such as clarification of the  customer\u2019s request, and data collected from defense contractors or  program offices. We reviewed the assumptions and factors used in  developing the data and the various elements that make up the data,  such as administrative charges and costs for training and spares. We  interviewed relevant DOD security assistance and program officials, and  defense contractor representatives to understand the context and  decisions made in developing, documenting, and communicating the  price and availability data.\nTo identify the factors that can influence the timeliness of responses, we  interviewed officials from DSCA and the Army, Navy, and Air Force. We  also obtained information from defense contractors and foreign customers  who, as stakeholders in the FMS price and availability process, have  broad insights and perspectives on the process. To gather input from  foreign customers, we interviewed representatives from the Foreign  Procurement Group who also solicited information from its consortium of  46 member countries on our behalf. We received responses from 12  countries\u2014one of which was also a customer for one of the examples  included in our review. To obtain contractor\u2019s perspectives, we gathered  information from five companies through interviews and attended a  meeting hosted by the National Defense Industrial Association. Three of  the companies we obtained information from were involved in providing  cost and schedule data for four of the examples in our sample. The  information we obtained from these foreign customers and defense  contractors is not generalizable to all foreign customers and defense  contractors. As mentioned previously, we did not assess the timeliness of  DOD\u2019s responses because DOD does not consistently track when price  and availability data responses are provided to customers in the Defense  Security Assistance Management System. However, the information we  gathered for the five examples in our sample provided some insight about  how long it took DOD to provide a response to the customer.\nWe conducted this performance audit from June 2018 to February 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\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, Candice Wright (Assistant  Director) and Leslie Ashton (Analyst-in-Charge) managed this review.  Bruna Oliveira, Carmen Yeung, Kurt Gurka, Robin Wilson, and Emily  Bond made significant contributions to the work.","output":"Why GAO Did This Study\n\nDOD manages the procurement of billions of dollars in defense items and services on behalf of foreign customers through the FMS program. These sales help support the defense industrial base and are vital to U.S. foreign policy and national security interests.\nThe FMS process generally begins with a request by a foreign government for information about a U.S. defense item or service. Requests for price and availability data are an optional step in the process. DOD guidance is to generally respond to such requests within 45 days.\nThe fiscal year 2018 National Defense Authorization Act included a provision for GAO to review DOD's process for developing price and availability data for foreign customers. This report addresses, among other objectives, (1) price and availability requests DOD received from fiscal years 2014 through 2018, (2) how DOD develops price and availability data, and (3) the factors that can influence the timeliness of DOD's responses to foreign customers with price and availability data.\nGAO analyzed DOD price and availability data for fiscal years 2014 through 2018, the latest data available; and reviewed documents for a non-generalizable sample of five price and availability responses\u2014varying by estimate value\u2014provided to foreign customers by the Army, Navy, and Air Force. GAO also interviewed defense contractors and DOD officials.\nGAO is not making any recommendations at this time.\n\nWhat GAO Found\n\nThe Department of Defense (DOD) reported receiving 3,038 requests for Foreign Military Sales (FMS) price and availability data in fiscal years 2014 through 2018 from 93 countries across six geographic regions, as shown in the figure. Foreign customer requests included services and items such as training and support services for weapon systems, missiles, aircraft, and communication equipment.\nNot all countries in each region submitted a price and availability request.\nDOD officials indicated they generally strove to offer price and availability data that reflected rough order of magnitude estimates of total anticipated costs for a complete and sustainable capability. Contractors often provide input to DOD for these cost and schedule estimates. In the five examples GAO reviewed, DOD officials considered factors such as possible production delays and included anticipated costs for support services, operations, and sustainment, when needed. DOD officials also included FMS administrative charges and, as applicable, nonrecurring and transportation costs. GAO found that when DOD considered these factors in developing the response to the customer, at times, they made adjustments to the estimates provided by contractors to more fully reflect expected costs if the items are purchased.\nAmong the five examples, GAO found that response times ranged from 45 to 320 days and that a number of factors can affect timeliness. For example, the complexity of the system or capability the customer is interested in acquiring may require involvement from multiple program offices and defense contractors, requiring more time than the 45 days suggested by DOD's guidance."}
{"id":"crs_RS22937","pid":"crs_RS22937_0","input":"\tWhat Is a \"Section 123\" Agreement?\n\nUnder existing law (Atomic Energy Act [AEA] of 1954, as amended [P.L. 83-703; 42 U.S.C. \u00a72153 et seq.]), all significant U.S. nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Significant nuclear cooperation includes the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes, and the export of reactors and critical parts of reactors. Section 123 agreements are required for the export of commodities under NRC export licensing authority (10 C.F.R. 110).\nSuch agreements, which are \"congressional-executive agreements\" requiring congressional approval, do not guarantee that cooperation will take place or that nuclear material will be transferred, but rather set the terms of reference and authorize cooperation. The AEA includes requirements for an agreement's content, conditions for the President to exempt an agreement from those requirements, presidential determinations and other supporting information to be submitted to Congress, conditions affecting the implementation of an agreement once it takes effect, and procedures for Congress to consider and approve the agreement.\nSection 123 of the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria and that the President submit any such agreement to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The Department of State is required to provide the President with an unclassified Nuclear Proliferation Assessment Statement (NPAS), which the President is to submit, along with the agreement, to those two committees. The State Department is also required to provide a classified annex to the NPAS, prepared in consultation with the Director of National Intelligence. The NPAS is meant to explain how the agreement meets the AEA nonproliferation requirements. The President must also make a written determination \"that the performance of the proposed agreement will promote and will not constitute an unreasonable risk to, the common defense and security.\"\n\n\t\tRequirements Under the Atomic Energy Act\n\nSection 123 of the AEA specifies the necessary steps for engaging in nuclear cooperation with another country.\nSection 123a. states that the proposed agreement is to include the terms, conditions, duration, nature, and scope of cooperation and lists nine criteria that the agreement must meet. It also contains provisions for the President to exempt an agreement from any of several criteria described in that section and includes details on the kinds of information the executive branch must provide to Congress. Section 123b. specifies the process for submitting the text of the agreement to Congress. Section 123c. specifies the procedure for congressional approval of cooperation agreements that are limited in scope (e.g., do not transfer nuclear material or cover reactors larger than 5 megawatts electric [MWe]). This report does not discuss such agreements. Section 123d. specifies the procedure for congressional approval of agreements that do cover significant nuclear cooperation (transfer of nuclear material or reactors larger than 5 MWe), including exempted agreements.\nSection 123a., paragraphs (1) through (9), lists nine criteria that an agreement with a nonnuclear weapon state must meet unless the President determines an exemption is necessary. These include guarantees that\nsafeguards on transferred nuclear material and equipment continue in perpetuity; International Atomic Energy Agency (IAEA) comprehensive safeguards are applied in nonnuclear weapon states; nothing transferred is used for any nuclear explosive device or for any other military purpose; the United States has the right to demand the return of transferred nuclear materials and equipment, as well as any special nuclear material produced through their use, if the cooperating state detonates a nuclear explosive device or terminates or abrogates an IAEA safeguards agreement; there is no retransfer of material or classified data without U.S. consent; physical security on nuclear material is maintained; there is no enrichment or reprocessing by the recipient state of transferred nuclear material or nuclear material produced with materials or facilities transferred pursuant to the agreement without prior approval; storage for transferred plutonium and highly enriched uranium is approved in advance by the United States; and any material or facility produced or constructed through use of special nuclear technology transferred under the cooperation agreement is subject to all of the above requirements.\nAlthough some experts have advocated requiring governments to forgo enrichment and reprocessing (a nonproliferation commitment sometimes referred to as the \"Gold Standard\") as a condition for concluding a nuclear cooperation agreement, the Atomic Energy Act does not include such a requirement (see Appendix B ). \n\n\t\tExempted vs. Nonexempted Agreements\n\nThe President may exempt an agreement for cooperation from any of the requirements in Section 123a. if he determines that the requirement would be \"seriously prejudicial to the achievement of U.S. nonproliferation objectives or otherwise jeopardize the common defense and security.\" The AEA provides different requirements, conditions, and procedures for exempt and nonexempt agreements. To date, all of the Section 123 agreements in force are nonexempt agreements. Prior to the adoption of P.L. 109-401 , the Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006, the President would have needed to exempt the nuclear cooperation agreement with India from some requirements of Section 123a. However, P.L. 109-401 exempted nuclear cooperation with India from some of the AEA's requirements. \n\n\tCongressional Review\n\nUnder the AEA, Congress has the opportunity to review a nuclear cooperation agreement for two time periods totaling 90 days of continuous session. The President must submit the text of the proposed agreement, along with required supporting documents (including the unclassified NPAS) to the House Foreign Affairs Committee and the Senate Foreign Relations Committee. The President is to consult with the committees \"for a period of not less than 30 days of continuous session.\" After this period of consultation, the President is to submit the agreement to Congress, along with the classified annex to the NPAS and a statement of his approval of the agreement and determination that it will not damage U.S. national security interests. This action begins the second period, which consists of 60 days of continuous session. In practice, the President has sent the agreement to Congress at the beginning of the full 90-day period, which begins on the date of transmittal. Typically, the 60-day period has immediately followed the expiration of the 30-day period. The President transmits the text of the proposed agreement along with a letter of support with a national security determination, the unclassified NPAS, its classified annex, and letters of support for the agreement from the Secretary of State and the Nuclear Regulatory Commission.\nIf the President has not exempted the agreement from any requirements of Section 123a., it may enter into force after the end of the 60-day period unless, during that time, Congress adopts a joint resolution disapproving the agreement and the resolution becomes law. If the agreement is an exempted agreement, Congress must adopt a joint resolution of approval and it must become law by the end of the 60-day period or the agreement may not enter into force. At the beginning of this 60-day period, joint resolutions of approval or disapproval, as appropriate, are to be automatically introduced in each house. During this period, the committees are to hold hearings on the proposed agreement and \"submit a report to their respective bodies recommending whether it should be approved or disapproved.\" If either committee has not reported the requisite joint resolution of approval or disapproval by the end of 45 days, it is automatically discharged from further consideration of the measure. After the joint resolution is reported or discharged, Congress is to consider it under expedited procedures, as established by Section 130.i. of the AEA. Congress has used procedures outside the above-described process to adopt legislation approving some nuclear cooperation agreements (see Appendix C ). \nSection 202 of P.L. 110-369 , the United States-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act, which President Bush signed into law October 8, 2008, amended Section 123 of the AEA to require the President to keep the Senate Foreign Relations Committee and the House Foreign Affairs Committee \"fully and currently informed of any initiative or negotiations relating to a new or amended agreement for peaceful nuclear cooperation.\"\n\n\tExport Licensing\n\nThe AEA sets out procedures for licensing exports to states with which the United States has nuclear cooperation agreements. (Sections 126, 127, and 128 codified as amended at 42 U.S.C. 2155, 2156, 2157.) Each export of nuclear material, equipment, or technology requires a specific export license or other authorization. The Nuclear Regulatory Commission (NRC) is required to meet criteria in Sections 127 and 128 in authorizing export licenses. These criteria are as follows:\nApplication of IAEA safeguards to any material or facilities proposed to be exported, material or facilities previously exported, and to any special nuclear material used in or produced through the use thereof (these are not full-scope safeguards, but safeguards required under Article III.2 of the nuclear Nonproliferation Treaty [NPT]). Nothing exported can be used for any nuclear explosive device or for research on or development of any nuclear explosive device. Recipient states must have adequate physical security on \"such material or facilities proposed to be exported and to any special nuclear material used in or produced through the use thereof.\" Recipient states are not to retransfer exported nuclear materials, facilities, sensitive nuclear technology, or \"special nuclear material produced through the use of such material\" without prior U.S. approval. Recipient states may not reprocess or alter in form or content exported nuclear material or special nuclear material produced though the use of exported nuclear material without prior U.S. approval. The foregoing conditions must be applied to any nuclear material or equipment that is produced or constructed under the jurisdiction of the recipient by or through the use of any exported sensitive nuclear technology. Section 128 requires that recipient nonnuclear weapon states must have full-scope IAEA safeguards.\nThe President must judge that the proposed export or exemption will \"not be inimical to the common defense and security\" or that any export of that type \"would not be inimical to the common defense and security because it lacks significance for nuclear explosive purposes.\" The executive branch may also consider other factors, such as \"whether the license or exemption will materially advance the nonproliferation policy of the United States by encouraging the recipient nation to adhere\" to the NPT; whether \"failure to issue the license or grant the exemption would otherwise be seriously prejudicial\" to U.S. nonproliferation objectives; and whether the recipient nation has agreed to conditions identical to those laid out in Section 127.\nSection 126b.(2) contains a provision for the President to authorize an export in the event that the NRC deems that the export would not meet Section 127 and 128 criteria. The President must determine \"that failure to approve an export would be seriously prejudicial to the achievement of U.S. nonproliferation objectives or otherwise jeopardize the common defense and security.\" In that case, the President would submit his executive order, along with a detailed assessment and other documentation, to Congress for 60 days of continuous session. After 60 days of continuous session, the export would go through unless Congress were to adopt a concurrent resolution of disapproval.\nSection 128b.(2) contains a provision for the President to waive termination of exports by notifying Congress that the state has adopted full-scope safeguards or that the state has made significant progress toward adopting such safeguards, or that U.S. foreign policy interests dictate reconsideration. Such a determination would become effective unless Congress were to adopt a concurrent resolution of disapproval within 60 days of continuous session.\nAdditionally, Section 129b.(1) forbids the export of \"nuclear materials and equipment or sensitive nuclear technology\" to any country designated as a state sponsor of terrorism. Section 129b.(3) allows the President to waive this provision.\n\n\t\tIran-Related Restrictions\n\nThe Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010 ( P.L. 111-195 ), which became law July 1, 2010, contains additional restrictions on licensing nuclear exports to countries with entities that have been sanctioned for conducting certain types of nuclear weapons-related transactions with Iran. Section 102a.(2)(A) of the law states that \"no license may be issued for the export, and no approval may be given for the transfer or retransfer\" of \"any nuclear material, facilities, components, or other goods, services, or technology that are or would be subject to an agreement for cooperation between the United States\" and such countries. Section 102 a.(2)(B), however, allows the President to waive these restrictions. Section 102a.(2)(C) allows the President to authorize licenses for nuclear exports \"on a case-by-case basis\" to entities (which have not been sanctioned) in countries subject to the restrictions described above.\n\n\tSubsequent Arrangements\n\nSection 131 of the AEA details procedures for subsequent arrangements to nuclear cooperation agreements concluded pursuant to Section 123. Such arrangements are required for forms of nuclear cooperation requiring additional congressional approval, such as transfers of nuclear material or technology and recipient states' enrichment or reprocessing of nuclear materials transferred pursuant to the agreement. Subsequent arrangements may also include arrangements for physical security, storage, or disposition of spent nuclear fuel; the application of safeguards on nuclear materials or equipment; or \"any other arrangement which the President finds to be important from the standpoint of preventing proliferation.\"\nBefore entering into a subsequent arrangement, the Secretary of Energy must publish in the Federal Register a determination that the arrangement \"will not be inimical to the common defense and security.\" A proposed subsequent arrangement shall not take effect before 15 days after publication of both this determination and notice of the proposed arrangement. The Secretary of State is required to prepare an unclassified Nuclear Proliferation Assessment Statement (NPAS) if, \"in the view of\" the Secretary of State, Secretary of Energy, Secretary of Defense, or the Nuclear Regulatory Commission, a proposed subsequent arrangement \"might significantly contribute to proliferation.\" The Secretary of State is to submit the NPAS to the Secretary of Energy within 60 days of receiving a copy of the proposed subsequent arrangement. The President may waive the 60-day requirement if the Secretary of State so requests, but must notify both the House Foreign Affairs Committee and Senate Foreign Relations Committee of any such waiver and the justification for it. The Secretary of Energy may not enter into the subsequent arrangement before receiving the NPAS. \nSection 131 specifies requirements for certain types of subsequent arrangements. Section 131b. describes procedures for the executive branch to follow before entering into a subsequent arrangement involving the reprocessing of U.S.-origin nuclear material or nuclear material produced with U.S.-supplied nuclear technology. These procedures also cover subsequent arrangements allowing the retransfer of such material to a \"third country for reprocessing\" or \"the subsequent retransfer\" of more than 500 grams of any plutonium produced by reprocessing such material. The Secretary of Energy must provide both the House Foreign Affairs Committee and Senate Foreign Relations Committee with a report describing the reasons for entering into the arrangement. Additionally, 15 days of continuous session must elapse before the Secretary may enter into the arrangement, unless the President judges that \"an emergency exists due to unforeseen circumstances requiring immediate entry\" into the arrangement. In such a case, the waiting period would be 15 calendar days. \nIf a subsequent arrangement described in the above paragraph involves a facility that has not processed spent nuclear reactor fuel prior to March 10, 1978 (when the Nuclear Nonproliferation Act of 1978 was enacted), the Secretaries of State and Energy must judge that the arrangement \"will not result in a significant increase of the risk of proliferation.\" In making this judgment, the Secretaries are to give \"foremost consideration ... to whether or not the reprocessing or retransfer will take place under conditions that will ensure timely warning to the United States of any diversion well in advance of the time at which the non-nuclear weapon state could transform the diverted material into a nuclear explosive device.\" For a subsequent arrangement involving reprocessing in a facility that has processed spent nuclear reactor fuel prior to March 10, 1978, the Secretary of Energy will \"attempt to ensure\" that reprocessing \"shall take place under conditions\" that would satisfy the timely-warning conditions described above. Section 131f. specifies procedures for congressional approval of subsequent arrangements involving the storage or disposition of foreign spent nuclear fuel in the United States.\nSection 133 states that, before approving a subsequent arrangement involving certain transfers of special nuclear material, the Secretary of Energy must consult with the Secretary of Defense \"on whether the physical protection of that material during the export or transfer will be adequate to deter theft, sabotage, and other acts of international terrorism which would result in the diversion of that material.\" If the Secretary of Defense determines that \"the export or transfer might be subject to a genuine terrorist threat,\" that Secretary is required to provide a written risk assessment of the risk and a \"description of the actions\" that he or she \"considers necessary to upgrade physical protection measures.\"\n\n\t\tExamples of Subsequent Arrangements\n\n\t\t\tU.S.-Japan Agreement\n\nThe first test of the subsequent arrangement provisions came in August 1978, when the Department of Energy informed the House and Senate foreign relations committees of a Japanese request for approval of the transfer of spent fuel assemblies from Japan to the United Kingdom for reprocessing. This was the first \"subsequent arrangement\" approved. The United States and Japan entered into similar arrangements until 1988, when the two governments revised their nuclear cooperation agreement. That agreement included an \"implementing agreement,\" which provided 30-year advance consent for the transfer of spent fuel from Japan to Europe for reprocessing. While controversial, Congress did not block the nuclear cooperation agreement.\nA subsequent arrangement was also necessary for the sea transport from Europe to Japan of plutonium that had been separated from the Japanese spent fuel. The Department of Energy approved a Japanese request for 30-year advance consent for the sea transport of plutonium. It was submitted to Congress as a subsequent arrangement, and took effect in October 1988.\n\n\t\t\tU.S.-India Agreement\n\nThe U.S. nuclear cooperation agreement with India grants New Delhi consent to reprocess nuclear material transferred pursuant to the agreement, as well as \"nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment so transferred.\" However, the agreement also includes a requirement that India first build a new national reprocessing facility to be operated under IAEA safeguards. The two countries signed a subsequent arrangement July 30, 2010, which governs the procedures for operating two new reprocessing facilities in India. The agreement also describes procedures for U.S. officials to inspect and receive information about physical protection measures at the new facilities. The arrangement would not have taken effect if Congress had adopted a joint resolution of disapproval within 30 days of continuous session; Congress did not adopt such a resolution. If India were to construct any additional facilities to reprocess fuel from U.S.-supplied reactors, a new subsequent arrangement would need to be submitted to Congress. \n\n\tTermination of Cooperation\n\nSection 129a. of the AEA requires that the United States end exports of nuclear materials and equipment or sensitive nuclear technology to any nonnuclear weapon state that, after March 10, 1978, the President determines to have detonated a nuclear explosive device; terminated or abrogated IAEA safeguards; materially violated an IAEA safeguards agreement; or engaged in activities involving source or special nuclear material and having \"direct significance\" for the manufacture or acquisition of nuclear explosive devices, and \"has failed to take steps which, in the President's judgment, represent sufficient progress toward terminating such activities.\"\nSection 129a. also requires that the United States halt exports to any nation the President determines to have materially violated the terms of an agreement for cooperation with the United States; assisted, encouraged, or induced any nonnuclear weapon state to obtain nuclear explosives or the materials and technologies needed to manufacture them; or retransferred or entered into an agreement for exporting reprocessing equipment, materials, or technology to a nonnuclear weapon state, unless in connection with an international agreement to which the United States subscribes.\nThe President can waive termination of exports if he determines that \"cessation of such exports would be seriously prejudicial to the achievement of United States nonproliferation objectives or otherwise jeopardize the common defense and security.\" The President must submit his determination to Congress, which is then referred to the House Committee on Foreign Affairs and the Senate Foreign Relations Committee for 60 days of continuous session. The determination becomes effective unless Congress adopts a joint resolution opposing the determination. \n\n\tPart 810 Agreements\n\nSection 57.b. (2) of the Atomic Energy Act allows for limited forms of nuclear cooperation related to the \"development or production of any special nuclear material outside of the United States\" if that activity has been authorized by the Secretary of Energy following a determination that it \"will not be inimical to the interest of the United States.\" The Secretary may only make such a finding with \"the concurrence of the Department of State, and after consultation with the Nuclear Regulatory Commission [NRC], the Department of Commerce, and the Department of Defense.\" Authorizations of such activities are also known as \"Part 810 authorizations,\" after 10 Code of Federal Regulations (C.F.R.) Part 810. Part 810 regulations describe activities that are \"generally authorized\" by the Secretary of Energy and activities that require \"specific authorization\" by the Secretary. Some \"generally authorized activities\" are limited to a list of \"generally authorized destinations.\" These regulations also detail \"reporting requirements for authorized activities.\"\nPart 810 authorizations mostly involve unclassified nuclear technology transfer and services, such as nuclear reactor designs, nuclear facility operational information and training, and nuclear fuel fabrication. Such an authorization is not required for exports of components and materials licensed by NRC governed by 10 C.F.R. Part 110. Civilian nuclear cooperation agreements under Section 123 of the Atomic Energy Act of 1954, as amended (hereinafter Atomic Energy Act or AEA), are not required for an 810 authorization or for transmission of nuclear-related information, except for restricted data. Such agreements are, however, required for such forms of nuclear cooperation as the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes; the export of reactors and critical parts of reactors; and other commodities under NRC export licensing authority (10 C.F.R. 110). The NRC may also authorize activities governed by Part 810 authorizations under a 123 agreement or under a subsequent arrangement to such an agreement. \nIt is worth noting that Part 810.9 includes \"[w]hether the United States has an agreement for cooperation in force covering exports to the country or entity involved\" as a factor for the Secretary of Energy to use in determining that an activity \"will not be inimical to the interest [sic] of the United States.\" Moreover, the list of \"generally authorized destinations\" is \"based principally on the United States agreements for civil nuclear cooperation,\" according to guidance from the National Nuclear Security Administration.\n\n\tRecent Legislative Activity\n\n\t\tS. 3785\/H.R. 7350\n\nOn December 19, 2018, Senators Markey and Rubio introduced S. 3785 , the No Nuclear Weapons for Saudi Arabia Act of 2018, and Representatives Sherman and Messer introduced the companion bill, H.R. 7350 . The bills would require a joint resolution of approval for a 123 agreement with Saudi Arabia. In addition, the bills' text includes the sense of Congress that no 123 agreement should be approved until Saudi Arabia has \"been truthful and transparent with regard to the death of Jamal Khashoggi\" and prosecuted those responsible, \"renounced uranium enrichment and reprocessing on its territory,\" concluded an IAEA Additional Protocol, and made \"substantial progress on the protection of human rights, including the release of political prisoners.\" The bills require the President to submit a report assessing progress on the above actions along with a proposed agreement. The text also includes a statement of policy that the United States should oppose sales of nuclear technology to Saudi Arabia through the Nuclear Suppliers Group (NSG) until Saudi Arabia has renounced enrichment and reprocessing. \n\n\t\tH.R. 7351\n\nOn December 19, 2018, Representative Brad Sherman introduced H.R. 7351 , the Nuclear Cooperation Agreements Reform Act of 2018, which would amend the Atomic Energy Act to require nonexempt nuclear cooperation agreements to include several additional provisions. These provisions include a legally binding \"commitment\" from the cooperating government stipulating that \"no enrichment or reprocessing activities, or acquisition or construction of such facilities, [would] occur within the territory over which the cooperating party exercises sovereignty\"; \"a guaranty by the cooperating party that no nationals of a third country\" would be \"permitted access to any reactor, related equipment, or sensitive materials transferred under\" the agreement without prior U.S. consent; a \"commitment to maintain\" or enact \"a legal regime providing for adequate protection from civil liability that will allow for the participation of United States suppliers in any effort by the country to develop civilian nuclear power\"; and a stipulation that the United States can demand the return of transferred items if the cooperating government \"violates or abrogates any provision\" of its IAEA safeguards agreement. \nH.R. 7351 would also require a cooperating party to sign, ratify, and implement an Additional Protocol to its IAEA safeguards agreement; implement a number of export control-related measures; comply with \"all United Nations conventions to which the United States is a party and all [UN] Security Council resolutions regarding the prevention of the proliferation of weapons of mass destruction\"; and be party to, as well as fully implement, \"the provisions and guidelines\" of the Biological Weapons Convention and the Chemical Weapons Convention, as well as \"all other international agreements to which the United States is a party regarding the export of nuclear, chemical, biological, and advanced conventional weapons, including missiles and other delivery systems.\" In addition, the bill would prohibit nuclear cooperation agreements with a country designated as a Destination of Diversion Concern pursuant to the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( P.L. 111-195 ). The bill would also prohibit such agreements with a country that is not \"closely cooperating with the United States to prevent state sponsors of terrorism\" from \"acquiring or developing\" nuclear, chemical, or biological (NBC) weapons \"or related technologies\" or \"destabilizing numbers and types of advanced conventional weapons.\" \nH.R. 7351 would also limit the duration of a nuclear cooperation agreement to 15 years, as well as prohibit nuclear-related exports to a country identified in the most recent version of a report mandated by the National Defense Authorization Act for Fiscal Year 1998 ( P.L. 105-85 ) as possessing or seeking to \"acquire or develop\" NBC weapons, ballistic missiles, or cruise missiles. Moreover, the bill would amend the AEA's congressional notification provisions concerning ongoing nuclear cooperation agreement negotiations by requiring the President to \"consult\" with the Senate Foreign Relations Committee and the House Foreign Affairs Committee \nconcerning such initiative or negotiations beginning not later than 15 calendar days after the initiation of any such negotiations, or the receipt or transmission of a draft agreement, whichever occurs first, and monthly thereafter until such time as the negotiations are concluded.\nThese consultations would include the provision of \"current working drafts and proposed text put forward for negotiation by the parties for inclusion in such agreement.\"\nThe bill would also require the President to submit a report to the House Foreign Affairs and Senate Foreign Relations Committees \"on the extent to which each country that engages in civil nuclear exports ... requires nuclear nonproliferation requirements as conditions for export comparable to those\" in the AEA as amended by the bill, which would also stipulate that the report include \"the extent to which the exports of each such country incorporate United States-origin components, technology, or materials that require United States approval for re-export\"; \"the civil nuclear-related trade and investments in the United States by any entity from each such country\"; and a list of \"any United States grant, concessionary loan or loan guarantee, or any other incentive or inducement to any such country or entity related to nuclear exports or investments in the United States.\"\nH.R. 7351 contains provisions concerning U.S. foreign assistance. For example, the bill would prohibit \"assistance (other than humanitarian assistance) under any provision of law ... to a country that has withdrawn\" from the NPT. H.R. 7351 would also require the United States to \"seek the return of any material, equipment, or components transferred under\" a nuclear cooperation agreement with such a country, as well as the return of any \"special fissionable material produced through the use\" of such transferred items. In addition, the bill would prohibit any assistance\nunder the Foreign Assistance Act of 1961 [FAA], the Arms Export Control Act [AECA], the Foreign Military Sales Act [FMSA], the Food for Peace Act, the Peace Corps Act, or the Export-Import Bank Act of 1945 to any country if the Secretary of State determines that the government of the country has repeatedly provided support for acts of proliferation of equipment, technology, or materials to support the design, acquisition, manufacture, or use of weapons of mass destruction or the acquisition or development of missiles to carry such weapons.\nThis section of the bill includes a reporting requirement and a presidential waiver provision. H.R. 7351 would also require the U.S. government to \"take into consideration whether\" proposed recipients of assistance pursuant to the AECA, FAA, or FMSA, have Additional Protocols to their IAEA safeguards agreements. The bill would also permit joint resolutions approving nuclear cooperation agreements to \"include any other provisions to accompany such proposed agreement for cooperation.'' Lastly, H.R. 7351 would require Congress to enact a joint resolution of approval for subsequent arrangements to nuclear cooperation agreements.\nAppendix A. Key Dates for Bilateral Civilian Nuclear Cooperation (\"Section 123\") Agreements\nAppendix B. Enrichment and Reprocessing Restrictions\nAlthough some experts have advocated requiring governments to forgo enrichment and reprocessing (a nonproliferation commitment sometimes referred to as the \"Gold Standard\") as a condition for concluding a nuclear cooperation agreement, the Atomic Energy Act (AEA) does not include such a requirement. In recent years, the United States has attempted to persuade certain countries with which it is negotiating nuclear cooperation agreements to forgo enrichment and reprocessing and conclude Additional Protocols to their International Atomic Energy Agency (IAEA) safeguards agreements; past U.S. nuclear cooperation agreements have not included these additional components. The AEA does mandate that U.S. nuclear cooperation agreements require U.S. consent for any \"alteration in form or content\" (to include enrichment or reprocessing) of U.S.-origin material or any material processed in a plant containing transferred U.S. nuclear technology. Such agreements also require U.S. consent for any retransfer of material or technology.\nThe United States has argued that its December 2009 nuclear cooperation agreement with the United Arab Emirates (UAE) could set a useful precedent for mitigating the dangers of nuclear proliferation. For example, President Barack Obama's May 21, 2009, letter transmitting the agreement to Congress argued that the agreement had \"the potential to serve as a model for other countries in the region that wish to pursue responsible nuclear energy development.\" Similarly, then-State Department spokesperson P.J. Crowley described the agreement as \"the gold standard\" during an August 5, 2010, press briefing, although the Obama Administration generally did not use this term when describing its nuclear cooperation policies.\nThe U.S.-UAE agreement's status as a potential model is grounded in two nonproliferation provisions not found in other U.S. nuclear cooperation agreements. First, the agreement requires the country to bring into force the Additional Protocol to its safeguards agreement before the United States licenses \"exports of nuclear material, equipment, components, or technology\" pursuant to the agreement. Second, the agreement states that the UAE\nshall not possess sensitive nuclear facilities within its territory or otherwise engage in activities within its territory for, or relating to, the enrichment or reprocessing of material, or for the alteration in form or content (except by irradiation or further irradiation or, if agreed by the Parties, post-irradiation examination) of plutonium, uranium 233, high enriched uranium, or irradiated source or special fissionable material.\nThe U.S.-UAE agreement also provides the United States with the right to terminate nuclear cooperation and to require the return of any nuclear \"material, equipment or components ... and any special fissionable material produced through their use\" if, after the agreement's entry into force, the UAE \"possesses sensitive nuclear facilities within its territory or otherwise engages in activities within its territory relating to enrichment of uranium or reprocessing of nuclear fuel.\"\nNotwithstanding its characterization of the U.S.-UAE agreement, the Obama Administration announced in December 2013 after an interagency review that renouncing domestic enrichment and reprocessing would not be a prerequisite to concluding a nuclear cooperation agreement for all countries, and each partner country would be considered individually. The U.S. nuclear cooperation agreement with Vietnam, which the two governments concluded in 2014, did not include a provision requiring the country to forgo enrichment and reprocessing, although the agreement's preamble includes a political commitment stating that Vietnam intends to rely on international markets for its nuclear fuel supply, rather than acquiring sensitive nuclear technologies.\nAppendix C. Nuclear Cooperation Agreements Approved Outside Atomic Energy Act Process\nCongress has used legislation to approve nuclear cooperation agreements that did not use the legislative process mandated by the Atomic Energy Act (AEA) of 1954, as amended. \nAustralia\nOn May 5, 2010, President Barack Obama submitted a renewed U.S.-Australia nuclear cooperation agreement to Congress for approval. H.R. 6411 , which the House adopted on November 30, 2010, would have approved the agreement even if there had not been sufficient legislative days remaining in the 111 th Congress; the Senate did not adopt its version of the bill ( S. 3844 ). These bills were not needed because the 111 th Congress contained a sufficient number of days for the agreement to enter into force. \nChina\nIn 1985, President Ronald Reagan submitted the first U.S.-China nuclear cooperation agreement to Congress, which adopted a joint resolution, P.L. 99-183 , requiring that the President make certain nonproliferation-related certifications in order for the agreement to be implemented. P.L. 99-183 required a presidential certification and a report followed by a period of 30 days of continuous session of Congress. P.L. 101-246 , the Foreign Relations Authorization Act for Fiscal Years 1990 and 1991, imposed sanctions on China, including suspending nuclear cooperation and requiring an additional presidential certification on Beijing's nuclear nonproliferation assurances. Before a summit with China, President William Clinton on January 12, 1998, signed the required certifications regarding China's nuclear nonproliferation policy and practices. Clinton also issued a certification and waived a sanction imposed under P.L. 101-246 . Congressional review ended on March 18, 1998, allowing the agreement to be implemented.\nIndia\nP.L. 109-401 , which became law on December 18, 2006, permitted the President to waive several provisions of the AEA with respect to a nuclear cooperation agreement with India. On September 10, 2008, President George W. Bush submitted to Congress a determination that P.L. 109-401 's requirements for such an agreement to proceed had been met. President Bush signed P.L. 110-369 , which approved the agreement, into law on October 8, 2008.\nNorway\nThe President submitted an extension of the U.S.-Norway nuclear cooperation agreement to Congress on June 14, 2016. P.L. 114-320 , which became law on December 16, 2016, approved the agreement \"[n]otwithstanding the provisions for congressional consideration\" in the AEA, thereby addressing concerns that that there was an insufficient number of legislative days remaining in the 114 th Congress for congressional consideration.","output":"In order for the United States to engage in significant civilian nuclear cooperation with other states, it must conclude a framework agreement that meets specific requirements under Section 123 of the Atomic Energy Act (AEA). Significant nuclear cooperation includes the export of reactors, critical parts of reactors, and reactor fuel. The AEA also provides for export control licensing procedures and criteria for terminating cooperation. Congressional review is required for Section 123 agreements; the AEA establishes special parliamentary procedures by which Congress may act on a proposed agreement."}
{"id":"gao_GAO-18-140","pid":"gao_GAO-18-140_0","input":"\tBackground\n\n\t\tFDA Medical Device Review Process\n\nFDA classifies each medical device type intended for human use into one  of three classes based on the level of risk it poses to the patient or the  user and the controls necessary to reasonably ensure its safety and  effectiveness. Examples of types of devices in each class include the  following:\nClass I: tongue depressors, elastic bandages, reading glasses, and\nClass II: electrocardiographs, powered bone drills, and mercury\nClass III: pacemakers and replacement heart valves.\nBefore medical devices may be legally marketed in the United States,  they are generally subject to one of two types of FDA premarket review  processes.\nPremarket approval (PMA) process: Class III device types are  typically required to obtain FDA approval through the PMA process.  Under this process, the medical device sponsor must submit an  application that includes\u2014among other things\u2014full reports of  investigations, typically including clinical data, providing reasonable  assurance that the new device is safe and effective. The PMA  process is the most stringent type of premarket review. A successful  application results in FDA\u2019s approval to market the device. From 2001  through 2016, medical device sponsors submitted 651 PMA  applications, and FDA approved for marketing 506 of those  submissions. (See fig. 1.)\nPremarket notification, or 510(k), process: Most medical devices  requiring premarket review are subject to FDA\u2019s premarket notification  or 510(k) process. This includes class I and II device types that are  not specifically exempted from the 510(k) notification requirement.  Under this process, the medical device sponsor must notify FDA at  least 90 days before it intends to market a new device and  demonstrate to FDA that the new device is substantially equivalent to  a predicate device, and therefore does not require a PMA. For most  510(k) notifications, clinical data are not required and substantial  equivalence will normally be determined based on comparative  descriptions of intended device uses and technological  characteristics, and may include performance data. A successful  510(k) submission results in FDA\u2019s clearance to market the device.  From 2001 through 2016, medical device sponsors submitted 61,439  premarket notifications and FDA cleared 51,028 devices for market.  (See fig. 2.)\nDuring premarket review under both the PMA and 510(k) processes, FDA  and the medical device sponsor may engage in an interactive process. To  start, there may be a pre-submission meeting between FDA and the  sponsor, during which the parties discuss the upcoming review and try to  resolve potential obstacles for approval or clearance. Then, FDA receives  the premarket submission, makes a determination to accept or not accept  the submission, and assigns a reviewer. In making its assessment  whether to approve, or clear, a submission, FDA relies on the sponsor to  provide supporting data as part of the submission. However, the agency  can request additional information in the course of the review in order to  make a determination of reasonable assurance of safety and  effectiveness, or of substantial equivalence. This additional information  can be obtained through informal interactions, such as a phone call or  email. Alternatively, for more significant issues, FDA may make a more  formal request for additional information, known as a deficiency letter in  the case of a PMA application and additional information (AI) letter for a  510(k) notification. FDA will issue such requests if the submission lacks  significant information necessary for FDA to complete its review, and the  agency will request the sponsor amend the submission to provide the  necessary information regarding the device.\nIf a sponsor disagrees with an FDA regulatory decision concerning a  medical device submission, including a CDRH employee\u2019s decision to  request additional information or a significant decision regarding approval  or clearance of a medical device, it can take multiple actions.  Specifically, a sponsor can, among other things, (1) contact the CDRH  Ombudsman for assistance, (2) file an internal appeal of an FDA  decision, or (3) request that the disagreement be resolved through  CDRH\u2019s Medical Device Dispute Resolution Panel, as described below.\nOmbudsman: According to FDA\u2019s guidance, prior to the agency  reaching a regulatory decision, the most effective means of resolving  a dispute between CDRH and an external stakeholder is through  discussion and agreement. The CDRH Ombudsman is available to  assist in clarifying issues, mediate meetings and teleconferences, and  conduct discussions with the parties in an effort to resolve  disagreements short of a formal review or internal appeal.\nInternal Appeal: Once FDA makes a regulatory decision, a sponsor  can request a supervisory review of that decision, which we refer to as  an internal appeal. For this process, the supervisor of an FDA  employee will, at the request of a medical device sponsor, review a  decision or action of the employee and issue a decision. The decision  rendered by the supervisor, acting as the review authority, customarily  takes one of the following forms: overturning the decision of the  employee; upholding the employee decision; or, in some  circumstances, referring the matter back to the employee for  reconsideration under defined conditions.\nMedical Device Dispute Resolution Panel: If the dispute remains  unresolved, the sponsor may request that FDA convene the Medical  Device Dispute Resolution Panel. The panel is intended to provide a  means for independent review of a scientific controversy or dispute  between a sponsor and FDA, and make a recommendation to the  Center director. According to FDA\u2019s guidance, the panel is primarily  intended to address scientific controversies rather than other issues  such as regulatory, legal, or statutory authority disputes.\nAs part of its commitments associated with the Medical Device User Fee  Amendments of 2012 (MDUFA III), FDA agreed to participate in an  independent, comprehensive assessment of the medical device  submission review process. Acting on recommendations from the  contractor that conducted the assessment, FDA established working  groups for each submission type, including PMAs and 510(k)s, which  studied existing review processes and made recommendations. In  August 2017, the Medical Device User Fee Amendments of 2017  (MDUFA IV) reauthorized FDA\u2019s medical device user fee program, and  FDA committed to another independent assessment. FDA has  committed to hiring a contractor to conduct this assessment by the end of  December 2017 with a second phase to begin in 2020.\n\n\t\tFDA Least Burdensome Requirements\n\nIn 1997, FDAMA added a requirement that the agency use the least  burdensome approach during certain parts of PMA and 510(k) reviews.  These requirements were intended to reduce unnecessary burdens  associated with the premarket approval and clearance processes;  however, they did not lower the statutory criteria for demonstrating a  reasonable assurance of safety and effectiveness or substantial  equivalence. While the language in FDAMA differs slightly for the PMA  and 510(k) processes, in both instances FDA was directed to consider the  \u201cleast burdensome\u201d means of requesting information needed for its  review. Specifically, FDAMA requires that when the agency specifies data  that must be submitted as part of a PMA application, the agency must  consider the least burdensome appropriate means of evaluating device  effectiveness that would have a reasonable likelihood of resulting in  approval. The agency must similarly consider the least burdensome  appropriate means of demonstrating substantial equivalence when  requesting information under the 510(k) notification process. In both  cases, FDA is statutorily required to request only information that is  necessary to support the determination that there is reasonable  assurance of effectiveness or substantial equivalence, respectively.\nSubsequent laws have clarified the least burdensome requirements. In  2012, the Food and Drug Administration Safety and Innovation Act clarified that the term \u201cnecessary\u201d means the minimum required  information that would support either a determination that a PMA  application provides reasonable assurance of the effectiveness of the  device or a determination, for a 510(k) notification, of substantial  equivalence between a new device and a predicate device. In 2016, the  21st Century Cures Act added a provision applying the least burdensome  concept to FDA\u2019s requests for additional information in the PMA  process. The law also applied the least burdensome concept to  significant decisions, such as denials of PMA applications, requiring such  decisions to include a brief statement regarding how least burdensome  requirements were considered and applied. Additionally, the law  mandated each FDA employee involved in premarket submission  reviews, including supervisors, to receive training on the least  burdensome provisions, and required the agency to conduct an audit of  the training, among other things, no later than June 2018.\nAlthough FDA officials have noted that the least burdensome principles  are broad and could apply to all activities within the PMA and 510(k)  premarket review process, they noted that the requests for additional  information represent a key juncture for the application of least  burdensome requirements. According to agency officials and industry  representatives, the requests for additional information\u2014deficiency letters  in the case of PMAs and AI letters for its 510(k) reviews\u2014are when FDA  and the sponsor could disagree on whether the requested information is  necessary for the agency to reach a final decision on the medical device  under review.\n\n\t\tFDA Implementation of the Least Burdensome Requirements\n\nFollowing the enactment of FDAMA in 1997, FDA went through a process  in collaboration with the medical device industry to define the least  burdensome concept and develop an approach to implement the  provisions. Based on this, FDA released multiple guidance documents  related to least burdensome requirements from 2000 through 2002.\nIn November 2000 guidance, FDA outlined a four-part approach\u2014 referred to as \u201cfour-part-harmony\u201d by FDA staff\u2014for communicating  deficiencies to medical device sponsors in accordance with the least  burdensome requirements. The guidance helps reviewers describe  deficiencies identified in submissions in ways that are direct, concise,  and complete, thus ensuring a more effective use of reviewers\u2019 and  sponsors\u2019 time, effort, and resources. It also provides a suggested  format for sponsors to respond to FDA. FDA updated this guidance in  September 2017.\nIn 2002 guidance, FDA described its principles for implementing the  least burdensome requirements and its activities to assess  implementation. The guidance outlines FDA\u2019s interpretation of the  least burdensome concept as described in FDAMA, and explains its  application to activities associated with PMA and 510(k) reviews. The  guidance also states that FDA was in the process of developing tools  to be used by both agency staff and its stakeholders to periodically  assess the implementation of the least burdensome principles. It  noted some measurement tools had already been developed and that  additional tools were also needed to assess the impact of the least  burdensome approach on expediting the development of new medical  technologies.\nIn addition, FDA has included language about those requirements in other  guidance documents. For example, in 2014, FDA issued guidance on the  510(k) program that describes how the least burdensome principles may  affect the type of information necessary to demonstrate substantial  equivalence at different decision points in the review of a 510(k).\n\n\tFDA Frequently Requested Additional Information to Support Medical Device Reviews, and Sponsor Disagreements Often Related to Least Burdensome Requirements\n\n\t\tFDA Issued Deficiency and Additional Information Letters for a Significant Proportion of PMAs and 510(k)s\n\nFDA requested sponsors provide additional information for a majority of  the PMAs and 510(k)s it reviewed. For the period 2001 through 2016,  FDA issued a large number of deficiency and AI letters relative to the  number of submissions, although there was variation annually. For  PMAs, the number of deficiency letters as a percentage of new PMA  applications submitted ranged from about 54 percent to 113 percent  annually, or 82 percent on average, from 2001 through 2016. For the  years 2006 through 2010, this percentage, as well as the total number of  letters was higher, and FDA issued more deficiency letters than there  were PMA applications submitted. Similarly, AI letters as a percentage of  total 510(k) notifications received ranged from about 58 percent to more than 174 percent annually, or about 106 percent on average, from 2001  through 2016. While the number of 510(k) notifications remained similar  across the time period we examined, from 2009 through 2012, the  number of AI letters issued each year was, on average, nearly double the  number in other years. During this period, FDA issued more AI letters  than there were 510(k) notifications submitted. Since 2014, these  percentages have been lower for both PMAs and 510(k)s.\nFDA officials acknowledged the historical increase in the number of  deficiency and AI letters and noted the more recent decrease. The  officials attributed this decrease to a number of changes the agency  agreed to in MDUFA III. For example, FDA implemented a policy to  review submissions for administrative completeness prior to accepting the  submission. They said this allowed the agency to limit deficiency and AI  letters to issues related to the quality of the data provided and the studies  conducted in support of the submission rather than to administrative  issues. Also as a result of MDUFA III, the agency implemented an  interactive review process to increase informal interaction between FDA  and applicants and to minimize the number of review questions  communicated through deficiency and AI letters. (See table 1.)\nWe identified changes in how the deficiency letters and AI letters  referenced the least burdensome requirements. Based on our sample of  73 letters from 1997 through 2016, FDA included an explicit  acknowledgment of the least burdensome requirements in the letters  issued from 2001 through 2009. However, based on our review, this  practice ended in 2010, and later letters did not include this standard  language. Representatives from the medical device industry told us that  including the least burdensome language in the deficiency letters was a  good practice because it raised awareness of the least burdensome  principles. In September 2017, FDA released updated deficiencies  guidance that, according to FDA officials, instructs staff how to better  articulate the reason that the information is needed in accordance with  the least burdensome requirements. This guidance does not set forth  boilerplate language regarding the least burdensome requirements for  use in deficiency letters, but does include examples of well-constructed  deficiencies, definitions for major and minor deficiencies, and a statement  that FDA will attempt to resolve minor deficiencies interactively.\n\n\t\tThough Data are Limited, Least Burdensome Requirements were a Significant Contributing Factor in Disagreements Raised by Medical Device Sponsors\n\nThe least burdensome requirements were often a significant contributing  factor in disagreements raised by medical device sponsors, according to  FDA officials and available FDA data. According to FDA, the most  effective means of resolving disagreements is through discussion and  mediation, and to that end, the Ombudsman\u2019s office is routinely involved  in discussions between firms and medical device reviewers during the  review process. For example, in 2016, the CDRH Ombudsman was  involved with PMA and 510(k) medical device reviews 360 times out of  3,444 submissions. Although the agency was unable to identify which of  these interactions were related to least burdensome requirements,  agency officials told us that a substantial number likely resulted from a  difference of opinion between the applicant and FDA on the appropriate  level of scientific evidence, a portion of which likely have a least  burdensome component.\nThe least burdensome provisions were also frequently related to issues  that applicants raised during internal agency appeals of FDA decisions of  PMA and 510(k) reviews. Although FDA did not have readily available  data on appeals that occurred prior to 2013, the agency was able to  provide information about the 63 appeals of significant decisions that  occurred from 2013 through 2016. Of these 63 appeals, FDA identified  33 appeals\u20142 related to PMAs and 31 related to 510(k)s\u2014in which the  issue identified by the sponsor was related to least burdensome  principles. According to medical device industry representatives,  sponsors may not always pursue an appeal, so the number of official  appeals may not represent the extent of least burdensome-related issues  that sponsors experience. They said the sponsor may determine it is best  to avoid conflict that could complicate future device submissions and  comply with the request for additional information, even if it disagrees.\nOf these 33 appeals, FDA agreed, or partially agreed with the sponsor for  11 appeals, which resulted in FDA overturning the decision or reopening  the file and continuing the review. For the remaining 22 appeals, the  agency upheld the initial reviewer decision. The following presents  examples of appeals where the issue identified by the sponsor was  related to the least burdensome requirements.\nIn one appeal related to a 510(k) review, the sponsor objected to the  reviewer\u2019s finding that the device was not substantially equivalent to a  device already on the market. The sponsor stated that it had provided  sufficient data for a substantial equivalence determination, and the  FDA reviewer\u2019s request for additional risk mitigation measures and  supplemental testing was unwarranted and inappropriate. The review  authority determined that, while the information provided in the 510(k)  premarket submission was not sufficient to establish substantial  equivalence, some of FDA\u2019s requests were unwarranted. As a result  of the appeal, FDA reopened the file and provided the sponsor an  opportunity to respond to a new set of requests for additional  information.\nIn an appeal related to a PMA review, the sponsor contended that  FDA\u2019s not approvable decision reflected an inconsistent and  erroneous interpretation of the clinical data supporting the safety and  effectiveness of the subject device, and that the data it had provided  was sufficient for FDA to reach an approved decision. The sponsor  further contended that the review staff failed to utilize the principles  outlined in FDA guidance. The review authority upheld FDA\u2019s initial  decision and determined there was not sufficient valid scientific  evidence to demonstrate a reasonable assurance that the subject  device was safe and effective under the proposed conditions of use.\nThe Medical Device Dispute Resolution Panel, which provides another  avenue to resolve disagreements between sponsors and the agency, has  also addressed issues related to the least burdensome requirements.  Since the panel was created following FDAMA in 1997, medical device  sponsors have requested that FDA resolve three disagreements through  this avenue, each related to PMAs. Although not tracked by FDA, at our  request, officials reviewed the records and found that one of the three  disputes was related to the least burdensome requirements. Specifically,  for a September 2001 dispute, FDA officials said the sponsor requested  the panel after FDA initially found that the data from the clinical study  submitted by the sponsor did not sufficiently support effectiveness. After  reviewing evidence from the applicant and from FDA, the dispute  resolution panel determined that the sponsor had provided sufficient  evidence to prove effectiveness, and the device was ultimately approved.\n\n\tFDA Offered Some Training on the Least Burdensome Requirements, and Evaluates its Training for Effectiveness\n\n\t\tFDA Offered Some Early Least Burdensome Training at Limited Times, and Has Incorporated Related Information in Broader Training\n\nFDA officials indicated that training specific to the least burdensome  requirements was held in the years following the enactment of FDAMA in  1997. FDA was unable to provide records of that training, including its  content. However, officials told us that the training was specific to the  least burdensome requirements and offered from 1997 through 1999.  FDA officials said the agency offered other presentations in subsequent  years that they said covered similar least burdensome topics. For  example, the agency provided slides from a presentation created in 2000  that provided an overview of FDA\u2019s implementation of the requirements.\nAlthough FDA officials told us this least burdensome specific training was  not offered after 1999, they identified various other trainings that they said  incorporated the least burdensome concept. For example, a 2005  presentation on clinical trial design has multiple slides on least  burdensome requirements, and specifically states that a course objective  is to \u201cunderstand how least burdensome principles apply.\u201d Least  burdensome requirements are also mentioned in other training materials  where they may not be the focus\u2014for example one slide of a presentation  on biomarkers included a mention of least burdensome requirements.  Officials also identified the training program for new reviewers that FDA  implemented in 2011 as a source of training on least burdensome  principles. Specifically, the Reviewer Certification Program is a training  curriculum that FDA has required most new device reviewers to complete  since 2011. The training curriculum covers a wide variety of courses on  topics related to a reviewer\u2019s responsibilities. While none of these  courses is specific to the least burdensome requirements, there are  courses covering related topics. For example, there is one course on  technical writing that includes FDA\u2019s guidance on developing deficiencies  with least burdensome principles. Five other courses on different topics  mention either the least burdensome requirements or related principles,  such as a course on FDA\u2019s legislative history that included a slide  identifying the least burdensome statutory provisions as an element of  FDAMA, though the slide did not explain the least burdensome  requirements or provide additional context. Of the 490 staff assigned to  review PMAs and 510(k)s, FDA indicated that as of the end of calendar  year 2016, 335 had completed the Reviewer Certification Program, 150  started working on premarket submissions prior to the beginning of 2011,  and the remaining 5 individuals did not complete the training for varying  reasons.\nIn response to the 21st Century Cures Act, enacted in December 2016,  FDA is providing mandatory online training specific to the least  burdensome requirements. FDA indicated that the training focuses on key  behaviors that reflect the least burdensome approaches as documented  in updated guidance that FDA issued in September 2017. FDA officials  told us that, as of October 31, 2017, 91 percent of CDRH staff had  received the new least burdensome specific training. In addition to the  online training, FDA plans other activities, such as follow-up office-level  briefings to address questions or concerns and an introductory podcast  from the CDRH director. In addition to providing this training to current  employees, FDA plans to incorporate least burdensome requirement  training into new employee orientation and the Reviewer Certification  Program, and plans to include ongoing support and promotion of least  burdensome principles through a center working group on the least  burdensome requirements. In addition to course-based training, FDA  officials told us that least burdensome concepts are conveyed to  reviewers through mentoring. Officials explained that much of the training  on the least burdensome requirements occurs through mentoring and  conversations with supervisors, and that those encounters are not  documented.\n\n\t\tFDA Is Implementing Evaluations of All Training Courses for Medical Device Review Staff, including Courses that Address the Least Burdensome Requirements\n\nWhile FDA has not had processes in place to evaluate its medical device  training, it is implementing such processes for all training, including  courses related to the least burdensome requirements. In its June 2014  report, the contractor performing the independent evaluation noted that  CDRH did not have mechanisms in place to measure the quality and  effectiveness of its training programs. The report noted that FDA should  identify metrics and incorporate methods to better assess review process  training satisfaction, learning, and staff behavior changes. FDA officials  explained that while they had customer reaction evaluations for trainings  for at least 24 years, they started evaluating training participant learning  with the Reviewer Certification Program starting in 2010.\nFDA is in the process of implementing a training evaluation model, which  includes various levels of evaluation, from assessing participant response  to the training to evaluating its impact on the agency. As of 2017, FDA  reported it was evaluating training programs to determine participant  learning and preparing to evaluate whether that learning changed  participant behavior. Officials told us they anticipate beginning to conduct  evaluations that assess agency impact in fiscal year 2018, and they plan  to have the model completely implemented for all trainings by fiscal year  2020. FDA currently evaluates its Reviewer Certification Program to  determine participant learning, and though the least burdensome  requirements are not specifically addressed in the Reviewer Certification  Program evaluation materials FDA provided to us, they did include  questions on topics related to least burdensome requirements.\nIn addition to its current training evaluation plan, FDA is also required by  the 21st Century Cures Act to conduct an audit of the training and its  effectiveness in implementing the least burdensome requirements.  Specifically, the training audit is to be conducted by the ombudsman  responsible for premarket reviews, identified by FDA as the CDRH  Ombudsman. According to a draft plan, FDA plans to conduct training  evaluations, a process review of 510(k) and PMA documentation to  assess reviewer compliance with FDA procedures, and seek feedback  from industry on its experience with the premarket review process and  how the least burdensome requirements are applied. Officials indicated  that criteria are still under development and that they hoped to have them  further developed in the first quarter of 2018, with the authorizing  legislation requiring completion of the audit by June 2018, 18 months  after enactment of the law.\n\n\tFDA is Taking Steps that May Improve Its Requests for Additional Information Overall, but Has Not Fully Evaluated Its Implementation of the Least Burdensome Requirements\n\n\t\tFDA Is Implementing Processes to Improve the Consistency and Clarity of Its Requests for Additional Information during Medical Device Reviews\n\nSome stakeholders and others have raised concerns about the  consistency and clarity of FDA\u2019s requests for additional information during  medical device reviews. For the past 17 years, FDA has required  reviewers to only request information that is necessary to make a PMA  determination of \u201creasonable assurance of safety and effectiveness\u201d or a  510(k) determination of \u201csubstantial equivalence\u201d in their review of a  submission. Representatives of one of the organizations representing  the medical device industry noted the high percentages of medical device  submissions that involve a letter, and some of their member companies  have said that FDA reviewers may request additional information as a  result of intellectual curiosity rather than a \u201cneed to know.\u201d In addition, the  independent assessment\u2019s 2014 report, funded by FDA as part of  MDUFA III, found inconsistent decision-making among FDA review staff  throughout various stages of the review process, including additional  information requests. While the 2014 report did not address least  burdensome requirements explicitly, it examined related processes. For  example, according to the report, there was inconsistent decision-making  among FDA review staff throughout various stages of the review process,  including a lack of clarity regarding FDA reviewer thresholds for triggering  deficiency letters. The report recommended that FDA develop criteria and  establish mechanisms to improve consistency in decision-making  throughout the review process.\nTo address problems identified during the independent assessment, FDA  is implementing several initiatives to improve center processes. FDA  officials told us that, in anticipation of MDUFA IV, they recognized a need  for a dedicated quality management infrastructure. In 2014, FDA  established a Quality Management Unit to improve center processes,  which they said would include those related to the least burdensome  requirements. The unit completed a framework that outlined its vision and  mission and established organizational objectives, such as developing a  document control system, providing training, and conducting quality  assessments, audits, and management reviews.\nIn addition, FDA officials told us that starting in October 2017, FDA  planned to fulfill its MDUFA IV commitments to improve the clarity and  consistency of its deficiency letters and AI letters after releasing updated  guidance.\nIn September 2017, FDA published guidance reflecting the  commitments under MDUFA IV that all deficiency letters and AI letters  include a statement indicating the specific basis for any cited  deficiencies. According to FDA officials, this new approach will help  ensure that the letters more consistently ground requests for  information in the specific reason that FDA is requesting the  information from the sponsor. For example, FDA may cite a law, final  rule, or specific scientific issue as the basis for its request, rather than  providing a more general statement of the request\u2019s relevance.  According to industry representatives, in the past, FDA reviewers  have, at times, asked for additional information without including  justification, and may have requested additional information as a  result of intellectual curiosity rather than a \u201cneed to know.\u201d The  representatives stated that this new policy may better ensure the  reviewers apply the least burdensome approach to their review.\nThe updated guidance also explains that all deficiency letters and AI  letters will undergo supervisory review prior to issuance to ensure that  the information requested is relevant to a marketing authorization  decision, all four elements of the deficiency are included, deficiencies  are prioritized from most to least significant, and each deficiency is  appropriate to include in light of the totality of all deficiencies. Officials  told us that while supervisory concurrence was previously needed,  under the new guidance, supervisors are now expected to review for  certain criteria. For example, in the past, supervisors may have  considered whether four-part harmony was addressed in each  deficiency letter, but under the updated guidance this is now an  expected practice. Officials said this will increase the extent to which  deficiency letters are consistently constructed.\nIn the MDUFA IV commitment letter, FDA agreed to base all  deficiency letters and AI letters on a complete review of the  submission and include all deficiencies. Therefore, FDA officials told  us that any deficiencies identified following that letter would generally  be limited to issues raised as a result of new information. For  example, if FDA asked for information on bio-compatibility testing,  FDA will first review that information, and based on that review may  ask for new information. In that instance, the information responding  to the initial deficiency is new information. FDA officials said that past  letters should also have included all deficiencies, but this may have  been done inconsistently.\nTo further standardize its process for reviewing medical device  submissions and developing requests for additional information, FDA is  developing and implementing smart templates. FDA officials told us that  these templates guide device reviewers through a standardized process  for each submission. For example, they help reviewers identify the types  of information necessary and include prewritten deficiency letters that  have been approved by internal experts. FDA has had a smart template  in place for the 510(k) process since 2013, according to FDA reports.  FDA indicated that the template is already required for certain offices and  divisions within CDRH, and plans for full adoption in the future. FDA  officials told us that the agency also developed templates for de novo  premarket submissions, which are currently available for voluntary use  and will likely be mandatory in fiscal year 2018. Officials told us they  plan to hire a person to develop a template to guide PMA reviews, which  will likely take most of 2018. They told us the use of the smart template  for PMAS will likely become mandatory for use by all reviewers in 2019.  In addition to improving the consistency of deficiency letters, FDA officials  said the information generated from the templates could be used to track  deficiencies and requests for additional information, as well as provide  information on the number and type of deficiencies in the letters. FDA  officials told us that the plans for database and back-end analytical  capabilities using information from the smart templates were less certain  and dependent on available resources, and they pointed out that the  information technology infrastructure can present unforeseen challenges.\n\n\t\tFDA Has Not Developed Metrics to Evaluate Implementation of the Least Burdensome Requirements, and While a New Audit Process Could Aid Oversight, Its Scope Is Still Unclear\n\nFDA has not established performance metrics that would allow it to  evaluate its implementation of the least burdensome provisions. FDA  officials told us that the agency does not track concerns related to the  least burdensome requirements, such as by examining dispute data to  identify those that may be related. According to FDA\u2019s 2002 guidance, the  agency was in the process of developing tools to be used by both agency  staff and its stakeholders to periodically assess the implementation of the  least burdensome requirements. The FDA guidance identified a need  for additional tools to accurately assess the agency\u2019s incorporation of the  least burdensome principles into its various regulatory activities and to  assess the impact of the least burdensome approach on expediting the  development of new medical technologies. Agency officials told us FDA  had not developed these tools, but was now in the process of making  other tools available. For example, they cited the development of the  smart templates that will guide reviewers as they evaluate medical device  submissions and generate deficiency letters. Officials noted that, given  the scientific nature of the inquiry, and because least burdensome is a  general principle, developing a metric specific to the least burdensome  requirements is a challenge. While this can be a challenge, FDA officials  have noted that they are attempting to identify surrogate measures that  can provide an indication that the reviewer considered the least  burdensome requirements when making a request. According to federal  standards for internal control, performance metrics are important for  management to have relevant, reliable, and timely information available  for management decision\u2013making and external reporting purposes.  Without such a metric, FDA may be asking medical device sponsors to  provide information unnecessarily or in less efficient ways that are not in  compliance with the requirement to use the least burdensome approach  to medical device reviews.\nFDA is in the process of developing an audit program that could provide it  with information on its implementation of the least burdensome  requirements. FDA has committed to conducting annual quality audits,  which will be led by CDRH\u2019s Quality Management Unit. Accordingly, FDA  plans to identify, with industry input, areas to audit at least once per year.  Initially, the agency has agreed to complete an audit of deficiency letters  and pre-submissions by the end of fiscal year 2020. As of August 2017,  FDA was still planning the deficiency letters audit, and developing its  methodology and identifying audit outcomes. FDA officials told us the  agency plans to finalize a deficiency letters audit plan by the spring of  2018 and begin data collection by early summer of 2018. Officials  explained that the audit will focus on processes\u2014for example, the audit  will not examine the scientific content of deficiency letters but will instead  focus on whether CDRH has followed existing policies and procedures  surrounding deficiency letters. In addition, the Quality Management Unit  was still in the process of hiring most of its staff. As of August 2017, FDA  officials told us the unit had 6 staff reporting to an Associate Director, and  CDRH plans to gradually hire 20 more staff by 2020, starting once  MDUFA IV funds are available beginning in October 2017.\nIn addition to these more specific efforts, FDA also plans to continue its  overall evaluation of the medical device review process. The 2016  independent assessment resulting from MDUFA III broadly evaluated  FDA\u2019s device review process, and although it mentioned least  burdensome requirements only briefly, it addressed a number of related  elements, including the quality of the review process and staff training.  Under MDUFA IV, FDA committed to another independent assessment in  two phases: (1) an evaluation of FDA\u2019s implementation of the corrective  action plan FDA developed in response to the MDUFA III assessment  and (2) an evaluation of FDA\u2019s premarket device review program to  identify efficiencies that should be realized as a result of the process  improvements and investments under MDUFA III and IV, among other  things. As with the prior assessment, the new assessment will likely  examine processes related to the least burdensome requirements, though  the extent to which it will address the requirements is not yet known.  Agency officials told us that FDA has committed to hiring a contractor by  the end of December 2017.\n\n\tConclusions\n\nFDA must balance the need to obtain sufficient data to determine the  safety and effectiveness of medical devices under review, with the  potential for undue burden and approval delays if unnecessary data is  requested. Assuring that the agency uses the least burdensome method  to complete its review helps to ensure it is able to make decisions about  medical device approval in a timely way. While FDA implemented  guidance and training related to the least burdensome requirements  following the passage of FDAMA in 1997, it has taken few steps to  develop performance metrics to evaluate the extent to which reviewers  are using a least burdensome approach when reviewing medical device  submissions. Recently, FDA implemented several changes that have the  potential to improve its oversight of the least burdensome requirements  and the clarity with which reviewers communicate the need for additional  information. While planned audits of FDA\u2019s medical device review  process have the potential to provide the agency with evaluation tools  through which to assess performance, these audits are still early in their  development and the extent to which they will allow FDA to assess  implementation of the least burdensome requirements is unclear. A  complete and thorough assessment will be important for the agency to  assure itself and external stakeholders that its reviews adhere to the least  burdensome principles and requirements and thus are appropriately  balanced.\n\n\tRecommendation for Executive Action\n\nWe are making the following recommendation to FDA:  The Commissioner of FDA should develop performance metrics and use  them to evaluate the implementation of the least burdensome  requirements, such as during its planned audits of medical device  deficiency letters. (Recommendation 1)\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS. HHS concurred with our  recommendation and provided written comments, which are reprinted in  appendix I. In its written comments, HHS agreed that appropriate  implementation of the least burdensome requirements is essential to  FDA\u2019s evaluation of its PMA and 510(k) medical device submissions, and  agreed that it is important for FDA to evaluate how successfully it is  implementing the requirements. HHS also reiterated FDA\u2019s commitment  to the least burdensome principles and provided an overview of its related  efforts, several of which were noted in our draft report. HHS noted its  concern that our draft report did not sufficiently capture all of FDA\u2019s  efforts. While HHS cited FDA\u2019s efforts related to improving the science  underlying its regulatory decisions, which could reduce burden on medical  device sponsors, our review focused on the steps involved in FDA\u2019s  review process. In this regard, HHS concurred with our recommendation  that it develop performance metrics and use them to evaluate the  implementation of the least burdensome requirements, such as during its  planned audits of medical device deficiency letters. In response to this  recommendation, HHS indicated that FDA intends to assess how it  follows least burdensome requirements as part of these audits. We  continue to encourage FDA to develop the evaluation tools necessary to  ensure it conducts a complete and thorough assessment of its  implementation of the least burdensome requirements. In addition to  these general comments, HHS provided technical comments, which we  incorporated as appropriate.\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 send copies of this report to the  Secretary of Health and Human Services and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-7114 or crossem@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II.\n\nAppendix I: Comments from the Department of Health and Human Services\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact above, William Hadley (Assistant Director),  Matthew Byer (Analyst-in-Charge), Luke Baron, and William Garrard  made key contributions to this report. Also contributing were Sam  Amrhein and Jennifer Rudisill.","output":"Why GAO Did This Study\n\nDetermining that a new medical device is safe and effective is a substantial investment of time and resources for the sponsor and FDA, the agency that regulates medical devices. FDA relies on the device sponsor to provide supporting data at the time of its original submission, and the agency can request additional information during the review. The Federal Food, Drug, and Cosmetic Act, as amended, requires that when FDA requests additional information from sponsors, the agency consider the least burdensome means of evaluating a medical device.\nGAO was asked to provide information on FDA's implementation of the least burdensome requirements in its medical device review process. This report (1) describes FDA's requests for additional information and sponsor disagreements, (2) describes its least burdensome training efforts, and (3) describes FDA actions to improve its requests for additional information and examines the extent to which it has evaluated its implementation of the least burdensome requirements. GAO reviewed FDA documents and guidance and interviewed agency officials. GAO also interviewed officials from four relevant medical device manufacturing associations.\n\nWhat GAO Found\n\nSince 1997, the Food and Drug Administration (FDA) has been required to consider the least burdensome means of evaluating certain types of medical devices for marketing, including when requesting that sponsors\u2014generally manufacturers\u2014seeking to market their medical devices provide information in addition to what was provided in their submissions. GAO found that, from 2001 through 2016, FDA issued letters asking sponsors to provide such information for a majority of the more than 62,000 medical device submissions that it reviewed. Sponsors may formally disagree with the request on the grounds that it is not the least burdensome method needed for FDA to review the submission. For example, sponsors appealed FDA decisions internally to agency management 63 times from 2013 through 2016, and of these, FDA identified 33 such appeals in which the sponsor raised an issue related to least burdensome requirements. FDA agreed or partially agreed with the sponsors in 11 of these appeals. Medical device industry representatives noted that these appeals may not fully represent the number of such disagreements, because applicants are generally concerned that an appeal would damage their relationship with FDA and potentially negatively affect future device applications.\nFDA provided staff training that was specifically dedicated to addressing the least burdensome requirements from 1997 through 1999. Since 1999, FDA has not offered a course dedicated to the least burdensome requirements, but has incorporated related concepts into other training programs, such as in a training mandatory for most new reviewers. In response to the 21st Century Cures Act, enacted in 2016, FDA is providing new least burdensome training to all relevant employees, and said that 80 percent had received the training as of October 2, 2017. Although FDA did not specifically evaluate the effectiveness of past training on least burdensome requirements, it is implementing an evaluation of all device-related training, including the new least burdensome training. It also plans to complete a required audit of training on least burdensome requirements by June 2018.\nFDA has not specifically evaluated implementation of the least burdensome requirements. However, in response to broader evaluations, such as an independent assessment of its medical device review process, the agency is in the early stages of developing processes that may improve its requests for additional information. For example, FDA plans to conduct an audit of letters requesting additional information. FDA is developing the audit's methodology and expects it will assess whether the agency's process was followed. However, due to their early stage, the extent to which these efforts will allow FDA to assess implementation of the least burdensome requirements is unclear. In 2002, FDA stated that it planned to periodically assess the implementation of the least burdensome principles, and federal internal control standards identify the importance of performance metrics for such assessments. However, the agency has yet to develop performance metrics to do so. Until such measures are developed and used, FDA will not be able to evaluate whether it effectively and consistently applies a least burdensome approach in its medical device reviews.\n\nWhat GAO Recommends\n\nGAO is making one recommendation that FDA develop and use performance metrics to evaluate the implementation of the least burdensome requirements. The Department of Health and Human Services agreed with GAO's recommendation."}
{"id":"gao_GAO-18-162","pid":"gao_GAO-18-162_0","input":"\tBackground\n\n\t\tUnmanned Systems\n\nUnmanned systems provide DOD with capabilities for conducting a range  of military operations, including environmental sensing and battlespace  awareness; chemical, biological, radiological, and nuclear detection;  counter-improvised explosive device capabilities; port security; precision  targeting; and precision strike. DOD\u2019s unmanned systems operate in  different warfighting \u201cdomains\u201d ranging from air, land, and maritime  environments. As shown in figure 1, DOD categorizes its unmanned  systems into five groups by domain (i.e., aerial and maritime, including  surface and underwater) and other attributes of size and capability.\nGroup 1 UASs weigh fewer than 20 pounds and operate below 1,200 feet  in altitude, whereas group 5 UASs weigh more than 1,320 pounds and  operate above 18,000 feet. Similarly, USVs are categorized in five  groups, increasing in size and capability from very small to extra-large,  and UUVs are categorized in four groups\u2014small, medium, large, and  extra-large.\n\n\t\tOrganizational Roles and Responsibilities for Evaluating Workforces\n\nVarious offices within the Office of the Secretary of Defense and the  Department of the Navy have roles and responsibilities for evaluating the  appropriate mix of personnel for the Navy\u2019s and the Marine Corps\u2019 total  workforces.\nAccording to Section 129a of Title 10 of the U.S. Code, which governs  DOD\u2019s general policy for total force management, the Secretary of  Defense is required to establish policies and procedures for determining  the most appropriate and cost efficient mix of military, federal civilian, and  contractor personnel to perform the missions of the department. Section  2463 of Title 10 mandates the Under Secretary of Defense for Personnel  and Readiness (USD(P&R)) to devise and implement guidelines and  procedures to ensure consideration is given to using DOD civilian  employees to perform new functions and functions that are performed by  contractors and could be performed by civilian employees.\nDOD policies also establish roles and responsibilities for the USD(P&R):\nDOD Directive 1100.4 establishes departmental policy concerning  workforce management, including multiple responsibilities for the  USD(P&R) (e.g., reviewing the workforce management guidelines and  practices of DOD components for compliance with established  policies and guidance).\nDOD Instruction 1100.22 implements policy set forth under DOD  Directive 1100.4; assigns responsibilities; and prescribes procedures  for determining the appropriate mix of military, federal civilian, and  contractor personnel. The instruction assigns to the USD(P&R) the  responsibility for overseeing the instruction\u2019s implementation and  working with component heads to ensure that they establish policies  and procedures consistent with this instruction.\nDOD Instruction 7041.04 states that DOD\u2019s USD(P&R), the  Comptroller, and the Director of Cost Assessment and Program  Evaluation are responsible for developing a DOD-wide cost model for  estimating and comparing the full costs of DOD workforce and  contract support.\nSection 129a of title 10 of the U.S. Code directs the Secretary of Defense  to delegate responsibility for the implementation of policies and  procedures established by the Secretary to the Secretaries of the military  departments. In accordance with this delegation, the Secretary of the  Navy has overall responsibility for requirements determination, planning,  programming, and budgeting for policies and procedures for determining  the appropriate and cost-effective mix of personnel.\nDOD policies establish the following roles and responsibilities for the  military department Secretaries, including the Secretary of the Navy and  heads of other DOD components:\nDOD Directive 1100.4 requires the component heads to designate an  individual with full authority for workforce management, to include  responsibility for, among other things, developing annual personnel  requests to Congress considering the advantages of converting from  one form of support (active or reserve military servicemembers,  federal civilians, or private sector contractors) to another for the  performance of a specified function, consistent with section 129a of  the U.S. Code.\nDOD Instruction 1100.22 establishes that the component heads  should require that their designated workforce authority issue  implementing guidance requiring the use of the instruction when  determining workforce mix for current, new, or expanded missions.\nSecretary of the Navy Instruction 5430.7R assigns authority for workforce  management in the Department of the Navy, including workforce mix issues, to the Assistant Secretary of the Navy for Manpower and Reserve  Affairs.\n\n\t\tNavy and Marine Corps Processes for Determining and Staffing Personnel Requirements\n\nConcurrently with a weapon system\u2019s development through DOD\u2019s  acquisition process, the Navy and the Marine Corps determine the  numbers and types of personnel and skills required for their unmanned  systems. The personnel requirements development process generally  begins with the program manager from a Navy systems command (e.g.,  Naval Air Systems Command for Navy and Marine Corps aircraft and  Naval Sea Systems Command for ships and submarines) that is  responsible for supervising the management of assigned acquisition  programs. The program manager and systems command utilize Navy  policies and other inputs to formulate initial requirements. In doing so, the  program manager coordinates any Navy personnel requirements with the  Office of the Chief of Naval Operations and other entities such as the  Navy Personnel Command and commands that will operate and maintain  the systems, such as the U.S. Fleet Forces Command and the  Commander, Naval Air Forces. For Marine Corps aircraft systems, the  program manager from the Naval Air Systems Command coordinates  with Marine Corps headquarters entities, such as the Deputy  Commandant for Aviation and the Deputy Commandant for Combat  Development and Integration. The program manager and systems  command calculate the cost of personnel as part of a system\u2019s total life  cycle cost. The program manager validates personnel requirements as  program changes dictate and at a minimum annually, over a system\u2019s  lifecycle.\nThe Navy and the Marine Corps staff the units that will operate and  maintain their unmanned systems by filling the required positions to the  extent possible based on the number of positions funded and the number  of trained and qualified personnel available to fill them. This staffing  process is managed by the Navy Personnel Command and in the Marine  Corps by the Deputy Commandant for Manpower and Reserve Affairs.\n\n\tThe Navy and the Marine Corps Have Not Evaluated Using Federal Civilian Employees and Private Sector Contractors as Workforce Alternatives for Unmanned System Operators\n\nThe Navy and the Marine Corps are in the process of rapidly growing  their portfolios of unmanned systems, but have not evaluated the use of  alternative workforces\u2014specifically the use of federal civilian employees  and private sector contractors as unmanned system operators. DOD  Directive 1100.4 states that authorities should consider all available  sources when determining workforce mix, including federal civilians and  contractors, and personnel shall be designated as federal civilians except  in enumerated circumstances. According to DOD Instruction 1100.22,  the initial steps in planning for personnel requirements include  determining categories of eligible personnel (e.g., military  servicemembers, federal civilian employees, or private sector  contractors). These determinations are based on whether activities to be  performed are \u201cmilitary essential\u201d (the activity must be performed by a  military servicemember), \u201cinherently governmental\u201d (the activity could be  performed by a military servicemember or a federal civilian employee), or  \u201ccommercial\u201d (the activity could be performed by military servicemembers,  federal civilians, or private sector contractors). Military servicemembers  and federal civilians must be considered before the services may  consider using contractors to perform a function.\nIn the absence of workforce alternative analyses, the services have  decided to rely solely on military servicemembers as operator workforces  for all of their unmanned systems, including the eight systems we  reviewed in detail. For all eight case studies, Navy and Marine Corps  officials told us that their decisions to rely on servicemembers as  operators were based on the pre-existing force structure made up of  personnel who were already trained in related mission areas. For seven  of the eight selected systems, the officials stated that they did not  evaluate the use of federal civilians or contractors in their determinations  for using military personnel for their operator workforces. In the case of an  eighth system, the MQ-4 Triton UAS, the Navy evaluated using contractor  personnel, but did so without first considering the use of federal civilian  employees as DOD policy requires. In a 2009 analysis for the Triton, the  Navy concluded that comparisons between the cost-effectiveness of  using military personnel and federal civilian employees were beyond the  expertise of the working group that performed the analysis. Ultimately, the  Navy decided to use military personnel as Triton operators.\nAccording to senior-level officials from OUSD(P&R), there are concerns  within the department about the level of consideration the military  services have applied to workforce mix alternatives for unmanned system  operators. As a result, OUSD(P&R) and other entities from the Office of  the Secretary of Defense commissioned the Institute for Defense  Analyses to conduct a study, which was published in June 2016, on  alternative staffing strategies to enable DOD to accomplish UAS-related  missions more cost-effectively. The study found that staffing alternatives  exist for each service and could produce cost savings. According to the  Institute for Defense Analyses\u2019 report, the use of enlisted personnel for a  portion of the Navy\u2019s and the Air Forces\u2019 UAS operator workforces offers  the potential for savings, as could the use of limited duty officers or  warrant officers. The Institute for Defense Analyses also reported that  federal civilian employees of DOD could generate the most substantial  savings of the options studied if they were used in combination with  military servicemembers as UAS operators responsible for the launch and  recovery of air vehicles. OUSD(P&R) officials stated that this latter  approach would free up military servicemembers to fill key positions for  supporting military readiness in other areas of operations that are military  personnel essential, and better leverage the services\u2019 limited military  personnel end strengths.\nIn September 2016, OUSD(P&R) issued a proposal for an additional  study of UAS staffing options that stated that the Department of the  Navy\u2019s workforce mix determination (i.e., relying on military  servicemembers as operators) is \u201cimmature and infeasible\u201d and that any  recommended approaches should also be applied to unmanned maritime  systems. OUSD(P&R) has also commissioned a study to clarify  circumstances in which military servicemembers should be considered  essential for certain positions, which is expected to be complete by the  end of fiscal year 2018. OUSD(P&R) officials stated that they plan to  continue their efforts to expand awareness of these studies and of the  available workforce mix alternatives for UAS operators with military  service officials.\nOn the basis of our discussions with Navy and Marine Corps workforce  planners, key reasons for not evaluating workforce alternatives for  unmanned system operators were that planners did not believe it was  necessary, and they did not believe that federal civilian employees or  private sector contractors were viable workforce alternatives to military  servicemembers for such roles and functions. For example, officials cited  concerns that federal civilians cannot serve aboard Navy ships or provide  rapid deployment capability. However, officials from OUSD(P&R) told us  that these concerns are inaccurate, noting that federal civilian employees  have deployed on Navy ships. Further, we note that DOD\u2019s Expeditionary  Civilian Workforce comprises federal civilian employees across DOD  components who are available to deploy within 120 days of notice to meet  urgent requirements. DOD officials responsible for the Expeditionary  Civilian Workforce program stated that such personnel are intended to be  predictable, reliable, and effective so that the military services will source  them and the combatant commands can depend upon them.\nFurther, service workforce planners stated that relevant service-level  guidance is unclear on when and how such personnel can and should be  considered for performing in operational roles and in deployable  positions. The Navy\u2019s and the Marine Corps\u2019 policies do not provide  details about the types of operational roles specific to a service, including  those related to unmanned system operators, that could be filled with  federal civilians or private sector contractors, nor do the policies provide  guidance on the limitations and benefits of using these personnel  sources, such as those identified in DOD-commissioned reports and our  prior work. For example, military personnel can be the most costly of the  three personnel categories and shortages exist in certain functions that  have been deemed military essential and are in high demand, such as  fighter pilots. On the other hand, federal civilians and private sector  contractors can be cost-effective and may augment military  servicemembers on a short-term basis if needed (see table 1).\nFederal internal controls standards emphasize the importance of having  clear, updated policies that align with an organization\u2019s mission and  goals. Officials from the Office of the Secretary of the Navy for  Manpower and Reserve Affairs agreed that the cited service policies do  not provide the sort of detail and clarity that could aid planners and  decision makers with determining eligible personnel categories for their  workforces and weighing the benefits and limitations thereof. Clarifying  their respective workforce planning policies could help workforce planners  better understand when, where, and how federal civilians or contractors  may serve in operational roles (e.g., from shore or from underway naval  vessels) and what the benefits and limitations are. The use of military  servicemembers, and not federal civilians or private sector contractors, as  unmanned system operators may indeed be the most appropriate and  cost-effective workforce option for the Navy and the Marine Corps.  However, the services will not have certainty about the basis for such  decisions without first clarifying workforce planning policies and then  applying the revised policies to evaluate the use of all personnel  resources available to them for future unmanned systems.\n\n\tThe Navy and the Marine Corps Have Not Fully Developed Personnel Requirements for One of Eight Selected Unmanned Systems or Updated Related Policies and Goals\n\nThe Navy and the Marine Corps have efforts underway to develop  requirements for operators, maintainers, and other support personnel  needed for selected unmanned systems. According to Navy information,  personnel requirements for three systems are sufficient and the  sufficiency of requirements for four other systems is yet undetermined.  However, the Navy and the Marine Corps have not updated personnel  requirements and the related cost estimate for the RQ-21 Blackjack UAS  based on deployment data. Furthermore, the Department of the Navy has  not fully evaluated and updated policies or clarified goals that may inform  future personnel requirements development and updates to requirements.\n\n\t\tThe Navy and the Marine Corps Developed Personnel Requirements for Selected Unmanned Systems but Have Not Updated the RQ-21 Blackjack UAS Requirements and Cost Estimate\n\nThe Navy and the Marine Corps have efforts underway to develop  requirements for operators, maintainers, and other support personnel  needed for selected unmanned systems, commensurate with each  system\u2019s maturity in DOD\u2019s acquisition process. The USVs associated  with the littoral combat ships, the Snakehead Large Displacement UUV,  and the MQ-25 Stingray UAS are in earlier phases of both acquisition and  personnel requirements development and, according to Navy information,  the precise number of required personnel will be determined and updated  as the systems progress through acquisition. On the other hand, the MK  18 UUVs, MQ-8 Fire Scout UAS, MQ-4 Triton UAS, and RQ-21 Blackjack  UAS have matured the furthest through DOD\u2019s acquisition process. The  Navy and the Marine Corps have identified personnel requirements, and  service officials told us they have reviewed their sufficiency as units have  trained and deployed with the systems. Although future modifications to  personnel requirements for the MK 18 UUVs, the MQ-8 Fire Scout, and  the MQ-4 Triton may be needed as their inventories and the pace of  deployments increase, Navy officials told us the numbers of operators are  appropriate at this time to meet mission objectives based on available  deployment data and feedback from operators.\nFor the RQ-21 Blackjack UAS, however, Navy and Marine Corps  headquarters and command entities disagree with unit-level officials  about the sufficiency of the personnel requirements. Marine Corps UAS  squadrons have identified a requirements shortfall of 13 to 21 personnel  per detachment to support each RQ-21 Blackjack UAS. The UAS  squadrons have established that a total of 22 personnel are necessary to  form a detachment sufficiently sized to support operations with the UAS.  Marine Corps unit-level officials told us that this personnel requirement is  based on the numbers needed to conduct training and deployments since  the first Blackjack system was delivered in 2015, for which 22 to 30  personnel have been needed per detachment to meet mission  requirements. In contrast, higher level command and service  headquarters entities in the Navy and the Marine Corps have established  a requirement of nine Marine Corps personnel per detachment, including  three enlisted UAS operators and one UAS officer along with  maintenance and support personnel. Squadron officials stated to the  Navy and the Marine Corps in their written rebuttal of the 9-person  requirement that 13 more personnel are needed to support operations for  10 to 12 hours per day, or up to 24 hours a day for 10-day surges in  operations, and to comply with naval aviation maintenance procedures.  Marine Corps officials also told us that the squadrons believe these  additional personnel are essential for supporting the workload and levels  of supervision they believe are necessary to operate and maintain an RQ- 21 Blackjack UAS and avoid mishaps and damage to the aircraft during  recovery.\nDOD policy directs that personnel requirements should be driven by  workload and established at the minimum levels necessary to accomplish  mission and performance objectives. In addition, according to a Navy  instruction, personnel requirements must be validated as program  changes dictate and at a minimum annually, over a system\u2019s lifecycle to  determine if a personnel update is required. The Navy instruction also  identifies guidelines for average weekly working hours and personnel  availability for different tasks, which are key elements in the calculation of  personnel requirements. The instruction states that routinely exceeding  these guidelines to meet workloads should be avoided because it can  adversely affect unit morale, retention and safety.\nWith respect to the RQ-21 Blackjack UAS, Marine Corps officials stated  that the concept of operations has changed for the service\u2019s vision of  employing the system to support Marine Expeditionary Units and that the  9-person detachment requirement was based on the outdated concept of  operations. As a result, Marine Corps officials told us that the personnel  requirements for the squadrons that operate them are too low to support  the workloads associated with the systems and service headquarters- level decision makers have not yet updated them based on the most  current and enduring concept of operations for the system. Marine Corps  officials stated that efforts are underway to review the differences in  personnel requirements deemed necessary by squadrons and  headquarters-level entities as training and deployments continue, which is  a positive step. However, according to the program office, the personnel  requirements were not changing at the time of this report. Until the Navy  and the Marine Corps update the personnel requirements for the RQ-21  Blackjack based on the most current and enduring concept of operations  and deployment data, the services will lack current information about the  number of operators needed for the squadrons that operate the RQ-21  Blackjack.\nIn addition, the Navy and the Marine Corps have not updated the life  cycle cost estimate for the RQ-21 Blackjack UAS to include additional  personnel that Marine Corps squadrons have needed for current  operations and expect to need for future operations and deployments.  The program office estimated the total Marine Corps personnel cost for  the RQ-21 Blackjack based on detachments of 9 personnel each at  approximately $371 million over the program\u2019s expected 19-year life  cycle\u2014nearly 20 percent of the Marine Corps\u2019 life cycle cost for the  program. However, this estimate may be too low because Marine Corps  squadrons have reported that they need up to 21 more personnel per  detachment to support the workload associated with the system, as  discussed previously.\nDOD guidance requires that components determine a weapon system  program\u2019s life cycle cost by planning for the many factors needed to  support the system, including personnel. Decision makers use this  information to determine whether a new program is affordable and the  program\u2019s projected funding and personnel requirements are achievable.  In addition, the Office of Management and Budget\u2019s Capital Programming  Guide indicates that to keep the cost analyses for capital assets, such as  weapon systems, current, accurate, and valid, cost estimating should be  continuously updated based on the latest information available as  programs mature.\nThe Navy and the Marine Corps have updated the life cycle cost estimate  for the RQ-21 Blackjack to account for changing assumptions, such as  the expected usage rate of spare parts for system repairs, but not for  additional Marine Corps personnel that squadrons have reportedly  needed for deployments. Without updating the cost estimate as  appropriate after updating personnel requirements, the Navy and the  Marine Corps may not have current information about the Marine Corps\u2019  RQ-21 Blackjack UAS lifecycle cost and affordability.\n\n\t\tThe Department of the Navy Has Made Positive Steps but Has Not Fully Evaluated and Updated Policies or Clarified Goals for Informing Future Personnel Requirements\n\n\t\t\tThe Navy Has Modified Some UAS Policies but Has Not Fully Evaluated and Updated Policies to Inform Future Personnel Requirements\n\nThe Department of the Navy has made some positive steps but has not  fully evaluated and updated its aviation policies for operation and  maintenance of certain UAS to inform the development of future  personnel requirements. According to officials from the Navy Manpower  Analysis Center, correctly determining personnel workload and the  related numbers of personnel required for operation and maintenance is  especially critical for UAS units because of the safety risks associated  with operating in shared airspaces and over populated areas. These  officials also stated that naval aviation policies\u2014which apply to manned  aircraft and UAS\u2014affect the workload of operators and maintenance  personnel and the numbers required to achieve a squadron\u2019s mission and  meet the standards prescribed in the policies. For example, the Naval Air  Training and Operating Procedures Standardization manual contains  provisions for pilot fatigue and hours they can fly compared with the hours  they must rest. Further, the Naval Aviation Maintenance Program  instruction prescribes standards for performing and documenting quality  assurance steps for maintenance tasks, among other things.\nOur review of these selected policies found that some naval aviation  standards have been modified to account for UAS separately from  manned aircraft, and to some extent between UAS of different sizes and  capabilities. The Naval Air Training and Operating Procedures  Standardization manual was updated in 2016 with a new chapter for UAS  policies and operations. The Naval Aviation Maintenance Program  instruction has been updated to specify that UAS of groups 3, 4, and 5  will always be governed by the policy similar to manned aircraft, with a  few exceptions, such as compass calibration.\nNotwithstanding these updates, Marine Corps headquarters- and unit- level officials told us that the policies have not been fully reviewed and  updated to account for differences in UAS of varying sizes and  capabilities, especially group 3 UAS, which are those systems weighing  55 to 1,320 pounds. According to these officials, applying certain  procedures and standards from these policies equally across different  sizes of UAS is problematic for group 3 UAS in particular, which includes  the RQ-21 Blackjack. The officials stated that the application of such  standards affects workloads and personnel levels in a way that prevents  squadrons from accomplishing their missions as efficiently as possible.  Specifically, they stated that upholding current naval aviation standards is  one key reason\u2014the other being changes to the concept of operations for  the RQ-21 Blackjack\u2014for having staffed up to 21 more personnel per  RQ-21 Blackjack detachment than the 9-person requirement discussed  earlier in this report.\nApplying naval aviation operating and maintenance standards equally  across different sizes of UAS may not align with the Marine Corps\u2019  concept of operations, which states that all UAS are intended to be  recovered by landing or capture even though they may be expendable.  Each RQ-21 Blackjack system includes five air vehicles, more than one of  which could be unavailable for assigned missions at the same time. For  example, Marine Corps officials told us that damage to RQ-21 Blackjack  air vehicles can be caused by weather, a deficiency with the air vehicle  itself, a crash landing, or a combination of factors, and up to three air  vehicles could be unavailable at a time. These officials told us that  holding the RQ-21 Blackjack to maintenance standards designed for  other non-expendable aircraft may not be efficient because their  application has a limited effect on mishap rates relative to the additional  personnel needed to uphold the standards. Moreover, in discussion  groups we held with Marine Corps UAS operator personnel, operators  mentioned that mishap investigations performed to existing standards  sideline operators from training pending the investigation\u2019s outcome.  Such standards also apply to the Navy\u2019s larger, non-expendable UAS like  the MQ-8 Fire Scout and the MQ-4 Triton.\nAccording to DOD Directive 1100.4, existing policies, procedures, and  structures should be periodically evaluated to ensure efficient and  effective use of personnel resources. Further, federal internal controls  standards emphasize the importance of having clear, updated policies  that align with an organization\u2019s mission and goals. Such goals could  include the Department of the Navy\u2019s goal to accelerate the development  and fielding of unmanned systems, and the Marine Corps\u2019 emphasis on  reducing operator workload and providing effective and efficient support  to mission execution and decision making. For example, the Marine  Corps\u2019 UAS concept of operations envisions a future in which one UAS  operator will perform multiple functions as opposed to the current  approach in which multiple Marines are necessary for a single mission.\nWe found that the Navy has taken a preliminary step to further evaluate  what policy changes may be needed to support unmanned systems by  establishing an advisor position for this purpose within the Naval  Innovation Advisory Council. The advisor is responsible for making  recommendations to the Secretary of the Navy and other senior leaders  to streamline policy and remove roadblocks that hinder innovation, among  other things. In addition, the program manager for the RQ-21 Blackjack  and the Marine Corps\u2019 Deputy Commandant for Combat Development  and Integration are supporting a research effort through the Naval  Postgraduate School to improve the efficiency and effectiveness of naval  aviation maintenance procedures for group 3 UAS, according to a Marine  Corps official who is leading this effort.\nWhile these are positive steps, the time frames for making such policy  changes have not been identified. In addition, we did not find evidence  that the Navy has taken or planned related steps such as determining  whether future reductions to personnel requirements could be  accomplished, and any associated cost savings, or benefits to UAS  operations if policies were further updated to account for UAS of different  sizes and capabilities. The Navy has thus far prioritized the evaluation  and modification of acquisition-related policies to expedite the delivery of  unmanned systems to units, consistent with a 2015 memorandum from  the Secretary of the Navy. Unless the Navy and the Marine Corps  prioritize updating policies for operating and maintaining UAS of different  sizes and capabilities they may miss opportunities to effectively and  efficiently use personnel resources as system inventories grow.\n\n\t\t\tThe Department of the Navy Lacks Clear Overarching Goals for Informing Future Unmanned System Personnel Requirements\n\nThe Department of the Navy also lacks clear overarching goals for  informing future unmanned system personnel requirements and the level  of priority that should be assigned to these systems and the units that  operate them for the purpose of personnel resourcing decisions. While  DOD\u2019s Unmanned Systems Integrated Roadmap, FY2013-2038 stated  that the department must strive to reduce the number of personnel  required to operate and maintain its unmanned systems, the Department  of the Navy has not affirmed this goal or communicated any other  personnel goals for its unmanned system development. Department of  the Navy documents we reviewed for unmanned systems expressed  goals that are less directly related to personnel requirements, to include  expanding the range of operations and reducing costs and risks to  personnel safety and mission success. As previously mentioned, the  Navy has prioritized the evaluation and modification of acquisition-related  policies to expedite the delivery of unmanned systems to units, consistent  with a 2015 memorandum from the Secretary of the Navy.\nNavy and Marine Corps officials we spoke with who are responsible for  the RQ-21 Blackjack and other case study systems we reviewed told us  they did not believe the Department of the Navy has a clear and  overarching goal for unmanned system personnel requirements either  now or over the long-term. For example, officials stated that they did not  know if the Department of the Navy expects that fewer personnel should  be needed to operate and support unmanned systems than the numbers  of personnel required for other types of systems. Without such clarity  about personnel-related goals and priority levels, some officials  expressed concern that using the term \u201cunmanned\u201d systems conveys  expectations that technological advances can substantially reduce  personnel requirements in the near term, and that funding for related  personnel resources are a lower priority than those for other system  types. For example, a senior Navy personnel official told us that the  Navy\u2019s past goals and related efforts to reduce personnel required for its  ship crews\u2014an initiative referred to as optimal manning\u2014makes them  cautious about whether the same goals and efforts will be adopted for  unmanned systems and could produce similar, undesirable effects on  readiness.\nNavy officials at three commands also stated they are concerned that  resources for unmanned system personnel over future years may not  keep pace with the increasing inventories of the systems if a lower priority  is assigned to them in budget decisions in the absence of goals and  clarity over priorities. The Navy\u2019s Commander, Submarine Forces,  identified a personnel shortfall for supporting increased UUV inventories  as its second-highest personnel priority for the Navy\u2019s fiscal year 2019  budget deliberations to help underscore to headquarters entities the  importance of personnel resources for such systems. According to Navy  officials, the Navy has since authorized the requested addition of 66  personnel to the command to augment the sole unit that will operate the  Snakehead Large Displacement UUV along with increasing inventories of  other types of UUVs.\nFederal internal controls standards state that an agency\u2019s management  should define goals clearly to enable the identification of risk. By  applying this standard to the Department of the Navy\u2019s acquisition and  operations of unmanned systems, such goals could include whether or  not unmanned systems should require fewer personnel resources than  manned counterparts. Until the Secretary of the Navy clarifies  overarching goals for unmanned system personnel requirements and  resource priority levels and communicates them to requirements planners  and budget decision makers, the services will be hampered in developing  future personnel requirements and identifying risks as system inventories  grow and operations expand.\n\n\tThe Navy and the Marine Corps Have Developed Staffing Approaches for Unmanned System Operators, but Face Challenges Meeting Personnel Requirements\n\nThe Navy and the Marine Corps have developed staffing approaches to  select, train, and track unmanned systems operators and to retain some  UAS operators by offering special and incentive pays. However, both  services face challenges in ensuring that there are sufficient UAS  operators to meet personnel requirements. Yet neither service has  assessed the commercial drone industry to inform its retention approach  for UAS operators. Although Marine Corps UAS operators and officers  report low morale and career satisfaction, the Marine Corps has not fully  explored the use of human capital flexibilities to address these workforce  challenges.\n\n\t\tThe Navy and the Marine Corps Have Developed Staffing Approaches to Select, Train, Track, and Retain Unmanned System Operators\n\nIn the Navy, unmanned system operations are secondary skills for  personnel from related communities. For its UASs in groups 4 and 5, for  example, the Navy utilizes personnel from manned aviation communities  within the same mission areas, such as MH-60 helicopter pilots and  aircrew who are selected and then trained to operate the MQ-8 Fire Scout  UAS. Likewise, Navy officials stated that personnel from related  communities are selected and trained to operate USVs and UUVs. The  Navy is taking steps to track these trained operator personnel by using  secondary skill identification codes. According to Navy officials, these  identification codes will help personnel managers monitor the inventories  of personnel with unmanned system operator qualifications and provide a  temporary surge in capability if needed.\nIn contrast to the Navy\u2019s approach, the Marine Corps has a primary  career field for operating UAS, including enlisted and officer personnel.  The Marine Corps replenishes its UAS operator and officer personnel  inventories by selecting from eligible applicant groups. To become UAS  operators, enlisted marines must achieve minimum test scores  comparable to those required for other high-skill occupations, such as  intelligence specialists. Eligible groups include new graduates of recruit  training and experienced marines who apply for a lateral transfer from  another occupational specialty. UAS officers take a separate test battery  and must attain the same minimum scores as other officers who are  selected for manned naval aviation training. They are selected from three  sources: new graduates of officer training; pilot or flight officer trainees  who do not complete their manned aircraft qualification; and experienced  officers seeking a transfer from another occupational specialty, including  pilots of manned aircraft. Following their selection, enlisted personnel and  officers must complete 5 months of Army UAS training courses or 6  months of Air Force UAS training courses, respectively. The Marine  Corps then assigns a primary occupation identification code to trained  personnel, which facilitates tracking their inventory to help meet  requirements.\nTo help retain sufficient numbers of personnel to meet requirements, both  the Navy and the Marine Corps have offered special and incentive pays  to personnel who operate UASs. Navy personnel who serve as air vehicle  operators for the MQ-8 Fire Scout and MQ-4 Triton or as MQ-4 Triton  tactical coordinators are eligible for two types of aviation pays based on  their qualification as pilots or naval flight officers rather than their UAS  assignments\u2014monthly \u201cflight pay\u201d of up to $1,000 and aviation career  continuation pay bonuses of $75,000 for a new 5-year contract, as of  fiscal year 2017. Marine Corps UAS officers are not offered special and  incentive pays, but enlisted operators have been eligible for a selective  reenlistment or selective retention bonus since 1998, which ranged from  $8,250 up to $19,750 in fiscal year 2017 for qualified marines who  committed to an additional 4 years of service.\n\n\t\tThe Navy and the Marine Corps Face Challenges Meeting UAS Operator Personnel Requirements and Have Not Assessed Commercial Competition to Inform Staffing Approaches\n\n\t\t\tNavy Faces Challenges Meeting UAS Operator Personnel Requirements\n\nBased on our analysis, the Navy faces challenges with meeting personnel  requirements for UAS operators although, according to Navy officials, it is  too soon to know if personnel shortfalls may arise with unmanned  maritime systems because many programs are in early in stages of  development. Navy officials told us they have sufficient numbers of  personnel to operate the current inventory of UAS, which included 49  MQ-8 Fire Scouts and 2 MQ-4 Tritons as of September 2017. As UAS  inventories increase, the Navy has reported growing retention challenges  among its pilots and naval flight officers over the past 3 years as the U.S.  economy improves and commercial airline hiring increases. Navy aviation  and workforce planning officials told us this could affect the ability to fill  both its manned aviation and UAS personnel requirements.\nAccording to Navy proposals for the Navy\u2019s aviation retention bonus  program, future retention shortfalls are expected in the helicopter,  maritime patrol and reconnaissance, and E-2 Hawkeye communities,  among others. The first two communities are sources of personnel for the  MQ-8 Fire Scout and MQ-4 Triton and, according to Navy officials, the  latter community is being considered as a personnel source for the MQ- 25 Stingray. In particular, the Navy has reported concerns about the  future retention of its maritime patrol and reconnaissance pilots because  their experience directly translates to a commercial 737 aircraft.  Additionally, the Navy has reported shortages and significant retention  issues in meeting requirements for its reserve helicopter and maritime  patrol and reconnaissance pilots, communities that the Navy uses to  augment its available inventories of active duty pilots who also operate  UASs.\n\n\t\t\tThe Marine Corps Has Not Met Personnel Requirements for UAS Operators\n\nBased on our analysis, the Marine Corps has experienced past shortfalls  of UAS operators through fiscal year 2017. Since the first fiscal year of  available data after the inception of the Marine Corps\u2019 career specialty for  UAS officers in 2012, personnel inventories have increased but fallen  short of requirements (see fig. 2).\nFor fiscal years 2013 through 2017, the Marine Corps was substantially  short of captains, majors, and lieutenant colonels (i.e., O3, O4, and O5  pay grades) to serve as UAS officers. Consistent with this trend, the  Marine Corps has designated UAS officer inventories as unhealthy since  fiscal year 2013. Marine Corps officials told us these shortfalls could be  attributable to the annual growth in requirements for this new community.  They also stated that they do not currently anticipate retention challenges  for UAS officers. However, according to these officials, their predictions  about UAS officer retention for future years are based on data from other  longer established career fields as proxies until more UAS officer data are  available.\nFor fiscal years 2007 through 2017, inventories of enlisted UAS operators  increased in all but one year, but fell short of requirements (see fig. 3) in  part due to substantial yearly shortfalls of certain junior enlisted  personnel. According to a Marine Corps official, the UAS operator  inventory will exceed requirements in fiscal year 2018 because the  requirement has decreased by about 60 percent from the previous year.\nHowever, the Marine Corps has leveraged lateral personnel transfers  from other occupations to meet approximately 33 to 89 percent of its  yearly retention quotas for first-term UAS operator reenlistments since  fiscal year 2010 (see fig. 3 above). A Marine Corps personnel planning  official told us that personnel transfers have been helpful and necessary  for meeting retention quotas. However, other Marine Corps officials told  us that heavily leveraging transfers shows that the UAS community is not  retaining its own experienced operators\u2014that is, UAS operators who  have attained proficiency and advanced skills and been deployed. For  more senior enlisted UAS operators eligible for a second reenlistment or  beyond, the Marine Corps has fallen short of its retention quotas for fiscal  years 2015 through 2017.\n\n\t\t\tThe Navy and the Marine Corps Have Not Assessed Commercial Supply, Demand, and Wages to Inform Staffing Approaches for UAS Operator Requirements\n\nDespite the current and future challenges previously discussed, Navy and  Marine Corps officials told us that the services have not used information  about the commercial drone industry to inform their use of special and  incentive pays because they did not believe doing so was needed. Marine  Corps officials told us that they have not observed a retention problem for  UAS operators and officers and unless they miss retention goals in 3  consecutive years they will not consider changing financial incentives\u2014 i.e., increasing bonuses to enlisted UAS operators or offering special and  incentive pays to UAS officers. Until such time, pilots who are selected for  the UAS career field are informed by the Marine Corps that their flight pay  and aviation continuation pay bonus eligibility will be terminated. Another  Marine Corps official with knowledge of the UAS community told us that  studying the commercial drone industry and the potential effect on  retention is timely because the services must program for the necessary  resources for financial incentives 2 years in advance of the budget year.  They stated that after 3 years of missing retention goals the problem  could persist for another 2 years before additional funds were available to  increase retention bonuses given the programming and budget cycle.\nNavy workforce planning officials acknowledged that they are concerned  about increasing difficulty in providing sufficient numbers of mid-career  pilots to meet the Navy\u2019s aviation requirements over future years, which  includes UAS operator requirements. In addition to competition from  commercial airlines, Navy officials told us a growing labor market in the  commercial drone industry could exacerbate pilot retention challenges for  those with secondary qualifications to operate UAS. However, they added  that little is known about the demand and available wages in that industry.\nLikewise, Marine Corps officials told us that past challenges in meeting  requirements and retaining experienced operators could persist in future  years, and hiring in the commercial drone industry could affect retention.  These officials stated that the Air Force could also pose a future retention  challenge for the Marine Corps\u2019 UAS operator community. The Air Force  offers the potential for higher pay to its UAS operators than the Marine  Corps along with larger and more capable types of UAS. The Air Force  reported to Congress in July 2017 that its projections of enlisted UAS  operator retention indicate that a bonus may be necessary as soon as  2022. During discussion groups we held with Marine Corps UAS  operators, enlisted operators cited the potential for higher pay for their  skills outside the Marine Corps as a factor that has influenced  reenlistment decisions among them or their peers. Operators in one  group told us that three of their five RQ-21 Blackjack instructors were  former enlisted operators from their squadron who secured employment  with the RQ-21 Blackjack\u2019s manufacturer as private sector contractors.\nDOD\u2019s 2012 Eleventh Quadrennial Review of Military Compensation  determined that organizations should assess civilian supply and demand  and civilian wages to develop the most cost effective special and  incentive pay strategies. We reported in February 2017 that conducting  such an assessment is a key principle of effective human capital  management by which to evaluate DOD\u2019s special and incentive pay  programs. Our report also found that the services do conduct such  assessments for aviation, nuclear propulsion, and cybersecurity  occupations. Without assessing the commercial drone industry and  using such information to inform retention approaches, including the use  of special and incentive pays, the Navy and the Marine Corps may not  know if their approaches are effectively tailored to ensure a sufficient  number of UAS operators are available to meet future requirements.\n\n\t\tMarine Corps UAS Operators and Officers Report Low Morale and Career Satisfaction, but the Marine Corps Has Not Fully Examined Human Capital Flexibilities to Address These Issues\n\nThe Marine Corps has experienced workforce challenges with its career  field for UAS officers and enlisted operators, including diminished morale  and career satisfaction and short periods of time in which operators are  trained and available to UAS squadrons before their contract or squadron  assignment ends. Results of a 2015 Marine Corps survey of UAS officers  showed that about 65 percent of captains and first lieutenants who  responded were dissatisfied with their career and about 75 percent of that  group cited low job satisfaction as influencing their decision to leave the  Marine Corps.\nUAS officers and enlisted operators in all eight discussion groups we held  told us about factors that enhance their morale, including the  opportunities to learn and to shape their community and their positive  deployment experiences, but they also discussed factors that negatively  affect their job satisfaction. UAS operators in all enlisted groups cited the  frequency of personnel turnover in the squadron as a source of frustration  in developing and retaining expertise with the RQ-21 Blackjack. Officers  told us they feel like a lower tier priority in Marine Corps aviation for  reasons ranging from the lack of a uniform insignia device akin to those  awarded to manned aircraft pilots (i.e., pilot \u201cwings\u201d), to confusion over  the strategy and missions for Marine Corps UAS now and in future years.  UAS officers also told us they desired assignments to positions outside  the UAS squadrons that they believed would enhance their leadership  ability, but such positions had not consistently been available to them  because they were needed to fill squadron billets. For example, the  Marine Corps has limited or restricted UAS officers from applying for in- residence professional military education opportunities in past years  because they could not be diverted from billets requiring their  qualifications due to inventory shortages.\nUAS operators and officers spend approximately 2 years or more of their  3-year squadron assignment awaiting and completing training to attain  proficiency and advanced skills with the RQ-21 Blackjack UAS. After  training and deployment, they may have about 4 months or fewer to  impart their knowledge and deployment experience to others in the  squadron before they reach the end of their squadron assignment, the  end of their service obligation, or both (see fig. 4).\nAccording to Marine Corps officials we spoke with, the loss of  experienced UAS operators who do not reenlist and are replaced by  lateral transfers from other careers results in diminished UAS expertise  among mid-career enlisted members in the squadrons. These officials  told us that personnel who transfer to the UAS career to replace  experienced operators must spend at least 2 years in training for initial  qualification and then proficiency on the RQ-21 Blackjack. Moreover,  Marine Corps officials told us that a portion of the UAS operators who  reenlist past their first contract must fulfill 3-year special duty assignments  outside the UAS community. They stated that this exacerbates the  diminished squadron expertise and is the reason that some operators  leave rather than reenlist in the Marine Corps.\nAlthough the Marine Corps has taken steps to address challenges with  UAS operator inventories by using special and incentive pays for enlisted  operators and limiting opportunities that would divert officers away from  squadrons, as previously discussed, it has not fully explored flexibilities  for managing its UAS career fields more effectively to help meet  requirements. Employing flexibilities to improve job satisfaction could help  improve retention of experienced personnel in an already-challenged  environment. For example, the Marine Corps has not authorized available  aviation special and incentives pays for UAS officers in spite of  challenges meeting personnel requirements. As mentioned previously,  pilots who are selected for the UAS career field are informed by the  Marine Corps that their flight pay and aviation continuation pay bonus  eligibility will be terminated. The Marine Corps has incentivized enlisted  personnel from certain specialties, such as aircraft maintenance, to both  reenlist and to remain in a specified unit as recently as fiscal year 2018,  but has not offered this opportunity to UAS operators. By considering  longer UAS operator contracts, the Marine Corps could increase the  availability of experienced operators to squadrons, where they can pass  on their knowledge and skills to junior enlisted personnel.\nOur prior work has identified that a key principle for effective strategic  human capital planning is that organizations should ensure that  flexibilities are part of the overall human capital strategy to ensure  effective workforce planning. According to Marine Corps officials, they  have not taken additional steps to address workforce challenges in part  because inventories of UAS operators and officers have grown and  squadrons have generally attained readiness goals and accomplished  their deployment missions despite personnel shortages. Further, these  officials stated that low morale and career satisfaction could be partially  caused by the current transition from the RQ-7 Shadow UAS to the RQ- 21 Blackjack, and to the relative newness of the officer career field.  Without exploring these or other human capital flexibilities to improve  morale and career satisfaction and maximize operators\u2019 availability to  squadrons, the Marine Corps may face continued challenges in meeting  personnel requirements and the growing demands of expanding  operations and increasing UAS inventories. Moreover, as the Marine  Corps budgets for additional resources to establish its own school for  UAS operator training, flexibilities that could improve retention and  maximize operator availability could also help ensure the greatest return  on its investment in the UAS operator workforce.\n\n\tConclusions\n\nFor almost 20 years we have identified strategic management of human  capital as a high-risk area across government in part because of  persistent gaps in mission critical skills. With the Navy\u2019s commitment to  accelerate the delivery of unmanned systems to the fleet and its budget of  nearly $10 billion to develop and procure those systems in fiscal years  2018 through 2022, having sufficient personnel with the appropriate skills  at the right time will be critical. To that end, without additional actions to  improve their workforce planning the Navy and the Marine Corps may not  be positioned to support their expanding unmanned systems operations.  Specifically, lacking clear workforce planning policies, decision makers  may not know when they should consider using federal civilian employees  and private sector contractors as alternatives in determining the most  appropriate and cost-effective workforces for their unmanned system  operators.\nWith respect to personnel requirements development, until the Marine  Corps\u2019 requirements and related cost estimates for the RQ-21 Blackjack  UAS are updated, the services will lack current information about the  number of operators needed and their affordability. Further, unless the  Navy and the Marine Corps prioritize policy updates for operating and  maintaining UAS of different sizes and capabilities they may miss  opportunities to effectively and efficiently use personnel resources as  system inventories grow. Without assessing the commercial drone  industry and using that information to inform retention approaches, the  Navy and Marine Corps may not know whether special and incentive  pays are effectively tailored to ensure a sufficient number of UAS  operators are available to meet future requirements. The Marine Corps, in  particular, may continue to face challenges in meeting requirements and  growing operational demands until it examines additional flexibilities to  improve morale and career satisfaction among its UAS operator  workforce and maximize the availability of operators serving in its  squadrons. Overall, unmanned systems are key to future Navy and  Marine Corps operations, but for these systems to be effective the  services need to ensure that they take the necessary actions to provide  sufficient personnel.\n\n\tRecommendations for Executive Action\n\nWe are making the following ten recommendations to DOD. The  Secretary of the Navy ensures that:\nThe Chief of Naval Operations should clarify workforce planning  policies to identify circumstances in which federal civilian employees  and private sector contractors may serve in operational roles and  what the benefits and limitations are of using federal civilians and  private sector contractors as alternative workforces.  (Recommendation 1)\nThe Chief of Naval Operations should, after clarifying workforce  planning policies, apply the revised policies to evaluate the use of  alternative workforces (including federal civilian employees and  private sector contractors) for future unmanned system operators.  (Recommendation 2)\nThe Commandant of the Marine Corps should clarify workforce  planning policies to identify circumstances in which federal civilian  employees and private sector contractors may serve in operational  roles and what the benefits and limitations are of using federal  civilians and private sector contractors as alternative workforces.  (Recommendation 3)\nThe Commandant of the Marine Corps should, after clarifying  workforce planning policies, apply the revised policies to evaluate the  use of alternative workforces (including federal civilian employees and  private sector contractors) for future unmanned system operators.  (Recommendation 4)\nThe Commander, Naval Air Systems Command, in coordination with  the Deputy Commandant of the Marine Corps for Combat  Development and Integration, should update the Marine Corps  personnel requirements associated with the RQ-21 Blackjack UAS  based on the most current and enduring concept of operations and  utilize the updated requirements in planning for UAS squadron  personnel requirements. (Recommendation 5)\nThe Commander, Naval Air Systems Command, should update the  life cycle cost estimate for the RQ-21 Blackjack UAS to make  adjustments as appropriate after updating the personnel requirements  for the system. (Recommendation 6)\nThe Deputy Chief of Naval Operations for Warfare Systems (N9), in  coordination with the Deputy Commandant for Aviation, should  prioritize continued efforts to fully evaluate policies for operating and  maintaining UAS of different sizes and capabilities, such as group 3  UAS\u2014to include establishing completion time frames, determining  whether reductions to personnel requirements could be accomplished,  and identifying any associated cost savings and the benefits to the  UAS squadrons\u2019 ability to complete missions\u2014and update such  policies as needed. (Recommendation 7)\nThe Secretary of the Navy should clarify overarching goals for  unmanned systems\u2019 personnel requirements, including related priority  levels for resourcing purposes, and communicate them to  requirements planners and budget decision makers.  (Recommendation 8)\nThe Chief of Naval Personnel and the Deputy Commandant for  Manpower and Reserve Affairs should assess civilian supply,  demand, and wages in the commercial drone industry and use the  results to inform retention approaches, including the use of special  and incentive pays for UAS operators. (Recommendation 9)\nThe Deputy Commandant for Aviation and the Deputy Commandant  for Manpower and Reserve Affairs should examine the use of  additional human capital flexibilities that could improve the career  satisfaction and retention of experienced UAS operators and  maximize their availability to squadrons. Such flexibilities could  include authorizing available special and incentive pays; permitting  UAS operators to extend their enlistments to serve longer within  squadrons; ensuring the availability of career- and promotion- enhancing opportunities for professional military education;  considering the use of a potential insignia device for operators; or  extending UAS operator contract lengths. (Recommendation 10)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in appendix III, DOD concurred with eight  of our recommendations and partially concurred with two  recommendations. DOD also provided technical comments on the draft  report, which we incorporated as appropriate.\nWith regard to our recommendation to assess civilian supply, demand,  and wages in the commercial drone industry and use the results to inform  retention approaches, DOD partially concurred. DOD stated that it will  assess competitive markets, both externally and internally, and then  analyze the usage of incentive pays for UAS operators when retention  rates and inventory levels of personnel display decreasing trends. DOD  added that such analysis would be premature if conducted before initial  operational capability is attained for each UAS because retention  behaviors and air crew dynamics are not yet established. As noted in our  report, the Navy and the Marine Corps have each attained initial  operational capability with one UAS (i.e., the MQ-8 Fire Scout B-variant  and the RQ-21 Blackjack) and quantities of these and other UAS are  expected to increase in future years. Additionally, the Marine Corps has  designated UAS officer inventories as unhealthy since fiscal year 2013.  Accordingly, we continue to believe that conducting such assessments  and using the results are timely and important steps to ensure enough  personnel to meet future operator requirements.\nDOD partially concurred with our recommendation to examine the use of  additional human capital flexibilities that could improve the career  satisfaction and retention of experienced UAS operators. DOD stated that  human capital flexibilities are constantly under review. Further, DOD  stated that the UAS community is still in its infancy, but as it continues to  grow and become healthier, assignment opportunities and flexibilities will  become more prevalent and special and incentive pays will be examined  as retention rates dictate. Such efforts would meet the intent of our  recommendation if the opportunities and flexibilities DOD considers  include other examples cited in our recommendation. That is, we continue  to believe that DOD should also consider permitting UAS operators to  extend their enlistments to serve longer within squadrons; ensuring the  availability of career- and promotion-enhancing opportunities for  professional military education; considering the use of a potential insignia  device for operators; and extending UAS operator contract lengths.\nWe are providing copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Navy, and the  Commandant of the Marine Corps. In addition, the report is available at  no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV.\n\nAppendix I: Characteristics of Selected Navy and Marine Corps Unmanned Systems\n\n\tNavy MQ-8 Fire Scout Unmanned Aerial System\n\nThe Navy\u2019s MQ-8 Fire Scout unmanned aerial system (UAS) (B and C  variants) is intended to provide real-time imagery and data in support of  intelligence, surveillance, and reconnaissance missions for surface, anti- submarine, and mine warfare. The system is part of the surface warfare  and mine countermeasures mission packages of the littoral combat ships.  The MQ-8 system comprises one or more air vehicles with sensors, a  control station, and ship equipment to aid in vertical launch and recovery.  According to the program office, the MQ-8C has 90 percent commonality  with the previously developed MQ-8B. The primary differences between  the two are structural modifications to accommodate the MQ- 8C\u2019s larger  airframe and fuel system.\n\n\t\tDelivery Status and Schedule\n\nThe manufacturer has delivered 49 aircraft to the Navy as of September  2017 (including 30 B variants and 19 C variants), and 11 more aircraft (C  variants) are scheduled to be delivered by fiscal year 2019.\nThe Navy attained initial operational capability with the B variant of the  Fire Scout in fiscal year 2014, and plans to attain initial operational  capability with the C variant in December 2018, depending on the  availability of the littoral combat ship from which it deploys.\n\n\t\tOperator Personnel Requirements\n\nA composite aviation detachment embarked on a littoral combat ship  consists of up to 24 personnel, including operator air crews equipped with  one MH-60 helicopter and one MQ-8 Fire Scout UAS. An air crew  consists of two personnel: one air vehicle operator and one mission  payload operator. There is no additive personnel requirement associated  with operators of the MQ-8 Fire Scout because these personnel already  reside within existing expeditionary MH-60 helicopter squadron  detachments. The littoral combat ships\u2019 crew berthing constraints was a  key limiting factor in creating the personnel requirements for the number  of air crew in a single composite aviation detachment.\nNavy officials told us that they believe, based on deployment experiences  and available data, that the personnel requirements for the MQ-8 Fire  Scout are correct, although they stated that the operational tempo has  been very limited to date due to problems with the littoral combat ship that  have reduced the number of deployments.\n\n\t\tOperator Staffing Approach\n\nMH-60 helicopter pilots and enlisted aircrewmen from expeditionary  helicopter squadrons attend 8 and 6 weeks, respectively, of MQ-8 Fire  Scout UAS training. During deployments, these personnel serve dual  roles as air crew of both the MH-60 and the MQ-8 Fire Scout.\nMQ-8 Fire Scout air vehicle operators hold primary career designators as  Navy helicopter pilots, and after their UAS training they are identified with  an additional qualification designator of DY8. According to a senior Navy  official, private sector contractors trained 126 air vehicle operators prior to  February 2015, and since then Navy has trained another 91 air vehicle  operators as of May 2017.\nMQ-8 Fire Scout mission payload operators have an enlisted rating as a  helicopter aircrewman, and after their UAS training they are identified with  a Navy enlisted classification code of 8367. According to a senior Navy  official, private sector contractors trained 148 mission payload operators  through March 2017, and the Navy has trained another 68 mission  payload operators since February 2017 (as of May 2017).\nAccording to Navy officials, they do not expect that the approach for  staffing MQ-8 Fire Scout aircrew to negatively affect accessions or  retention in the helicopter community, even when operational tempo  increases, but they are continuing to monitor feedback from deployments.\n\n\tNavy MQ-4 Triton UAS\n\nThe Navy\u2019s MQ-4 Triton UAS is intended to provide persistent maritime  intelligence, surveillance, and reconnaissance data collection and  dissemination capability in an operating area of a 2,000 nautical miles  radius. Based on the Air Force\u2019s RQ-4B Global Hawk air vehicle, the MQ- 4 Triton was formerly known as the Broad Area Maritime Surveillance  UAS. Triton UAS sensors can provide detection, classification, tracking,  and identification of maritime targets. Additionally, the MQ-4 Triton is  designed with a communications relay capability that can link dispersed  forces in the theater of operation. The system will cue other Navy assets  for further situational investigation and\/or attack, and will also provide a  battle damage assessment of the area of interest. Tactical-level data  analysis will occur in real-time at shore-based mission control systems via  satellite communications.\nThe MQ-4 Triton is planned to operate from five shore-based sites  worldwide as part of the Navy\u2019s family of maritime patrol and  reconnaissance systems. From these sites, five MQ-4 Triton air vehicles  will be airborne concurrently, 24 hours a day and 7 days a week (see  fig.6).\nAs a precursor to the MQ-4 Triton, the Navy\u2019s RQ-4A Broad Area  Maritime Surveillance System-Demonstrator has been continuously  deployed to the U.S. Central Command area since January 2009. All four  of those planned demonstrator systems have been delivered to the Navy.\n\n\t\tPlanned Quantity\n\nThe manufacturer has delivered 2 systems to the Navy as of September  2017 and the Navy expects 10 more systems to be delivered through  fiscal year 2021. At the time of this report, no air vehicles had yet been  delivered to the Navy\u2019s first unmanned patrol squadron; the 2 systems  were being utilized for testing.\nThe Navy has estimated that it will attain initial operational capability with  the MQ-4 Triton UAS in 2021.\n\n\t\tOperator Personnel Requirements\n\nOne of the Navy\u2019s two planned unmanned patrol squadrons (referred to  as VUPs) will have 30 mission crews, the other squadron will have 20  mission crews, and both squadrons will have additional launch and  recovery operators. A MQ-4 Triton mission crew will consist of four  personnel: one air vehicle operator, one tactical coordinator, and two  mission payload operators. Future upgrades to the MQ-4 Triton will  require a fifth mission crew member to fill a signals intelligence capability  operator position. The number of required mission crew members was  based in part upon a model that Naval Air Systems Command utilizes to  project the number of air crew personnel to support a system.\nAccording to Navy officials, the additional personnel requirements for the  Navy associated with the establishment of Triton squadrons are offset by  realignments of the Maritime Patrol and Reconnaissance Force, including  the retirement of the P-3 Orion aircraft and reduction of associated  personnel requirements.\nNavy officials told us that they believe, based in part on experience with  the Broad Area Maritime Surveillance - Demonstrator, that the personnel  requirements for the MQ-4 Triton are adequate, although they stated that  they will continue to review and monitor the requirements for sufficiency in  future years as the Navy attains steady state operations with the system\u2019s  five continuous orbits.\n\n\t\tOperator Staffing Approach\n\nThe Navy\u2019s approach for staffing operator aircrew for the MQ-4 Triton is  to utilize a portion of its naval aviators, naval flight officers, and enlisted  aircrew whose qualification is on a maritime patrol and reconnaissance  force aircraft (e.g., the P-8A Poseidon) and assign them to an unmanned  patrol squadron following a sea tour with their primary aircraft. According  to Navy officials, the career path for all its aviators generally includes a  number of shore duty options following a first deployment. The unmanned  patrol squadron assignments will be an additional option for aviators\u2019 first  shore tour. The Navy will provide Triton aircrew members with  approximately 3 months of training to qualify on the UAS in connection  with their unmanned patrol squadron assignment. Air vehicle operators  and tactical coordinators who are trained and qualified on the MQ-4 Triton  will be identified with an additional qualification designator of DC5.  Trained and qualified mission payload operators will be identified with a  Navy enlisted classification of 7828.\nAccording to Navy officials, they do not expect the approach for staffing  MQ-4 Triton aircrew to affect accessions or retention in the maritime  patrol and reconnaissance community at this time, but it is too soon to be  certain. In the meantime, the officials stated that they will continue to  monitor personnel feedback and reassure personnel about the career  value of experience in a MQ-4 Triton squadron. In addition, the Navy  plans to leverage members of its reserve component to augment the pool  of available personnel who can be assigned to its VUP squadrons.\n\n\tNavy MQ-25 Stingray UAS\n\nThe Navy\u2019s MQ-25 Stingray UAS will be the first UAS to operate from  aircraft carriers. According to Navy officials, the MQ-25 Stingray\u2019s primary  mission will be to provide a robust refueling capability to extend the range  and reach of the carrier air wing and reduce the need for F\/A-18E\/F  Super Hornets to perform refueling missions, freeing them for strike  missions, and preserving service life. As a secondary mission, the MQ-25  Stingray will also provide an intelligence, surveillance, and  reconnaissance capability. The Navy previously referred to the MQ-25  Stingray as the Carrier Based Aerial Refueling System, a program that  followed a restructuring of the former Unmanned Carrier-Launched  Airborne Surveillance and Strike program.\n\n\t\tPlanned Quantity\n\nThe Navy\u2019s initial plan is to purchase 72 MQ-25 Stingray air vehicles.\n\n\t\tDelivery Status and Schedule\n\nNo systems have been delivered and a delivery schedule has not been  established because the system is still in an early stage of DOD\u2019s  acquisition process, with a contract award for system development  scheduled for the fourth quarter of fiscal year 2018.\nThe Navy has estimated attaining initial operational capability with the  system by the mid-2020s time frame.\n\n\t\tOperator Personnel Requirements\n\n\t\tOperator Staffing Approach\n\nThe Navy has not yet developed a staffing approach for MQ-25 Stingray  operators. According to Navy officials involved in establishing plans and  requirements for the system, they are considering different options for the  systems\u2019 operators, including using enlsited personnel or an approach  similar to that used for the MQ-8 Fire Scout operators in which a  population of aviation personnel, including pilots, would be identified from  a related, existing aircraft community\u2014such as the E-2 Hawkeye  aircraft\u2014and provided with UAS qualification training if they were  assigned to operate the MQ-25 Stingray in a composite squadron along  with their other primary aircraft. According to these officials, at the  direction of the Commander of Naval Air Forces, they have considered  establishing a new UAS operator career field and surveyed midshipmen  at the U.S. Naval Academy to gauge their interest in such a career.\n\n\tMarine Corps RQ-21 Blackjack UAS\n\nThe Marine Corps\u2019 RQ-21 Blackjack UAS provides units with a dedicated  intelligence, surveillance, and reconnaissance capability for tactical  commanders in real time by providing actionable intelligence and  communications relay for 12-hour continuous operations per day, with a  short surge capability of 24-hours of continuous operations for a 10-day  period, during any 30-day cycle.\nAn RQ-21 Blackjack system consists of five air vehicles, two ground  control stations, multi-mission payloads, one launcher, one recovery  system, data links, and support systems. Standard payloads include  electro-optical and infrared cameras, communications relay payload, and  automatic identification system. Future upgraded capabilities may include  command and control integration, weapons integration, heavy fuel  engine, laser designator, frequency agile communications relay, digital  common data link, and cyclic refresh of the electro-optical and infrared  cameras.\nThe RQ-21 Blackjack can be launched and recovered from land or from  air-capable ships, including L-class ships (e.g., amphibious transport  docks) (see fig. 7).\n\n\t\tDelivery Status and Schedule\n\nThe manufacturer has delivered 11 systems to the Marine Corps as of  September 2017 and the Marine Corps expects the other 21 planned  systems to be delivered through 2022.\nThe Marine Corps attained initial operational capability with the RQ-21  Blackjack in 2016.\n\n\t\tOperator Personnel Requirements\n\nThe Marine Corps has three active duty unmanned aerial vehicle  squadrons (VMU 1, 2, and 3) and one reserve VMU squadron (VMU 4)  that will operate the RQ-21 Blackjack UAS. Each active duty VMU will  contain nine detachments and each detachment will comprise 9  personnel\u2014including 1 UAS officer and 3 enlisted UAS operators\u2014and  one RQ-21 Blackjack UAS. The Marine Corps Reserve\u2019s VMU 4 will  contain three detachments.\nThe Marine Corps\u2019 does not distinguish between requirements for air  vehicle operators and mission payload operators for the RQ-21 Blackjack  because those functions are performed by the same operator.\n\n\t\tOperator Staffing Approach\n\nThe Marine Corps has a primary career field for operating UAS, including  enlisted UAS operators and UAS officers. The Marine Corps replenishes  its UAS operator and officer personnel inventories by selecting from  eligible applicant groups. For enlisted UAS operators, eligible groups  include new graduates of recruit training and experienced marines who  apply for a lateral transfer from another occupational specialty. UAS  officers are selected from three sources: new graduates of officer training;  pilot or flight officer trainees who do not complete their manned aircraft  qualification; and experienced officers seeking a transfer from another  occupational specialty, including pilots of manned aircraft.\nThe Marine Corps requires certain minimum test scores before marines  can be selected for UAS training. Enlisted marines must achieve  minimum test scores comparable to those required for other high-skill  occupations, such as intelligence specialists. Officers take a separate  test battery and must attain the same minimum scores as other officers  who are selected for manned naval aviation training. Following their  selection for UAS training, enlisted personnel must complete 5 months of  Army UAS training courses to attain their military occupational specialty  as a UAS operator. Officers attend 6 months of Air Force training courses  to attain their occupational specialty. The Marine Corps then assigns a  primary occupation identification code to trained personnel, which is 7314  for enlisted UAS operators or 7315 for UAS officers.\nThe Marine Corps assigns enlisted personnel and officers to one of its  UAS squadrons after they attain their occupational specialty, where they  continue their UAS training to attain and maintain proficiency and  advanced qualifications. As discussed earlier in this report, Marine Corps  UAS squadrons believe that an RQ-21 Blackjack detachment requirement  of 9 personnel is not sufficient to meet their workloads. Since 2015,  squadrons have staffed their deploying detachments with up to 30  personnel each to support the workload and levels of supervision they  believe are necessary to operate and maintain an RQ-21 Blackjack UAS  and avoid mishaps and damage to the aircraft during recovery to meet  operating and maintenance standards, among other reasons.\n\n\tNavy Mine Countermeasures Unmanned Surface Vehicle and Unmanned Influence Sweep System\n\nThe Navy\u2019s Mine Countermeasures Unmanned Surface Vehicle (USV)  and Unmanned Influence Sweep System will be part of the mine  countermeasures mission package of the Navy\u2019s littoral combat ships  (see fig. 8).\nThe Mine Countermeasures USV will tow a sonar payload for mine  hunting. The Unmanned Influence Sweep System will use the same USV  platform to tow an acoustic and magnetic influence sweep payload to  clear bottom and moored mines. Both systems will be launched and  recovered from littoral combat ships.\n\n\t\tPlanned Quantity\n\nFor the Mine Countermeasures USV, the projected inventory is 2 systems  per mine countermeasures mission package for a total of 48 systems, in  addition to systems needed for training.\nFor the Unmanned Influence Sweep System, the projected inventory is 1  per mine countermeasures mission package for a total of 24 payloads, in  addition to payloads for training.\n\n\t\tDelivery Status and Schedule\n\nAs of September 2017, two Mine Countermeasures USVs were under  construction, but neither had been delivered to the Navy. The Navy plans  to attain initial operational capability with the Mine Countermeasures  USVs in fiscal year 2021.\nAs of September 2017, one Unmanned Influence Sweep System had  been constructed and the Navy expects it to be delivered for testing by  fiscal year 2018. The Navy plans to attain initial operational capability with  the Unmanned Influence Sweep System in fiscal year 2019.\n\n\t\tOperator Personnel Requirements\n\nThe Mine Countermeasures USV and Unmanned Influence Sweep  System will be operated by littoral combat ship mine countermeasures  mission package crews of 20 personnel each. The precise number of  operators per system will be determined and updated as the systems  progress through acquisition.\n\n\t\tOperator Staffing Approach\n\nAccording to Navy officials, USV operators associated with the littoral  combat ships\u2019 mine countermeasures mission package crews will not be  directly accessed and recruited to such positions. Instead, these officials  stated that enlisted sailors from related primary career ratings will be  assigned to the crews and trained on the USVs along with other systems  as part of a longer training pipeline. Upon their completion of training, the  Navy plans to identify them with a Navy enlisted classification code of  1206, Littoral Combat Ship Mine Warfare Mission Package Specialist.\n\n\tNavy MK 18 Unmanned Underwater Vehicle Family of Systems\n\nThe Navy\u2019s MK 18 Unmanned Underwater Vehicle (UUV) family of  systems consists of the MK 18 \u201cMod 1\u201d Swordfish UUV and the MK 18  \u201cMod 2\u201d Kingfish UUV. The MK 18 Mod 1 Swordfish is a man-portable  system that performs autonomous, low-visibility exploration and  reconnaissance missions in support of amphibious landings and mine  countermeasures operations, among other things. The MK 18 Mod 2  Kingfish UUV is a larger vehicle with increased endurance and depth, and  more advanced sensors to improve mine countermeasures capabilities.  The Mod 1 Swordfish and the Mod 2 Kingfish operate in very shallow  water and shallow water zones, and will be tactically integrated to enable  detection of moored and bottom mines at increased standoff and reduced  risk to operators and systems that would otherwise be operating in the  minefield.\nThe MK 18 systems can be launched and recovered from shore, from  rigid hull inflatable boats or from ships (see fig. 9).  41 (25 Mod 1 Swordfish and 16 Mod 2 Kingfish)\n\n\t\tDelivery Status and Schedule\n\nThe manufacturer has delivered 33 systems (21 Mod 1 Swordfish and 12  Mod 2 Kingfish) to the Navy as of fiscal year 2017. The Navy attained full  operational capability with the first increment of the Mod 1 Swordfish in  fiscal year 2007 and expects to attain initial operational capability with the  first increment of the Mod 2 Kingfish in fiscal year 2019.\n\n\t\tOperator Personnel Requirements\n\nMK 18 UUVs are operated by platoons within three different Navy units:  Explosive Ordinance Disposal Mobile Unit One, Mobile Diving and  Salvage Unit Two, and the Naval Oceanography Mine Warfare Center.  According to Navy officials, the establishment of such platoons did not  generate an additive personnel requirement to those units. The minimal  personnel requirement for MK 18 operations includes three UUV  operators and a UUV supervisor, along with an officer-in-charge, a boat  coxswain, and a boat engineer.\n\n\t\tOperator Staffing Approach\n\nAccording to Navy officials, the Navy does not directly access or recruit  personnel to fill its requirements for operators of the MK 18 UUVs. These  officials stated that, instead, enlisted sailors from related primary career  ratings, including special warfare boat operator and aerographer\u2019s mate  ratings, can be assigned to a unit that operates the UUVs either on their  first tour or later in their career on a subsequent assignment. Navy  officials also stated that Navy Expeditionary Combat Command is  coordinating with the Commander, Submarine Forces, to potentially utilize  the Navy enlisted classification code of 9550 for its UUV operators.\n\n\tNavy Snakehead Large Displacement UUV\n\nThe Navy\u2019s Snakehead Large Displacement UUV will be a long- endurance, off-board system that will conduct reconnaissance and  surveillance missions in denied areas and in waters too shallow or  otherwise inaccessible for conventional platforms (see fig. 10).\nThe Snakehead Large Displacement UUV will be launched and recovered  from submarines and surface ships.\n\n\t\tPlanned Quantity\n\nNo systems have been delivered to the Navy. The Navy is planning for  the first 2 systems to be delivered in fiscal year 2020 and for another 2  systems to be delivered in fiscal year 2023. The Navy will attain initial  operational capability with the first phase systems when two of them are  delivered and tested on a host platform, a life-cycle sustainment plan is in  place, and personnel are trained and equipped to operate and maintain  the system from a host platform.\n\n\t\tOperator Personnel Requirements\n\nThe Navy plans to field the Snakehead Large Displacement UUVs to  UUV Squadron 1. According to Navy officials, the squadron is also testing  or operating more than 10 other types of UUVs and expects to receive 2  or more other new types of UUVs  through approximately fiscal year  2020, along with the Snakehead. Although Navy officials told us that it is  too soon to analyze and determine the numbers of personnel required for  the system at the time of this report, they plan to utilize forward-deployed  operators to launch and recover the vehicle, an operator to control the  vehicle from an operations center on land, and a mission payload  operator as needed depending on the mission. The precise number of  operators per system will be determined and updated as the systems  progress through acquisition.\n\n\t\tOperator Staffing Approach\n\nIn staffing personnel to meet requirements for UUV Squadron 1, Navy  officials stated that they do not directly access or recruit personnel to fill  such positions. Instead, these officials told us that enlisted sailors from  related career ratings within the submarine community, such as sonar  technicians, are assigned to the squadron generally after they have  completed at least one previous assignment and have approximately 5  years of experience in the Navy. According to the officials, once  personnel are assigned to the squadron, they receive UUV training to  qualify on the systems they will operate, and they will be identified with a  Navy enlisted classification code of 9550 for UUV operators.\n\nAppendix II: Objectives, Scope, and Methodology\n\nThis report addresses the extent to which the Navy and the Marine Corps  have (1) evaluated workforce alternatives for their unmanned system  operators, including the use of federal civilian employees and private  sector contractors; (2) developed and updated personnel requirements  and related policies and goals that affect requirements for operators,  maintainers, and other support personnel for selected unmanned  systems; and (3) developed approaches for staffing unmanned system  operators to meet personnel requirements and have met those  requirements.\nTo address these objectives, we included in the scope of our review the  Navy\u2019s and the Marine Corps\u2019 unmanned aerial systems (UAS),  unmanned surface vehicles (USV), and unmanned underwater vehicles  (UUV) that were programs of record in calendar year 2016. On the basis  of Department of the Navy documentation and interviews with  knowledgeable officials, we identified 24 such systems. To provide  illustrative examples for our first and third objectives and to address the  entirety of our second objective, we further narrowed our scope to those  systems that had progressed far enough through DOD\u2019s acquisition  process to be part of a program of record within the purview of the  services\u2019 system commands. Additionally, we narrowed our scope for  UASs, in particular, to those categorized as group 3 or above. We  omitted smaller group 1 UASs because service officials told us that those  systems are fielded in larger numbers as additional capabilities for  existing units in accomplishing their missions and entail a small workload  for operating and maintaining them relative to UASs of group 3 and  above. Group 2 UASs that the Navy and the Marine Corps utilize are  contractor-owned and operated, which was outside the scope of our  review.\nFrom the remaining unmanned systems in our scope, we selected eight  case studies to review the services\u2019 evaluations of workforce alternatives,  development and updates of personnel requirements and related policies  and goals, and staffing approaches: four UASs\u2014the Navy\u2019s MQ-4 Triton,  MQ-8 Fire Scout, MQ-25 Stingray, and the Marine Corps\u2019 RQ-21  Blackjack; the two USVs\u2014the Unmanned Influence Sweep System and  the Mine Countermeasures USV\u2014associated with the Navy\u2019s littoral  combat ships; and two types of the Navy\u2019s UUVs\u2014the MK 18 family of  UUV systems and the Snakehead Large Displacement UUV\u2014based on  their size and missions. Although the results of the UUV case studies  cannot be generalized to all UUVs across the Navy, they illustrate  different characteristics of and approaches used for workforce mix,  requirements, and staffing for such systems.\nTo address our first objective, we compared any Navy and Marine Corps  efforts to evaluate federal civilian employees and private sector  contractors as workforce alternatives for operators of all of their  unmanned systems, including those from our case study sample, with  criteria from (1) DOD Directive 1100.4, Guidance for Manpower  Management, which directs, among other things, that authorities consider  all available sources when determining workforce mix, and that  workforces be designated as federal civilians except in certain  circumstances, and (2) DOD Instruction 1100.22, Policy and Procedures  for Determining Workforce Mix, which establishes the workforce mix  decision process and directs that workforce planning authorities consider  all available personnel when determining the workforce mix\u2014that is, the  combination of military servicemembers, federal civilians, and private  sector contractors. Specifically, we analyzed available documentation for  the selected case study systems on any evaluations the services  performed of alternative workforces and the related decisions made about  eligible personnel categories, and interviewed knowledgeable service  officials about factors that informed those evaluations and decisions and  any reasons for not evaluating workforce alternatives.\nWe also interviewed officials from the Navy and OUSD(P&R) who are  responsible for reviewing workforce and personnel planning documents  for Navy and Marine Corps programs to understand any broader DOD or  service workforce planning efforts for unmanned systems, and reasons  for omitting certain personnel categories from consideration for systems  that are in development. We reviewed our prior reports on workforce mix  and DOD-commissioned workforce mix studies and interviewed officials  from OUSD(P&R) to identify limitations and benefits associated with  different categories of personnel, including military servicemembers,  federal civilian employees of DOD, and private sector contractors. We  reviewed the Navy\u2019s and the Marine Corps\u2019 policies on workforce  planning to determine whether those policies provide more detailed  guidance or criteria relative to those available in DOD\u2019s policies on  circumstances for which alternative personnel sources should be  considered or on the limitations and benefits associated with different  workforce mix options. We also compared these service-level workforce  planning policies with federal internal controls standards that emphasize  the importance of having clear, updated policies that align with an  organization\u2019s mission and goals.\nTo address our second objective, we reviewed the Navy\u2019s and the Marine  Corps\u2019 efforts to develop and update personnel requirements for our  selected case study systems, including documentation of steps taken to  analyze and determine personnel requirements levels. We interviewed  service officials about their views of the sufficiency of those personnel  requirements for supporting training and deployment requirements for the  selected systems. For any systems that service officials were concerned  about the sufficiency of related personnel requirements, we compared  documentation of the requirements with DOD Directive 1100.4 and with a  Navy instruction. The DOD policy states that personnel requirements  should be driven by workload and established at the minimum levels  necessary to accomplish mission and performance objectives. Navy  Instruction 1000.16L states that personnel requirements must be validated as program changes dictate and at a minimum annually over a  system\u2019s lifecycle to determine if a personnel update is required. Further,  we reviewed documentation of the life cycle cost estimate for the number  of Marine Corps personnel required to operate and maintain the RQ-21  Blackjack, and of UAS squadrons\u2019 position on the sufficiency of those  personnel requirements, and compared those documents with DOD  guidance requiring that components determine a weapon system  program\u2019s life cycle costs by planning for the many factors needed to  support the system, including personnel, and with Office of Management  and Budget guidance that states that to keep the cost analyses for capital  assets, such as weapon systems, current, accurate, and valid, cost  estimating should be continuously updated based on the latest  information available as programs mature.\nIn addition, we reviewed Navy policies on operating and maintaining UAS  and documentation from the Marine Corps about the effect of those  policies on UAS squadron personnel workload, and interviewed Navy and  Marine Corps headquarters- and unit-level officials about those effects  and any efforts underway to review and update policies. We then  compared those efforts to review and update policies with DOD Directive  1100.4 stating that existing policies, procedures, and structures should be  periodically evaluated to ensure efficient and effective use of personnel  resources, and with federal internal controls standards that emphasize  the importance of having clear, updated policies that align with an  organization\u2019s mission and goals. Finally, we compared goals  established in DOD\u2019s Unmanned Systems Integrated Roadmap, FY2013- 2038 and Department of the Navy strategy documents on unmanned  systems with federal internal controls standards that state than an  agency\u2019s management should define objectives clearly to enable the  identification of risk.\nFor our third objective, we reviewed the Navy\u2019s and the Marine Corps\u2019  steps to select, train, and track unmanned system operators to identify  any challenges. We reviewed for the selected systems a combination of  manpower estimate reports and personnel and training plan documents to  identify approaches for staffing operators. We also reviewed personnel  and training manuals describing prerequisites for related military  qualifications and occupations. We interviewed command- and unit-level  officials from the Navy and the Marine Corps to discuss the effectiveness  of current staffing approaches for meeting their training and deployment  requirements.\nFocusing on challenges with providing enough personnel to serve as UAS  operators in particular, we also reviewed Navy reports on the retention of  certain aviation personnel to serve as UAS operators and we reviewed  Marine Corps data on its UAS operator inventory and retention levels  relative to its requirements and goals. Specifically, we reviewed Navy  reports on retention for fiscal years 2015 through 2017 because data from  earlier years were less relevant given the lower numbers of UAS  inventories. We requested data from the Marine Corps on its inventories  of and requirements for enlisted UAS operators for fiscal years 2007  through 2017 and on UAS officers for fiscal years 2013 (the first year of  available data) through 2017. We requested retention data\u2014actual  numbers of personnel who reenlisted versus annual quotas\u2014on enlisted  UAS operators for fiscal years 2010 (the earliest year for which data were  available) through 2017.\nWe assessed the reliability of these Marine Corps data by administering  questionnaires and interviewing relevant personnel responsible for  maintaining and overseeing the systems that supplied the data and  manually checking the data for errors or omissions. Through these  methods, we obtained information on the systems\u2019 ability to record, track,  and report on these data, as well as on the quality control measures in  place. We found the inventory and requirements data to be sufficiently  reliable for the purposes of describing personnel inventory trends and the  sufficiency of operator personnel to meet requirements. We found that the  retention data are of undetermined reliability but are reporting them  because they are the data of record used by Marine Corps planning  officials. We also reviewed Navy and Marine Corps financial incentives for  retaining sufficient personnel to serve as UAS operators and compared  those approaches with criteria from DOD\u2019s 2012 Eleventh Quadrennial  Review of Military Compensation, which established that organizations  should assess civilian supply and demand and civilian wages to  determine the most cost effective special and incentive pay strategies.\nFurther, we compared the Marine Corps\u2019 efforts to address workforce  challenges specific to the Marine Corps\u2019 UAS operator career field with a  key principle of strategic human capital planning from our prior work,  which states that agencies should ensure that flexibilities are part of their  overall human capital strategy. In our prior work, we found that strategic  human capital planning is an important component of an agency\u2019s effort  to develop long-term strategies for acquiring, developing, and retaining  staff needed for an agency to achieve its goals and of an agency\u2019s effort  to align human capital activities with the agency\u2019s current and emerging  mission. Specifically, we have found that an agency\u2019s efforts to conduct  strategic human capital planning should include, among other things,  building the capability needed to address administrative, educational, and  other requirements important to supporting workforce strategies by  ensuring that flexibilities are part of the overall human capital strategy.  We focused on workforce challenges in the Marine Corps, in particular,  because it has a long-established career field for UAS operators, and the  Navy does not yet have a separate career field for any of its unmanned  systems operators.\nWe identified workforce challenges within the Marine Corps\u2019 UAS  operator career field by reviewing a 2015 Marine Corps-sponsored survey  of its pilot and UAS officer workforce. The survey included questions  about satisfaction with career and benefits, and intentions to stay in the  Marine Corps and the underlying reasons for these. Although officers in  ranks of first lieutenant through lieutenant colonel were surveyed, we  were unable to include majors and lieutenant colonels in reporting results  for UAS officers because the Marine Corps aggregated those officers\u2019  responses with those of majors and lieutenant colonels who operate other  types of aircraft. By reviewing the survey methodology and interviewing  an official involved in administering the survey and analyzing the results,  we determined that the survey results were sufficiently reliable for  reporting the perceptions about career satisfaction at a single point in  time for UAS operators who answered those questions.\nIn addition, we visited one of three active duty Marine Corps UAS  squadrons, which we chose because it had the most deployment  experience with the RQ-21 Blackjack UAS. We met with squadron  leaders to discuss their views about UAS personnel requirements and  staffing approaches. We also conducted eight small group discussions  with active duty UAS operators and officers\u2014separately for enlisted  personnel and officers\u2014to gain their perspectives on topics such as  morale, workload, and career satisfaction. The opinions of Marine Corps  UAS operators we obtained during our discussion groups are not  generalizable to the population of UAS operators in the Marine Corps.\n\n\tOffice of the Secretary of Defense\n\n\tJoint Staff\n\n\tMarine Corps\n\nOffice of the Deputy Commandant for Aviation\nOffice of the Deputy Commandant for Combat Development and\nOffice of the Deputy Commandant for Manpower and Reserve Affairs\nMarine Corps Systems Command\nMarine Unmanned Aerial Vehicle Squadron 2  We conducted this performance audit from September 2016 to February  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.\n\nAppendix III: Comments from the Department of Defense\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, key contributors to this report  were Lori Atkinson, (Assistant Director), Melissa Blanco, Tim Carr, Mae  Jones, Amie Lesser, Felicia Lopez, Ben Sclafani, Mike Silver, and Paul  Sturm.\n\nRelated GAO Products\n\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.\nHigh Risk Series: Progress on Many High-Risk Areas, While Substantial  Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15,  2017.\nMilitary Compensation: Additional Actions Are Needed to Better Manage  Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.:  February 3, 2017.\nUnmanned Aerial Systems: Air Force and Army Should Improve Human  Capital Planning for Pilot Workforces. GAO-17-53. Washington, D.C.:  January 31, 2017.\nUnmanned Aerial Systems: Further Actions Needed to Fully Address Air  Force and Army Pilot Workforce Challenges. GAO-16-527T. Washington,  D.C.: March 16, 2016.\nMilitary Personnel: Army Needs a Requirement for Capturing Data and  Clear Guidance on the Use of Military for Civilian or Contractor Positions.  GAO-15-349. Washington, D.C.: June 15, 2015.\nUnmanned Aerial Systems: Actions Needed to Improve DOD Pilot  Training. GAO-15-461. Washington, D.C.: May 14, 2015.\nAir Force: Actions Needed to Strengthen Management of Unmanned  Aerial System Pilots. GAO-14-316. Washington, D.C.: April 10, 2014.\nHuman Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD\u2019s Total Workforce. GAO-13-470.  Washington, D.C.: May 29, 2013.\nUnmanned Aircraft Systems: Comprehensive Planning and a Results- Oriented Training Strategy Are Needed to Support Growing Inventories.  GAO-10-331. Washington, D.C.: March 26, 2010.\nHuman Capital: Key Principles for Effective Strategic Workforce Planning.  GAO-04-39. Washington, D.C.: December 11, 2003.","output":"Why GAO Did This Study\n\nThe Department of the Navy has committed to rapidly grow its unmanned systems portfolio. It currently has at least 24 types of systems and has budgeted nearly $10 billion for their development and procurement for fiscal years 2018-2022. Personnel who launch, navigate, and recover the systems are integral to effective operations. Senate Report 114-255 included a provision for GAO to review the Navy's and the Marine Corps' strategies for unmanned system operators. GAO examined, among other things, the extent to which the Navy and the Marine Corps have (1) evaluated workforce alternatives (such as the use of civilians and contractors) for unmanned system operators and (2) developed and updated personnel requirements and related policies and goals for selected unmanned systems. GAO compared documentation on unmanned systems with DOD policies and conducted discussion groups with unmanned system operators.\n\nWhat GAO Found\n\nThe Navy and the Marine Corps are rapidly growing their portfolios of unmanned aerial systems (UAS) and unmanned maritime systems and have opted to use military personnel as operators without evaluating alternatives, such as federal civilian employees and private sector contractors. Service officials stated that civilians or contractors are not viable alternatives and policies are unclear about when and how to use them. However, a June 2016 Department of Defense-commissioned study found that alternative staffing strategies could meet the UAS mission more cost-effectively. Military personnel may be the most appropriate option for unmanned systems, but without clarifying policies to identify circumstances in which civilians and contractors may serve in operational roles, the services could continue to make workforce decisions that do not consider all available resources.\nThe Navy and the Marine Corps have sufficient personnel requirements or efforts underway to develop personnel requirements for seven unmanned systems that GAO reviewed (see fig.), but requirements for one system (i.e., the RQ-21 Blackjack UAS) have not been updated. That system's requirements have not been updated because service entities disagree about whether they are sufficient. Since 2015, units have deployed with about two to three times the personnel that headquarters and command officials expected they would need. Marine Corps officials stated that the Blackjack's personnel requirements were based on an outdated concept of operations and are insufficient for supporting workloads. Without updating the personnel requirements for the Blackjack UAS, the services will lack current information about the number of personnel needed.\nThe Department of the Navy has taken positive steps but has not fully evaluated and updated aviation policies that affect personnel requirements for certain UAS and lacks clear goals for informing future requirements for all of its UASs. GAO found that the policies do not fully account for differences between UASs of varying sizes and capabilities. These policies require, for example, that the Blackjack UAS be held to the same maintenance standards designed for larger aircraft and UAS, which in turn affects personnel requirements. Until the Department of the Navy evaluates and updates such policies and clarifies related goals, the services will be hampered in developing and updating future requirements as unmanned system inventories grow and operations expand.\n\nWhat GAO Recommends\n\nGAO is making ten recommendations, including that the Navy and the Marine Corps clarify policies to identify circumstances in which civilians and contractors may serve in operational roles and apply the policies to future evaluations; update personnel requirements for one UAS; and evaluate and update policies and goals to inform future personnel requirements. DOD concurred with eight recommendations and partially concurred with two. As discussed in the report, GAO continues to believe that all ten are warranted."}
{"id":"crs_R45576","pid":"crs_R45576_0","input":"\tIntroduction\n\nDuring World War II and then again after the outbreak of fighting in Korea, Congress found that the existence of thousands of small business concerns was being threatened by war-induced shortages of materials coupled with an inability to obtain defense contracts or financial assistance. Concerned that many small businesses might fail without government assistance, in 1953, Congress passed and President Dwight Eisenhower signed into law the Small Business Act (P.L. 83-163), which authorized the Small Business Administration (SBA). The act specifies that it is the declared policy of Congress to promote the interests of small businesses to \"preserve free competitive enterprise.\" Congress specified that one of the ways to preserve free competitive enterprise was to insure that small businesses received a \"fair proportion\" of federal contracts and subcontracts:\nIt is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.\nCongress indicated that its intent in supporting small businesses was not to \"favor small business at the expense of its larger competitors. Our only purpose in supporting the creation and effective operation of the SBA is to equalize the scales when necessary to guarantee the continued vigor of our competitive free enterprise system.\"\nMore recently, a House committee report indicated that the primary rationale for small business contracting programs\nis the positive economic benefits they provide, as well as assisting small businesses overcome the complexities of the system. The economic benefits of these programs can be seen in two primary areas\u2014market competition and local economic development. First, [these] programs \u2026 are designed to increase and diversify small contractors with the intent of expanding the federal supplier base. This leads to increased competition, which results in higher quality, greater product variety, and lower prices. Second, these contracting initiatives lower barriers to entry in a wide range of markets for small businesses. This provides greater market access for small firms' goods and services. From an economic perspective, such access is critical to generating positive macroeconomic benefits, including higher job creation, wage growth, and greater income distribution.\nOver the years, Congress has approved legislation to support small business in various ways. For example, the SBA administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. In recent years, congressional interest in these programs has increased, primarily because assisting small businesses is viewed as a means to stimulate economic activity and create jobs.\nThis report describes the various federal programs, requirements, procurement officers, and procurement offices involved in promoting federal contracting and subcontracting with small businesses, small disadvantaged businesses (SDBs), SDBs participating the SBA's \"8(a) Program,\" Historically Underutilized Business Zone (HUBZone) small businesses, women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs). The SBA administers many, but not all, of these programs.\nIt examines the following federal requirements and authorities in promoting contracting and subcontracting with small businesses:\n1. The requirement that federal agencies generally reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000) but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased. 2. The establishment of small business procurement goals, both government-wide and agency specific, to promote the awarding of contracts to small businesses. 3. The requirement that federal agencies generally set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation that offers will be obtained from at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price. 4. The authority provided federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances). 5. The authority provided federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, WOSBs, and SDVOSBs). \nIt discusses the SBA's oversight and responsibilities concerning the small business goaling program, small business mentor-prot\u00e9g\u00e9 programs, the 7(j) management and training program, and the surety bond guaranty program. \nIt also discusses the role of the Office of Small and Disadvantaged Business Utilization (OSDBU), located in each federal agency, in promoting contracting with small businesses, and examines the role and responsibilities of various federal procurement officers, including procurement center representatives, commercial market representatives, and business opportunity specialists, in promoting small business contracting opportunities.\nThis report concludes with a brief discussion of the strong bipartisan support for small business contracting programs. However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs. For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates want the federal government to enact policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences. Critics have questioned some of these programs' effectiveness, in terms of promoting both small business opportunities to win federal contracts and a more diversified, robust economy.\n\n\tBasic Contracting Requirements\n\n\t\tFederal Contractors\n\nWith a few exceptions, businesses interested in bidding on a federal contract must obtain a Dun & Bradstreet Data Universal Numbering System (DUNS) number (i.e., a unique nine-digit identification number) for each of the business's physical locations, and register with the federal government's System for Award Management (SAM). SAM is used by government agencies for several purposes, including to find contractors. \nBusinesses also must match their products and services to a North American Industry Classification System (NAICS) code. Businesses generally have a primary NAICS code, and may have multiple NAICS codes if they sell multiple products and services. \nBusinesses that identify themselves as a small business in SAM must (1) meet the Small Business Act's definition of a small business and (2) not exceed size standards established, and updated periodically, by the SBA.\nThe Small Business Act defines a small business as one that \nis organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis.\nThe business may be a sole proprietorship, partnership, corporation, or any other legal form.\nThe Small Business Act authorizes the SBA to establish size standards to ensure that only small businesses are provided SBA assistance. The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards , for some lending and venture capital investment programs based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards are used to determine eligibility for federal small business contracting purposes. \nThe SBA determines if a business is small by comparing that business's economic characteristics (typically number of employees or average annual receipts) to size standards listed in the SBA's Table of Small Business Size Standards . The table has size standards for 1,036 industrial classifications in the North American Industrial Classification System. Businesses that exceed the applicable size standard for their primary industry do not meet the requirement of being small.\nThe SBA's size standards are designed to (1) encourage competition within each industry and (2)\u00a0ensure that SBA assistance is provided only to firms that are not dominant in their field on a national basis. The size standards are derived through an assessment of four economic factors: (1)\u00a0the average firm size, (2) the average assets size as a proxy of start-up costs and entry barriers, (3) the four-firm concentration ratio (the cumulative share of total industry receipts of that industry's four biggest firms) as a measure of industry competition, and (4) the size distribution of firms. The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\" \nHistorically, the SBA has used the number of employees to determine if manufacturing and mining companies are small (ranging from fewer than 50 employees for some industries to fewer than 1,500 employees for others) and average annual receipts for most other industries (ranging from no more than $1 million for some industries to no more than $40 million for others).\n\n\t\tFederal Agencies\n\nTo make it easier to determine if an offeror meets the SBA's definition of a small business, prior to soliciting bids, federal agencies are required to classify a product or service being acquired in only one (NAICS code) industry, \"whose definition best describes the principal nature of the product or service being acquired even though for other purposes it could be classified in more than one.\" When acquiring a product or service that could be classified in two or more industries with different size standards, contracting officers must \"apply the size standard for the industry accounting for the greatest percentage of the contract price.\" If a solicitation calls for more than one item and allows offers to be submitted on any or all of the items, \"an offeror must meet the size standard for each item it offers to furnish.\" If a solicitation calling for more than one item requires offers on all or none of the items, \"an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price.\"\nWith several notable exceptions (e.g., HUBZone small businesses, SBA 8(a) program participants, and veteran-owned small businesses [VOSBs] and SDVOSBs seeking contracts with the Department of Veterans Affairs), businesses generally self-certify their status as small when they register their business in the SAM database.\nThe contracting officer is required to accept an offeror's representation in a specific bid or proposal that it is a small business unless \"(1) another offeror or interested party challenges the concern's small business representation or (2) the contracting officer has a reason to question the representation.\" \nIf an offeror's small business status is challenged, the contracting officer is generally not allowed to award the contract until the SBA has made a size determination or 15 business days after the SBA receives the protest, whichever occurs first. The SBA's Office of Government Contracting Area Office (Area Office) serving the area in which the headquarters of the offeror is located initially reviews the protest. The Area Office is required, by regulation, to determine the offeror's size status within 15 business days after receipt of the protest, or \"within any extension of time granted by the contracting officer.\" If the SBA does not make a determination within the required time, the contracting officer \"may award the contract after determining in writing that there is an immediate need to award the contract and that waiting until SBA makes its determination will be disadvantageous to the government.\" \nAn appeal of the Area Office's decision may be filed with the SBA's Office of Hearings and Appeals (OHA) . If the OHA accepts the appeal for consideration and finds the protested concern to be ineligible for award, the contracting officer must \"terminate the contract unless termination is not in the best interests of the government, in keeping with the circumstances described in the [aforementioned] written determination. However, the contracting officer shall not exercise any options or award further task or delivery orders.\" Furthermore, a concern cannot become eligible for a specific award after the SBA has determined that it is not a small business, even if the concern takes action to meet the definition of a small business. \nThe SBA or the federal agency may suspend or debar a firm from future government contracts for misrepresenting its size status. In addition, individuals that knowingly misrepresent a business's size to secure a federal contract can be subject to civil and criminal penalties.\n\n\tThe Pre-Award Process\n\n\t\tFederal Agency Requirements\n\n15 U.S.C. \u00a7644(e)(1) states, \"To the maximum extent practicable, procurement strategies used by a Federal department or agency having contracting authority shall facilitate the maximum participation of small business concerns as prime contractors, subcontractors, and suppliers.\" To accomplish this goal, FAR regulations (FAR \u00a719.202-1) require contracting officers, when applicable, to take the following actions prior to awarding a federal contract:\n1. \"Divide proposed acquisitions of supplies and services (except construction) into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement.\" 2. \"Plan acquisitions such that, if practicable, more than one small business concern may perform the work, if the work exceeds the amount for which a surety may be guaranteed by the SBA against loss under 15 U.S.C. \u00a7694b [generally $6.5 million, or $10 million if the contracting officer certifies that the higher amount is necessary].\" 3. \"Ensure that delivery schedules are established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the Government.\" 4. \"Encourage prime contractors to subcontract with small business concerns [primarily through the agency's role in negotiating an acceptable small business subcontracting plan with prime contractors on contracts anticipated to exceed $700,000 or $1.5 million for construction contracts].\" 5. \"Provide a copy of the proposed acquisition package to the SBA procurement center representative [PCR, duties are described later]\" for his or her review, comment and recommendation, or, if a PCR is not assigned, to the SBA Area Office serving the area in which the procuring activity is located \"at least 30 days prior to the issuance of the solicitation if (i) The proposed acquisition is for supplies or services currently being provided by a small business and the proposed acquisition is of a quantity or estimated dollar value, the magnitude of which makes it unlikely that small businesses can compete for the prime contract; (ii) The proposed acquisition is for construction and seeks to package or consolidate discrete construction projects and the magnitude of this consolidation makes it unlikely that small businesses can compete for the prime contract; or (iii) The proposed acquisition is for a consolidated or bundled requirement.\u2026 The contracting officer shall provide all information relative to the justification for the consolidation or bundling, including the acquisition plan or strategy and if the acquisition involves substantial bundling, the information identified in [FAR] 7.107-4. The contracting officer shall also provide the same information to the agency Office of Small and Disadvantaged Business Utilization [duties are described later].\" 6. \"Provide a statement explaining why the (i) Proposed acquisition cannot be divided into reasonably small lots (not less than economic production runs) to permit offers on quantities less than the total requirement; (ii) Delivery schedules cannot be established on a realistic basis that will encourage small business participation to the extent consistent with the actual requirements of the government; (iii) Proposed acquisition cannot be structured so as to make it likely that small businesses can compete for the prime contract; (iv) Consolidated construction project cannot be acquired as separate discrete projects; or (v) Consolidation or bundling is necessary and justified.\" 7. \"Process the 30-day notification concurrently with other processing steps required prior to the issuance of the solicitation.\" 8. \"If the contracting officer rejects the SBA procurement center representative's recommendation \u2026 document the basis for the rejection and notify the SBA procurement center representative [who (as described later) may appeal the rejection to the chief of the contracting office and, ultimately, to the agency head].\"\n\n\t\tThe Role of SBA Procurement Center Representatives\n\nThe SBA may assign one or more procurement center representatives (PCRs) to any contracting activity or contract administration office to implement the SBA's policies and programs. The SBA currently has 49 PCRs located in the SBA's six Area Offices. PCRs are required to comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information.\nPCR duties include the following:\nReview proposed acquisitions to recommend \"the setting aside of selected acquisitions not unilaterally set aside by the contracting officer;\" new qualified small business sources; and the feasibility of breaking out components of the contract for competitive acquisitions. Review proposed acquisition packages. If the PCR (or, if a PCR is not assigned, the SBA Area Office serving the area in which the procuring activity is located) \"believes that the acquisition, as proposed, makes it unlikely that small businesses can compete for the prime contract,\" the PCR can recommend any alternate contracting method that he or she \"reasonably believes will increase small business prime contracting opportunities.\" The recommendation must be made to the contracting officer within 15 days after the package's receipt. Recommend small businesses \"for inclusion on a list of concerns to be solicited in a specific acquisition.\" Appeal to the contracting office's chief \"any contracting officer's determination not to solicit a concern recommended by the SBA for a particular acquisition, when not doing so results in no small business being solicited.\" This appeal may be further appealed to the agency head. Conduct periodic reviews of the agency's contracting activity, including the agency's assessment of any required small business subcontracting plan, \"to ascertain whether the agency is complying with the small business policies in this regulation.\" Sponsor and participate in conferences and training \"designed to increase small business participation in the contracting activities of the office.\"\n\n\t\tThe Role of the Office of Small and Disadvantaged Business Utilization\n\nEvery federal agency (except the SBA) that has procurement powers is required to have an OSDBU, whose director, by statute, reports directly to the head of the agency and has supervisory authority over agency staff performing certain procurement functions. The OSDBU's primary responsibility is to ensure that small businesses, SDBs, WOSBs, SDVOSBs, and HUBZone small businesses are treated fairly and that they have an opportunity to compete and be selected for a fair amount of the agency's contract dollars. Among its statutory responsibilities are the following: \n\"Identify proposed solicitations that involve significant bundling of contract requirements, and work with the agency acquisition officials and the Administration to revise the procurement strategies for such proposed solicitations where appropriate to increase the probability of participation by small businesses as prime contractors, or to facilitate small business participation as subcontractors and suppliers, if a solicitation for a bundled contract is to be issued.\" Assist small businesses \"to obtain payments, required late payment interest penalties, or information regarding payments due to the concern from an executive agency or a contractor.\" Assign \"a small business technical adviser to each office to which the SBA has assigned\" a PCR. The small business technical advisor \"shall be a full-time employee of the procuring activity, well qualified, technically trained and familiar with the supplies or services purchased at the activity; and whose principal duty shall be to assist\" the PCR. Provide the agency's \"Chief Acquisition Officer and senior procurement executive \u2026 with advice and comments on acquisition strategies, market research, and justifications [related to limitations on the consolidation of contracts as a means to provide small businesses appropriate opportunities to participate as prime contractors and subcontractors].\" Provide training to small businesses and contract specialists, provided that the training does not interfere with the director carrying out his or her other responsibilities. Ensure that a small business that notifies the PCR prior to a contract's award that \"a solicitation, request for proposal, or request for quotation unduly restricts [its] ability \u2026 to compete for the award \u2026 is aware of other resources and processes available to address unduly restrictive provisions \u2026 even if such resources and processes are provided by such agency, the Administration, the Comptroller General, or a Department of Defense (DOD) procurement technical assistance program [described below].\" Review all subcontracting plans \"to ensure that the plan provides maximum practicable opportunity for small business concerns to participate in the performance of the contract to which the plan applies.\"\nIn accordance with P.L. 109-163 , the National Defense Authorization Act of 2006, the DOD renamed its OSDBU the Office of Small Business Programs (OSBP). The act also redesignated the Army, Navy, and Air Force's OSDBUs to OSBPs of the Department of the Army, Navy, and Air Force, respectively.\n\n\t\tThe Roles of Other Procurement Officers and Offices\n\nAt the agency level, procurement department heads (sometimes titled senior procurement executive ) are responsible for implementing small business programs at their agencies, including achieving program goals. In general, procurement department staff who work on small business issues (often titled small business specialists ) coordinate with OSDBU directors on their agencies' small business programs.\nChief acquisition officers provide a focal point for acquisition in agency operations. Their key functions include \"monitoring and evaluating agency acquisition activities, increasing the use of full and open competition, increasing performance-based contracting, making acquisition decisions, managing agency acquisition policy, acquisition career management, acquisition resources planning, and conducting acquisition assessments.\"\nThe SBA must assign a breakout procurement center representative (breakout PCR) to each major procurement center. A major procurement center is, in the opinion of the SBA Administrator, a procurement center that purchases substantial dollar amounts of other than commercial items, and has the potential to incur significant savings as a result of the placement of a breakout PCR. \nThe breakout PCR advocates for (1) the appropriate use of full and open competition, and (2) the breakout of items, \"when appropriate and while maintaining the integrity of the system in which such items are used.\" The breakout PCR is in addition to the PCR.\nWhen a breakout PCR is assigned, the SBA must assign at least two co-located small business technical advisors. SBA breakout PCRs and technical advisors must comply with the contracting agency's directives governing the conduct of contracting personnel and the release of contract information. The SBA must obtain security clearances for its breakout PCRs and technical advisors as required by the contracting agency.\nThe SBA has four commercial market r epresentatives who, among other duties, help prime contractors find small businesses that are capable of performing subcontracts; provide counseling on the contractor's responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews of contractors awarded contracts requiring an acceptable subcontracting plan that provides small businesses \"the maximum practicable opportunity to participate in contract performance consistent with its efficient performance\" (generally any solicitation to perform a contract that is expected to exceed $700,000 ($1.5 million for construction) and that has subcontracting possibilities).\nThe SBA's business opportunity s pecialists provide, among other duties, guidance, counseling, and referrals for assistance with technical, management, financial, or other matters intended to improve the competitive viability of SBA 8(a) program participants. They provide 8(a) program participants comprehensive assessments of the firm's strengths and weaknesses; monitor and document their compliance with 8(a) program requirements; advise them on compliance with contracting regulations after the award of a 8(a) program contract or subcontract; review and monitor their compliance with mentor-prot\u00e9g\u00e9 agreements; represent the interests of the SBA Administrator and small businesses in the award, modification, and administration of 8(a) program contracts and subcontracts; and report fraud or abuse involving the 8(a) program.\nThe Small Business Procurement Advisory Council (SBPAC), whose members are composed of the SBA Administrator (or his or her designee), the director of the Minority Business Development Agency, and the head of each OSDBU in each federal agency having procurement powers, has the following statutory duties:\n1. Develop positions on proposed procurement regulations affecting the small business community. 2. Submit comments reflecting such positions to appropriate regulatory authorities. 3. Conduct reviews of each OSDBU to determine the office's compliance with its statutory requirements. 4. Identify best practices for maximizing small business utilization in federal contracting that may be implemented by federal agencies having procurement powers. 5. Submit annually, to the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship, a report describing (1) the comments submitted to appropriate regulatory authorities, including any outcomes related to the comments; (2) the results of its review of each OSDBU ; and (3) best practices identified for maximizing small business contracting .\nThe Defense Logistic Agency's Procurement Technical Assistance Program (PTAC) helps \"businesses pursue and perform under contracts with the Department of Defense, other federal agencies, state and local governments and with government prime contractors. Most of the assistance the PTACs provide is free. PTAC support to businesses includes registration in systems such as the System for Award Management (SAM), identification of contract opportunities, and help in understanding requirements and in preparing and submitting bids.\"\n\n\tSet-Asides and Sole Source Awards\n\nThe Competition in Contracting Act of 1984 generally requires \"full and open competition\" for government procurement contracts. However, various provisions of the Small Business Act authorize or, in some cases, require federal agencies to provide for other than \"full and open competition through the use of competitive procedures\" when contracting with small businesses. For example, as mentioned previously, federal agencies are generally required to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and the quality and delivery of the goods or services being purchased.\nIn addition, federal agencies \nare generally required to set aside contracts that have an anticipated value exceeding the simplified acquisition threshold exclusively for small businesses when there is a reasonable expectation by the contracting officer that offers will be obtained by at least two responsible small businesses offering the products of different small businesses (Rule of Two) and the award will be made at a fair market price; may similarly set aside contracts exceeding the simplified acquisition threshold for competition reserved for specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, WOSBs and SDVOSBs); may enter into negotiations directly with particular types of small businesses (e.g., a sole source award) when the award could not otherwise be made (e.g., only a single source is available or under urgent and compelling circumstances); and are required to grant HUBZone small businesses a price evaluation preference of not more than 10% in open and unrestricted competitions. \n\n\tSBA Contracting Programs66\n\nSeveral SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs; subcontracting programs; and other assistance (e.g., contracting technical training assistance and oversight of the federal small business goaling program and the Surety Bond Guarantee program).\n\n\t\tPrime Contracting Programs\n\nSeveral contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole source awards in circumstances in which such awards could not be made to other firms. These programs provide small businesses an opportunity to win government contracts without having to compete against larger and more experienced companies.\n\n\t\t\t8(a) Program67\n\nThe 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) provides business development assistance to businesses owned and controlled by persons who are socially and economically disadvantaged. African Americans, Hispanics, Native Americans (including American Indians, Eskimos, Aleuts, and Native Hawaiians), Asian-Pacific Americans, and Subcontinent Asian Americans are presumed to be socially and economically disadvantaged. Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis. To be considered economically disadvantaged, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. \nFederal agencies are authorized to award contracts for goods or services, or to perform construction work, to the SBA for subcontracting to 8(a) firms. The SBA is authorized to delegate the function of executing contracts to the procuring agencies and often does so. Once the SBA has accepted a contract for the 8(a) Program, the contract is awarded through either a set-aside or on a sole source basis, with the contract amount generally determining the acquisition method used. When the contract's anticipated total value, including any options, is less than $4 million ($7 million for manufacturing contracts), the contract is normally awarded without competition (as a sole source award). In contrast, when the contract's anticipated value exceeds these thresholds, the contract generally must be awarded via a set-aside with competition limited to 8(a) firms so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award can be made at fair market price. The SBA also provides technical assistance and training to 8(a) firms. Firms may participate in the 8(a) Program for no more than nine years. \nIn FY2017, the federal government awarded $27.2 billion to 8(a) firms. \n$16.4 billion was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8.4 billion through an 8(a) sole source award); $4.8 billion was awarded to an 8(a) firm in open competition with other firms; and $6 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses).\n\n\t\t\tHistorically Underutilized Business Zone Program72\n\nThis program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole source awards (so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million, or $7 million for manufacturing contracts) and price evaluation preferences (of up to 10%) in full and open competitions. The HUBZone program targets assistance to small businesses located in areas with low income, high poverty, or high unemployment. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. \nIn FY2017, the federal government awarded $7.53 billion to HUBZone-certified small businesses. \n$1.90 billion was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole source award, and $346.9 million through a HUBZone price-evaluation preference); $1.53 billion was awarded to HUBZone-certified small businesses in open competition with other firms; and $4.10 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses).\n\n\t\t\tService-Disabled Veteran-Owned Small Business Program\n\nThis program allows agencies to set aside contracts for SDVOSBs. Also, federal agencies may award sole source contracts to SDVOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts). For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs. \nIn FY2017, the federal government awarded $18.2 billion to SDVOSBs.\n$6.8 billion was awarded through a SDVOSB set-aside award; $4.3 billion was awarded to a SDVOSB in open competition with other firms; and $7.1 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and WOSBs).\n\n\t\t\tWomen-Owned Small Business Program\n\nUnder this program, contracts may be set aside for economically disadvantaged WOSBs in industries in which women are underrepresented and substantially underrepresented. Federal agencies may award sole source contracts to WOSBs so long as the award can be made at a fair and reasonable price, and the anticipated total value of the contract, including any options, is below $4 million ($6.5 million for manufacturing contracts).\nIn FY2017, the federal government awarded $21.3 billion to WOSBs.\n$648.9 million was awarded with a WOSB preference ($580.5 million through a WOSB set-aside and $68.4 million through a WOSB sole source award); $7.0 billion was awarded to a WOSB in open competition with other firms; and $13.7 billion was awarded with another small business preference (e.g., set-asides and sole source awards for small businesses generally and for HUBZone firms, 8(a) firms, and SDVOSBs).\n\n\t\tSubcontracting Programs\n\nFederal contracting officers are required to provide the SBA's PCR (or, if a PCR is not assigned, the SBA Area Office serving the procuring activity area) a \"reasonable period of time\" to review any solicitation requiring submission of a small business subcontracting plan and to submit advisory findings before the solicitation is issued. The PCR's advisory comments regarding the small business subcontracting plan's acceptability must be submitted, in writing, to the appropriate contracting officer within five working days after the plan's receipt. \nAs mentioned previously, the SBA's commercial market representatives help prime contractors find small businesses to perform subcontracts; counsel contractors on their responsibility to maximize subcontracting opportunities for small businesses; and conduct periodic reviews, often in concert with a SBA PCR, of contractors awarded contracts that require an acceptable small business subcontracting plan.\n\n\tOther Federal Agency Contracting Programs\n\nFederal agencies may also set aside contracts or make sole source awards to small businesses not participating in any other program under certain conditions.\n\n\t\tDepartment of Transportation Disadvantaged Business Enterprise Program\n\nThe Department of Transportation's (DOT's) Disadvantaged Business Enterprise (DBE) Program originally began in 1980 as a minority\/women's business enterprise program \"established by regulation under the authority of Title VI of the Civil Rights Act of 1964 and other nondiscrimination statutes that apply to DOT financial assistance programs.\" Congress has reauthorized the DBE program several times since its inception; most recently in P.L. 114-94 , the Fixing America's Surface Transportation Act (FAST-Act).\nThe FAST-Act provides, that, except to the extent the Secretary of Transportation determines otherwise, not less than 10% of the amounts made available for any program under Titles I (federal-aid highways), II (innovative project finance), III (public transportation) and VI (innovation) of the act and 23 U.S. Code 403 (highway safety research and development), shall be expended with DBEs. DOT also has a separate DBE program for airport concessions.\nA DBE is a for-profit small business owned and controlled by socially and economically disadvantaged individuals. Eligibility for the DBE program differs somewhat from the 8(a) program. For example, under the DBE program, women are presumed to be socially and economically disadvantaged individuals. Also, to be regarded as economically disadvantaged, an individual must have a personal net worth (excluding ownership interest in the firm and equity in his or her primary personal residence) that does not exceed $1.32 million. The DBE must also meet SBA size criteria and have average annual gross receipts not exceeding $23.98 million. Size limits for the airport concessions DBE program are higher.\nThe DBE program's eight objectives are to\n1. ensure nondiscrimination in the award and administration of DOT-assisted contracts in the department's highway, transit, and airport financial assistance programs; 2. create a level playing field on which DBEs can compete fairly for DOT-assisted contracts; 3. ensure that the department's DBE program is narrowly tailored in accordance with applicable law; 4. ensure that only firms that fully meet the program's eligibility standards are permitted to participate as DBEs; 5. help remove DBE-participation barriers in DOT-assisted contracts; 6. promote the use of DBEs in all types of federally-assisted contracts and procurement activities conducted by recipients; 7. assist the development of firms that can compete successfully in the marketplace outside the DBE program; and 8. provide appropriate flexibility to recipients of federal financial assistance in establishing and providing opportunities for DBEs.\n\n\t\tSubcontracting Programs for Small Disadvantaged Businesses\n\nOther federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. \nFederal agencies must negotiate \"subcontracting plans\" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs \"have an equitable opportunity to compete for subcontracts.\" Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors \"monetary incentives\" to subcontract with SDBs. \nAs of February 11, 2019, the SBA's Dynamic Small Business Search database included 2,538 SBA-certified SDBs and 100,595 self-certified SDBs.\n\n\tOther Small Business Programs of Interest\n\n\t\tThe SBA 7(j) Management and Technical Assistance Program\n\nThe SBA's 7(j) Management and Technical Assistance program provides \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, SDBs, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\"\nIn FY2017, the 7(j) Management and Technical Assistance program assisted 4,100 small businesses.\n\n\t\tSBA Surety Bond Guarantee Program94\n\nThe SBA's Surety Bond Guarantee program aims to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs. In FY2017, the SBA guaranteed 10,397 bid and final surety bonds with a total contract value of more than $6.3 billion.\nA surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting.\nSurety bonds are meant to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract's terms and conditions. \nSurety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors\u2014prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States\u2014to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government.\n\n\t\tSmall Business Mentor-Prot\u00e9g\u00e9 Programs101\n\nSmall business mentor-prot\u00e9g\u00e9 programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships. Prot\u00e9g\u00e9s may receive financial, technical, or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives. \nThe federal government currently has several mentor-prot\u00e9g\u00e9 programs to assist small businesses in various ways. \nThe 8(a) Mentor-Prot\u00e9g\u00e9 Program is a government-wide program designed to assist small businesses \"owned and controlled by socially and economically disadvantaged individuals\" participating in the SBA's Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) program) in obtaining and performing federal contracts. For that purpose, mentors may (1) form joint ventures with prot\u00e9g\u00e9s that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in prot\u00e9g\u00e9 firms; (3) lend or subcontract to prot\u00e9g\u00e9 firms; and (4) provide technical or management assistance to their prot\u00e9g\u00e9s. The SBA's A ll S mall B usiness Mentor-Prot\u00e9g\u00e9 Program is a government-wide mentor-prot\u00e9g\u00e9 program for all small business concerns, consistent with the SBA's mentor-prot\u00e9g\u00e9 program for participants in the SBA's 8(a) Business Development program. The Department of Defense (DOD) Mentor-Prot\u00e9g\u00e9 Program , in contrast, is agency-specific. It assists various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts. Mentors may (1) make advance or progress payments to their prot\u00e9g\u00e9s that DOD reimburses; (2) award subcontracts to their prot\u00e9g\u00e9s on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in prot\u00e9g\u00e9 firms; and (4) provide or arrange for other assistance. \nOther agencies also have agency-specific mentor-prot\u00e9g\u00e9 programs to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts. The Department of Homeland Security (DHS), for example, has a mentor-prot\u00e9g\u00e9 program wherein mentors may provide prot\u00e9g\u00e9s with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance. Because these programs are not based in statute, unlike the SBA and DOD programs, they generally rely upon preexisting authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor participation. \nCurrently, more than 1,200 mentor-prot\u00e9g\u00e9 agreements are in place, even though there are issues with the accuracy and thoroughness of some federal agency records.\n\n\tSmall Business Procurement Goals\n\nSince 1978, federal agency heads have been required to establish federal procurement goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting the goals to the SBA.\nIn 1988, Congress authorized the President annually to establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be \"not less than 20% of the total value of all prime contract awards for each fiscal year\" and \"not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year\" for small businesses owned and controlled by socially and economically disadvantaged individuals.\nEach federal agency was also directed to \"have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.\" The SBA was also required to report to the President annually on the attainment of the goals and to include the information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a small business eligible baseline for evaluating the agency's performance. The agency head is required to \"make consistent efforts to annually expand participation by small business concerns from each industry category.\" If the SBA and the agency cannot agree on the goals, the agency may submit the case to the Office of Management and Budget (OMB) Office of Federal Procurement Policy (OFPP) for resolution.\nThe small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., non-appropriated funds), contracts not covered by the FAR, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System \u2013 Next Generation, or FPDS-NG (such as government procurement card purchases and contracts valued less than $10,000). These exclusions typically account for 18% to 20% of all federal prime contracts each year.\nThe SBA then evaluates the agencies' performance against their negotiated goals annually, using FPDS-NG data, managed by the U.S. General Services Administration (GSA), to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually. Each agency that fails to achieve any proposed prime or subcontract goal is required to submit a justification to the SBA on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective action.\nAgencies can take credit in every category that is applicable to the recipient of the contract. For example, \"when counting goaling achievements, a contract awarded to a service-disabled Veteran-Owned Woman-Owned Small Business would be counted toward the Small Business (SB) goal, the Service-Disabled Veteran-Owned Small Business (SDVOSB) goal and the Women-Owned Small Business (WOSB) goal. However, these category counts are not summed to triple the total count. The Sum of Parts Does Not Equal the Whole (italics in original).\"\nOver the years, federal government-wide procurement goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997\u2014Title VI of the Small Business Reauthorization Act of 1997); small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 ); women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994); small businesses located within a HUBZone ( P.L. 105-135 ); and small businesses owned and controlled by a service-disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999).\nThe current federal small business procurement goals are\nat least 23.0% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year; 5.0% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses (including participants in the SBA's 8(a) Program) for each fiscal year; 5.0% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses; 3.0% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses; and 3.0% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses.\nThere are no punitive consequences for not meeting these goals. However, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings. \nAs shown in Table 1 , the FY2017 Small Business Goaling Report , using FPDS-NG data, indicates that federal agencies met the federal procurement goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. \n Table 1 also provides, for comparative purposes, the percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017.\n\n\tCertificate of Competency Program\n\nBefore awarding a federal contract, the contracting officer must affirmatively determine that the business is responsible to perform the contract. If the contracting officer determines that an apparent successful small business offeror lacks certain elements of responsibility (e.g., is unable to fulfill the requirements of a specific government procurement because it lacks capability, competency, capacity, credit, integrity, perseverance, tenacity, or limitations on subcontracting), the officer is required to refer the matter in writing to the SBA for review and a possible Certificate of Competency (COC), even if the next acceptable offer is also from a small business. The COC certifies in writing that the small business meets all required elements of responsibility for the purpose of receiving and performing a specific government contract. The \"COC program empowers the SBA to certify to contracting officers as to all elements of responsibility of any small business concern to receive and perform a specific government contract. The COC program does not extend to questions concerning regulatory requirements imposed and enforced by other federal agencies.\"\n\n\tPost-Award Requirements\n\nAs mentioned previously, the SBA's commercial market representatives conduct periodic compliance reviews of contractors awarded contracts that require an acceptable small business subcontracting plan. In addition, once the contract is completed, federal agencies are required to pay the contractor on a timely basis and pay interest penalties for late payments. Under specified circumstances, federal agencies may also pay contractors before the contract's payment's due date.\n\n\t\tSmall Business Subcontracting Plan Reviews\n\nThe periodic compliance review can take place on-site, at the contracting agency, or virtual. Materials that may be reviewed include the contractor's contract files, correspondence that is directly or indirectly related to the contract, IT systems, subcontracting methods, and procedures. Contractors are selected randomly for audit. The SBA may enter into agreements with other federal agencies to conduct these assessments.\nThe compliance report includes compliant and non-compliant items found during the assessment of the contractor's subcontracting activities and a rating indicating the contractor's level of compliance or non-compliance, ranging from unsatisfactory to outstanding. If any deficiencies are found, the contractor is required to submit, within 30 days of the compliance review rating letter date, a corrective action plan (CAP). The CAP is submitted to the SBA Area Office via email, or any method designated by the SBA. The commercial market representative conducts a follow-up compliance report within six months to a year of the date the SBA acknowledges receipt of the contractor's CAP to ensure that corrective actions have been taken to eliminate the deficiencies. The SBA keeps the federal agency that awarded the contract informed of the contractor's adherence to correcting the deficiencies.\nIf the contractor refuses to provide or address all deficiencies in the CAP, a delinquent CAP letter is sent advising the contractor that it has 15 days from the letter's date to comply with federal regulations. If an acceptable CAP is not received in the allotted time frame the case is escalated to the SBA's subcontracting program manager who informs the SBA's Office of Government Contracting director and works with the SBA's Office of General Counsel and the federal agency that awarded the contract for resolution or to begin accessing liquidated damages.\n\n\t\tPrompt Payments\n\nOnce a contract is awarded, federal agencies are generally required to pay interest to prime contractors on any invoice payments the agency fails to make by the date(s) specified in the contract, or within 30 days of receipt of a proper invoice for the amount due if no date is specified in the contract. \nSimilar requirements exist for prime contractors in paying subcontractors on construction contracts. These requirements are especially important for small businesses in the construction industry. Specifically, every construction contract awarded by a federal agency must contain clauses obligating the prime contractor to (1) pay the subcontractor for \"satisfactory performance\" under the subcontract within seven days of receiving payment from the agency and (2) pay interest on any amounts that are not paid within the proper time frame. The contract must also obligate the prime contractor to include similar payment and interest penalty terms in its subcontracts, as well as require its subcontractors to impose these terms on their subcontractors. This latter provision ensures that the payment and interest penalty requirements flow down to all tiers of construction subcontractors.\nIn addition, required subcontracting plans must incorporate terms obligating the prime contractor to notify the agency awarding the contract in writing if a subcontractor is paid a reduced price for goods supplied or services completed under the contract, or if payment is made to the subcontractor more than 90 days past due. The prime contractor must include the reason for the reduction in payment or failure to pay a subcontractor within 90 days. If the contracting officer for a covered contract (a contract that requires an acceptable subcontracting plan) determines that a prime contractor has a history of unjustified, untimely payments to contractors, the contracting officer shall record the contractor's identity, describe the circumstances under which the contractor may be determined to have a history of unjustified, untimely payments to subcontractors, and include the contractor's identity in, and make publicly available through, the Federal Awardee Performance and Integrity Information System, or any successor. This information is used by federal agencies to \"evaluate the business ethics and quality of prospective contractors competing for Federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.\" \n\n\t\tAccelerated Payments\n\nFederal agencies are permitted to make an accelerated payment up to seven days before the required payment date in a federal contract, or earlier if the agency deems it necessary on a case-by-case basis if, after receiving a proper invoice, it is in the best interest of the government, and any of the following is true:\nthe invoice in under $2,500; the payment is to a small business; or the payment is related to an emergency, disaster, or military deployment.\nIn addition, the Secretary of Defense is required, to the fullest extent permitted by law, to establish an accelerated payment date for its small business prime contractors, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract. \nThe Secretary of Defense is also required to establish, to the fullest extent permitted by law, an accelerated payment date for its prime contractors that subcontract with small businesses, with a goal of 15 days after receipt of a proper invoice for the amount due if a specific payment date is not established by contract and the prime contractor agrees to make payments to the subcontractor \"in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.\" \n\n\tConcluding Observations\n\nThe small business contracting programs described in this report generally have strong bipartisan support. However, that does not mean that these programs face no opposition or that issues have not been raised concerning the impact or operations of specific programs. For example, small business advocates \nseek policies that reduce or eliminate exclusions that narrow the reach of small business contracting preferences, want the SBA to use the total value of all prime contract awards in the Small Business Goaling Report, and want the SBA to use a more discerning methodology for awarding performance grades to federal agencies in meeting its small business contracting goals.\nCritics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and a more diversified, robust economy.\nMany observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether the federal government and individual federal agencies meet the procurement goals in the annual Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses generally, 5% to SDBs, and 3% to SDVOSBs. However, it has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses. \nThe Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations. For example, the report does not include all federal contracts, because some are not deemed to be small business eligible and others are not recorded in the FPDS-NG. In addition, the report does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy. As one group of researchers has argued,\nthe entire goal-setting process \u2026 is geared to measuring the dollars and contracts awarded to small business, and pays little attention to the effect that access to government contracts has on small business starts, growth, and wealth generation. Results of the program are also hard to isolate, difficult to measure, and generally not judged against the next best or other alternative policies [emphasis in original].\nComprehensive studies examining the effect of small business contracting preferences on small business startups, growth, wealth generation, and industry competitiveness may prove useful for congressional oversight. In the meantime, although the Small Business Goaling Report has its limitations, it can help policymakers identify programs most in need of examination. For example, the SBA has announced that it is focusing additional efforts on promoting the HUBZone program to federal contracting officials, primarily due to the continuing difficulties federal agencies have had in meeting the 3% goal for HUBZone small businesses.","output":"Congress has broad authority to impose requirements upon the federal procurement process, that is, the process whereby agencies obtain goods and services from the private sector. One way in which Congress has exercised this authority is by adopting measures to promote contracting and subcontracting between \"small businesses\" and federal agencies.\nThese measures, among other things, declare a congressional policy of ensuring that a \"fair proportion\" of federal contract and subcontract dollars is awarded to small businesses; establish government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to small businesses; establish an annual Small Business Goaling Report to measure progress in meeting these goals; generally require federal agencies, under specified circumstances, to reserve contracts that have an anticipated value greater than the micro-purchase threshold (currently $10,000), but not greater than the simplified acquisition threshold (currently $250,000) exclusively for small businesses; authorize federal agencies, under specified circumstances, to set aside contracts that have an anticipated value greater than the simplified acquisition threshold exclusively for small businesses; authorize federal agencies to make sole source awards to small businesses when the award could not otherwise be made (e.g., only a single source is available, under urgent and compelling circumstances); authorize federal agencies to set aside contracts for, or grant other contracting preference to, specific types of small businesses (e.g., 8(a) small businesses, HUBZone small businesses, women-owned small businesses (WOSBs) and service-disabled veteran-owned small businesses (SDVOSBs)); and task the Small Business Administration (SBA) and other federal procurement officers with reviewing and restructuring proposed procurements to maximize opportunities for small business participation.\nSmall business contracting programs generally have strong bipartisan support. However, that does not mean that these programs face no opposition, or that issues have not been raised concerning the impact and operations of specific programs. For example, small business advocates note that implementing regulations in the Federal Acquisition Regulation (FAR) narrow the reach (and impact) of some small business contracting preferences by excluding specific types of contracts, such as those listed in the Federal Supply Schedules, from FAR requirements pertaining to small business contracting. Advocates want the federal government to enact policies that reduce or eliminate such exclusions. Critics have questioned some of these programs' effectiveness, in terms of both promoting small business opportunities to win federal contracts and promoting a more diversified, robust economy.\nMany observers judge the relative success or failure of federal efforts to enhance small business contracting opportunities by whether federal government and individual federal agencies meet the predetermined procurement goals in the annual Small Business Goaling Report. In recent years, the federal government has generally succeeded in meeting the government-wide goals of awarding 23% of the total value of all small business eligible prime contract awards to small businesses, 5% to small disadvantaged businesses (SDBs), and 3% to SDVOSBs. It has had difficulty meeting the goals of 5% to WOSBs and 3% to HUBZone small businesses.\nThe Small Business Goaling Report is the most convenient measure available to compare federal small business contracting performance over time, but it has limitations. For example, the SBA excludes some contracts from the report in its determination of what is \"small business eligible\" and some federal procurement activities are not included because they are not recorded in the Federal Procurement Data System\u2014Next Generation. It also does not evaluate the effect these contracts have on small businesses, industry competitiveness, or the overall economy."}
{"id":"gao_GAO-18-446","pid":"gao_GAO-18-446_0","input":"\tBackground\n\n\t\tHow Reverse Auctions Work\n\nIn a traditional auction, the intent is for multiple buyers to bid against one  another by submitting bids to purchase a good or service that is for sale.  Generally speaking, the bidder offering the highest price receives the item  for sale and the seller benefits from receiving more money due to  competition. In contrast, reverse auctions are intended to encourage  multiple vendors to compete against one another to win a contract from  the government by lowering the price for which the vendor is willing to sell  a particular good or service. The buyer\u2014typically a contracting official\u2014then evaluates the technical proposals and bids, and selects a winning  vendor\u2014generally the bidder who submitted the lowest price bid with an  acceptable proposal\u2014to meet the government\u2019s need. Figure 1 compares  these two types of auctions.\nReverse auctions can be opened to any vendor on the open market or  can be limited to vendors that hold contracts on existing contract vehicles,  such as indefinite-delivery vehicles under which the government has  already determined that a specific group of vendors is qualified to sell  specific goods or services. Existing vehicles provide a simplified way to  procure commercial products and services. Agencies can use reverse  auctions as a tool to further promote competition and lower prices, among  other potential benefits. Agencies can use reverse auctions to order from  various existing contract vehicles, including:\nThe Army\u2019s CHESS program. CHESS is the Army\u2019s primary source  for commercial information technology hardware, software, and  services.\nDHS\u2019s First Source II. First Source II is a 100 percent small business  contract vehicle, specifically designed as a preferred source to  acquire commercially available information technology commodities,  solutions, and value-added vendor services to support DHS  programs.\nGSA\u2019s Federal Supply Schedules program. The Federal Supply  Schedules provide federal agencies a simplified method of purchasing  commercial products and services off of multiple schedules, from  numerous vendors, at prices associated with volume discount buying.\nNational Aeronautics and Space Administration\u2019s Solutions for  Enterprise-Wide Procurement (SEWP). SEWP allows federal  agencies government-wide to purchase from over 140 vendors and  offers a wide range of commercial advanced technology products and  product-based services.\nReverse auction providers can be private companies or offices within  federal agencies, and the providers may provide reverse auction services  across the government or to specific agencies. Since we last reported on  this issue in December 2013, two federal agencies developed platforms  to facilitate reverse auctions through existing contract vehicles, by  adapting existing electronic platforms. In July 2013, GSA\u2019s Federal  Acquisition Service launched its platform, GSA Reverse Auctions, which  was built off its e-Buy tool and initially offered reverse auctions for a  limited number of GSA and VA Federal Supply Schedule contracts,  expanding to additional schedule contracts and agency-specific multiple  award contracts over the following 2 years. In November 2015,  GSA Reverse Auctions expanded further to offer open market auctions. In  January 2016, Army\u2019s CHESS program launched a capability using its IT  e-mart to run reverse auctions on certain CHESS contracts. Similarly to  when the private sector builds a platform, new government capabilities  have costs associated with development and ongoing maintenance.  According to GSA officials, development of the reverse auction capability  cost approximately $2 million, and operations and maintenance costs are  expected to total about $650,000 over the next 3 fiscal years. According  to CHESS officials, its capability was developed at no additional financial  cost under the fixed-price contract for the IT e-mart, although there were  opportunity costs because other lower priority actions were delayed.  Table 1 includes information about the reverse auction providers we  identified in our review.\nReverse auction providers offer differing levels of service, ranging from  simply providing a web-based reverse auction platform to a full-service  model. Full-service providers may offer services such as creating draft  auctions, soliciting vendors to participate, helping create a marketplace of  vendors, and encouraging vendor participation for low-bid-count auctions.  Agency buyers can select which additional services, if any, to use. FedBid  is an example of a full-service provider, whereas Army CHESS provides a  self-service web-based reverse auction platform, the IT e-mart.\nWhile the government pays some reverse auction providers directly, other  reverse auction providers, including FedBid and GSA, collect reverse  auction fees through an indirect payment process. Generally, in the  indirect payment process, the reverse auction provider adds a fee onto  the winning vendor\u2019s bid. Then, the agency pays the winning vendor this  total amount. In turn, the reverse auction provider collects the fee from  the winning vendor (see figure 2).\n\n\t\tPrior GAO Work\n\nIn December 2013, we reviewed the use of reverse auctions at four  agencies\u2014Army, DHS, Interior, and VA\u2014and found that these agencies  steadily increased their use of reverse auctions (in number and dollar  value) from fiscal years 2008 to 2012. For auctions in 2012 across the  four agencies, we found:\nAgencies awarded about 95 percent of reverse auctions for  $150,000 or less.\nInformation technology goods and services were among the top  categories purchased.\nProducts made up about 90 percent of total dollar value of awarded  reverse auctions.\n47 percent of reverse auctions were for orders from existing contracts.\n80 percent of reverse auction dollars and about 86 percent of reverse  auctions were awarded to small businesses.\nIn addition, we found that the four agencies in our review did not  maximize the potential benefits of reverse auctions\u2014competition and  savings. We found that over one-third of reverse auctions in 2012 had no  iterative bidding and that it was unclear whether savings calculated for  reverse auctions were accurate because cost estimates developed before  the auction may have been set too low or too high. In addition, we found  that almost half of the reverse auctions were used to obtain items from  existing contracts.\nWe further noted that there was a lack of comprehensive  government-wide guidance and that the Federal Acquisition Regulation  (FAR) did not specifically address reverse auctions, resulting in confusion  about their use. We recommended the Director of the Office of  Management and Budget (OMB) take steps to amend the FAR to address  agencies\u2019 use of reverse auctions and issue government-wide guidance  to maximize competition and savings when using reverse auctions.  OMB\u2019s OFPP subsequently issued guidance in June 2015 on reverse  auctions, and the proposed FAR changes are currently being reviewed  prior to being published for public comment.\n\n\t\tGovernment-wide Regulations and Guidance\n\nPrior to 1997, the FAR prohibited agencies from using auctioning  techniques. In 1997, the FAR was revised to eliminate these prohibitions  as part of an overall effort to make the source selection process more  innovative, simplify the acquisition process, and facilitate a best value  acquisition approach.\nIn June 2015, OFPP issued guidance to federal agencies on the effective  use of reverse auctions. This memorandum reviewed the benefits of reverse auctions, offered a set of reminders to help contracting offices  maximize the value of this tool, and asked agencies to work with OFPP in  identifying and collecting data that can be used to evaluate and improve  results. Specifically, the memorandum noted that some of the benefits of  reverse auctions are price reductions, enhanced competition, and  significant small business participation. In addition, the memorandum  noted that reverse auctions are not a \u201cone size fits all\u201d solution and are  likely to be most effective in the following circumstances: are steady and relatively simple and might otherwise be acquired  using either a sealed bid or achieving best value through \u201clow  price technically acceptable\u201d source selection criteria; and  result in fixed price agreements.\nTypically, these circumstances exist in acquisitions for commercial items  and simple services that often fall under the simplified acquisition  threshold.\nThe memorandum reminds agencies that, as with any procurement,  market research must be conducted to understand the marketplace and  to determine if it is reasonable to assume that the potential benefits of a  reverse auction can be achieved. It also notes that agencies should  regularly evaluate their experiences with reverse auctions and the  effectiveness of existing practices and policies as part of procurement  management reviews so that refinements can be made as necessary.  The issues addressed in the OFPP memorandum have not yet been  incorporated into the FAR. While the FAR does not specifically address  reverse auctions, several provisions facilitate agencies\u2019 use of them, such  as allowing the use of innovative strategies and electronic commerce.\n\n\tFederal Agencies\u2019 Use of Reverse Auctions Decreased between Fiscal Years 2013 and 2017\n\nWe found the value of awarded reverse auctions decreased  approximately 22 percent across the government between 2013 and  2017, from about $1.9 billion to about $1.5 billion. Although the number  of auctions consistently decreased each year from 2013 to 2017, the  dollar value of auctions increased after 2015, indicating that some  individual reverse auctions have been for larger dollar values in the past  couple of years (see figure 3).\nDuring this same period, the overall trend in federal contract obligations  initially decreased from 2013 through 2015 and then increased overall  through 2017\u2014from about $490 billion in 2013 to $508 billion in 2017.  Hence, since 2013, contracts awarded through reverse auctions have  consistently represented less than 0.5 percent of federal contract  spending. In addition, almost all auctions and the vast majority of the  dollars agencies awarded between 2013 and 2017 resulted from the use  of the FedBid reverse auction platform.\nWe also found that the dollar value of awarded reverse auctions varied  from 2013 to 2017 across the six agencies we reviewed, with total  reverse auction value greater in 2017 than in 2013 for half of the agencies  (DHS, Navy, and State) (see figure 4).\nOur analysis indicates that agencies\u2019 and components\u2019 policies may  influence the use of reverse auctions. Specifically, two agencies that  experienced substantial reductions in their use of reverse auctions  changed their policies so that contracting officers would no longer be  required to use reverse auctions. For example, Interior\u2019s August 2015  policy rescinded a previous requirement to first consider using reverse  auctions for commercial items using simplified procedures above the  micro-purchase threshold and below the simplified acquisition threshold.  The revised policy encouraged contracting officials to use procurement  tools as appropriate, allowing for the use of reverse auctions at  contracting officials\u2019 discretion. VA\u2019s Veterans Healthcare  Administration\u2014formerly one of the largest users of reverse auctions\u2014 revised its procurement manual in February 2014 to suspend the use of  any reverse auction platform to conduct new reverse auctions. The  Veterans Healthcare Administration amended its procurement manual  again in October 2015 to lift the suspension of GSA Reverse Auctions,  but kept in effect the suspension of all other reverse auctions platforms.  VA and Veterans Healthcare Administration officials stated that they  revised their policies following investigations about the use of reverse  auctions at the Veterans Healthcare Administration by the VA Office of  Inspector General.\nOther agencies and components we reviewed have policies that  encourage the use of reverse auctions. For example:\nState\u2019s May 2015 policy memorandum established a requirement that  contracting officials first consider using reverse auctions conducted  through FedBid for all noncomplex commodities.\nDHS\u2019s Customs and Border Protection\u2019s August 2014 standard  operating procedure required that reverse auctions conducted through  FedBid be given priority consideration when acquiring non-complex  commodities.\nA Naval Supply Systems Command\u2019s November 2014 policy letter  required use of reverse auctions for commercial off-the-shelf supply  items valued from $25,000 to the simplified acquisition threshold.\nThe Army\u2019s Mission Installation Contracting Command Desk Book has  generally required use of reverse auctions for all acquisitions above  the micro-purchase threshold for commercial supplies in certain  categories.\nOverall, of the almost 15,000 reverse auctions conducted and awarded in  2016 by the five agencies for which we reviewed detailed data, we found  that about 94 percent were for contracts valued below $150,000.  However, we found that nearly two-thirds of the dollar value of awarded  reverse auctions was for purchases above $150,000 (see figure 5).\nFurther, we found that reverse auctions valued at more than $1 million in  2016 accounted for less than 1 percent of the number of auctions and  32 percent of the dollar value. Most (about 80 percent) of these higher- dollar-value auctions were for information technology-related products  and services, while the remainder included hand tools, cabling  equipment, radios, uniforms, air rifles, and vehicle trailers.\nOur analysis also found that the selected agencies generally used  reverse auctions with fixed-price contracts, commercial items, products,  and to promote small business participation\u2014a few of the effective uses  outlined in the June 2015 OFPP memorandum. For example, in terms of  award value, 87 percent was for products and 13 percent for services. In  addition, 60 percent of auction award value was for information  technology-related purchases. Further, 83 percent of auction value was  for awards made to small businesses.\n\n\tAgencies Obtained Benefits of Enhanced Competition and Reduced Administrative Burden, but Savings Estimates Should be Viewed with Caution\n\nThe agencies we reviewed obtained iterative bidding, indicating enhanced  competition between multiple vendors, in nearly three-quarters of reverse  auctions, and contracting officials cited reduced administrative burden as  another key benefit, but determining the actual amount of savings is  challenging due to data issues. Overall, in fiscal year 2016, the agencies  we reviewed achieved iterative bidding for 75 percent of reverse auctions.  However, in 20 percent of auctions only one bidder participated. Auctions  representing nearly half of the value of State\u2019s reverse auction awards  had only one bidder, driven by large dollar value procurements, in part  due to State\u2019s requirement to use reverse auctions for all non-complex  commodities without regard to expectations for competition. Contracting  officials we spoke to cited reduced administrative burden, particularly at  the end of the fiscal year, as a key factor in the decision to use reverse  auctions. Based on data from reverse auction providers, reverse auctions  that took place in 2016 resulted in contract awards that were an estimated  $100 million below the government\u2019s pre-auction estimate, though the  extent to which this figure represents actual savings is difficult to  determine.\n\n\t\tThree-Quarters of 2016 Auctions Resulted in Enhanced Competition through Iterative Bidding, But Competition Results Varied by Agency and Other Factors\n\n\t\t\tReverse Auctions Generally Resulted in Iterative Bidding\n\nWe found the agencies we reviewed achieved iterative bidding on  75 percent of auctions in fiscal year 2016, accounting for 68 percent of  dollars spent. However, in 20 percent of the auctions, only one bidder  participated (see figure 6). OFPP\u2019s June 2015 guidance states that  reverse auctions are likely to be most effective in highly competitive  marketplaces.\nWe found that auctions with iterative bidding resulted in award prices that  were, on average, about 12 percent lower than pre-auction cost  estimates, which generally reflect the government\u2019s independent cost  estimate. In contrast, this difference was about 6 percent among those  auctions without iterative bidding. Of the 40 auctions we selected for  in-depth review, we reviewed 29 auctions with iterative bidding. Review of  the bid history for some of these auctions demonstrated the potential  benefits of iterative bidding. For example:\nState awarded an approximately $4.3 million contract for night vision  goggles following an open market reverse auction that got 110 bids  from 16 vendors. The winning vendor bid 17 times and lowered its  price by roughly 30 percent over the course of the auction, not  including the reverse auction provider\u2019s indirect fee.\nDHS\u2019s Customs and Border Protection awarded an approximately  $268,000 contract, including an option period, for tires following an  open market reverse auction that got 35 bids from 13 vendors. The  winning vendor bid three times and lowered its bid by roughly  25 percent over the course of the auction, not including the reverse  auction provider\u2019s indirect fee.\nArmy National Guard Bureau awarded an approximately  $14,000 contract for ice climbing equipment following an open market  reverse auction that got 20 bids from 7 vendors. The winning vendor  bid six times and lowered its price by roughly 10 percent over the  course of the auction, not including the reverse auction provider\u2019s  indirect fee.\n\n\t\t\tAbout One-Fifth of Reverse Auctions Had Only One Bidder\n\nAlthough three-quarters of 2016 auctions achieved iterative bidding for  the agencies we reviewed, we found that in 20 percent of the awarded  reverse auctions only one bidder participated, representing 27 percent of  the dollars awarded. This percentage is higher than the percent of  obligations on all 2016 competitive procurements for which there was only  one offer received across the government (14 percent). However, this  varied by agency. Four of the five agencies we reviewed had higher  proportions of only one bidder participating on reverse auctions, by dollar  value, than for their competitive procurements in general, particularly at  State. The other agency, Interior, had a lower proportion of only one  bidder participating in reverse auctions. Table 2 describes differences in  competition for selected agencies in 2016.\nOur analysis indicates that requiring the use of reverse auctions through  agency or component-level guidance may contribute to agencies  obligating more money through reverse auctions that attract only one  bidder. Specifically, State\u2019s percentage of dollar value for auctions with  one-bidder\u2014almost 40 percent\u2014was substantially higher than other  agencies in our review and more than twice State\u2019s percentage of dollars  obligated on competitive procurements in general when only one offer  was received. This was driven by the results of reverse auctions for larger  dollar value contracts. In 2016, State awarded more auctions valued over  $1 million than any of the other agencies we reviewed. Of 36 State  auctions valued at more than $1 million, 13 had only one bidder\u2014 accounting for 27 percent of the total dollar value of State\u2019s reverse  auctions in 2016. State\u2019s May 2015 guidance requires contracting officials  to first consider using FedBid\u2019s reverse auction platform for the  acquisition of non-complex commodities, but does not mention  competition or its benefits. While the policy allows contracting officers to  seek waivers in certain circumstances, none of the potential exceptions  listed in the policy include the expectation of a lack of robust competition.  Some State contracting officials we spoke to said that the requirement  encourages the use of reverse auctions even if there is not a reasonable  expectation of competition.\nWe reviewed four State auctions valued at more than $1 million where  there was only one bidder. Contracting officials responsible for three of  the four auctions cited the guidance as a reason they used a reverse  auction. For example, State awarded a $12 million contract for brand  name computer and storage infrastructure equipment following a 2-day  reverse auction at the end of the fiscal year open to National Aeronautics  and Space Administration SEWP vendors. The contracting official  responsible for this auction told us that market research indicated that two  SEWP vendors could meet their needs, but only one vendor had  responded to inquiries during market research. However, she said that  she used a reverse auction because State policy required it for contracts  of this type.\nIn the fourth instance, State officials acknowledged that other factors,  including poor acquisition planning that resulted in tight timeframes, led  them to use a reverse auction as a \u201ccrisis management tool\u201d. State  awarded a $19 million contract, including option periods, for construction  support services in Afghanistan following a 17-hour reverse auction  among Federal Supply Schedule vendors, although only one vendor had  responded to market research inquiries. Officials said that they had  sought to combine this contract with another set of services for which the  same vendor was the only identified source likely to respond, but  coordinating with the customers took too long, and they ultimately ran out  of time before the predecessor contract was set to expire and services  would stop. Under tight timeframes that risked the program losing critical  services, contracting officials said they used a reverse auction because it  allowed them to make a contract award quickly while still opening the  requirement to multiple vendors, even though there was little chance of  multiple vendors bidding.\nOFPP\u2019s June 2015 reverse auctions guidance states that market  research\u2014the process used to collect and analyze data about the  capabilities in the market to satisfy agency needs\u2014must be conducted to  understand the marketplace and to determine if it is reasonable to  assume that the potential benefits of reverse actions can be achieved.  State\u2019s requirement to first consider using FedBid\u2019s reverse auction  platform for all non-complex supplies, even with exceptions, may  contribute to State using and paying for reverse auctions when a different  approach could garner more competition and potentially a better price.\n\n\t\t\tCompetition Rates Were Lower When Agencies Used Existing Contract Vehicles\n\nFor the almost 15,000 auctions the five selected agencies conducted in  2016, nearly $590 million\u2014about 65 percent\u2014of total awarded reverse  auction value was for orders on existing contract vehicles. We found  that, in comparison to open market auctions, reverse auctions using  existing contract vehicles had 1) higher rates of only one bidder  participating, and 2) were less likely to have iterative bidding (see  table 3).\nThe 40 auctions we reviewed in-depth included 24 auctions that used  existing contract vehicles, including 5 in which only one bidder  participated\u20144 awarded by State and 1 by DHS\u2019s Customs and Border  Protection. However, our review of these examples did not identify clear  reasons why auctions on existing contract vehicles have lower  competition rates overall than open market auctions. Agency procurement  officials told us that they are aware of variations in the competition  obtained for particular existing vehicles more generally than when reverse  auctions are used, and suggested that it would be useful to examine the  competition dynamics for reverse auctions vehicle by vehicle.\nNone of the agency guidance we reviewed comprehensively addressed  how to use reverse auctions effectively when ordering from existing  contract vehicles. Further, none of the five agencies we reviewed have  collected data on or assessed why the number of reverse auctions with  only one bidder on existing contract vehicles was significantly higher than  reverse auctions using open markets. OFPP\u2019s June 2015 reverse  auctions guidance states that agencies should be evaluating their  experiences with reverse auctions and the effectiveness of existing  practices and policies so that refinements can be made as necessary.  Standards for internal control require management to periodically review  policies and procedures for continued relevance and effectiveness in  achieving the entity\u2019s objectives. Without understanding what factors  indicate that conducting reverse auctions using existing contract vehicles  is appropriate and providing this information to contracting officials so that  they can consider it when developing their acquisition strategies,  agencies may be using and paying for reverse auctions when another  approach might yield better competition and pricing.\n\n\t\tDecreased Workload and Ease of Use Are Key Reasons Officials Use Reverse Auctions\n\nSimilar to what we found in December 2013, of the 35 contracting officials  we interviewed, 29 cited ease of use and reduced administrative burden  as key reasons why they chose to use reverse auctions, particularly at the  end of the fiscal year. Officials noted that certain reverse auction  providers, such as FedBid, offer acquisition support services in addition to  the reverse auction platform itself that can decrease the workload for  contracting officials. In particular, contracting officials noted the following  as ways that reverse auctions assisted them in performing their  responsibilities:\nThe reverse auction provider performed functions such as  building complex auctions and following up with vendors to  encourage participation. In some instances, such as at State or  Customs and Border Protection, FedBid provides support personnel  on-site at agencies. Contracting officials told us that this is helpful  because they are able to obtain in-person support for troubleshooting  and time-sensitive purchases. Officials said that they used these  additional services for 7 of the 29 FedBid auctions about which we  interviewed contracting officials.\nReverse auction platforms produced auction documentation that  decreased the administrative burden of producing a contract file.  For example, Army officials responsible for a $14,000 award for ice  climbing equipment explained that the summary document produced  by the FedBid platform includes much of the competition information,  such as auction participants and bids, needed for the contract file.\nThe reverse auction platforms enabled contracting officials to  replicate past auctions for similar items, then update  auction-specific information. For example, a DHS Immigration and  Customs Enforcement contracting official responsible for a  $38,000 award for detention uniforms said that he makes frequent  purchases of the same items, so the ability to clone past auctions and  update the quantities, pre-auction cost estimates, clauses, and  sources (open market or existing contracts) saves a lot of time. He  said that with other procurement methods he must re-enter  procurement information each time.\nReverse auctions enabled them to work on multiple  procurements simultaneously, rather than sending emails or  making phone calls to individual vendors to obtain quotes. For  example, a DHS Customs and Border Protection contracting official  responsible for two auctions we reviewed said that reverse auctions  allow him to work on multiple contract awards at a time at the end of  the fiscal year.\nData we collected from reverse auction providers found that contracting  officials make greater use of reverse auctions at the end of the fiscal year.  While the agencies we reviewed made a disproportionate number of new  awards in the last fiscal quarter of 2016\u201442 percent\u2014reverse auctions  were used even more heavily, with agencies conducting 53 percent of  reverse auctions in the last quarter (see figure 7).\n\n\t\tReverse Auctions Data Indicate $100 million in Savings in 2016, but Savings Estimates Should be Viewed with Caution\n\nBased on fiscal year 2016 data from reverse auction providers, Army,  Navy, DHS, Interior, and State awarded contracts with values that totaled  more than $100 million less than the agencies\u2019 pre-auction cost  estimates, after including any reverse auction provider fees (see table 4).\nThe agencies we reviewed generally rely on reverse auction providers to  report savings estimates to them. FedBid\u2014the largest provider used by  our selected agencies\u2014and GSA Reverse Auctions generally calculate  savings as the difference between the pre-auction cost estimate\u2014 represented by the auction\u2019s \u201ctarget price\u201d set by buyer\u2014and the award  price, which is the winning vendor\u2019s bid plus the reverse auction  provider\u2019s fee. In some cases, however, FedBid will modify this approach  to account for potential shortcomings in the quality of pre-auction cost  estimates. FedBid does this in two different scenarios.\nFirst, to correct for situations when using the agency target price  results in abnormally high savings\u2014generally defined by FedBid as  savings more than 50 percent above the target price\u2014instead FedBid  uses a target price based on an average of bids received during the  auction. FedBid representatives explained that these adjustments  help avoid overstating savings caused by outlier target prices.\nSecond, to correct for situations when the agency target price was  lower than the winning bid, and would result in a calculated savings of  less than $0, instead FedBid uses a target price equal to the winning  bid, so that calculated savings equal $0. FedBid representatives  explained that, in their opinion, a contracting official would not  proceed with an award if the winning bid was higher than the target  price unless the contracting official believed that the pre-auction  estimate was invalid.\nOverall, we found that in 4 of the 33 FedBid auctions we reviewed, the  awarded reverse auction prices were collectively $900,000 higher than  the pre-auction cost estimates (which were used as the target prices).  Prior to reporting savings to the agencies, FedBid adjusted the target  prices to match the award values and reported that these auctions  resulted in no savings. FedBid representatives said that they have  provided details about this data normalization process to the contracting  officers responsible for their agency contracts.\nWe identified other approaches to calculating savings resulting from  reverse auctions. For example, in December 2016, the Army negotiated a  new contract with FedBid that established a different method for  calculating savings in an attempt to isolate the savings due to the specific  effects of reverse auctions. The Army calculates savings as the difference  between the \u201cinitial leading bid\u201d\u2014the second bid usually\u2014and the winning  bid. GSA Reverse Auctions and Army CHESS have also calculated  savings through different methods, including as the difference between  the highest bid and the lowest bid, as well as between the winning  vendor\u2019s initial and lowest bids.\nContracting officials acknowledged several challenges in using the  pre-auction cost estimate as a baseline from which to calculate savings.  For example:\nContracting officials at Interior\u2019s US Geological Services stated that it  is critical to ensure that the pre-auction cost estimates they set in the  reverse auction system are based on good market research, and that  the target price is set at the lowest price they can obtain outside of a  reverse auction. They noted that before conducting a reverse auction  for water filters, these officials lowered the pre-auction cost estimate  by about $450,000 from the program office\u2019s initial cost estimate, to  reflect a lower price identified in subsequent market research. During  the reverse auction, Interior obtained five bids from four vendors,  resulting in an award valued at $1.4 million, including option periods.  The auction\u2019s savings were then calculated to be $670,000.\nIn another auction resulting in a $430,000 contract awarded by the  Army for laptops, the contracting official noted that the pre-auction  cost estimate was developed by the customer based on historic  pricing. In turn, the price obtained through the reverse auction  reflected a calculated savings of $67,000 or about 13 percent from the  pre-auction estimate. However, the contracting official said that this  method is not a reliable way to calculate savings as his customers  typically use a high estimate to make sure they do not have to request  additional funds. The contracting officer also noted that, in his  experience, using historical pricing for technology products can be  problematic since pricing changes very quickly as new technology is  developed and old products become obsolete.\nWe reported in December 2013 that it was unclear whether comparing  auction award prices to the pre-auction cost estimate produced an  accurate estimate of savings, as it depended on the quality of the  pre-auction cost estimate, which is generally informed by market  research. In our current review, contracting officials reiterated this  perspective. Federal regulations provide flexibility in terms of the extent to  which market research should be conducted, and how that research  should be conducted, including for low dollar procurements. Because  the FAR has not yet been amended to address any specific requirements  for reverse auctions as we recommended in our previous report, we are  not making additional recommendations on this issue.\n\n\tAgency Guidance and Contracting Approaches Lack Sufficient Information to Ensure Good Business Decisions and Appropriate Contract Oversight\n\nFor reverse auctions conducted in 2016, the five agencies we reviewed  indirectly paid more than $13 million in fees. Similar to our findings from  our December 2013 review, we found that agency contracting officials we  interviewed generally did not have a complete and accurate  understanding of reverse auction fee structures. This hinders their ability  to make informed decisions about when to use reverse auctions or which  reverse auction platform to use for a specific procurement, potentially  leading to paying more fees than necessary for reverse auctions for the  level of service required. Our analysis of agency- and component-level  guidance found that none of the agency-level guidance we reviewed fully  informed contracting officials about the availability of reverse auction  providers and platforms and any applicable reverse auction fee  structures, nor did the guidance ensure that contracting officials would  compare the options available to them when considering whether to use  reverse auctions. In addition, agencies that used the services of FedBid,  the largest reverse auction provider, did not always draft sufficiently  detailed fee arrangements to ensure that the agencies were  knowledgeable about and could conduct oversight of FedBid\u2019s indirect  fees.\n\n\t\tSelected Agencies Paid over $13 Million for Reverse Auctions Conducted in 2016\n\nThe five agencies we reviewed indirectly paid about $13.4 million in fees  to reverse auction providers in 2016. As discussed previously, generally,  in the indirect payment process, the reverse auction provider adds a fee  onto the winning vendor\u2019s bid. Then, the agency pays the winning vendor  this total amount. In turn, the reverse auction provider collects the fee  from the winning vendor.\nAgencies we reviewed primarily conducted reverse auctions using three  reverse auction providers\u2019 platforms in 2016. The agencies paid indirect  fees to two of these reverse auction providers in 2016\u2014FedBid and  GSA\u2014while the third provider, Army CHESS, did not charge a fee for its  services. Indirect fees paid to FedBid and GSA generally varied from 0 to  3 percent of the value of the transaction, though both FedBid and GSA  cap certain fees and will waive fees in certain circumstances. For  example, GSA does not charge an indirect reverse auction fee for Federal  Supply Schedule orders or agency contracts based on Federal Supply  Schedule contracts. See table 5 for additional details on typical fee  structures of reverse auction providers used by the agencies we  reviewed.\n\n\t\tAgency Guidance Does Not Provide Sufficient Information to Contracting Officials on Reverse Auction Fees to Help Ensure Good Business Decisions\n\nWe found that none of the guidance we reviewed from the five agencies  included the information needed to help ensure that contracting officials  understand reverse auction indirect fees and their roles in assessing  those fees. OFPP\u2019s June 2015 guidance states that contracting officers  should consider the amount of fees paid when evaluating whether the  price of a product or service in a reverse auction is fair and reasonable,  including any additional fees for use of another agency\u2019s existing contract.  This expectation is further established in agency guidance at the Army,  DHS, and Interior. Our review found, however, that contracting officers  generally did not understand how fees would be applied or the amount  they would actually pay to use a reverse auction. This finding is  consistent with our observation from our December 2013 report that  agency officials were uncertain about how reverse auction fees were  paid. Understanding reverse auctions\u2019 costs is essential to making  informed business decisions about when to use reverse auctions or which  reverse auction platform to use for a particular procurement. Without such  understanding, the risk increases that agencies may be paying more in  fees than necessary for the level of service required.\nAgency officials we interviewed generally did not have an accurate  understanding of reverse auction indirect fee structures. For example,  acquisition policy officials at State told us that their contract with FedBid  has no cost to the agency because the fees are paid from the companies  that win the auctions and it is up to the companies whether or not to  include the fee in their final price to the government. As discussed above,  however, FedBid automatically adds fees on to all vendor bids. An official  who was involved in developing policy related to reverse auction use at  Interior told us that agency officials were not fully aware of the fee  structure used by FedBid when they initially contracted for the company\u2019s  reverse auction services in October 2010. The official added that in  hindsight, the fee structure is something that should have been more  closely considered.\nAdditionally, while the contracting officials we interviewed for the  30 auctions we reviewed that incurred an indirect reverse auction fee  were generally aware that they were paying a fee, officials responsible for  28 of these 30 auctions were uncertain about one or more elements of  the reverse auction fee structure. For example:\nLack of understanding of fee amount charged: Contracting officials  who conducted 18 of the 29 FedBid auctions in our review were not  aware of the fee charged for the reverse auction. All but three of these  officials told us that they generally do not see the fee amount because  it is included in the vendors\u2019 bids and is not broken out separately, so  they evaluate the price inclusive of the fee. In response, FedBid  representatives told us that since March 2014 they have offered  functionality in the FedBid system that displays the fee separately.  However, FedBid only turns this functionality on at the request of  agency officials, which had not occurred at the time of our review. We  found that procurement officials at all five of the agencies we reviewed  were unaware that this feature was available. According to FedBid  representatives, they have since notified the contracting officers  responsible for their agency contracts about this feature.\nConfusion about circumstances for fee waivers or reductions:  Although FedBid will waive or reduce its fee when the fee causes the  auction to be above the pre-auction cost estimate or an established  contract price, contracting officials responsible for 22 of the 29 FedBid  reverse auctions did not accurately understand how this would work  when we asked about it. For instance, some contracting officials at  State and Customs and Border Protection told us in error that FedBid  would waive its fee if there was only one bidder in an auction.  Additionally, contracting officials for two auctions told us that they  thought the fees associated with their auctions had been waived and  expressed surprise when they learned the fee amount. For one  auction, a State contracting officer told us that if she had been aware  of the amount of the potential fee for an auction for construction  services for which only one bid was received, she may have  considered other alternatives for awarding the contract.\nUncertainty about how fee caps are applied: While FedBid generally  caps its reverse auction fees at $10,000 per transaction, officials we  interviewed that were responsible for 20 of 29 FedBid auctions told us  they were not aware of this or did not know the dollar threshold for the  fee cap.\nAdditionally, while increased competition is typically cited as a benefit of  reverse auctions, we found that about 18 percent of fees paid to reverse  auction providers in 2016\u2014approximately $2.5 million\u2014were for auctions  in which there was only one bidder participating (see table 6 for detail by  agency).\nFurther, we found that agencies in our review indirectly paid  approximately $3.3 million in fees for reverse auctions conducted in 2016  even when an alternative no-fee reverse auction platform was likely  available. The availability of an alternative platform does not necessarily  mean that the no-fee platform is the most appropriate option, because  different platforms provide different levels of service. We did not  determine whether particular platforms were more appropriate or resulted  in lower overall prices to the government. However, we found that  agencies paid these fees to FedBid to conduct reverse auctions for orders  on Federal Supply Schedule contracts or Army CHESS contracts when  they might have used GSA Reverse Auctions or the Army CHESS IT  e-mart without paying a fee. Our 40 case studies included 10 auctions for  orders off GSA\u2019s Federal Supply Schedules or Army CHESS contracts  that used FedBid rather than using GSA Reverse Auctions or the Army  CHESS IT e-mart. For five auctions at Army and State, contracting  officials told us they were required or strongly encouraged by agency or  component policy to use FedBid. For the other five auctions, contracting  officials told us that they preferred FedBid because it was easier to use or  they were more familiar with it than GSA Reverse Auctions. Without  considering which provider best meets its needs in these cases, the  agencies may have paid more in fees than necessary for the required  level of service.\nWe found that none of the agency guidance we reviewed was sufficient to  ensure that contracting officials understood reverse auction fees and their  roles in assessing those fees. A clear understanding is necessary to  make informed decisions about when to use reverse auctions or which  reverse auction platform to use for a particular procurement (see table 7).\nWe found that agency guidance we reviewed at two of the five  agencies\u2014Navy and State\u2014did not address the role of contracting  officials in understanding and assessing reverse auction fees.  Specifically:\nNavy does not have agency-wide guidance that addresses the  circumstances and processes for using reverse auctions. At the  component level, the Naval Supply Systems Command\u2019s November  2014 guidance states that contracting officials may use any available  government or commercial reverse auction platform for reverse  auctions, unless ordering off GSA\u2019s Federal Supply Schedule or other  contract vehicle posted at GSA\u2019s eBuy site, but the guidance does not  provide information about how contracting officers should consider  reverse auction fees in deciding which platform to use.\nState\u2019s guidance on reverse auctions does not address the role of  contracting officers in considering reverse auction fees. As noted  previously, State\u2019s May 2015 policy memorandum requires that  contracting officers first consider using FedBid for acquisition of all  non-complex commodities unless a waiver is obtained.\nGuidance we reviewed at the other three agencies\u2014Army, Interior, and  DHS\u2014did address the role of contracting officials in understanding and  assessing reverse auction fees, although the level of detail varied among  the three agencies. Specifically:\nA June 2015 policy alert from the Army stated that contracting officials  are required to be aware of reverse auction fees and consider them in  evaluating whether the price of the product or service being acquired  is fair and reasonable.\nSimilarly, Interior\u2019s August 2015 guidance states that contracting  officers need to evaluate the estimated amount of reverse auction  fees that will be paid when assessing whether prices are fair or  reasonable.\nDHS\u2019s May 2017 guidance states that contracting officers need to  understand the fees charged by a provider, and determine and  document that the fee structure represents a fair and reasonable cost  and offers the best value to the government.\nNone of the agency-wide guidance we reviewed at the five agencies  detailed the fee structure of each reverse auction platform used by the  respective agency. As a result, contracting officials\u2019 ability to understand  and assess the fees\u2014an existing requirement in OFPP guidance and at  the Army, Interior, and DHS\u2014is hindered. Neither State nor Interior had  guidance that detailed the specific fee structures of reverse auction  providers used by contracting officials at those agencies. While one Army  command developed guidance on FedBid\u2019s fee structure, the Army has  not provided any agency-wide guidance on FedBid or GSA Reverse  Auctions fee structures, even though the Army awarded reverse auctions  valued at approximately $326 million using these two providers in 2016.  Similarly, while the Navy\u2019s May 2017 memorandum of understanding for  using GSA Reverse Auctions informs contracting officials of GSA  Reverse Auctions\u2019 fee structure, the Navy does not have guidance that  details FedBid\u2019s fee structure. In 2016, the Navy conducted more than  10 times as many auctions using FedBid\u2019s platform as it did using GSA\u2019s  platform.\nAdditionally, we found that none of the agencies had agency-wide  guidance that required contracting officials to consider whether no-fee  reverse auction alternatives, such as GSA Reverse Auctions for Federal  Supply Schedule orders and the Army\u2019s CHESS IT e-mart for Army  CHESS orders, would meet their needs. State, DHS, and Interior  guidance does not address this issue at all. Similarly, while neither the  Army nor Navy have agency-wide guidance that does so, each agency  has component or command-level guidance that addresses this issue to a  limited extent. For example, Naval Supply Systems Command guidance  issued in November 2014 requires that contracting officials use GSA  Reverse Auctions for products or services off the Federal Supply  Schedule. More recently, according to Army officials, as of July 2017, the  Army\u2019s CHESS program began recommending that reverse auctions for  orders off Army CHESS contracts be conducted using the Army CHESS  IT e-mart.\nStandards for internal control in the federal government require agencies  to develop policies that address operational processes and the  responsibilities of individuals for carrying out those processes. Our  review found that, while certain agencies or agency components had  guidance that provided some information about reverse auction fees,  none of the agency-level guidance we reviewed fully addresses  contracting officials\u2019 role in understanding and assessing reverse auction  fees, details fee structures for reverse auction platforms used by the  agency, or requires that contracting officers compare the options for  reverse auction providers that are available to them, particularly regarding  no-fee alternatives. Without such guidance, contracting officers are at risk  of paying more in fees than necessary for the level of service they  require.\n\n\t\tAgencies\u2019 Contracting Approaches Do Not Provide Sufficient Information on Reverse Auction Fees to Facilitate Oversight and Adherence to Internal Control Standards\n\nWe found that while nearly all reverse auction fees were paid to FedBid  since FedBid was by far the largest reverse auction provider used by the  selected agencies, agencies\u2019 approaches to contracting with FedBid did  not result in sufficiently detailed fee arrangements to ensure that the  agencies were knowledgeable about the fees they were paying and could  conduct oversight of whether FedBid was applying indirect fees as  expected. For the five agencies we reviewed that conducted reverse  auctions using FedBid in 2016, two did not have documented agency- level fee arrangements with FedBid, while the other three had contracts  that did not fully address at least one element of FedBid\u2019s fees, as shown  in table 8.\nThree of the five agencies we reviewed that used FedBid\u2014Army, Navy,  and State\u2014had agency-wide contracts in place with FedBid, but we found  that these contracts did not always document key aspects of the fee  terms with FedBid. Specifically:\nLack of clarification on how the fee cap applies to contracts with  option years: FedBid representatives stated that their standard  practice is that the fee cap will apply separately to each option year  awarded. The Navy\u2019s January 2018 contract with FedBid is consistent  with this practice and explains how the fee cap will apply to contracts\u2019  option years. In contrast, Army\u2019s and State\u2019s December 2016  contracts with FedBid do not specify how the fee cap would apply to  option years. Contracting officials who were responsible for managing  the FedBid contract at the Army told us they believed that the fee cap  was a total of $10,000 per contract awarded, including for the base  and all option years.\nLack of detail on calculation of fee cap: Navy and State\u2019s contracts  with FedBid did not include full details on how the fee cap would be  applied. As discussed above, FedBid generally caps its fee at  $10,000. However, due to the way FedBid calculates fees, if the  lowest bid is not selected, the fee on the selected bid may be over  $10,000. We found that 19 reverse auctions in 2016 resulted in  FedBid fees over $10,000. Neither the Navy\u2019s January 2018 contract  nor State\u2019s December 2016 contract explains that the fee may be  above $10,000.\nAccording to agency officials, DHS and Interior did not have agency-wide  contracts with FedBid for reverse auctions conducted in 2016. While three  DHS components had their own contracts with FedBid that were active in  2016, four additional components plus DHS headquarters used FedBid in  2016 without either an agency- or component-level contract in place. At  Interior, the contract with FedBid expired in September 2015 and was not  renewed, although contracting officials at Interior components continued  to conduct reverse auctions on FedBid. Contracting officials at these  agencies used FedBid\u2019s services by agreeing to its standard terms and  conditions each time they accessed the FedBid platform. FedBid  representatives told us they consider the terms of use to be the contract  between FedBid and the government when there is no agency- or  component-level contract in place, and that this is similar to how  commercial e-commerce marketplaces operate with federal agencies for  micro-purchases. FedBid\u2019s standard terms and conditions, however, do  not provide detailed information on fees, such as the precise fee  percentage charged or the amount of the fee cap. FedBid representatives  told us that they typically charge federal agencies a 3 percent fee, but that  fee details are not included in the standard terms and conditions because  commercial and government customers may pay different fees. At DHS  and Interior, when there are not agency- or component-level contracts in  place and contracting officials use FedBid by agreeing to the standard  terms and conditions, there is a risk that they may agree to fees or other  terms that have not been reviewed and approved by agency acquisition  and legal offices.\nLastly, we found that only two of the agencies we reviewed\u2014the Army  (since December 2016) and the Navy (since May 2012)\u2014required and  received regular monthly reporting from FedBid on reverse auction fees  paid indirectly by the agency. Both agencies also have contractual  requirements for FedBid to provide this information annually, in addition to  the monthly reporting. Army officials told us that requiring additional data  in their December 2016 contract with FedBid was a result of lessons  learned from their September 2012 contract, and was intended, in part, to  improve oversight of fees paid. Army and Navy officials provided  examples of FedBid reverse auction fee reports, and described how they  used this information to oversee their contracts with FedBid. The Army  and Navy also both requested and received monthly reports from GSA  Reverse Auctions that included detailed information on fees.\nIn contrast, DHS, Interior, and State did not require or receive regular  reporting on fees from FedBid or GSA Reverse Auctions. As previously  discussed, according to officials, DHS and Interior do not have agency- wide contracts with FedBid and, therefore, do not have a mechanism in  place to require agency-wide reporting. Interior officials told us they do  not receive any reports on fees paid from FedBid. For the two DHS  components we reviewed, Immigration and Customs Enforcement  officials told us that they received ad hoc reporting on fees paid to FedBid  and provided us with a sample report that included fee data. While  Customs and Border Protection\u2019s contract with FedBid requires reporting  on costs incurred by the government, officials told us that they do not  receive any reporting on fees. State neither requires nor receives  reporting on fees from FedBid. State and Customs and Border Protection  officials told us that they do not receive such reporting since fees are paid  by winning vendors and therefore there is no direct cost to the  government to use FedBid. We found, however, that these agencies  indirectly paid almost $4.2 million in fees to FedBid in 2016.\nStandards for internal control require agencies to appropriately document  transactions and significant events to assist with oversight and help  ensure that agency objectives are being achieved effectively and  efficiently. Without a documented contract or arrangement in place  between agencies or components and FedBid that provides a clear and  common understanding of payment terms and fee structure, agencies  lack sufficient information to conduct contract oversight to determine  whether FedBid is applying its indirect fees as the agencies expect.\nFurther, internal control standards emphasize timely and reliable  information and data so that agencies can effectively monitor their  operations. Without requiring reporting on reverse auction fees, agencies  may not have sufficient information to understand and oversee their use of reverse auction platforms and conduct contract oversight to ensure that  the fees they are being charged are appropriate.\n\n\tConclusions\n\nThe landscape of reverse auctions has changed slightly since our last  review in December 2013. There are more reverse auction providers,  including government providers, in the marketplace, with the vast majority  of auctions conducted through FedBid. The use of reverse auctions,  however, continues to constitute a relatively small percentage of federal  contract spending. For the most part, agencies are using reverse auctions  to acquire low-cost, commercial products and benefitting from the ease of  use and reduced administrative burden that reverse auctions can provide.  Agencies are also achieving more robust competition in the form of  iterative bidding on nearly three-quarters of reverse auctions. Despite this  level of competition, however, precisely quantifying the amount of savings  is inherently difficult. Given that the vast majority of auctions are small  dollar procurements which are, by design, intended to be simpler and to  pose less administrative burden on the acquisition workforce, it may be  counterproductive to expend more time and resources to produce a better  estimate of savings. Nevertheless, there is room for improvement in the  guidance agencies provide to their contracting personnel to ensure the  appropriate use of reverse auctions, increase benefits, and reduce costs.  Agencies could benefit from paying more attention to  rates of one-vendor participation, provider fee structures, and  contracts with reverse auction providers.\nAcross the agencies in our review, often only one bidder participates, in  particular when agencies conduct a reverse auction using existing  contract vehicles rather than opening the auction to all potential vendors.  At State, its requirement for contacting officers to use reverse auctions for  all non-complex acquisitions may result in reverse auction use in  situations where it is not warranted; that is, without the type of highly  competitive marketplace that can result in savings.\nOur work also identified a need for agencies to provide contracting  officers better information on the fee structures so that they can make  informed decisions as to whether to use a reverse auction and which  reverse auction platform to use. Further, agencies are not requiring data  on or analyzing the fees they are paying. The indirect nature of provider  fees\u2014combined with fee arrangements that are missing important details  or are nonexistent and a lack of visibility into those fees\u2014puts agencies  at risk of paying more than necessary for the level of service needed.  These issues are not new: we raised similar concerns in our report more  than 4 years ago. Taken together, these issues put the government at risk  of failing to maximize the benefits that the effective use of reverse auction  can provide, and worse, put agencies at risk of paying millions of dollars  more in fees than necessary for the level of service needed.\n\n\tRecommendations\n\nWe are making a total of 21 recommendations, including 3 to Army, 4 to  Navy, 4 to DHS, 4 to Interior, and 6 to State.\nWe are making the following seven recommendations to heads of  agencies within the Department of Defense:\nThe Secretary of the Army should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies. (Recommendation 1)\nThe Secretary of the Army should: document and provide information  to contracting officials that describes available reverse auction  providers and platforms, and any associated fee structures; and  provide guidance, as appropriate, to contracting officials to ensure  that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 2)\nThe Secretary of the Army should clarify with FedBid how fees apply  when contract option years are exercised. (Recommendation 3)\nThe Secretary of the Navy should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies.(Recommendation 4)\nThe Secretary of the Navy should review the agency\u2019s current  guidance to assess whether it adequately addresses contracting  officer responsibilities to consider the cost of any fees associated with  reverse auction options they may be considering when developing  their acquisition strategies, and revise its guidance as appropriate.  (Recommendation 5)\nThe Secretary of the Navy should: document and provide information  to contracting officials that describes available reverse auction  providers and platforms, and any associated fee structures; and  provide guidance, as appropriate, to contracting officials to ensure  that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 6)\nThe Secretary of the Navy should clarify with FedBid how FedBid\u2019s  fee cap will be calculated. (Recommendation 7)\nWe are making the following four recommendations to DHS:\nThe Secretary of the Homeland Security should: assess why reverse  auctions that are conducted using existing contract vehicles have only  one bidder at higher rates than reverse auctions conducted on the  open market; determine what factors indicate that conducting reverse  auctions is appropriate when using existing contract vehicles; and  provide this information to contracting officials so that they can  consider it when developing their acquisition  strategies.(Recommendation 8)\nThe Secretary of Homeland Security should: document and provide  information to contracting officials that describes available reverse  auction providers and platforms, and any associated fee structures;  and provide guidance, as appropriate, to contracting officials to  ensure that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 9)\nThe Secretary of Homeland Security should determine if it would be  advantageous for the agency to enter into contracts with third-party  reverse auction providers. (Recommendation 10)\nThe Secretary of Homeland Security should obtain timely information  on how much the agency is paying for reverse auction services.  (Recommendation 11)\nWe are making the following four recommendations to Interior:\nThe Secretary of the Interior should: assess why reverse auctions that  are conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies.(Recommendation 12)\nThe Secretary of the Interior should: document and provide  information to contracting officials that describes available reverse  auction providers and platforms, and any associated fee structures;  and provide guidance, as appropriate, to contracting officials to  ensure that they compare the options that are available to them when  considering whether to use reverse auctions. (Recommendation 13)\nThe Secretary of the Interior should determine if it would be  advantageous for the agency to enter into contracts with third-party  reverse auction providers. (Recommendation 14)\nThe Secretary of the Interior should obtain timely information on how  much the agency is paying for reverse auction services.  (Recommendation 15)\nWe are making the following six recommendations to State:\nThe Secretary of State should review the agency\u2019s current guidance  to assess whether it leads contracting officials to use reverse auctions  in situations where there is not a highly competitive marketplace, and  revise its guidance as appropriate. (Recommendation 16)\nThe Secretary of State should: assess why reverse auctions that are  conducted using existing contract vehicles have only one bidder at  higher rates than reverse auctions conducted on the open market;  determine what factors indicate that conducting reverse auctions is  appropriate when using existing contract vehicles; and provide this  information to contracting officials so that they can consider it when  developing their acquisition strategies. (Recommendation 17)\nThe Secretary of State should review the agency\u2019s current guidance  to assess whether it adequately addresses contracting officer  responsibilities to consider the cost of any fees associated with  reverse auction options they may be considering when developing  their acquisition strategies, and revise its guidance as appropriate.  (Recommendation 18)\nThe Secretary of State should: document and provide information to  contracting officials that describes available reverse auction providers  and platforms, and any associated fee structures; and provide  guidance, as appropriate, to contracting officials to ensure that they  compare the options that are available to them when considering  whether to use reverse auctions. (Recommendation 19)\nThe Secretary of State should clarify with FedBid how FedBid\u2019s fee  cap will be calculated and how fees apply when contract option years  are exercised. (Recommendation 20)\nThe Secretary of State should obtain timely information on how much  the agency is paying for reverse auction services. (Recommendation  21)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD, DHS, Interior, State, the  Department of Housing and Urban Development, GSA, VA, and OMB.  Collectively, the agencies concurred with 18 of the 21 recommendations  we made, and did not concur with three.\nIn its written response, reproduced in appendix IV, DOD concurred with  our seven recommendations\u2014three to the Army and four to the Navy\u2014 and stated that the department expected to complete actions to address  the recommendations by the end of calendar year 2018.\nIn its written response, reproduced in appendix V, DHS concurred with  two recommendations and did not concur with two recommendations.  DHS concurred with our recommendation that it assess why reverse  auctions conducted using existing vehicles have higher one bidder rates  and provide information to contracting officials about factors that indicate  conducting reverse auctions using existing vehicles is appropriate.  However, DHS did not believe that it needed to conduct an assessment  specific to reverse auctions. The department stated that the factors that  contribute to one bidder participating in other procurements\u2014such as  inadequate market research and poorly defined requirements\u2014would  similarly affect reverse auctions. Nevertheless, DHS stated that the Office  of the Chief Procurement Officer will communicate to its contracting  officials that when market research for a planned reverse auction buy on  an existing contract vehicle demonstrates that only one bid is expected, a  reverse auction must not be used to conduct the procurement. DHS  expects to complete actions in response to this recommendation by the  end of November 2018.\nDHS also concurred with our recommendation that it determine if it would  be advantageous for the agency to enter into contracts with third party  reverse auction providers. DHS stated that an assessment should be  done periodically to determine if there is a need to have a department- wide reverse auction provider. In that regard, DHS stated that an  assessment was conducted in 2016 to evaluate providers and platforms  and, based on this evaluation, DHS made the decision to continue to  provide contracting offices the flexibility to choose their own reverse  auction provider. DHS stated that it believes its past actions address our  recommendation. However, the intent of our recommendation is not to  suggest that DHS consider whether to mandate a certain provider be  used agency-wide. Rather, we are recommending that DHS assess  whether agency-level contracts with reverse auction providers\u2014be it one  or several different providers\u2014are desirable to protect against the risk  that individual contracting officials may be agreeing to fees or other terms  that have not been reviewed and approved by agency acquisition and  legal offices. It is unclear whether DHS\u2019s 2016 assessment considered  these issues.\nDHS did not concur with our recommendation that it provide information  to contracting officials regarding available reverse auction providers and  fee structures and, as appropriate, provide guidance to contracting  officials to ensure they compare available options for reverse auctions. In  its response, DHS stated that there is limited value in centrally collecting  and updating this information, and that it is the contracting officer\u2019s  responsibility, as a part of market research, to be knowledgeable about  reverse auction providers and fee structures. DHS stated that its May  2017 reverse auctions policy requires contracting officers to understand  the fees that will be charged and determine and document that the fee  structure represents a fair and reasonable cost and offers best value to  the government. DHS stated that the Office of the Chief Procurement  Officer will issue an alert reminding contracting professionals of these  responsibilities by the end of November 2018. Given the pervasive  confusion we found among contracting officials about the fee structures of  reverse auction providers, we continue to believe that DHS should  document and provide information to contracting officials, which could  help eliminate confusion and minimize the duplication of individual  reverse auction users repeatedly collecting the same information.\nDHS also did not concur with our recommendation that it obtain timely  information on how much the agency is paying for reverse auction  services, stating that aggregating fee data at the department level would  require systems changes or manual collection that would not inform DHS  as to whether reverse auctions were used correctly or if the fee was too  high. In this case, however, our work found that reverse auction providers  have this data available upon request. As such, in lieu of making changes  to systems or attempting to have contracting officers manually collect this  information, we believe DHS could obtain this information from its reverse  auction provider and use this information to help DHS understand what it  pays for reverse auction services. This approach would also better inform  the department in its periodic assessments of contractual relationships  with reverse auction providers.\nIn its written response, reproduced in appendix VI, State concurred with  all six recommendations, and described actions the Office of Acquisitions  Management intends to take to address them, including reviewing current  guidance and revising it as appropriate; increasing contracting officer  awareness through training and policy guidance; and engaging with its  primary reverse auction provider to obtain a better understanding of the  fee structure and timely reporting of fees. State did not provide  information as to when it expected these actions to be completed.\nIn its written response, reproduced in appendix VII, Interior concurred with  three recommendations and did not concur with one recommendation.  Interior concurred with our recommendation that it assess why reverse  auctions conducted using existing vehicles have higher one bidder rates  and provide information to contracting officials about factors that indicate  conducting reverse auctions using existing vehicles is appropriate. The  department stated that it will implement policy regarding the use of  reverse auctions with existing contract vehicles. Interior also concurred  with our recommendation that it provide information to contracting officials  regarding available reverse auction providers and fee structures and, as  appropriate, provide guidance to contracting officials to ensure they  compare available options for reverse auctions. The department stated it  would review and update guidance to provide contracting officials with  current and relevant information on available reverse auction providers,  platforms, and associated fee structures. Interior also concurred with our  recommendation that it obtain timely information on how much the agency  is paying for reverse auction services. Interior did not provide information  as to when it expected the above actions to be completed.\nInterior did not concur with our recommendation to determine if it would  be advantageous for the agency to enter into contracts with third-party  reverse auction providers, stating that it would be more efficient to provide  guidance to contracting officials so that they can make the best business  decision. Interior officials told us verbally that they have already  considered whether or not to enter into contracts with reverse auction  providers and determined that it is not to the department\u2019s advantage to  do so. Interior officials told us they would provide us information about the  factors considered in making this decision, but we did not receive this  information prior to issuing this report.\nIn its written response, reproduced in appendix VIII, VA provided  information about its use of reverse auctions for energy purchases  through GSA and its energy reverse auction provider, EnerNOC. The  Department of Housing and Urban Development, GSA, and OMB  informed us that they had no comments on this report.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of Homeland  Security, the Secretary of Housing and Urban Development, the  Administrator of General Services, the Secretary of the Interior, the  Secretary of State, the Secretary of Veterans Affairs, and the  Administrator of Federal Procurement Policy. In addition, the report is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX.\n\nAppendix I: Defense Logistics Agency and Army Computer Hardware Enterprise Software and Solutions Reverse Auctions\n\n\tDefense Logistics Agency\u2019s Use of Reverse Auctions\n\nThe Defense Logistics Agency\u2019s (DLA) use of reverse auctions declined  over 80 percent from fiscal years 2013 to 2017 from about $7 billion to  about $1 billion in constant fiscal year 2017 dollars, according to data we  obtained from DLA\u2019s provider Procurex for all auctions conducted (that  may or may not have resulted in an award). According to DLA officials,  the agency\u2019s declining use is largely due to a policy revision that no  longer requires, but rather allows contracting officers to consider using  reverse auctions for all procurements over $150,000. DLA pays a flat fee  to its reverse auction provider for use of the reverse auction platform. This  payment mechanism is different from the fee arrangements in contracts  between agencies and many other reverse auction providers, for which  providers calculate fees on a per-transaction basis. In addition, DLA  generally uses a reverse auction as a price negotiation tool among a  group of selected vendors that the agency determined to be technically  acceptable based on vendors\u2019 initial responses to a solicitation. Because  of these differences, DLA does not have a need to track the reverse  auctions awarded for its reporting and oversight purposes.\n\n\tArmy Computer Hardware Enterprise Software and Solutions (CHESS) Information Technology (IT) e-mart Reverse Auction\n\nThe Army Computer Hardware Enterprise Software and Solutions  (CHESS) Information Technology (IT) e-mart program introduced its  reverse auction capability in January 2016. It offers fee-free reverse  auctions for a number of the CHESS contracts. According to Army  officials, in July 2017, the CHESS program began recommending use of  its reverse auction capability rather than other reverse auction platforms.  According to data provided by the CHESS program office for all auctions  conducted (that may or may not have resulted in an award), use of  reverse auctions increased over 225 percent between fiscal years 2016  and 2017 from about $28 million to about $91 million in constant fiscal  year 2017 dollars. The CHESS IT e-mart does not track which auctions  result in awards. According to officials, users capture award information in  the agency\u2019s contract writing system. While CHESS officials told us they  are interested in that kind of information, CHESS does not charge a fee  and does not have a need to track the reverse auctions awarded for its  oversight purposes.\n\nAppendix II: Agency Policies and Guidance Reviewed\n\nAppendix III: Objectives, Scope, and Methodology\n\nThis report examines (1) federal agencies\u2019 use of reverse auctions  between 2013 and 2017, (2) the extent to which selected agencies  achieved benefits through reverse auctions, and (3) the extent to which  selected agencies have insight into reverse auction fees.\nFor all objectives, we reviewed policies and guidance related to reverse  auctions from Office of Federal Procurement Policy (OFPP) and at  selected agencies and relevant components of those agencies we  reviewed, as well as the Standards for Internal Control in the Federal  Government and relevant work by agency Inspectors General. We also  interviewed procurement policy officials from the selected agencies and  representatives from reverse auction providers.\nTo examine federal agencies\u2019 use of reverse auctions between 2013 and  2017, we collected data from reverse auction providers we identified by  reviewing our past work in this area, reviewing federal procurement  solicitation and award information, conducting interviews with agency  officials, and conducting internet searches about federal use of reverse  auctions. Through these efforts, we identified eight reverse auction  providers that offered reverse auction services either government-wide or  to specific agencies (see table 10 below).\nWhile it is possible that our efforts did not identify all reverse auction  providers that federal agencies use, we are reasonably confident we have  included the largest reverse auction providers used by the selected  agencies in our review. In addition to the identification efforts described  above, for the selected agencies in our review, we asked component  officials to identify reverse auction providers with which the agency has a  contractual relationship and which reverse auction platforms the agency\u2019s  contracting officials use. We also asked numerous individual contracting  officers about the various platforms the individual has used. No additional  providers or platforms were identified as part of those efforts.\nWe collected fiscal year 2013 through 2017 data on reverse auctions use  from these reverse auction providers and analyzed it to identify the  number of reverse auctions conducted annually across the government  and the dollar value of those reverse auctions. For our analysis of the  number and dollar value of the auctions, we analyzed auctions that  resulted in a contract award between the agency and a vendor in a  particular year, according to provider data. We describe these as  awarded reverse auctions. The dollar value of an awarded auction is  based on the dollar amount of the bid selected for award; however, the  dollar amount of the bid selected for award is not necessarily equivalent  to the amount ultimately obligated on the resulting contract. We present  the dollar value of agencies\u2019 awarded auctions from 2013 through 2017 in  constant fiscal year 2017 dollars using the Congressional Budget Office\u2019s  June 2017 Gross Domestic Product price index projection\u2014the most  recent projection available at the time of our analysis. We generally  collected data from reverse auction providers because information about  reverse auction use is not available in the Federal Procurement Data  System-Next Generation, a government-wide source of contract data. In  addition, the selected agencies we reviewed do not separately track use  of reverse auctions. We collected data from the Department of Housing  and Urban Development directly because the agency tracks its reverse  auction use, including which auctions it awards. Two of the providers we  identified, Procurex and the Army CHESS IT e-mart reverse auction  platform, do not track the reverse auctions that agencies award to  vendors. The agencies using these providers, Defense Logistics Agency  and the Department of the Army, do not require this information for their  own reporting and oversight purposes or for paying for the reverse  auction services.\nFor purposes of this report, all references to reverse auction use exclude  auctions conducted with these providers. Therefore, our analysis includes  only the value and number of known, awarded auctions between  2013 through 2017. As a result, we underestimate total federal reverse  auction use. Using available data for the Department of the Army, we  estimate our analysis includes over 95 percent of the value and  99 percent of Army auctions. For the Defense Logistics Agency, Procurex  reported that over the five-year period the agency conducted  approximately 7,100 auctions valued at about $19 billion. While we  cannot say with certainty the number and value of awarded auctions, we  can assume the agency awarded fewer auctions than it conducted. Based  on information from other providers for which we have data on the number of auctions conducted and awarded, agencies using these  providers awarded about 45 percent of the auctions conducted between  2013 and 2017. Of the six providers with awarded auction data, FedBid  accounted for almost all auctions and the vast majority of dollars agencies  awarded using reverse auctions from 2013 through 2017.\nWe also used this data to identify six of the largest users of reverse  auctions for that period\u2014Departments of the Army, Homeland Security  (DHS), the Interior, the Navy, State, and Veterans Affairs (VA)\u2014by  number of auctions and dollar value. In determining the largest users of  reverse auctions, we excluded energy-related auctions from our analysis.  Energy-related auctions represented a sizable portion\u201410 percent\u2014of  reverse auction value, but less than 1 percent of auctions. We determined  that conducting a detailed review of energy-related auctions was not likely  to provide insight for other procurements because the unique  characteristics of energy markets make it difficult to compare to reverse  auctions for other goods and services that were included in our review.\nFor five of the six selected agencies (Army, Navy, DHS, Interior, and  State), we collected additional data on auctions awarded in fiscal year  2016\u2014the most recent year of detailed data available at the time that we  began our review. We limited our analysis to auctions for which we  identified a start, end, and contract award date in 2016, according to  provider data. Our analysis of fiscal year 2016 auctions included almost  15,000 auctions with a total awarded value of approximately $910 million.  We excluded reverse auctions for which the data indicated that they were  awarded in 2016 but for which the auction dates indicated that the  auctions were conducted in a prior year. At least some of these auctions  represent options exercised on earlier auctions, rather than new auctions,  and we wanted to ensure we could compare auction activity to policies  and procedures in place for a specific period. Our analysis of awarded  auctions excluded auctions identified as cancelled or with an auction  start, end, or award date outside of 2016. The sixth agency (VA)  conducted less than a dozen new auctions in 2016, and so we excluded  them from our analysis of 2016 data, as well as our analysis of the  benefits and fees associated with reverse auctions.\nWe analyzed agencies\u2019 use of reverse auctions, including but not limited  to  the number and dollar value of the awarded auctions,  types of products and services purchased,  level of competition achieved (number of participating vendors and  bids received),  savings from government pre-auction estimates, and  fees associated with the auctions.\nFor our analysis of the number and dollar value of the awarded auctions,  we included auctions that resulted in a contract award between the  agency and a vendor, according to provider data. Actual award  obligations may differ. For example, an agency may adjust the  procurement (such as increasing or decreasing the number of items  purchased) between the auction and the final award, which may not be  reflected in the data we used. In addition, the number of awarded  auctions may differ. While we took steps to exclude awarded auctions for  which agencies had cancelled the resulting contracts, if the provider data  did not identify an auction as cancelled we may have included it in our  analysis. For the analysis of products and services, we examined  auctions conducted and awarded in 2016 by two of the three reverse  auction providers, both of which had product and service code data  available for awarded reverse auctions. These two providers accounted  for almost all contracts awarded via reverse auctions that year. Provider  data included an overall product and service code for the auction. The  auction may include goods and services outside that particular code. For  our purposes, we used the code provided to categorize the auction as a  product or service and the type of purchase. The third provider, GSA  Reverse Auction, does not capture similar product and service code data.\nUsing other data GSA Reverse Auction provided, we were able to  estimate that about 20 percent of dollars awarded using GSA\u2019s Reverse  Auctions platform included information technology products and services.\nFor our analysis of contract vehicles, we used provider data on whether  the buyer selected to conduct the auction on the open marketplace or  limit the auction to vendors qualified to bid on existing contract vehicles.  For example, buyers may have conducted auctions on the open market,  which is available to any vendor selling the good or service that is  registered to bid via the reverse auction provider or conducted auctions  that were limited to vendors with specific agency or government-wide  contracts. For our analysis of competition, we included all vendors and  associated bids submitted in provider data. During our interviews with  contracting officials, we learned that in some auctions officials determined  particular vendors were not technically acceptable following an auction.  This information is not available in provider data and, as a result, our  analysis includes vendors that contracting officials determined were not  technically acceptable.\nWe also obtained contract-related information from the Federal  Procurement Data System-Next Generation for awarded auctions with  available contract or order numbers to identify if agencies used  commercial acquisition procedures and firm-fixed-price contracts in  accordance with the effective practices outlined in the June 2015 OFPP  memorandum. Government auditing standards require that we assess the  reliability of data we use in our products. As part of our assessment, we  reviewed the reverse auction data collected for obvious issues, such as  missing data elements, duplicates, and outliers. We also tested the  relationships between variables. In addition, we interviewed agency and  reverse auction provider officials to understand the data and collected  information on the systems used to collect and store the data, as well as  how those data are used. Further, we compared the data for a  non-generalizable sample of 40 auctions to contract files. We assessed  the reliability of the data used in this report and determined they were  sufficiently reliable for describing the known number and value of  awarded reverse auctions by federal agencies from 2013 through 2017  and identifying salient characteristics of selected agencies\u2019 awarded  auctions in 2016, including the number of participating vendors and bids,  type of good or service purchased, and indirect fees associated with the  auction.\nTo identify the extent to which selected agencies achieved the benefits of  reverse auctions, we analyzed the 2016 data we collected on reverse  auction use at our five selected agencies to identify factors related to  competition (e.g., the number of participating vendors in auctions and the  number of bids received, and the frequency of iterative bidding, defined  as when there are multiple bidders and at least one bidder submits more  than one bid during the auction) and savings (e.g., savings as calculated  by the reverse auction providers). This analysis excludes auctions  conducted using the Army CHESS IT e-mart because it does not track  which auctions result in awards. However, the analysis still includes at  least 93 percent of reverse auction award value and 98 percent of the  awarded auctions in 2016. To obtain a more in-depth understanding of  the benefits achieved by selected agencies, we selected and reviewed a  nongeneralizable selection of 40 contracts awarded from 2016 reverse  auctions across the five agencies. These contracts were chosen to  obtain variety across the following characteristics: buying agency and  component; contract vehicle (open market or orders on existing contracts  such as Federal Supply Schedules or agency indefinite-delivery \/  indefinite-quantity contracts); dollar value; fees charged by the reverse  auction providers; and goods and services being purchased (see table  11).\nAt DHS, we selected case studies from two components, Customs and  Border Protection and Immigration and Customs Enforcement. Customs  and Border Protection had an active contract with FedBid in 2016 and  Immigration and Customs Enforcement did not, so we selected these two  components in order to understand the difference in how components  with and without an active contract used FedBid.\nFor each of the selected case studies, we reviewed contract  documentation related to the reverse auction, such documentation of  market research, pre-auction cost estimates (e.g. independent cost  estimates), price negotiation memoranda, and contract award documents.  In addition, to obtain contracting officials\u2019 perspectives on the benefits of  reverse auctions, we interviewed the contracting officials involved with  35 of these 40 auctions: for the remaining 5, knowledgeable officials were  not available to interview. We conducted our interviews using a semi- structured interview process in which we asked contracting officials a  standard set of questions about their experiences conducting reverse  auctions. We did not compare reverse auctions to alternative acquisition  methods to compare the relative costs and benefits.\nTo identify the extent to which selected agencies had insight into reverse  auction fees, we analyzed provider data on fees paid indirectly to FedBid  and GSA Reverse Auctions in 2016 for the five agencies selected for our  review. Fees paid to these two reverse auction providers were paid  indirectly by the agencies through the winning vendor. Our analysis  included the total amount of fees paid by each agency in 2016 to each  reverse auction provider and the amount of fees paid by each agency in  2016 for auctions with only one bidder.\nWe also analyzed agency guidance to determine the extent of information  provided to contracting officials on reverse auction fees. Specifically, we  assessed whether agency guidance identified roles and responsibilities of  contracting officials in understanding and assessing reverse auction fees  and provided sufficient information to help ensure contracting officers  understood how reverse auction fees are applied. Further, we interviewed  contracting officials for 35 of our 40 selected auctions to develop an  understanding of the officials\u2019 knowledge of the fees related to the  auctions they conducted. As noted above, officials for the other 5 auctions  were not available to interview. The 40 selected auctions included 33 that  incurred an indirect fee, 2 for which the provider waived the fee, and 5 for  which no fee applied. We interviewed the contracting officials involved  with 30 of the auctions that incurred a fee and 5 of the auctions for which  the fee was waived or no fee applied. To determine whether contracting  officials we interviewed had a complete and accurate understanding of  reverse auction fee structures, we analyzed their responses to questions  about reverse auction fee structures and the fee paid for the reverse  auction we reviewed in detail, and compared their responses to fee  structures documented in agency contracts and reverse auction provider  terms and conditions.\nLastly, to determine whether agencies had sufficient insight into reverse  auction fees to conduct appropriate oversight, we analyzed contracts  between the selected agencies and FedBid as well as other fee  arrangements, including provider terms of service and GSA\u2019s Federal  Supply Schedule contract with FedBid. Our analysis included both  contracts that were in place in fiscal year 2016 in order to understand the  terms and conditions that covered the reverse auctions we reviewed in  detail, as well as contracts agencies awarded subsequent to fiscal year  2016 so that we could understand whether and how agencies fee  arrangements with reverse auction providers had changed. We analyzed  the contracts and other fee arrangements to determine the extent to  which they explained details of how the fees were applied, such as what  fee percentage would be charged, how the fees would apply to contract  option years, and how fee caps were applied.\nWe also used a variety of investigative tools and techniques to determine  if reverse auction procurement officials and commercial and government  providers have engaged in potential fraud, waste, abuse, and  mismanagement associated with reverse auction use. We reviewed fraud  alerts to learn about potential complaints, coordinated with agency  inspector general offices regarding work related to reverse auctions,  inquired about contracting officials\u2019 awareness of fraud incidents among  the 35 case studies for which we interviewed contracting officials, and  conducted a limited review for obvious financial relationships among  agency officials responsible for drafting reverse auction policy and  commercial reverse auction providers. While steps we took did not  uncover any obvious fraud, waste, abuse, or systemic mismanagement,  we cannot definitively state that there is no fraud, waste, abuse, or  mismanagement in federal use of reverse auctions.\nWe conducted this performance audit from January 2017 to July 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from April 2017 to March 2018 in accordance with  investigative standards prescribed by the Council of the Inspectors  General on Integrity and Efficiency.\n\nAppendix IV: Comments from the Department of Defense\n\nAppendix V: Comments from the Department of Homeland Security\n\nAppendix VI: Comments from the Department of the Interior\n\nAppendix VII: Comments from the Department of State\n\nAppendix VIII: Comments from the Department of Veterans Affairs\n\nAppendix IX: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Janet McKelvey (Assistant  Director), Luqman Abdullah, Cory Ahonen, Peter Anderson, Leslie  Ashton, Matthew Crosby, Alexandra Dew Silva, Lorraine Ettaro, April H.  Gamble, Anne McDonough, Miranda Riemer, Robin Wilson, and Helina  Wong made key contributions to this report.","output":"Why GAO Did This Study\n\nReverse auctions are intended to result in enhanced competition, lower prices, and reduced acquisition costs. GAO has previously found that agencies did not maximize these benefits.\nGAO was asked to review federal agencies' use of reverse auctions. This report examines (1) the use of reverse auctions and the extent to which selected agencies achieved benefits, such as competition; and (2) the extent to which selected agencies had insight into reverse auction fees.\nGAO collected and analyzed data on federal agencies' use of reverse auctions from fiscal years 2013 to 2017. For five of the largest users of reverse auctions\u2014the Departments of the Army, Homeland Security, Interior, Navy, and State\u2014GAO reviewed documentation for 40 auctions that resulted in contract awards in fiscal year 2016 (the most recent data available when the review began), and that were selected to obtain a mix of dollar values and levels of competition, among other factors. GAO also interviewed contracting officials and analyzed agency guidance.\n\nWhat GAO Found\n\nFederal agencies' use of reverse auctions\u2014a process where vendors bid against each other with lower prices to win government contracts\u2014declined between fiscal years 2013 and 2017, from about 34,000 to 19,000 auctions valued at about $1.9 billion and $1.5 billion, respectively. In fiscal year 2016, the year GAO studied in detail, nearly three-quarters of auctions at the agencies GAO reviewed resulted in iterative bidding\u2014when there are multiple bidders and at least one bidder submits more than one bid during the auction (see figure).\nContracting officers said reverse auctions reduce administrative burden, especially during peak contracting times. Reverse auctions data indicate that selected agencies may have saved more than $100 million in 2016.\nThe five agencies GAO reviewed indirectly paid about $13 million in fees to reverse auction providers through awardees in 2016. However, 28 of the 30 contracting officials GAO interviewed did not fully understand how fees were set. Further, in 2016, agencies GAO reviewed indirectly paid approximately $3 million in fees for reverse auctions for which a fee-free alternative was likely available. None of the guidance GAO reviewed provided sufficient information for contracting officers to assess the appropriateness of these fees (see table). Without better information, contracting officials may be offsetting potential savings by paying more in fees than necessary for the level of services required.\n\nWhat GAO Recommends\n\nGAO is making a total of 21 recommendations to the five agencies in GAO's review, including that agencies inform contracting officials about fees to better compare available provider options. Defense, State, and Interior concurred with this recommendation. DHS did not, stating that contracting officials should obtain this knowledge during market research. GAO believes managing this information centrally could eliminate confusion and minimize duplicate efforts."}
{"id":"gao_GAO-18-383T","pid":"gao_GAO-18-383T_0","input":"\tAccelerated by E- Commerce, Changes in the Counterfeits Market Present Challenges to U.S. Agencies, Consumers, and the Private Sector\n\n\t\tE-Commerce Has Contributed to a Shift in the Market for Counterfeit Goods\n\nThe rise of e-commerce has contributed to a fundamental change in the  market for counterfeit goods, according to our analysis of documents from  CBP, ICE, and international organizations and our interviews with CBP  and ICE officials. U.S. agencies and international organizations have  observed a shift in the sale of counterfeit goods from \u201cunderground\u201d or  secondary markets, such as flea markets or sidewalk vendors, to primary  markets, including e-commerce websites, corporate and government  supply chains, and traditional retail stores. Whereas secondary markets  are often characterized by consumers who are knowingly purchasing  counterfeits, primary markets involve counterfeiters who try to deceive  consumers into purchasing goods they believe are authentic.\nThis shift has been accompanied by changes in the ways in which  counterfeit goods are sold. In the past, consumers could often rely on  indicators such as the location of sale or the goods\u2019 appearance or price  to identify counterfeit goods in the marketplace. However, counterfeiters  have now adopted new ways to deceive consumers. For example, as  consumers increasingly purchase goods online, counterfeiters may  exploit third-party online marketplaces to gain an appearance of  legitimacy and access to consumers. When selling online, counterfeiters  may post pictures of authentic goods on the websites where they are  selling counterfeits and may post pseudonymous reviews of their  products or businesses in order to appear legitimate. Additionally, by  setting the price of a counterfeit at, or close to, the retail price of a  genuine good, counterfeiters may deceive consumers, who will pay the  higher price because they believe the goods are real or who believe that  they are getting a slight bargain on genuine goods.\n\n\t\tCBP Data Indicate Changes in Several Key Characteristics of Counterfeit Goods Seized\n\nAccording to CBP seizure data and CBP officials, the volume, variety, and  methods of shipment of counterfeit goods seized by CBP and ICE have  changed in recent years. CBP reports indicate that the number of IPR  seizures increased by 38 percent in fiscal years 2012 through 2016.  According to CBP data, approximately 88 percent of IPR seizures made  during this period were shipped from China and Hong Kong. The variety  of products being counterfeited has also increased, according to CBP  officials. CBP and ICE officials noted that, while many consumers may  think of luxury handbags or watches as the most commonly counterfeited  goods, counterfeiting occurs in nearly every industry and across a broad  range of products. In addition, according to CBP data we reviewed and  officials we spoke to, the methods of importing counterfeit goods into the  United States have changed in recent years. Specifically, express carriers  and international mail have become the predominant form of  transportation for IPR-infringing goods entering the United States,  constituting approximately 90 percent of all IPR seizures in fiscal years  2015 and 2016, according to CBP data.\n\n\t\tTwenty of 47 Items Purchased from Third- Party Sellers on Popular E-Commerce Websites Were Counterfeits, Highlighting Potential Risks to Consumers\n\nIn an attempt to illustrate the risk that consumers may unknowingly  encounter counterfeit products online, we purchased a nongeneralizable  sample of four types of consumer products\u2014shoes, travel mugs,  cosmetics, and phone chargers\u2014from third-party sellers on five popular  e-commerce websites. According to CBP data we reviewed and officials  we spoke to, CBP often seizes IPR-infringing counterfeits of these types  of products. As table 1 shows, the rights holders for the four selected  products we purchased determined that 20 of the 47 items were  counterfeit.\nWe did not identify any clear reasons for the variation among the  counterfeit and authentic items that we purchased based on the products  that they represented, the e-commerce websites where we bought the  items, or the third-party sellers from whom we bought them. For three of  the four product types, at least one item we purchased was determined to  be counterfeit, with results varying considerably by product.  Representatives of the rights holders also could not provide a specific  explanation for the variation among authentic and counterfeit goods that  we received. They noted that the results of covert test purchases can  fluctuate depending on enforcement activities and the variety of goods and sellers on a particular website on a given day. Rights-holder testing  also showed that we purchased at least one counterfeit item and one  authentic item from each of the five e-commerce websites. In addition,  our analysis of the customer ratings of third-party sellers from whom we  bought the items did not provide any clear indications that could warn  consumers that a product marketed online may be counterfeit. For  example, we received both counterfeit and authentic items from third- party sellers with ratings that were less than 70 percent positive as well  as sellers with ratings that were up to 100 percent positive.\nRights holders were able to determine that items we purchased were not  authentic on the basis of inferior quality, incorrect markings or  construction, and incorrect labeling. Some counterfeit items we  purchased were easily identifiable as likely counterfeit once we received  them. For example, one item contained misspellings of \u201cAustin, TX\u201d and  \u201cMade in China.\u201d Other items could be more difficult for a typical  consumer to identify as counterfeit. For example, the rights holder for a  cosmetic product we purchased identified one counterfeit item on the  basis of discrepancies in the color, composition, and design of the  authentic and counterfeit items\u2019 packaging. Counterfeit goods may also  lack key elements of certification markings and other identifiers. For  example, on a counterfeit phone charger we purchased, the UL  certification mark did not include all components of the authentic mark.  Figure 1 shows examples of these counterfeit items.\nThe risks associated with the types of counterfeit goods we purchased  can extend beyond the infringement of a company\u2019s IPR. For example, a  UL investigation of counterfeit iPhone adapters found a 99 percent failure  rate in 400 counterfeit adapters tested for safety, fire, and shock hazards  and found that 12 of the adapters tested posed a risk of lethal  electrocution to the user. Similarly, according to a rights holder  representative, counterfeits of common consumer goods, such as Yeti  travel mugs, may contain higher-than-approved concentrations of  dangerous chemicals such as lead, posing health risks to consumers.  According to ICE, seized counterfeit cosmetics have been found to  contain hazardous substances, including cyanide, arsenic, mercury, lead,  urine, and rat droppings.\nRepresentatives of rights holders and e-commerce websites whom we  interviewed reported taking independent action to try to protect IPR within  their areas of responsibility. For example, both rights holders and e- commerce websites maintain IPR protection teams that work with one  another and with law enforcement to address infringement issues. E- commerce websites may also take a variety of steps to block and remove  counterfeit items listed by third-party sellers. These efforts rely on data  collected through a variety of means, including consumer reporting of  counterfeits, rights-holder notifications of IPR infringement, and corporate  efforts to vet potential third-party sellers, according to private sector  representatives.\nOur January 2018 report includes information on steps that consumer  protection organizations and government agencies recommend  consumers take to limit the risk of purchasing counterfeits online. These  steps include, for example, buying only from authorized retailers online,  avoiding prices that look \u201ctoo good to be true,\u201d and reporting counterfeit  purchases.\n\n\t\tChanges in the Marketplace Can Pose Challenges to U.S. Agencies and the Private Sector\n\nWe identified a number of key challenges that the changes in the market  for counterfeit goods can pose to CBP and ICE as well as to the private  sector. First, the increasing sophistication of counterfeits can make it  difficult for law enforcement officers to distinguish between legitimate and  counterfeit goods. Second, as the range of counterfeit goods expands,  CBP has a wider variety of goods to screen, which requires CBP officials  to have in-depth knowledge of a broad range of products and of how to  identify counterfeits. Third, counterfeiters may break up large shipments  into multiple smaller express carrier or mail packages to decrease the risk  of losing significant quantities of merchandise to a single seizure. This  shift toward smaller express shipments of counterfeit goods to the United  States poses challenges to CBP and ICE because, according to CBP  officials, seizure processing requires roughly the same amount of time  and resources regardless of shipment size or value.\nThe changing marketplace also presents challenges to the private sector,  according to representatives from rights holders and e-commerce  websites. For example, it is more difficult for rights holders and e- commerce websites to identify and investigate individual counterfeit  cases, because e-commerce websites face a growing inventory from a  larger registry of sellers. Tracking goods from known counterfeiters  through various website fulfillment and delivery mechanisms is also a  significant challenge for the private sector. Furthermore, the growth of e- commerce has accelerated the pace at which counterfeiters can gain  access to consumers or reinvent themselves if shut down.\n\n\tCBP and ICE Engage in Activities to Enhance IPR Enforcement, but CBP Has Not Fully Evaluated the Results of Its Activities\n\nCBP and ICE engage in a number of activities to enhance IPR  enforcement; however, while ICE has assessed some of its efforts, CBP  has taken limited steps to do so. CBP\u2019s and ICE\u2019s IPR enforcement  activities broadly include detecting imports of potentially IPR-infringing  goods, conducting special operations at U.S. ports, engaging with  international partners, and undertaking localized pilot programs or port- led initiatives. CBP and ICE have collected some performance data on  activities we reviewed, and ICE has taken some steps to better  understand the impact of its efforts, such as creating a process to track  cases it deems significant. However, we found that CBP has conducted  limited evaluation of its efforts to enhance IPR enforcement.  Consequently, we concluded that CBP may lack information needed to  ensure it is investing its resources in the most efficient and effective  activities. We recommended in our report that CBP take steps to evaluate  the effectiveness of its IPR enforcement efforts; CBP concurred with this  recommendation.\n\n\tCBP and ICE Generally Collaborate on IPR Enforcement, but CBP Is Restricted in Sharing Information with the Private Sector\n\nOur analysis showed that CBP and ICE interagency collaboration on IPR  enforcement is generally consistent with the following selected key  practices for effective interagency collaboration: (1) define and articulate  a common outcome; (2) establish mutually reinforcing or joint strategies;  (3) identify and address needs by leveraging resources; (4) agree on  roles and responsibilities; and (5) establish compatible policies,  procedures, and other means to operate across agency boundaries. For  example, the agencies may leverage resources by collocating staff or  sharing their expertise. CBP and ICE have also issued guidance and  developed standard operating procedures to clarify roles and  responsibilities. CBP and ICE also coordinate with the private sector in a  variety of ways, such as obtaining private sector assistance to determine  whether detained goods are authentic and to conduct training.\nRepresentatives of rights holders and e-commerce websites noted that  information shared by law enforcement entities is critical to private sector  IPR enforcement, such as pursuing civil action against a counterfeiter or  removing counterfeit items from websites. In the Trade Facilitation and  Trade Enforcement Act of 2015, Congress provided CBP with explicit  authority to share certain information with trademark and copyright  owners before completing a seizure. CBP officials stated that they share  information about identified counterfeits with e-commerce websites and  rights holders to the extent possible under current regulations. However,  according to private sector representatives we spoke to, restrictions on  the amount and type of information about seized items shared by CBP  limit the ability of rights holders and e-commerce websites to protect IPR.  CBP officials noted that there are legal limitations to the amount and type  of information they can share, particularly if the e-commerce website is  not listed as the importer on forms submitted to CBP.\nSeveral private sector representatives stated that receiving additional  information from CBP would enhance their ability to protect IPR.  Representatives of one website noted that information on the exterior of  seized packages, such as business identifiers on packages destined for  distribution centers, would be helpful for identifying groups of counterfeit  merchandise from the same seller. However, according to CBP officials,  CBP cannot provide such information to e-commerce websites.  Representatives of one e-commerce website noted that ICE sometimes  shares information related to an investigation, but that ICE\u2019s involvement  in the enforcement process begins only after CBP has identified and  seized counterfeit items. Representatives of two e-commerce websites  stated that, because of the limited information shared by CBP, they may  not be aware of IPR-infringing goods offered for sale on their websites,  even if CBP has seized related items from the same seller.\nAccording to CBP officials, CBP is reviewing options for sharing additional  information with rights holders and e-commerce websites and is  assessing what, if any, additional information would be beneficial to share  with private sector entities. CBP officials stated that they have not yet  determined whether changes to the amount and types of information  provided to e-commerce websites would require regulatory changes or  additional legal authorities. These officials also said that they have  discussed differences in CBP\u2019s and ICE\u2019s information sharing with ICE  officials. In our report, we recommended that CBP, in consultation with  ICE, assess what, if any, additional information would be beneficial to  share with the private sector and, as appropriate, take action to enhance  information sharing where possible. CBP concurred with this  recommendation.\nChairman Hatch, Ranking Member Wyden, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  answer any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact Kimberly Gianopoulos, Director, International Affairs and Trade,  at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this testimony are Joyee Dasgupta, Kara Marshall, Katie Bassion, Kristen  Timko, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina  Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James  Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale.\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":"Why GAO Did This Study\n\nThis testimony summarizes the information contained in GAO's January 2018 report, entitled Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market , ( GAO-18-216 ).\n\nWhat GAO Found\n\nChanges in the market for counterfeit goods entering the United States pose new challenges for consumers, the private sector, and U.S. agencies that enforce intellectual property rights (IPR). Specifically, growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products. For example, 20 of 47 items GAO purchased from third-party sellers on popular consumer websites were counterfeit, according to testing by the products' rights holders (see table), highlighting potential risks to consumers. The changes in the market for counterfeit goods can also pose challenges to the private sector\u2014for example, the challenge of distinguishing counterfeit from authentic goods listed for sale online\u2014and complicate the enforcement efforts of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).\nCBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so. CBP's and ICE's IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U.S. ports, engaging with international partners, and undertaking localized pilot programs or port-led initiatives. CBP and ICE have collected some performance data for each of the eight activities GAO reviewed, and ICE has taken some steps to understand the impact of its efforts. However, CBP has conducted limited evaluation of its efforts to enhance IPR enforcement. Consequently, CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities.\nCBP and ICE generally collaborate on IPR enforcement, but according to private sector representatives, restrictions on CBP's information sharing limit private sector enforcement efforts. GAO found that CBP and ICE have undertaken efforts that align with selected key practices for interagency collaboration, such as participating in developing a national IPR enforcement strategy and agreeing on roles and responsibilities. However, sharing additional information about seized items with rights-holding companies and e-commerce websites could improve enforcement, according to private sector representatives. CBP officials said they share information to the extent allowed under current regulations, but CBP has not completed an assessment of what, if any, additional information would be beneficial to share with private sector entities. Without such an assessment, CBP will not know if sharing additional information requires regulatory or legal changes."}
{"id":"crs_R42917","pid":"crs_R42917_0","input":"\tIntroduction\n\nCongress has demonstrated renewed interest in Mexico, a top trade partner and energy supplier with which the United States shares a nearly 2,000-mile border and strong cultural, familial, and historical ties (see Figure 1 ). Economically, the United States and Mexico are interdependent, and Congress closely followed efforts to renegotiate NAFTA, which began in August 2017, and ultimately resulted in a proposed United States-Mexico-Canada Agreement (USMCA) signed in November 2018. Similarly, security conditions in Mexico and the Mexican governments' ability to manage U.S.-bound migration flows affect U.S. national security, particularly at the Southwest border. \nFive months into his six-year term, Mexican President Andr\u00e9s Manuel L\u00f3pez Obrador enjoys an approval ratings of 78%, even as his government is struggling to address rising insecurity and sluggish growth. Discontent with Mexico's traditional parties and voters' desire for change led them to elect L\u00f3pez Obrador president with 53% of the vote. Some fear that L\u00f3pez Obrador, whose National Regeneration Movement (MORENA) coalition captured legislative majorities in both chambers of the Congress, will reverse the reforms enacted in 2013-2014. Others predict that pressure from business groups, civil society, and some legislators and governors may constrain L\u00f3pez Obrador's populist tendencies.\nThis report provides an overview of political and economic conditions in Mexico, followed by assessments of selected issues of congressional interest in Mexico: security and foreign aid, extraditions, human rights, trade, migration, energy, education, environment, and water issues. \n\n\tBackground\n\nOver the past two decades, Mexico has transitioned from a centralized political system dominated by the Institutional Revolutionary Party (PRI), which controlled the presidency from 1929-2000, to a true multiparty democracy. Since the 1990s, presidential power has become more balanced with that of Mexico's Congress and Supreme Court. Partially as a result of these new constraints on executive power, the country's first two presidents from the conservative National Action Party (PAN)\u2014Vicente Fox (2000-2006) and Felipe Calder\u00f3n (2006-2012)\u2014struggled to enact some of the reforms designed to address Mexico's economic and security challenges.\nThe Calder\u00f3n government pursued an aggressive anticrime strategy and increased security cooperation with the United States. Mexico arrested and extradited many drug kingpins, but some 60,000 people died due to organized crime-related violence. Mexico's security challenges overshadowed some of the government's achievements, including its economic stewardship during the global financial crisis, health care expansion, and efforts on climate change. \nIn 2012, the PRI regained control of the presidency 12 years after ceding it to the PAN with a victory by Enrique Pe\u00f1a Nieto over L\u00f3pez Obrador of the leftist Democratic Revolutionary Party (PRD). L\u00f3pez Obrador then left the PRD and founded the MORENA party. Voters viewed the PRI as best equipped to reduce violence and hasten economic growth, despite concerns about its reputation for corruption. In 2013, Pe\u00f1a Nieto shepherded structural reforms through a fragmented legislature by forming a \"Pact for Mexico\" agreement among the PRI, PAN, and PRD. The reforms addressed a range of issues, including education, energy, telecommunications, access to finance, and politics (see Table A-1 in the Appendix ). The energy reform led to foreign oil and gas companies committing to invest $160 billion in the country.\nDespite that early success, Pe\u00f1a Nieto left office with extremely low approval ratings (20% in November 2018) after presiding over a term that ended with record levels of homicides, moderate economic growth (averaging 2% annually), and pervasive corruption and impunity. Pe\u00f1a Nieto's approval rating plummeted after his government botched an investigation into the disappearance of 43 students in Ayotzinapa, Guerrero in September 2014. Reports that surfaced in 2014 of how Pe\u00f1a Nieto, his wife, and his foreign minister benefitted from ties to a firm that won lucrative government contracts, further damaged the administration's reputation. In 2017, reports emerged that the Pe\u00f1a Nieto government used spyware to monitor its critics, including journalists.\n\n\tL\u00f3pez Obrador Administration\n\n\t\tJuly 1, 2018, Election7\n\nOn July 1, 2018, Andr\u00e9s Manuel L\u00f3pez Obrador and his MORENA coalition dominated Mexico's presidential and legislative elections. Originally from the southern state of Tabasco, L\u00f3pez Obrador is a 65-year-old former mayor of Mexico City (2000-2005) who ran for president in the past two elections. After his loss in 2012, he left the center-left Democratic Revolutionary Party (PRD) and established MORENA. \nMORENA, a leftist party, ran in coalition with the socially conservative Social Encounter Party (PES) and the leftist Labor Party (PT). L\u00f3pez Obrador won 53.2% of the presidential vote, more than 30 percentage points ahead of his nearest rival, Ricardo Anaya, of the PAN\/PRD\/Citizen's Movement (MC) alliance who garnered 22.3% of the vote. L\u00f3pez Obrador won in 31 of 32 states (see Figure 2 ). The PRI-led coalition candidate, Jos\u00e9 Antonio Meade, won 16.4% of the vote followed by Jaime Rodr\u00edguez, Mexico's first independent presidential candidate, with 5.2%.\nAndr\u00e9s Manuel L\u00f3pez Obrador's victory signaled a significant change in Mexico's political development. L\u00f3pez Obrador won in 31 of 32 states, demonstrating that he had broadened his support from his base in southern Mexico.The presidential election results have prompted soul-searching within the traditional parties and shown the limits of independent candidates. Anaya's defeat provoked internal struggles within the PAN. Meade's performance demonstrated voters' deep frustration with the PRI. \nIn addition to the presidential contest, all 128 seats in the Mexican senate and 500 seats in the chamber of deputies were up for election. Senators serve for six years, and deputies serve for three. Beginning this cycle, both senators and deputies will be eligible to run for reelection for a maximum of 12 years in office. MORENA's coalition won solid majorities in the Senate and the Chamber which convened on September 1, 2018. As of April 2019, the ruling coalition controls 70 of 128 seats in the Senate and 316 of 500 seats in the Chamber. The MORENA coalition lacks the two-thirds majority it needs to make constitutional changes or overturn reforms passed in 2013. The PAN is the second-largest party in each chamber.\nMexican voters gave L\u00f3pez Obrador and MORENA a mandate to change the course of Mexico's domestic policies. Nevertheless, L\u00f3pez Obrador's legislative coalition may face opposition if it seeks to enact policies that would shift the balance of power between federal and state offices. L\u00f3pez Obrador proposed having a federal representative in each state to liaise with his office and to oversee distribution of all federal funds, but governors opposed this proposal. As shown in Figure 3 , MORENA and allied parties control four of 32 governorships, including that of Mexico City. \n\n\t\tPresident L\u00f3pez Obrador: Priorities and Early Actions\n\nIn 2018, L\u00f3pez Obrador promised to bring about change by governing differently than recent PRI and PAN administrations. He focused on addressing voters' concerns about corruption, poverty and inequality, and escalating crime and violence.Although some of his advisers endorse progressive social policies, L\u00f3pez Obrador personally has opposed abortion and gay marriage. \nL\u00f3pez Obrador has set high expectations for his government and promised many things to many different constituencies, some of which appear to conflict with each other. Upon taking office, L\u00f3pez Obrador pledged to bring about a \"fourth transformation\" that would make Mexico a more just and peaceful society, but observers question whether his ambitious goals are attainable, given existing fiscal constraints. As an example, he has promised to govern austerely but has started a number of new social programs. His finance minister has promised that existing contracts with private energy companies will be respected, but his energy minister has halted new auctions and is seeking to rebuild the heavily indebted state oil company ( Petr\u00f3leos de M\u00e9xico or Pemex). \nPresident L\u00f3pez Obrador's distinct brand of politics has given him broad support. L\u00f3pez Obrador has dominated the news cycle by convening daily, early morning press conferences. His decision to cut his own salary and public sector salaries generally have prompted high-level resignations among senior bureaucrats, but proven popular with the public. His government has started a new youth scholarship program and pensions for the elderly, while also promising to create jobs with infrastructure investments (including a new oil refinery and a railroad in the Yucat\u00e1n) in southern Mexico regardless of their feasibility. Voters have given the government the benefit of the doubt even when its policies have caused inconveniences, such as fuel shortages that occurred after security forces closed some oil pipelines in an effort to combat theft. \nInvestors have been critical of some of the administration's early actions. Many expressed concern after L\u00f3pez Obrador cancelled a $13 billion airport project already underway after voters in a MORENA-led referendum rejected its location. Investors were somewhat assuaged, however, after the administration unveiled a relatively austere budget in late 2018 and then decided to allow energy contracts signed during Pe\u00f1a Nieto's presidency to proceed while halting new ones. With L\u00f3pez Obrador's support, the Congress has enacted reforms to strengthen the protection of labor rights and workers' salaries, in part to comply with its domestic commitments related to the USMCA. On the other hand, it is unclear whether legislators' revisions will water down, or completely undo, education reforms passed in 2013 that were deemed a step forward toward raising education standards by many, but have been opposed by unions and ordered repealed by L\u00f3pez Obrador. \nCritics maintain that President L\u00f3pez Obrador has shunned reputable media outlets that have questioned his policies and cut funding for entities that could provide checks on his presidential power. He has dismissed data collected on organized crime-related violence by media outlets as \"fake news\" even as government data corroborate their findings that violence is escalating. His government has cut the budget for the national anticorruption commission, newly independent prosecutor general's office, and several regulatory agencies.\n\n\t\tSecurity Conditions\n\nEndemic violence, much of which is related to organized crime, has become an intractable problem in Mexico (see Figure 4 ). Organized crime-related violence has been fueled by U.S. drug demand, as well as bulk cash smuggling and weapons smuggling from the United States. Organized crime-related homicides in Mexico rose slightly in 2015 and significantly in 2016. In 2017, total homicides and organized crime-related homicides reached record levels. During Mexico's 2018 campaign, more than 150 politicians reportedly were killed. The homicide rate reached record levels in 2018 and rose even higher during the first three months of 2019 as fighting among criminal organizations intensified.\nInfighting among criminal groups has intensified since the rise of the Jalisco New Generation, or CJNG, cartel, a group that shot down a police helicopter in 2016. The January 2017 extradition of Joaqu\u00edn \"El Chapo\" Guzm\u00e1n prompted succession battles within the Sinaloa Cartel and emboldened the CJNG and other groups to challenge Sinaloa's dominance. Crime groups are competing to supply surging U.S. demand for heroin and other opioids. Mexico's criminal organizations also are fragmenting and diversifying away from drug trafficking, furthering their expansion into activities such as oil theft, alien smuggling, kidnapping, and human trafficking. Although much of the crime\u2014particularly extortion\u2014disproportionately affects localities and small businesses, fuel theft has become a national security threat, costing Mexico as much as $1 billion a year and fueling violent conflicts between the army and suspected thieves.\nMany assert that the Pe\u00f1a Nieto administration maintained Calder\u00f3n's reactive approach of deploying federal forces\u2014including the military\u2014to areas in which crime surges rather than proactively strengthening institutions to deter criminality. These deployments led to a swift increase in human rights abuses committed by security forces (military and police) against civilians (see \" Human Rights \" below). High-value targeting of top criminal leaders also continued. As of August 2018, security forces had killed or detained at least 110 of 122 high-value targets identified as priorities by the Pe\u00f1a Nieto government; nine of those individuals received sentences. In August 2018, the Mexican government and the U.S. Drug Enforcement Administration (DEA) announced a new bilateral effort to arrest the leader of the CJNG. Even as many groups have developed into multifaceted illicit enterprises, government efforts to seize criminal assets have been modest and attempts to prosecute money laundering cases have had \"significant shortcomings.\"\nWith violence reaching historic levels during the first quarter of 2019 and high-profile massacres occurring, President L\u00f3pez Obrador is under increasing pressure to refine his security strategy. As a candidate, L\u00f3pez Obrador emphasized anticorruption initiatives, social investments, human rights, drug policy reform, and transitional justice for nonviolent criminals. In line with those priorities, Mexico's security strategy for 2018-2024 includes a focus on addressing the socioeconomic drivers of violent crime. The administration has launched a program to provide scholarships to youth to attend university or to complete internships. Allies in the Mexican Congress are moving toward decriminalizing marijuana production and distribution.\nAt the same time, President L\u00f3pez Obrador has backed constitutional reforms to allow military involvement in public security to continue for five more years, despite a 2018 Supreme Court ruling that prolonged military involvement in public security violated the constitution. He secured congressional approval of a new 80,000-strong National Guard (composed of military police, federal police, and new recruits) to combat crime, a move that surprised many in the human rights community. After criticism from human rights groups, the Congress modified L\u00f3pez Obrador's original proposal to ensure the National Guard will be under civilian command. \n\n\t\tCorruption, Impunity, and Human Rights Abuses\n\n\t\t\tCorruption and the Rule of Law\n\nCorruption is an issue at all levels of government in Mexico: 84% of Mexicans identify corruption as among the most pressing challenge facing the country. In Mexico, the costs of corruption reportedly reach as much as 5% of gross domestic product each year. Mexico fell 33 places in Transparency International's Corruption Perceptions Index from 2012 to 2018. At least 14 current or former governors (many from the PRI) are under investigation for corruption, including collusion with organized crime groups that resulted in violent deaths. A credible case against the chair of Pe\u00f1a Nieto's 2012 campaign (and former head of Pemex) for receiving $10.5 million in bribes from Odebrecht, a Brazilian construction firm, stalled after the prosecutor investigating the case was fired. Even though L\u00f3pez Obrador has called for progress and transparency in anticorruption cases, his government has not unsealed information on investigations related to the Odebrecht case.\nNew Criminal Justice System. By the mid-2000s, most Mexican legal experts had concluded that reforming Mexico's corrupt and inefficient criminal justice system was crucial for combating criminality and strengthening the rule of law. In June 2008, Mexico implemented constitutional reforms mandating that by 2016, trial procedures at the federal and state level had to move from a closed-door process based on written arguments presented to a judge to an adversarial public trial system with oral arguments and the presumption of innocence. These changes aimed to help make a new criminal justice system that would be more transparent, impartial, and efficient (through the use of alternative means of dispute settlement). Federal changes followed advances made in early adopters of the new system, including states such as Chihuahua.\nUnder Pe\u00f1a Nieto, Mexico technically met the June 2016 deadline for adopting the new system, with states that have received technical assistance from the United States showing, on average, better results than others. Nevertheless, s problems in implementation occurred and public opinion turned against the system as many criminals were released by judges due to flawed investigations by police and\/or weak cases presented by prosecutors. On average, fewer than 20% of homicides have been successfully prosecuted, suggesting persistently high levels of impunity. According to the World Justice Project, the new system has produced better courtroom infrastructure, more capable judges, and faster case resolution than the old system, but additional training for police and prosecutors is needed. It is unclear whether L\u00f3pez Obrador will dedicate the resources necessary to strengthen the system.\nReforming the Attorney General's Office. Analysts who study Mexico's legal system highlight the inefficiency of the attorney general's office (PGR). For years, the PGR's efficiency has suffered because of limited resources, corruption, and a lack of political will to resolve high-profile cases, including those involving high-level corruption or emblematic human rights abuses. Three attorneys general resigned from 2012 to 2017; the last one stepped down over allegations of corruption. Many civil society groups that pushed for the new criminal justice system in the mid-2000s also lobbied the Mexican Congress to create an independent prosecutor's office to replace the PGR. Under constitutional reforms adopted in 2014, Mexico's Senate would appoint an independent individual to lead the new prosecutor general's office. \nPresident Andr\u00e9s Manuel L\u00f3pez Obrador downplayed the importance of the new office during his presidential campaign, but Mexico's Congress established the office after he was inaugurated in December 2018. In January 2019, Mexico's Senate named Dr. Alejandro Gertz Manero, a 79-year old associate and former security advisor to L\u00f3pez Obrador, as Prosecutor General. Gertz Manero's nomination and subsequent appointment has raised concerns about his capacity to remain independent, given his ties to the president. Many wonder if he will take up cases against the president and his administration. Gertz Manero is to serve a nine-year term.\nMaking Electoral Fraud and Corruption Grave Crimes. In December 2018, L\u00f3pez Obrador proposed constitutional changes that would expand the list of grave crimes for which judges must mandate pretrial detention to include corruption and electoral fraud. The proposal passed the Senate in December and the lower chamber in February 2019. Critics, such as the UN High Commissioner for Human Rights (OHCHR), noted that the change violates the presumption of innocence, an international human right under the UN's Universal Declaration of Human Rights. Increasing pretrial detention also goes against one of the stated goals of the NCJS. The president, however, welcomed the outcome.\nNational Anticorruption System. In July 2016, Mexico's Congress approved legislation to fully implement the national anticorruption system (NAS) created by a constitutional reform in April 2015. The legislation reflected several of the proposals put forth by Mexican civil society groups. It gave the NAS investigative and prosecutorial powers and a civilian board of directors; increased administrative and criminal penalties for corruption; and required three declarations (taxes, assets, and conflicts of interest) from public officials and contractors. During the Pe\u00f1a Nieto government, federal implementation of the NAS lagged and state-level implementation varied significantly. In December 2017, members of the system's civilian board of directors maintained that the government had thwarted its efforts by denying requests for information. \nAlthough he campaigned on an anticorruption platform, President L\u00f3pez Obrador has questioned the necessity of the NAS. Since taking office, L\u00f3pez Obrador has not prioritized implementing the system. Nevertheless, Prosecutor General Gertz Manero named a special anticorruption prosecutor in February 2019. The 18 judges required to hear corruption cases are still to be named. In addition, many states have not fulfilled the constitutional requirements for establishing a local NAS.\n\n\t\t\tHuman Rights\n\nCriminal groups, sometimes in collusion with public officials, as well as state actors (military, police, prosecutors, and migration officials), have continued to commit serious human rights violations against civilians, including extrajudicial killings. The vast majority of those abuses have gone unpunished, whether prosecuted in the military or civilian justice systems. The government also continues to receive criticism for not adequately protecting journalists and human rights defenders, migrants, and other vulnerable groups. \nFor years, human rights groups and U.S. State Department Country Reports on Human Rights Practices have chronicled cases of Mexican security officials' involvement in extrajudicial killings, \"enforced disappearances,\" and torture. In October 2018, the outgoing Pe\u00f1a Nieto government estimated that more than 37,000 people who had gone missing since 2006 remained unaccounted for. States on the U.S.-Mexico border (Tamaulipas, Nuevo Le\u00f3n, and Sonora) have among the highest rates of disappearances. The National Human Rights Commission estimates that \"more than 3,900 bodies have been found in over 1,300 clandestine graves since 2007.\" \nIn 2017, the Mexican Congress enacted a law against torture. After an April 2019 visit to Mexico, the U.N. Committee against Torture welcomed the passage of the 2017 law, but stated that torture by state agents occurred in a \" generalized manner \" in Mexico and found the use of torture to be \"endemic\" in detention centers. They also maintained that impunity for the crime of torture must be addressed: 4.6% of investigations into torture claims resulted in convictions.\nDuring a recent visit to Mexico, Michelle Bachelet, the United Nations High Commissioner for Human Rights recognized President L\u00f3pez Obrador's efforts to put human rights at the center of his government. Bachelet highlighted the President's willingness to \"unveil the truth, provide justice, give reparations to victims and guarantee the nonrepetition\" of human rights violations. She commended the creation of the Presidential Commission for Truth and Access to Justice for the Ayotzinapa case and acknowledged the government's broader commitment to search for the disappeared. The commissioner welcomed the government's presentation of the Plan for the Implementation of the General Law on Disappearances (approved in 2017), the reestablishment of the National Search System, and the announcement of plans to create a Single Information System and a National Institute for Forensic Identification. \nIn recent years, international observers have expressed alarm as Mexico has become one of the most dangerous countries for journalists to work outside of a war zone. From 2000 to 2018, some 120 journalists and media workers were killed in Mexico and many more have been threatened or attacked, according to Article 19 (an international media rights organization). A more conservative estimate from the Committee to Protect Journalists (CPJ) is that 41 journalists have been killed in Mexico since 2000. In addition, Mexico ranks among the top 10 countries globally with the highest rates of unsolved journalist murders as a percentage of population in CPJ's Global Impunity Index . \nMexico is also a dangerous country for human rights defenders. During the first three months of the L\u00f3pez Obrador government, at least 17 journalists and human rights defenders were killed, at least one of whom was receiving government protection. Although L\u00f3pez Obrador has been critical of some media outlets and reporters, his government has pledged to improve the mechanism intended to protect human rights defenders and journalists.\n\n\t\tForeign Policy\n\nPresident Pe\u00f1a Nieto prioritized promoting trade and investment in Mexico as a core goal of his administration's foreign policy. During his term, Mexico began to participate in U.N. peacekeeping efforts and spoke out in the Organization of American States on the deterioration of democracy in Venezuela, a departure for a country with a history of nonintervention. Pe\u00f1a Nieto hosted Chinese Premier Xi Jinping for a state visit to Mexico, visited China twice, and in September 2017 described the relationship as a \"comprehensive strategic partnership.\" The Pe\u00f1a Nieto government negotiated and signed the proposed Trans-Pacific Partnership (TPP) trade agreement with other Asia-Pacific countries (and the United States and Canada). Even after President Trump withdrew the United States from the TPP agreement, Mexico and the 10 other signatories of the TPP concluded their own trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Mexico also prioritized economic integration efforts with the pro-trade Pacific Alliance countries of Chile, Colombia, and Peru and focused on expanding markets for those governments. \nIn contrast to his predecessor, President L\u00f3pez Obrador generally has maintained that the best foreign policy is a strong domestic policy. His foreign minister, Marcelo Ebrard (former mayor of Mexico City), is leading a return to Mexico's traditional, noninterventionist approach to foreign policy (the so-called Estrada doctrine ). Many analysts predict, however, that Mexico may continue to engage on global issues that it deems important. L\u00f3pez Obrador reversed the active role that Mexico had been playing during the Pe\u00f1a Nieto government in seeking to address the crises in Venezuela. Mexico has not recognized Juan Guaid\u00f3 as Interim President of Venezuela despite pressure from the United States and others to do so. As of January 2019, U.N. agencies estimated that some 39,000 Venezuelan migrants and refugees were sheltering in Mexico. \nDespite these changes, Mexico continues to participate in the Pacific Alliance, promote its exports and seek new trade partners, and support investment in the Northern Triangle countries (Guatemala, El Salvador, and Honduras). The Mexican government has long maintained that the best way to stop illegal immigration from Central America is to address the insecurity and lack of opportunity there. Nevertheless, fiscal limitations limit the Mexican government's ability to support Central American efforts to address those challenges. \n\n\tEconomic and Social Conditions67\n\nMexico has transitioned from a closed, state-led economy to an open market economy that has entered into free trade agreements with 46 countries. The transition began in the late 1980s and accelerated after Mexico entered into NAFTA in 1994. Since NAFTA, Mexico has increasingly become an export-oriented economy, with the value of exports equaling more than 38% of Mexico's gross domestic product (GDP) in 2016, up from 10% of GDP 20 years prior. Mexico remains a U.S. crude oil supplier, but its top exports to the United States are automobiles and auto parts, computer equipment, and other manufactured goods. Reports have estimated that 40% of the content of those exports contain U.S. value added content. \nDespite attempts to diversify its economic ties and build its domestic economy, Mexico remains heavily dependent on the United States as an export market (roughly 80% of Mexico's exports in 2018 were U.S.-bound) and as a source of remittances, tourism revenues, and investment. Studies estimate that a U.S. withdrawal from NAFTA, could cost Mexico more than 950,000 low-skilled jobs and lower its GDP growth by 0.9%. In recent years, remittances have replaced oil exports as Mexico's largest source of foreign exchange. According to Mexico's central bank, remittances reached a record $33.0 billion in 2018. Mexico remained the leading U.S. international travel destination in 2017 (the most recent year calculated by the U.S. Department of Commerce). U.S. travel warnings regarding violence in resort areas such as Playa del Carmen, Los Cabos, and Canc\u00fan could result in declining arrivals. \nThe Mexican economy grew by 2% in 2018, but growth may decline to 1.6% in 2019, due, in part, to lower projected private investment. Mexico's Central Bank has also cited slowing investment, gasoline shortages, and strikes as reasons for revising its growth forecast for 2019 downward to a range of 1.1% to 2.1% for 2019. Some observers believe that investor sentiment and the country's growth prospects could worsen if L\u00f3pez Obrador continues to promote government intervention in the economy and to rely on popular referendums to make economic decisions.\nEconomic conditions in Mexico tend to follow economic patterns in the United States. When the U.S. economy is expanding, as it is now, the Mexican economy tends to grow. However, when the U.S. economy stagnates or contracts, the Mexican economy also tends to contract, often to a greater degree. The negative impact of protectionist U.S. trade policies and a projected U.S. economic slowdown in 2020 could hurt Mexico's growth prospects. President Trump has threatened to close the U.S.-Mexico border in response to his concerns about illegal immigration and illicit drug flows. Closing the border could have immediate and serious economic consequences. As an example, the U.S. auto industry stated that U.S. auto production would stop after a week due to the deep interdependence of the North American auto industry.\nSound macroeconomic policies, a strong banking system, and structural reforms backed by a flexible line of credit with the International Monetary Fund (IMF) have helped Mexico weather recent economic volatility. Nevertheless, the IMF has recommended additional steps to deal with potential external shocks. These steps include improving tax collection, reducing informality, reforming public administration, and improving governance. \n\n\t\tFactors Affecting Economic Growth\n\nOver the past 30 years, Mexico has recorded a somewhat low average economic growth rate of 2.6%. Some factors\u2014such as plentiful natural resources, a young labor force, and proximity to markets in the United States\u2014have been counted on to help Mexico's economy grow faster in the future. Most economists maintain that those factors could be bolstered over the medium to long term by continued implementation of some of the reforms described in Table A-1 . \nAt the same time, continued insecurity and corruption, a relatively weak regulatory framework, and challenges in its education system may hinder Mexico's future industrial competitiveness. Corruption costs Mexico as much as $53 billion a year (5% of GDP). A lack of transparency in government spending and procurement, as well as confusing regulations and red tape, has likely discouraged some investment. Deficiencies in the education system, including a lack of access to vocational education, have led to firms having difficulty finding skilled labor. \nAnother factor affecting the economy is the price of oil. Because oil revenues make up a large, if lessening, part of the country's budget (32% of government revenue in 2017), low oil prices since 2014 and a financial crisis within Pemex have proved challenging. The Pe\u00f1a Nieto government raised other taxes to recoup lost revenue from oil, but the L\u00f3pez Obrador administration has pledged to make budget cuts in order to maintain fiscal targets.\nMany analysts predict that Mexico will have to combine efforts to implement its economic reforms with other actions to boost growth. A 2018 report by the Organisation for Economic Co-operation and Development suggests that Mexico will need to enact complementary reforms to address issues such as corruption, weak governance, and lack of judicial enforcement to achieve its full economic growth potential. \n\n\t\tCombating Poverty and Inequality\n\nMexico has long had relatively high poverty rates for its level of economic development (43.6% in 2016), particularly in rural regions in southern Mexico and among indigenous populations. Some assert that conditions in indigenous communities have not measurably improved since the Zapatistas launched an uprising for indigenous rights in 1994. Traditionally, those employed in subsistence agriculture or small, informal businesses tend to be among the poorest citizens. Many households rely on remittances to pay for food, clothing, health care, and other basic necessities. \nMexico also experiences relatively high income inequality. According to the 2014 Global Wealth Report published by Credit Suisse, 64% of Mexico's wealth is concentrated in 10% of the population. Mexico is among the 25 most unequal countries in the world included in the Standardized World Income Inequality Database. According to a 2015 report by Oxfam Mexico, this inequality is due in part to the country's regressive tax system, oligopolies that dominate particular industries, a relatively low minimum wage, and a lack of targeting in some social programs.\nEconomists have maintained that reducing informality is crucial for addressing income inequality and poverty, while also expanding Mexico's low tax base. The 2013-2014 reforms sought to boost formal-sector employment and productivity, particularly among the small- and medium-sized enterprises (SMEs) that employ some 60% of Mexican workers, mostly in the informal sector. Although productivity in Mexico's large companies (many of which produce internationally traded goods) increased by 5.8% per year between 1999 and 2009, productivity in small businesses fell by 6.5% per year over the same period. To address that discrepancy, the financial reform aimed to increase access to credit for SMEs and the fiscal reform sought to incentivize SMEs' participation in the formal (tax-paying) economy by offering insurance, retirement savings accounts, and home loans to those that register with the national tax agency.\nThe Pe\u00f1a Nieto administration sought to complement economic reforms with social programs, but corruption within the Secretariat for Social Development likely siphoned significant funding away from some of those programs. It expanded access to federal pensions, started a national anti-hunger program, and increased funding for the country's conditional cash transfer program. Pe\u00f1a Nieto renamed that program Prospera (Prosperity) and redesigned it to encourage its beneficiaries to engage in productive projects. In addition to corruption, some of Pe\u00f1a Nieto's programs, namely the anti-hunger initiative, were criticized for a lack of efficacy.\nDespite his avowed commitment to austerity, L\u00f3pez Obrador has endorsed state-led economic development and promised to rebuild Mexico's domestic market as part of his National Development Plan 2018-2024, which he presented on May 1, 2019. In addition to revitalizing Pemex, the president has promised to build a \"Maya Train\" to connect five states in the southeast and facilitate tourism (see Figure 5 ). In December 2018, L\u00f3pez Obrador announced a plan to invest some $25 billion in southern Mexico to accompany an estimated $4.8 billion in potential U.S. public and private investments to promote job growth, infrastructure, and development in that region, including jobs for Central American migrants.\nL\u00f3pez Obrador's pledges related to social programs include (1) doubling monthly payments to the elderly; (2) providing regular financial assistance to a million disabled people; (3) giving a monthly payment to students in 10 th to 12 th grades to lower the dropout rate, and (4) offering paid apprenticeships for 2.3 million young people. While some of these programs have already gotten underway, their ultimate scale and impacts will take time to evaluate. Some observers are concerned about his plan to decouple monthly support to families provided through the program formerly known as Prospera with requirements that children attend school and receive regular health checkup. \n\n\tU.S. Relations and Issues for Congress\n\nMexican-U.S. relations generally have grown closer over the past two decades. Common interests in encouraging trade flows and energy production, combating illicit flows (of people, weapons, drugs, and currency), and managing environmental resources have been cultivated over many years. A range of bilateral talks, mechanisms, and institutions have helped the Mexican and U.S. federal governments\u2014as well as stakeholders in border states, the private sector, and nongovernmental organizations\u2014find common ground on difficult issues, such as migration and water management. U.S. policy changes that run counter to Mexican interests in one of those areas could trigger responses from the Mexican government on other areas where the United States benefits from Mexico's cooperation, such as combating illegal migration. \nDespite predictions to the contrary, U.S.-Mexico relations under the L\u00f3pez Obrador administration have thus far remained friendly. Nevertheless, tensions have emerged over several key issues, including trade disputes and tariffs, immigration and border security issues, and Mexico's decision to remain neutral in the crisis in Venezuela. The new government has generally accommodated U.S. migration and border security policies, but has protested recent policies that have resulted in extended border delays. President L\u00f3pez Obrador has also urged the U.S. Congress to consider the USMCA. \nSecurity Cooperation: Transnational Crime and Counternarcotics\nMexico is a significant source and transit country for heroin, marijuana, and synthetic drugs (such as methamphetamine) destined for the United States. It is also a major transit country for cocaine produced in the Andean region. Mexican-sourced heroin now accounts for nearly 90% of the total weight of U.S.-seized heroin analyzed in the U.S. Drug Enforcement Administration's (DEA's) Heroin Signature Program. In addition to Mexico serving as a transshipment point for Chinese fentanyl (a powerful synthetic opioid), the DEA suspects labs in Mexico may use precursor chemicals smuggled over the border from the United States to produce fentanyl.\nMexican drug trafficking organizations pose the greatest crime threat to the United States, according to the DEA's 2018 National Drug Threat Assessment . These organizations engage in drug trafficking, money laundering, and other violent crimes. They traffic heroin, methamphetamine, cocaine, marijuana, and, increasingly, the powerful synthetic opioid fentanyl. \nMexico is a long-time recipient of U.S. counterdrug assistance, but cooperation was limited between the mid-1980s and mid-2000s due to U.S. distrust of Mexican officials and Mexican sensitivity about U.S. involvement in the country's internal affairs. Close cooperation resumed in 2007, when Mexican President Felipe Calder\u00f3n requested U.S. assistance to combat drug trafficking organizations, and worked with President George W. Bush to develop the M\u00e9rida Initiative. While initial U.S. funding for the initiative focused heavily on training and equipping Mexican security forces, U.S. assistance shifted over time to place more emphasis on strengthening Mexican institutions. \nIn 2011, the U.S. and Mexican governments agreed to a revised four-pillar strategy that prioritized (1) combating transnational criminal organizations through intelligence sharing and law enforcement operations; (2) institutionalizing the rule of law while protecting human rights through justice sector reform and forensic assistance; (3) creating a \"21 st century border\" while improving immigration enforcement in Mexico; and (4) building strong and resilient communities with pilot programs to address the root causes of violence and reduce drug demand. The M\u00e9rida Initiative has continued to evolve along with U.S. and Mexican security concerns. Recent programs have focused on combating opioid production and distribution, improving border controls and interdiction, training forensic experts, and combating money laundering. Nevertheless, organized crime-related homicides in Mexico and opioid-related deaths in the United States have surged, leading some critics to question the efficacy of bilateral efforts. \nThe future of the M\u00e9rida Initiative is unclear. Some observers predict L\u00f3pez Obrador may seek to emphasize anticorruption initiatives, social investments in at-risk youth, human rights, and drug policy reform as he did during his presidential campaign. Others maintain that L\u00f3pez Obrador has thus far accommodated the Trump Administration's emphasis on combating Central American migration and may back other U.S. priorities, such as combating the fentanyl trade. Other common interests may include countering human rights violations, combating weapons trafficking, and accelerating efforts against money laundering and corruption.\nThere has been bipartisan support in Congress for the M\u00e9rida Initiative, which has accounted for the majority of U.S. foreign assistance to Mexico provided over the past decade (see Table 1 ). The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) provided some $145 million for accounts that fund the initiative ($68 million above the budget request). The increased resources are primarily for addressing the flow of U.S.-bound opioids. The joint explanatory statement accompanying the act ( H.Rept. 116-9 ) requires a State Department strategy on international efforts to combat opioids (including efforts in Mexico) and a report on how the M\u00e9rida Initiative is combating cocaine and methamphetamine flows. The Administration's FY2020 budget request asks Congress to provide $76.3 million for the M\u00e9rida Initiative.\n\n\t\tDepartment of Defense Assistance\n\nIn contrast to Plan Colombia, the Department of Defense (DOD) did not play a primary role in designing the M\u00e9rida Initiative and is not providing assistance through M\u00e9rida accounts. However, DOD oversaw the procurement and delivery of equipment provided through the FMF account. Despite DOD's limited role in the M\u00e9rida Initiative, bilateral military cooperation has been increasing. DOD assistance aims to support Mexico's efforts to improve security in high-crime areas, track and capture suspects, strengthen border security, and disrupt illicit flows. \nA variety of funding streams support DOD training and equipment programs. Some DOD equipment programs are funded by annual State Department appropriations for FMF, which totaled $5.0 million in FY2018. International Military Education and Training (IMET) funds, which totaled $1.5 million in FY2018, support training programs for the Mexican military, including courses in the United States. Apart from State Department funding, DOD provides additional training, equipping, and other support to Mexico that complements the M\u00e9rida Initiative through its own accounts. Individuals and units receiving DOD support are vetted for potential human rights issues in compliance with the Leahy Law. DOD programs in Mexico are overseen by U.S. Northern Command, which is located at Peterson Air Force Base in Colorado. DOD counternarcotics support to Mexico totaled approximately $63.3 million in FY2018. \nPolicymakers may want to receive periodic briefings on DOD efforts to guarantee that DOD programs are being adequately coordinated with M\u00e9rida Initiative efforts, complying with U.S. vetting requirements, and not reinforcing the militarization of public security in Mexico.\n\n\t\tExtraditions\n\nDuring the Calder\u00f3n government, extraditions were another indicator that the State Department used as an example of the M\u00e9rida Initiative's success. During the final years of the Calder\u00f3n government, Mexico extradited an average of 98 people per year to the United States, an increase over the prior administration. When President Pe\u00f1a Nieto took office, extraditions fell to 54 in 2013 but rose to a high of 76 in 2016 (see Figure 6 ).\n\n\t\tHuman Rights99\n\nThe U.S. Congress has expressed ongoing concerns about human rights conditions in Mexico. Congress has continued to monitor adherence to the Leahy vetting requirements that must be met under the Foreign Assistance Act (FAA) of 1961, as amended (22 U.S.C. 2378d), which pertains to State Department aid, and 10 U.S.C. 2249e, which guides DOD funding. DOD reportedly suspended assistance to a brigade based in Tlatlaya, Mexico, due to concerns about the brigade's potential involvement in the extrajudicial killings previously described. From FY2008 to FY2015, Congress made conditional 15% of U.S. assistance to the Mexican military and police until the State Department sent a report to appropriators verifying that Mexico was taking steps to comply with certain human rights standards. In FY2014, Mexico lost $5.5 million in funding due to human rights concerns. For FY2016-FY2019, human rights reporting requirements applied to FMF rather than to M\u00e9rida Initiative accounts. \nU.S. assistance to Mexico has supported the Mexican government's efforts to reform its judicial system and to improve human rights conditions in the country. Congress has provided funding to support Mexico's transition from an inquisitorial justice system to an oral, adversarial, and accusatory system that aims to strengthen human rights protections for victims and the accused. The State Department has established a high-level human rights dialogue with Mexico. The U.S. Agency for International Development (USAID) supported Mexico's 2014-2018 human rights plan, including the development of legislation in compliance with international standards, prevention efforts, improved state responses to abuses, and expanded assistance to victims. One recent project addressed the way the Mexican government addresses cases of torture and enforced disappearances, another sought to help the government protect journalists and resolve crimes committed against them. In many of these areas, U.S. technical assistance to the government is complemented by support to think tanks and civil society organizations, including in the area of providing forensic assistance to help search for missing people.\nCongress may choose to augment M\u00e9rida Initiative funding for human rights programs, such as ongoing training programs for military and police, or to fund new efforts to support human rights organizations. Human rights conditions in Mexico, as well as compliance with conditions included in the FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) are likely to be closely monitored. Some Members of Congress have written letters to U.S. and Mexican officials regarding human rights concerns, including allegations of extrajudicial killings by security forces, abuses of Central American migrants, and the use of spyware against human rights activists.\nU.S. policymakers may question how the L\u00f3pez Obrador administration moves to punish past human rights abusers, how it intends to prevent new abuses from occurring, and how the police and judicial reforms being implemented are bolstering human rights protections.\n\n\t\tEconomic and Trade Relations108\n\nThe United States and Mexico have a strong economic and trade relationship that has been bolstered through NAFTA. Since 1994, NAFTA has removed virtually all tariff and nontariff trade and investment barriers among partner countries and provided a rules-based mechanism to govern North American trade. Most economic studies show that the net economic effect of NAFTA on the United States and Mexico has been relatively small but positive, though there have been adjustment costs to some sectors in both countries. Further complicating assessments of NAFTA, not all trade-related job gains and losses since NAFTA entered into force can be entirely attributed to the agreement. Numerous other factors have affected trade trends, such as Mexico's trade-liberalization efforts, economic conditions, and currency fluctuations. \nMexico is the United States' third-largest trading partner. Mexico ranks third as a source of U.S. merchandise imports and second as an export market for U.S. goods. The United States is Mexico's most important export market for goods, with 80% of Mexican exports destined for the United States. Merchandise trade between the two countries in 2018 was six times higher (in nominal terms) than in 1993, the year NAFTA entered into force. The merchandise trade balance went from a U.S. surplus of $1.7 billion in 1993 (the year before NAFTA entered into force) to a widening deficit that reached $81.5 billion in 2018. In services, the United States had a trade surplus with Mexico of $7.4 billion in 2017 (latest available data); it largely consists of travel, transportation, business, and financial services. \nTotal trade (exports plus imports) amounted to $561.3 billion in 2018. Much of that bilateral trade occurs in the context of supply chains, as manufacturers in each country work together to create goods. The expansion of trade has resulted in the creation of vertical supply relationships, especially along the U.S.-Mexican border. The flow of intermediate inputs produced in the United States and exported to Mexico and the return flow of finished products increased the importance of the U.S.-Mexican border region as a production site.\nForeign direct investment (FDI) is also an integral part of the bilateral economic relationship. The stock of U.S. FDI in Mexico increased from $15.2 billion in 1993 to $109.7 billion in 2017. Although the stock of Mexican FDI in the United States is much lower, it has also increased significantly since NAFTA, from $1.2 billion in 1993 to $18.0 billion in 2017.\nThe Obama Administration worked with Mexico to balance border security with facilitating legitimate trade and travel, promote economic competitiveness, and pursue energy integration. The U.S.-Mexican High-Level Economic Dialogue, launched in 2013, was a bilateral initiative to advance economic and commercial priorities through annual Cabinet meetings. The High-Level Regulatory Cooperation Council launched in 2012 helped align regulatory principles. Trilateral (with Canada) cooperation occurred under the aegis of the North American Leadership Summits. \nWhile those mechanisms have not continued under the Trump Administration, the bilateral Executive Steering Committee (ESC), which guides broad efforts along the border, and the Bridges and Border Crossings group on infrastructure have continued to meet. The U.S.-Mexico CEO Dialogue has also continued to convene biannual meetings to produce joint recommendations for the two governments. Mexican business leaders reportedly worked with U.S. executives, legislators, and governors to encourage the Trump Administration to back the proposed USMCA rather than just abandoning NAFTA.\n\n\t\t\tTrade Disputes\n\nDespite positive advances on many aspects of bilateral and trilateral economic relations, trade disputes continue. The United States and Mexico have had a number of trade disputes over the years, many of which have been resolved. Some of them have involved: country-of-origin labeling, dolphin-safe tuna labeling, and NAFTA trucking provisions. In 2017, Mexico and the United States concluded a suspension agreement on a U.S. antidumping and countervailing duty investigation on Mexican sugar exports to the United States in which Mexico agreed to certain limitations on its access to the U.S. sugar market. \nIn recent years, new trade disputes have emerged. In January 2018, President Trump announced new tariffs on imported solar panels and washing machines under the Trade Act of 1974 that included products coming from Mexico. In February 2019, U.S. Commerce Secretary Wilbur Ross announced that the United States intends to withdraw from a 2013 suspension agreement on fresh tomato exports from Mexico. The agreement effectively suspends an investigation by the U.S. International Trade Commission (USITC) into whether Mexican producers are dumping fresh tomatoes into the U.S. market. Mexico's ambassador to the United States has stated she is \"cautiously optimistic\" the United States and Mexico will agree to a new arrangement before a U.S. withdrawal. \nThe United States and Mexico are in another trade dispute over U.S. actions to impose tariffs on imports of steel and aluminum under Section 232 of the Trade Expansion Act of 1962, which authorizes the President to impose restrictions on certain imports based on national security threats. Using these authorities, on May 31, 2018, the United States imposed a 25% duty on steel imports and a 10% duty on aluminum imports from Mexico and Canada. In response, Mexico applied retaliatory tariffs of 5% to 25% on U.S. exports valued at approximately $3.6 billion on pork, apples, potatoes, and cheese, among other items. \nOn May 23, 2018, the Trump Administration initiated a Section 232 investigation into the imports of motor vehicles and automotive parts (83 FR 24735) to determine if those imports threaten to impair U.S. national security. \n\n\t\t\tThe Proposed USMCA119\n\nOn November 30, 2018, the United States, Canada, and Mexico signed the proposed USMCA, which, if approved by Congress and ratified by Mexico and Canada, would replace NAFTA. The proposed USMCA would retain many of NAFTA's chapters, while making notable changes to others, including market access provisions for autos and agriculture products, and new rules on investment, government procurement, and intellectual property rights (IPR). It would add new chapters on digital trade, state-owned enterprises, and currency misalignment. \nThe USMCA would tighten rule of origin requirements for duty-free treatment of U.S. motor vehicle imports from Mexico. Under NAFTA, motor vehicles must contain 62.5% North American content, while all other vehicles and motor parts must contain 60% North American content to qualify for duty-free treatment. The new rules would require that 75% of a motor vehicle and 70% of its steel and aluminum originate in North America and that 40%-45% of auto content be made by workers earning at least $16 per hour. Side letters would exempt up to 2.6 million vehicles from Canada and Mexico annually from potential Section 232 auto tariffs. \nUSMCA would maintain the NAFTA state-to-state mechanism for resolving most disputes, as well as NAFTA's binational mechanism for reviewing and settling trade remedy disputes. However, it would maintain an investor-state dispute settlement (ISDS) process only between the United States and Mexico, without Canada, but limit its scope to government contracts in oil, natural gas, power generation, infrastructure, and telecommunications sectors. It would also maintain U.S.-Mexico ISDS in other sectors provided the claimant exhausts national remedies first, among other changes and new limitations.\nPolicymakers may consider numerous issues related to U.S.-Mexico trade as they debate the proposed USMCA. Some issues could include the timetable for congressional consideration under Trade Promotion Authority (TPA), whether the proposed USMCA meets TPA's negotiating objectives and other requirements, and the impact of the agreement on U.S.-Mexico trade relations. In April 2019, the USITC completed a required study on the possible economic impact of a USMCA on the United States. The report estimates that the agreement would have a very small but positive impact on the U.S. economy, potentially raising U.S. real GDP by \"0.35% and U.S. employment by 176,000 jobs (0.12 %).\" Other policymakers contend that the United States lift steel and aluminum tariffs on imports from Canada and Mexico before the agreement is considered by Congress and state that the tariffs act as a barrier hindering Mexican and Canadian ratification of the proposed USMCA.\nCongressional objectives and concerns are likely to shape timing of congressional consideration of the proposed USMCA. Some policymakers view the agreement as vital for U.S. firms, workers, and farmers, and believe that the updated agreement would benefit U.S. economic interests. Other issues of concern include a lack of worker rights protection in Mexico and the enforceability of labor provisions, the scaling back of ISDS provisions, which could affect U.S. investors, and possible adverse effects of auto rules of origin on U.S. automakers. Although USMCA would revise NAFTA labor provisions and provide the same dispute mechanism as other parts of the agreement, some critics contend that USMCA has the same limitations as NAFTA; they allege that the proposed USMCA enforcement tools do not go far enough to ensure the protection of worker rights to organize and bargain collectively. It is unclear whether labor reforms that have passed the Mexican Congress will be enough to assuage those concerns.\n\n\t\tMigration and Border Issues\n\n\t\t\tMexican-U.S. Immigration Issues\n\nImmigration policy has been a subject of congressional concern over many decades, with much of the debate focused on how to prevent unauthorized migration and address the large population of unauthorized migrants living in the United States. Mexico's status as both the largest source of migrants in the United States and a continental neighbor means that U.S. migration policies\u2014including stepped-up border and interior enforcement\u2014have primarily affected Mexicans. Beginning in FY2012, foreign nationals from countries other than Mexico began to comprise a growing percentage of total apprehensions. Due to a number of factors, more Mexicans have been leaving the United States than arriving. Nevertheless, protecting the rights of Mexicans living in the United States, including those who are unauthorized, remains a top Mexican government priority. \nSince the mid-2000s, successive Mexican governments have supported efforts to enact immigration reform in the United States, while being careful not to appear to be infringing upon U.S. authority to make and enforce immigration laws. Mexico has made efforts to combat transmigration by unauthorized migrants and worked with U.S. law enforcement to combat alien smuggling and human trafficking. In FY2018, the Trump Administration removed (deported) some 141,045 Mexicans, as compared to 128,765 removals in FY2017. During the Obama Administration, some of Mexico's past concerns about U.S. removal policies, including nighttime deportations and issues concerning the use of force by some U.S. Border Patrol officials, were addressed through bilateral migration talks and letters of agreement. \nPresident Trump's shifts in U.S. immigration policies have tested U.S.-Mexican relations. His repeated assertions that Mexico will pay for a border wall resulted in President Pe\u00f1a Nieto canceling a White House meeting in January 2017 and continued to strain relations throughout his term. The Mexican government expressed regret after the Administration's decision to rescind the Deferred Action for Childhood Arrivals (DACA) initiative, which has provided work authorization and relief from removal for migrants brought to the United States as children, but pledged to assist DACA beneficiaries who return to Mexico. In June 2018, Mexico criticized U.S. \"zero tolerance\" immigration policies. Despite these developments, Mexico has continued to work with the United States on migration management and border issues.\nIn E.O. 13678, the Trump Administration broadened the categories of authorized immigrants prioritized for removal. As a result, the profile of Mexican deportees now include more individuals who have spent many decades in the United States than in recent years (when the Obama Administration had focused on recent border crossers and those with criminal records). The potential for large-scale removal of Mexican nationals present in the United States without legal status is an ongoing concern of the Mexican government that reportedly has been expressed to Trump Administration officials. Mexico's consular network in the United States has bolstered the services offered to Mexicans in the United States, including access to identity documents and legal counsel. It has launched a 24-hour hotline and mobile consultants to provide support, both practical and psychological, to those who may have experienced abuse or are facing removal. \nThe Mexican government has expressed hope that the U.S. Congress will develop a solution to resolve the phased ending of the DACA initiative. As of July 2018, some 561,400 Mexicans brought to the United States as children had received work authorizations and relief from removal through DACA. Many DACA recipients born in Mexico have never visited the country, and some do not speak Spanish.\n\n\t\t\tDealing with Unauthorized Migration, Including from Central America137\n\nSince 2014, Mexico has helped the United States manage a surge in unauthorized migration from the \"Northern Triangle\" (El Salvador, Guatemala, and Honduras). Collectively, those countries have overtaken Mexico as the primary source for migrants apprehended at the U.S.-Mexico border. From 2015 to November 2018, Mexico reported apprehending almost 524,000 migrants and asylum seekers from the Northern Triangle. As U.S. asylum policies have tightened, Mexico also has absorbed more Central Americans in need of humanitarian protection (see Figure 7 ). \nMexico has received U.S. assistance for its immigration control efforts through the M\u00e9rida Initiative. Mexico has received support for its humanitarian protection efforts through global U.S. Migration and Refugee Assistance (MRA) implemented by the U.N. High Commissioner for Refugees (UNHCR) and others. Some U.S. policymakers have praised Mexico's management of these migration flows, whereas others have questioned Mexico's ability to protect migrants from abuse and to provide asylum to those in need of protection. \nThe L\u00f3pez Obrador administration has a broad vision of addressing immigration by protecting human rights, decriminalizing migration, and cooperating with Central America. Implementing this vision has thus far proved difficult in an environment of increased flows from the Northern Triangle and pressure from the United States to limit them. The Mexican government has long maintained that the best way to stop illegal immigration from Central America is to address the insecurity and lack of opportunity there, but fiscal limitations limit its ability to support Central American efforts to address those challenges. As previously mentioned, the U.S. and Mexican governments issued a joint statement in December 2018 pledging to boost public and private investment in Central America. On March 29, 2019, the Trump Administration announced that it intends to end foreign assistance programs for the Northern Triangle countries for failing to combat unauthorized migration, appearing to reverse its prior pledge. The State Department has indicated that the decision will affect approximately $450 million in FY2018 funding. \nThe L\u00f3pez Obrador administration has provided humanitarian relief to Central American migrants in Mexico, but not increased funding for the migration agency or asylum system. Under pressure from the United States and with its migration stations overcapacity, the Mexican government has recently limited protections and increased deportations, particularly for those traveling in large groups or caravans, to discourage future flows. From April 1-22, 2019, Mexico removed nearly 11,800 people, up from 9,650 removed in the month of April 2018. Mexico's asylum system is underfunded and overwhelmed; it received 29,000 applications in 2018 even as 80% of applications from 2017 still awaited resolution. \nPresident L\u00f3pez Obrador's desire to maintain positive relations with the U.S. government has prompted domestic criticism and may cause strain in its relations with some Central American governments. His government's decision to allow Central American asylum seekers to be returned to Mexico under the U.S. Migrant Protection Protocols (MPP) to obtain humanitarian visas\u2014rather than challenging the MPP\u2014has put pressure on local governments and aid organizations to assist the migrants. Many state it may also be putting migrants' lives at risk; many Mexican border cities are among the countries most dangerous.\n\n\t\t\tModernizing the U.S.-Mexican Border\n\nSince the terrorist attacks of September 11, 2001, there have been significant delays and unpredictable wait times at the U.S.-Mexican border. The majority of U.S.-Mexican trade passes through a port of entry along the southwestern border, often more than once, due to the increasing integration of manufacturing processes in the United States and Mexico. Past bilateral efforts discussed below have contributed to reductions in wait times at some points of entry, but infrastructure and staffing issues remain on both the U.S. and Mexican sides of the border. One effort that has continued is the use of public-private partnerships to address those issues.\nOn May 19, 2010, the United States and Mexico declared their intent to collaborate on enhancing the U.S.-Mexican border as part of pillar three of the M\u00e9rida Initiative. A Twenty-First Century Border Bilateral Executive Steering Committee (ESC) has met since then, most recently in November 2017, to develop binational action plans and oversee implementation of those plans. The plans set goals within broad objectives: coordinating infrastructure development, expanding trusted traveler and shipment programs, establishing pilot projects for cargo preclearance, improving cross-border commerce and ties, and bolstering information sharing among law enforcement agencies. In 2015, the two governments opened the first railway bridge in 100 years at Brownsville-Matamoros and launched three cargo pre-inspection test locations where U.S. and Mexican customs officials are working together. A Mexican law allowing U.S. customs personnel to carry arms in Mexico hastened these bilateral efforts.\nIn recent months, wait times have lengthened as a result of U.S. efforts to deal with an influx of Central American asylum seekers and to hasten construction of additional border barriers. Businesses have been concerned that unless L\u00f3pez Obrador speaks out, President Trump may adopt policies that could exacerbate the delays at the border resulting from his decision to transfer customs personnel from ports of entry to perform migration management duties. As an example, President Trump has recently threatened to close the U.S.-Mexico border or to impose 25% tariffs on Mexican motor vehicle exports to the United States if the Mexican government does not increase its efforts to stop U.S.-bound migrants over the coming year. Mexico has recently urged the U.S. government to reconsider policies resulting in extended border delays.\nAs Congress carries out its oversight function on U.S.-Mexican migration and border issues, questions that may arise include the following: How well is Mexico fulfilling its pledges to increase security along its northern and southern borders and to enforce its immigration laws? What is Mexico doing to address Central American migration through its territory? What is the current level of bilateral cooperation on border security and immigration and border matters, and how might that cooperation be improved? How well are the U.S. and Mexican governments balancing security and trade concerns along the U.S.-Mexican border? To what extent would the construction of a new border wall affect trade and migration flows in the region?\n\n\t\tEnergy153\n\nThe future of energy production in Mexico is important for Mexico's economic growth and for the U.S. energy sector. Mexico has considerable oil and gas resources, but its state oil company (Pemex), has struggled to counter declining production and postponed needed investments due to fiscal challenges. Mexico's 2013 constitutional reforms on energy opened up oil, electricity, gas, transmission, production, and sales to private and foreign investment while keeping ownership of Mexico's hydrocarbons under state control, as established in its 1917 constitution. \nThe 2013 reforms created opportunities for U.S. businesses in exploration, pipeline construction and ownership, natural gas production, and commercial gasoline sales. Although the reforms did not privatize Pemex, they did expose the company to competition and hastened its entrance into joint ventures. Because of the reforms, Mexico has received more than $160 billion in promised investment. However, the reforms ended subsidies that kept gasoline prices low for Mexican consumers and failed to reverse production declines and ongoing problems within Pemex. Pemex's debt increased by more than 60% from 2013 to 2017. While analysts still predict that the reforms will bring long-term benefits to the country, the Pe\u00f1a Nieto administration oversold their short-term impacts, which has emboldened those within the L\u00f3pez Obrador government who have opposed private involvement in the sector.\nThe United States sought to help lock in Mexico's energy reforms through the NAFTA renegotiations. NAFTA includes some reservations for investment in Mexico's energy sector. The proposed USMCA would reinforce Mexico's 2013 constitutional reforms and the current legal framework for private energy projects in Mexico. It also would apply similar investor-state dispute settlement mechanisms that currently exist in NAFTA to the oil and gas, infrastructure, and other energy sectors. In addition, the free trade agreement would allow for expedited exports of U.S. natural gas to Mexico, which have increased about 130% since the 2013 reforms.\nPrivate sector trade, innovation, and investment have created a North American energy market that is interdependent and multidirectional, with cross-border gas pipelines and liquefied natural gas (LNG) shipments from the United States to Mexico surging. In 2018, the value of U.S. petroleum products exports to Mexico totaled $30.6 billion, nearly double the value of U.S. energy imports from Mexico ($15.8 billion). Some experts estimate that the United States, Mexico, and Canada represent 20% of global oil and gas supply, as well as 20%-25% of the expected additions to international supply over the next 25 years. They believe that deepened energy cooperation with Mexico will give North America an industrial advantage. \nL\u00f3pez Obrador's plans for Mexico's energy sector are still developing. He opposed the 2013 reforms, but he and his top officials have said that his government will honor existing contracts that do not involve any corruption. Despite that commitment, the new government has halted future rounds of auctions and plans to upgrade existing refineries and construct a new refinery in Tabasco rather than importing U.S. natural gas. L\u00f3pez Obrador's energy plans also focus on revitalizing Pemex, although the company's financial problems have already become a financial burden for the government and its credit rating has been downgraded. The government's decision to halt new auctions in wind and solar energy, which had also attracted significant investment as a result of the reforms, has led some environmentalists to challenge L\u00f3pez Obrador's commitment to a clean energy future for Mexico.\nOpportunities exist for continued U.S.-Mexican energy cooperation in the hydrocarbons sector, but the future of those efforts may depend on the policies of the L\u00f3pez Obrador government. Leases have been awarded in the Gulf of Mexico under the U.S.-Mexico Transboundary Agreement, which was approved by Congress in December 2013 ( P.L. 113-67 ). Bilateral efforts to ensure that hydrocarbon resources are developed without unduly damaging the environment could continue, possibly through collaboration between Mexican and U.S. regulatory entities. Educational exchanges and training opportunities for Mexicans working in the petroleum sector could expand. The United States and Mexico could build upon efforts to provide natural gas resources to help reduce energy costs in Central America and connect Mexico to the Central American electricity grid, as discussed during conferences on Central America cohosted by both governments in 2017 and in 2018. Analysts also have urged the United States to provide more technical assistance to Mexico\u2014particularly in deepwater and shale exploration.\nIn addition to monitoring energy-related issues as they pertain to NAFTA, oversight questions may focus on how the Transboundary Hydrocarbons Agreement is implemented, the extent to which Mexico is developing capable energy-sector regulators, and the effects of transnational crime groups and violence on Mexico's energy industry and the safety of foreign workers employed in the energy sector. An emerging issue for congressional oversight may involve the fairness of policies adopted by the incoming Mexican government toward foreign investors.\n\n\t\tWater and Floodplain Issues162\n\nThe United States and Mexico share the waters of the Colorado River and the Rio Grande. These shared rivers have long presented complex issues leading to cooperation and conflict in the U.S.-Mexican border region and between the United States and Mexico. \nA bilateral water treaty from 1944 (the 1944 Water Treaty) and other binational agreements guide how the two governments share the flows of these rivers. The binational International Boundary and Water Commission (IBWC) administers these agreements and includes a U.S. Section that operates under foreign policy guidance from the U.S. Department of State. Since 1944, the IBWC has been the principal venue for addressing river-related disputes between the United States and Mexico. The 1944 Water Treaty authorizes the IBWC to develop rules and to issue proposed decisions, called minutes , regarding matters related to the treaty's execution and interpretation. \nUnder the 1944 Water Treaty, the United States is required to provide Mexico annually with 1.5 million acre-feet (AF) of Colorado River water. U.S. deliveries to Mexico in the Rio Grande basin near El Paso\/Ciudad Ju\u00e1rez occur annually under a 1906 binational convention, whereas Mexico's deliveries downstream of Fort Quitman, TX, are established in the 1944 Water Treaty. Mexico is to deliver to the United States a minimum amount during a five-year cycle. IBWC also administers other binational boundary and water-related agreements and projects for flood control and sanitation (principally wastewater treatment facilities) and binational reservoirs.\nRecent Developments in the Colorado River Basin . The United States continues to meet its Colorado River annual delivery requirements to Mexico pursuant to the 1944 Water Treaty. Recent IBWC actions on the Colorado River have focused on how to manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. The most recent minute governing basin operations, Minute 323 (signed in September 2017) is a set of binational measures that provides for binational cooperative basin water management, including environmental flows to restore riverine habitat. Minute 323 also provides for Mexico to share in cutbacks during shortage conditions in the U.S. portion of the basin, including delivery reductions under Drought Contingency Plans that were authorized by Congress in April 2019. In addition, Minute 323 designates a \"Mexican Water Reserve\" through which Mexico can delay its water deliveries from the United States and store its delayed deliveries upstream at Lake Mead, thereby increasing the lake's elevation. For the Colorado River basin, issues before Congress may be largely related to oversight of Minute 323 implementation and water management associated with potential shortage conditions.\nRecent Development in the Rio Grande Basin . On multiple occasions since 1994, Mexico has not met its Rio Grande delivery obligations within the five-year cycle established by the 1944 Water Treaty, most recently during the five-year cycle from 2010 to 2015. Mexico made up for those shortfalls in subsequent five-year cycles, as authorized under the 1944 Treaty. The October 2015 to October 2020 cycle is under way. Mexico offset its below-target deliveries for the first year of this cycle with additional deliveries in the second year. IBWC indicates that Mexico delivered less than its 350,000 AF in the third year of the cycle; however, higher deliveries in the second year resulted in Mexico's deliveries being almost at 98% of the three-year cumulative delivery target. In recent years, IBWC reportedly has been working toward a binational model for water management in the Rio Grande and obtaining input from binational working groups with the objective of improved predictability and reliability in water deliveries and treaty compliance.\nTo date, Congress has been primarily involved in conducting oversight through reporting requirements for the U.S. Department of State. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) includes a reporting requirement from the Senate Appropriations Subcommittee on State, Foreign Operations, and Related Programs ( S.Rept. 115-282 ):\nNot later than 45 days after enactment of the act, the Secretary of State, in consultation with the IBWC Commissioner, shall submit to the Committee an update to the report required in section division J of Public Law 113\u2013325 detailing efforts to establish mechanisms to improve transparency of data on, and predictability of, water deliveries from Mexico to the United States to meet annual water apportionments to the Rio Grande, in accordance with the 1944 Treaty between the United States and Mexico Respecting Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande, and actions taken to minimize or eliminate future water deficits to the United States.\nPursuant to the various reporting requirements, various reports have been delivered to various committees of Congress, including in the spring of 2019. \nRecent Development in Wastewater and River Pollution . On border wastewater issues, congressional appropriators have shown interest in increasing oversight through statements and reporting requirements related to the pollution in the Tijuana River. Authorizing committees have engaged on issues related to wastewater management near Nogales, AZ. The FY2019 Consolidated Appropriations Act ( P.L. 116-6 ) includes a reporting requirement stating that\nNot later than 180 days after enactment of the act, the IBWC shall submit a report to the Committee quantifying the total annual volume and composition of transboundary flows that enter the United States from Mexico in the Tijuana watershed, as well as the amount of time between each discharge from Mexico and the notification of the U.S. Government and local communities, as recorded\u2026by the IBWC. The report shall also include a description of steps taken by the IBWC and other relevant Federal agencies to implement additional mitigation measures to address increased flows in 2017 and 2018. \nBorder Floodplain Encroachment . Discussion of increased U.S. security measures along the border, particularly the border between Texas and Mexico, may revive concerns regarding compliance with treaty provisions related to the construction of structures in the binational floodplain that increase flood risk. \n\n\t\tEnvironment and Renewable Energy Policy\n\nIn addition to the water management and conservation issues addressed by the IBWC, the U.S. and Mexican governments have worked together on broader environmental issues in the border region since signing the La Paz Agreement in 1983. Led by the U.S. Environmental Protection Agency (EPA) and the Mexican secretary of environmental resources, the agreement committed the two governments to regularly consult and review environmental concerns. Federal funding and interest in border environmental issues peaked in the 1990s during the negotiations for and implementation of the environmental side agreement to NAFTA that created the North American Development Bank (NADB) and the Border Environment Cooperation Commission (BECC). \nEven after federal funding for border environmental projects decreased post-2000, the governments have continued to design and implement binational environmental programs. The current 10-year border program, Border 2020, is focused on cooperation in five areas: (1) reducing air pollution; (2) improving access to clean water; (3) promoting materials and waste management; (4) enhancing joint preparedness for environmental response; and (5) enhancing environmental stewardship. The Trump Administration's FY2020 budget request would zero out funding and staff for the U.S.-Mexican border programs run by the EPA. In FY2018 and FY2019, the Administration did not requested any funding for the programs, but Congress provided $3.0 million in EPA funding each year.\nIn 2009, President Obama and then-President Calder\u00f3n announced the Bilateral Framework on Clean Energy and Climate Change to jointly develop clean energy sources and encourage investment in climate-friendly technologies. Among others, its goals included enhancing renewable energy, combating climate change, and strengthening the reliability of cross-border electricity grids. USAID and Mexico also expanded cooperation through the Mexico Global Climate Change (GCC) Program, which began in 2010 and provided $50 million in funding through FY2016, although bilateral efforts on climate change began around 1990. By 2016, environmental protection and clean energy became a priority for North American cooperation. \nMexico, Canada, and the United States all became parties to the Paris Agreement, which entered into force on November 4, 2016, under the U.N. Framework Convention on Climate Change. The Mexican Congress and the Canadian parliament ratified the Paris Agreement. In contrast, U.S. executive branch officials stated that the Paris Agreement is an executive agreement not requiring Senate advice and consent to ratification. President Obama signed an instrument of acceptance on behalf of the United States on August 29, 2016, without submitting it to Congress. \nOn June 1, 2017, President Trump announced his intention to withdraw from the Paris Agreement. The Administration's FY2018 budget request, released on May 23, 2017, proposed to \"eliminate U.S. funding for the Green Climate Fund (GCF) in FY2018, in alignment with the President's promise to cease payments to the United Nations' climate change programs.\" The FY2018 budget request also eliminates funding for Global Climate Change programs run by USAID, the Department of State, and the Department of the Treasury. Congress did not provide funding for those programs in FY2018. \nPresident L\u00f3pez Obrador's 2018-2014 plan for the environment includes pledges to adjust government policies to comply with the Paris Accord and meet Mexico's Nationally Determine Contribution (NDC). It is unlikely that those pledges will be met, however, as L\u00f3pez Obrador has also pledged to bolster hydrocarbons production rather than renewable energy sources. Environmental groups are concerned about L\u00f3pez Obrador's plans to build a coal-fired refinery, which would reverse prior pledges to reduce the country's coal-based electricity generation beginning in 2017. According to data from Mexico's National Institute of Ecology and Climate Change, Mexico would need to invest $8 billion per year from 2014 to 2030 to meet its NDC. In 2017, the country reportedly invested $2.4 billion. \n\n\t\tEducational Exchanges and Research\n\nEducational and research exchanges between the United States and Mexico have been occurring for decades, but they rose higher in the bilateral agenda during the Obama Administration as part of the High-Level Economic Dialogue. In 2011, President Obama established a program called \"100,000 Strong in the Americas\" to boost the number of U.S. students studying in Latin America (including Mexico) to 100,000 (and vice versa) by 2020. Similarly, President Pe\u00f1a Nieto implemented Proyecta 100,000, which aimed to have 100,000 Mexican students and researchers studying in the United States by 2018. Together, the U.S. and Mexican governments launched a Bilateral Forum on Higher Education, Innovation, and Research (FOBESII) in May 2013, which led to more than 80 partnerships between U.S. and Mexican universities. Both programs are still being implemented, albeit mostly with private funding.\nCountry and bilateral efforts face continued challenges. In 2016-2017 (the latest year available), the number of U.S. students studying in Mexico increased by 10.8% compared to 2015-2016. In contrast, the number of Mexicans studying in the United States decreased by 8.9% in 2017-2018 as compared to the previous year. Mexico ranks ninth on the Institute of International Education's list of countries with students studying in the United States. China is number one and India is number two. A lack of scholarship funding and a lack of English language skills have been barriers for many Mexican students.\n\n\t\t\tAppendix. Structural Reforms\n\n\t\tStructural Reforms: Enacted but Implemented Unevenly\n\nMany analysts praised President Pe\u00f1a Nieto and his advisers for shepherding structural reforms through the Mexican Congress but predicted that the reforms' impact would depend on their implementation. Mexico's ranking in the World Economic Forum's Global Competiveness Index for 2017 improved, in part due to some of the reforms. Nevertheless, critics have alleged that votes in favor of the reforms \"were duly purchased\" by the PRI.\"\nSome of Mexico's reforms have faced problems due to issues in implementation; others have faced opposition from entrenched interest groups. Still others have faced unfavorable global conditions. Fiscal reforms faced challenges in tax collection, and a 2017 Supreme Court ruling reportedly watered down the telecommunications reform. Teachers unions, particularly in southern Mexico, vehemently opposed education reforms requiring teacher evaluations and accountability measures. In June 2016, 8 people died and more than 100 were injured after unions and police clashed in Oaxaca. Although Mexico's energy sector has attracted significant international investment, low global oil prices thus far have rendered shale resources and other unconventional fields unfeasible to develop.","output":"Congress has maintained significant interest in Mexico, an ally and top trade partner. In recent decades, U.S.-Mexican relations have grown closer through cooperative management of the 2,000-mile border, the North American Free Trade Agreement (NAFTA), and security and rule of law cooperation under the M\u00e9rida Initiative. Relations have been tested, however, by President Donald J. Trump's shifts in U.S. immigration and trade policies.\nOn December 1, 2018, Andr\u00e9s Manuel L\u00f3pez Obrador, the leftist populist leader of the National Regeneration Movement (MORENA) party, which he created in 2014, took office for a six-year term after winning 53% of votes in the July 1, 2018, presidential election. Elected on an anticorruption platform, L\u00f3pez Obrador is the first Mexican president in over two decades to enjoy majorities in both chambers of Congress. L\u00f3pez Obrador succeeded Enrique Pe\u00f1a Nieto of the Institutional Revolutionary Party (PRI). From 2013-2014, Pe\u00f1a Nieto shepherded reforms through the Mexican Congress, including one that opened Mexico's energy sector to foreign investment. He struggled, however, to address human rights abuses, insecurity, and corruption.\nPresident L\u00f3pez Obrador has pledged to make Mexico a more just and peaceful society, but also to govern with austerity. Given fiscal constraints and rising insecurity, observers question whether his goals are attainable. L\u00f3pez Obrador aims to build infrastructure in southern Mexico, revive the state oil company, promote social programs, and maintain a noninterventionist position in foreign affairs, including the crisis in Venezuela. His power is constrained, however, by MORENA's lack of a two-thirds majority in Congress, which he would need to enact constitutional reforms or to roll back reforms. Non-MORENA governors have also opposed some of his policies. Still, as of April 2019, L\u00f3pez Obrador had an approval rating of78%.\nU.S. Policy\nDespite predictions to the contrary, U.S.-Mexico relations under the L\u00f3pez Obrador government have thus far remained friendly. Nevertheless, tensions have emerged over several key issues, including trade disputes and tariffs, immigration and border security issues, and Mexico's decision to remain neutral in the crisis in Venezuela. The new government has accommodated U.S. migration and border security policies, despite the domestic criticism it has received for agreeing to allow Central American asylum seekers to await U.S. immigration proceedings in Mexico and for rapidly increasing deportations. The Trump Administration requested $76.3 million for the M\u00e9rida Initiative for FY2020 (a 35% decline from the FY2018-enacted level).\nIn November 2018, Mexico, the United States, and Canada signed a proposed U.S.-Mexico-Canada (USMCA) free trade agreement that, if approved by Congress and ratified by Mexico and Canada, would replace NAFTA. Mexico has applied retaliatory tariffs in response to U.S. tariffs on steel and aluminum imports imposed in 2018.\nLegislative Action\nThe 116th Congress may consider approval of the USMCA. Congressional concerns regarding the USMCA include possible effect on the U.S. economy, working conditions in Mexico and the protection of worker rights, enforceability of USMCA labor provisions, U.S.-Mexican economic relations, and other issues. It is not known whether or when Congress will consider implementing legislation for USMCA. In January 2019, Congress provided $145 million for the M\u00e9rida Initiative ($68 million above the budget request) in the FY2019 Consolidated Appropriations Act (P.L. 116-6) and asked for reports on how bilateral efforts are combating flows of opioids, methamphetamine, and cocaine. The House also passed H.R. 133 (Cuellar), a bill that would promote economic partnership between the United States and Mexico, as well as educational and professional exchanges. A related bill, S. 587 (Cornyn), has been introduced in the Senate.\nFurther Reading\nCRS In Focus IF10578, Mexico: Evolution of the M\u00e9rida Initiative, 2007-2019.\nCRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation.\nCRS In Focus IF10215, Mexico's Immigration Control Efforts.\nCRS Report R45489, Recent Migration to the United States from Central America: Frequently Asked Questions.\nCRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications.\nCRS Report R44981, NAFTA Renegotiation and the Proposed United States-Mexico-Canada Agreement (USMCA)\nCRS Report R45430, Sharing the Colorado River and the Rio Grande: Cooperation and Conflict with Mexico"}
{"id":"crs_R41153","pid":"crs_R41153_0","input":"\tIntroduction\n\nThe diminishment of Arctic sea ice has led to increased human activities in the Arctic, and has heightened interest in, and concerns about, the region's future. Issues such as Arctic territorial disputes; commercial shipping through the Arctic; Arctic oil, gas, and mineral exploration; endangered Arctic species; and increased military operations in the Arctic could cause the region in coming years to become an arena of international cooperation or competition.\nThe United States, by virtue of Alaska, is an Arctic country and has substantial political, economic, energy, environmental, and other interests in the region. Decisions that Congress makes on Arctic-related issues could significantly affect these interests.\nThis report provides an overview of Arctic-related issues for Congress, and refers readers to more in-depth CRS reports on specific Arctic-related issues. Congressional readers with questions about an issue discussed in this report should contact the author or authors of the section discussing that issue. The authors are identified by footnote at the start of each section.\nThis report does not track legislation on specific Arctic-related issues. For tracking of legislative activity, see the CRS reports relating to specific Arctic-related issues that are listed at the end of this report, just prior to Appendix A .\n\n\tBackground1\n\n\t\tDefinitions of the Arctic\n\nThere are multiple definitions of the Arctic that result in differing descriptions of the land and sea areas encompassed by the term. Policy discussions of the Arctic can employ varying definitions of the region, and readers should bear in mind that the definition used in one discussion may differ from that used in another. This CRS report does not rely on any one definition.\n\n\t\t\tArctic Circle Definition and Resulting Arctic Countries\n\nThe most common and basic definition of the Arctic defines the region as the land and sea area north of the Arctic Circle (a circle of latitude at about 66.34 o North). For surface locations within this zone, the sun is generally above the horizon for 24 continuous hours at least once per year (at the summer solstice) and below the horizon for 24 continuous hours at least once per year (at the winter solstice).\nThe Arctic Circle definition includes the northernmost third or so of Alaska, as well as the Chukchi Sea, which separates that part of Alaska from Russia, and U.S. territorial and Exclusive Economic Zone (EEZ) waters north of Alaska. It does not include the lower two-thirds or so of Alaska or the Bering Sea, which separates that lower part of the state from Russia.\nThe area within the Arctic Circle is about 14.5 million square kilometers, or about 5.6 million square miles. This equates to about 2.8%, or about 1\/36 th , of the world's surface. About 4 million people, or about 0.05% of the world's population, live in the Arctic, of which roughly half (roughly 2 million) live in Russia's part of the Arctic.\nEight countries have territory north of the Arctic Circle: the United States (Alaska), Canada, Russia, Norway, Denmark (by virtue of Greenland, a member country of the Kingdom of Denmark), Finland, Sweden, and Iceland. These eight countries are often referred to as the Arctic countries, and they are the member states of the Arctic Council, which is discussed further below. A subset of the eight Arctic countries are the five countries that are considered Arctic coastal states: the United States, Canada, Russia, Norway, and Denmark (by virtue of Greenland).\n\n\t\t\tDefinition in Arctic Research and Policy Act (ARPA) of 1984\n\nSection 112 of the Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) defines the Arctic as follows:\nAs used in this title, the term \"Arctic\" means all United States and foreign territory north of the Arctic Circle and all United States territory north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers [in Alaska]; all contiguous seas, including the Arctic Ocean and the Beaufort, Bering, and Chukchi Seas; and the Aleutian chain.\nThis definition, which is codified at 15 U.S.C. 4111, includes certain parts of Alaska below the Arctic Circle, including the Aleutian Islands and portions of central and western mainland Alaska, such as the Seward Peninsula and the Yukon Delta. Figure 1 below shows the Arctic area of Alaska as defined by ARPA; Figure 2 shows the entire Arctic area as defined by ARPA.\n\n\t\t\tOther Definitions\n\nOther definitions of the Arctic are based on factors such as average temperature, the northern tree line, the extent of permafrost on land, the extent of sea ice on the ocean, or jurisdictional or administrative boundaries. A definition based on a climate-related factor could circumscribe differing areas over time as a result of climate change.\nThe 10 o C isotherm definition of the Arctic defines the region as the land and sea area in the northern hemisphere where the average temperature for the warmest month (July) is below 10 o Celsius, or 50 o Fahrenheit. This definition results in an irregularly shaped Arctic region that excludes some land and sea areas north of the Arctic Circle but includes some land and sea areas south of the Arctic Circle. This definition currently excludes all of Finland and Sweden, as well as some of Alaska above the Arctic Circle, while including virtually all of the Bering Sea and Alaska's Aleutian Islands.\nThe definition of the Arctic adopted by the Arctic Monitoring and Assessment Programme (AMAP)\u2014a working group of the Arctic Council\u2014\"essentially includes the terrestrial and marine areas north of the Arctic Circle (66\u00b032' N), and north of 62\u00b0 N in Asia and 60\u00b0 N in North America, modified to include the marine areas north of the Aleutian chain, Hudson Bay, and parts of the North Atlantic, including the Labrador Sea.\" The AMAP website includes a map showing the Arctic Circle, 10o C isotherm, tree line, and AMAP definitions of the Arctic.\nSome observers use the term \"high north\" as a way of referring to the Arctic. Some observers make a distinction between the \"high Arctic\"\u2014meaning, in general, the colder portions of the Arctic that are closer to the North Pole\u2014and other areas of the Arctic that are generally less cold and further away from the North Pole, which are sometimes described as the low Arctic or the subarctic.\n\n\t\tU.S. Identity as an Arctic Nation\n\nAs mentioned earlier, the United States, by virtue of Alaska, is an Arctic country and has substantial political, economic, energy, environmental, and other interests in the region. Even so, Alaska is geographically separated and somewhat distant from the other 49 states, and relatively few Americans\u2014fewer than 68,000 as of July 1, 2017\u2014live in the Arctic part of Alaska as shown in Figure 2 . A November 8, 2018, research paper on the Arctic in U.S. national identity, based on data collected in online surveys conducted in October and December 2017, stated the following:\nWe found that Americans on average continue mildly to disagree with the canonical assertion of U.S. Arctic identity and interests as articulated in government policy. On a scale from 1 to 7, with higher numbers indicating stronger agreement, Americans' average rating was 3.51, up slightly from 3.16 in 2015, but still below the scale midpoint [of 4.0]. A plurality of respondents (27%) answered with a score of one, indicating the strongest disagreement. Men and older individuals showed greater inclination to agree with the assertion of Arctic identity and interests than women or younger respondents, a pattern also observed in 2015. No region of the country showed particularly greater inclination to agree or disagree, except Alaskans[, who] showed substantially greater agreement.\nWe also conducted a series of comparative surveys and found that Canadians, with an average rating of 4.87, had a much greater sense of being an Arctic nation than did Americans. American respondents, however, did register somewhat higher agreement than British and Australians in judging their country an Arctic nation with strong Arctic interests. In a separate comparative survey, Americans indicated a stronger sense of being a Pacific nation than an Arctic one.\n\n\t\tU.S. Arctic Research\n\n\t\t\tArctic Research and Policy Act (ARPA) of 1984, As Amended\n\nThe Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) \"provide[s] for a comprehensive national policy dealing with national research needs and objectives in the Arctic.\" The act, among other things\nmade a series of findings concerning the importance of the Arctic and Arctic research; established the U.S. Arctic Research Commission (USARC) to promote Arctic research and recommend Arctic research policy; designated the National Science Foundation (NSF) as the lead federal agency for implementing Arctic research policy; established the Interagency Arctic Research Policy Committee (IARPC) to develop a national Arctic research policy and a five-year plan to implement that policy, and designated the NSF representative on the IARPC as its chairperson; and defined the term \"Arctic\" for purposes of the act.\nThe Arctic Research and Policy Act of 1984 was amended by P.L. 101-609 of November 16, 1990. For the texts of the Arctic Research and Policy Act of 1984 and P.L. 101-609 , see Appendix A and Appendix B , respectively.\n\n\t\t\tFY2019 NSF Budget Request for Arctic Research\n\nNSF\u2014the lead federal agency for implementing Arctic research policy\u2014carries out Arctic research activities through its Office of Polar Programs (OPP), which operates as part of the Directorate for Geosciences (GEO). NSF is requesting a total of $534.5 million for OPP for FY2019, an increase of 30.6% over the $409.18 million requested for FY2018, and an increase of 14.3% over the $467.85 million actual for FY2017. Within the $534.54 million requested for OPP for FY2019 is $113.56 million for research in both the Arctic and Antarctic, an increase of 2.7% over the $110.58 million requested for FY2018, and a reduction of 4.6% from the $119.05 million actual for FY2017. Also within the $534.54 million requested for OPP for FY2019 is $39.33 million for Arctic research and support logistics, an increase of 8.9% over the $36.11 million requested for FY2018, and a reduction of 12.7% from the $45.06 actual for FY2017.\nNSF states in the overview of its FY2019 budget request that\nIn 2019, NSF will support 10 Big Ideas, which are bold ideas that identify areas for future, long-term investment at the frontiers of science and engineering. With its broad portfolio of investments, NSF is uniquely suited to advance this set of cutting-edge research agendas and processes that will require collaborations with industry, private foundations, other agencies, science academies and societies, and universities and other education institutions. The Big Ideas represent unique opportunities to position our Nation at the frontiers\u2014indeed to define the frontiers\u2014of global science and engineering leadership and to invest in fundamental research that advances America's economic competitiveness and security.\nAmong the 10 big ideas, NSF states in its overview that number 6 is\nNavigating the New Arctic (NNA) \u2014Establishing an observing network of mobile and fixed platforms and tools across the Arctic to document and understand the Arctic's rapid biological, physical, chemical, and social changes.\nFor FY2019, NSF is requesting $30.0 million for NNA under Integrative & Collaborative Education and Research (ICER) effort of GEO. NSF states that\na number of GEO programs contribute directly to NSF's overarching theme of Navigating the New Arctic (NNA).... As part of NNA, and in partnership with the other research directorates and offices, GEO will invest funds in its ICER division to support convergent activities that transcend the traditional disciplinary boundaries of individual NSF directorates and offices. These activities will enable pursuit of fundamental research in Arctic regions. While budget management and reporting for this investment will be the responsibility of GEO, the convergent activities will be overseen and managed collaboratively by the multi-directorate\/office NNA leadership team.\nRegarding its FY2019 budget request for OPP, NSF states that\nThe Office of Polar Programs (OPP) is the primary U.S. supporter of fundamental research in the polar regions. In the Arctic, NSF helps coordinate research planning as directed by the Arctic Research Policy Act of 1984, and the NSF Director chairs the Interagency Arctic Research Policy Committee (IARPC) created for this purpose....\nOPP supports investments in research and education and provides support for research infrastructure, such as permanent stations and temporary field camps in the Antarctic and the Arctic. OPP's FY 2019 Budget Request is influenced by three key priorities: (1)\u00a0supporting critical facilities that enable frontier research in the Earth's polar regions; (2) maintaining strong disciplinary programs that provide a base for our investments in cross-disciplinary system science programs and; (3) maintaining U.S. research community activities in polar system science. As part of priority one, OPP will start the construction phase of the multi-year Antarctic Infrastructure Modernization for Science (AIMS) project. OPP will also prioritize investment in two of the Big Ideas: Navigating the New Arctic where OPP leads NSF efforts, and Windows on the Universe where OPP invests in underpinning activities. All of these priorities reflect opportunities for fundamental scientific discovery uniquely possible in polar regions, as well as studies to investigate the causes and future trajectory of environmental and ecosystem changes now being observed at the poles that could impact global systems. This work will implement the Foundation's lead-agency role in facilitating the Nation's investment in polar science.\nIn addition to shared cross-directorate basic research objectives, OPP investments will be guided by recent sponsored studies to identify priority areas and ensure effective polar research programs:\n\u2022 For the Arctic, IARPC's Arctic Research Plan: FY 2017-20211 , and the World Meteorological Organization's Year of Polar Prediction Implementation Plan inform science investment priorities. Efforts to build an integrated research capacity to address the potential opportunities and challenges of Arctic change for the Nation's security and economics and well-being of Arctic residents will continue.\nRegarding the $39.33 million requested for FY2019 for Arctic Research Support and Logistics within OPP, NSF states the following:\nThe Research Support and Logistics program in the Arctic Sciences section of OPP responds to science supported by the section. Funding is provided directly to grantees or to key organizations that provide or manage Arctic research support and logistics. A contractor provides research support and logistics services for NSF-sponsored activities in the Arctic. Additional major support components include: access to USCG and other icebreakers, University-National Oceanographic Laboratory (UNOLS) vessels and coastal boats; access to fixed- and rotary-wing airlift support; assets at Toolik Field Station, University of Alaska Fairbanks' field station for ecological research on Alaska's North Slope; safety training for field researchers and funding for field safety experts; global satellite telephones for emergency response and improved logistics coordination; and development of a network of strategically placed U.S. observatories linked to similar efforts in Europe and Canada....\nArctic Sciences personnel support merit-reviewed research proposals in social, earth systems, and a broad range of natural sciences; its Research Support & Logistics program responds to research by assisting researchers with access to the Arctic and sharing of plans and results with local Arctic communities.\n\n\t\tMajor U.S. Policy Documents Relating to the Arctic\n\n\t\t\tJanuary 2009 Arctic Policy Directive (NSPD 66\/HSPD 25)\n\nOn January 12, 2009, the George W. Bush Administration released a presidential directive establishing a new U.S. policy for the Arctic region. The directive, dated January 9, 2009, was issued as National Security Presidential Directive 66\/Homeland Security Presidential Directive 25 (NSPD 66\/HSPD 25). The directive was the result of an interagency review, and it superseded for the Arctic (but not the Antarctic) a 1994 presidential directive on Arctic and Antarctic policy. The directive, among other things,\nstates that the United States is an Arctic nation, with varied and compelling interests in the region; sets forth a six-element overall U.S. policy for the region; describes U.S. national security and homeland security interests in the Arctic; and discusses a number of issues as they relate to the Arctic, including international governance; the extended continental shelf and boundary issues; promotion of international scientific cooperation; maritime transportation; economic issues, including energy; and environmental protection and conservation of natural resources.\nFor the text of NSPD 66\/HSPD 25, see Appendix C .\n\n\t\t\tMay 2010 National Security Strategy\n\nIn May 2010, the Obama Administration released a national security strategy document that states the following:\nThe United States is an Arctic Nation with broad and fundamental interests in the Arctic region, where we seek to meet our national security needs, protect the environment, responsibly manage resources, account for indigenous communities, support scientific research, and strengthen international cooperation on a wide range of issues.\n\n\t\t\tMay 2013 National Strategy for Arctic Region\n\nOn May 10, 2013, the Obama Administration released a document entitled National Strategy for the Arctic Region . The document appears to supplement rather than supersede the January 2009 Arctic policy directive (NSPD 66\/HSPD 25) discussed above. The executive summary of National Strategy for the Arctic Region begins by quoting the above statement from the May 2010 national security strategy document, and then states the following:\nThe National Strategy for the Arctic Region sets forth the United States Government's strategic priorities for the Arctic region. This strategy is intended to position the United States to respond effectively to challenges and emerging opportunities arising from significant increases in Arctic activity due to the diminishment of sea ice and the emergence of a new Arctic environment. It defines U.S. national security interests in the Arctic region and identifies prioritized lines of effort, building upon existing initiatives by Federal, state, local, and tribal authorities, the private sector, and international partners, and aims to focus efforts where opportunities exist and action is needed. It is designed to meet the reality of a changing Arctic environment, while we simultaneously pursue our global objective of combating the climatic changes that are driving these environmental conditions. Our strategy is built on three lines of effort:\n1. Advance United States Security Interests \u2013 We will enable our vessels and aircraft to operate, consistent with international law, through, under, and over the airspace and waters of the Arctic, support lawful commerce, achieve a greater awareness of activity in the region, and intelligently evolve our Arctic infrastructure and capabilities, including ice-capable platforms as needed. U.S. security in the Arctic encompasses a broad spectrum of activities, ranging from those supporting safe commercial and scientific operations to national defense.\n2. Pursue Responsible Arctic Region Stewardship \u2013 We will continue to protect the Arctic environment and conserve its resources; establish and institutionalize an integrated Arctic management framework; chart the Arctic region; and employ scientific research and traditional knowledge to increase understanding of the Arctic.\n3. Strengthen International Cooperation \u2013 Working through bilateral relationships and multilateral bodies, including the Arctic Council, we will pursue arrangements that advance collective interests, promote shared Arctic state prosperity, protect the Arctic environment, and enhance regional security, and we will work toward U.S. accession to the United Nations Convention on the Law of the Sea (Law of the Sea Convention).\nOur approach will be informed by the following guiding principles:\n\u2022 Safeguard Peace and Stability \u2013 Seek to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. Support and preserve: international legal principles of freedom of navigation and overflight and other uses of the sea and airspace related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes for all nations.\n\u2022 Make Decisions Using the Best Available Information \u2013 Across all lines of effort, decisions need to be based on the most current science and traditional knowledge.\n\u2022 Pursue Innovative Arrangements \u2013 Foster partnerships with the state of Alaska, Arctic states, other international partners, and the private sector to more efficiently develop, resource, and manage capabilities, where appropriate and feasible, to better advance our strategic priorities in this austere fiscal environment.\n\u2022 Consult and Coordinate with Alaska Natives \u2013 Engage in a consultation process with Alaska Natives, recognizing tribal governments' unique legal relationship with the United States and providing for meaningful and timely opportunity to inform Federal policy affecting Alaskan Native communities.\nFor the main text of the document, see Appendix D .\n\n\t\t\tJanuary 2014 Implementation Plan for National Strategy for Arctic Region\n\nOn January 30, 2014, the Obama Administration released an implementation plan for the May 2013 national strategy for the Arctic region. The plan states that it\ncomplements and builds upon existing initiatives by Federal, State, local, and tribal authorities, the private sector, and international partners, and focuses efforts where opportunities exist and action is most needed. The Implementation Plan reflects the reality of a changing Arctic environment and upholds national interests in safety, security, and environmental protection, and works with international partners to pursue global objectives of addressing climatic changes.\nThis Implementation Plan follows the structure and objectives of the Strategy's three lines of effort and is consistent with the guiding principles. The lines of effort of the Strategy and the Implementation Plan are as follows:\n\u2022 Advance United States Security Interests\n\u2022 Pursue Responsible Arctic Region Stewardship\n\u2022 Strengthen International Cooperation\nThese lines of effort and guiding principles are meant to be implemented as a coherent whole.\nThe plan also states the following:\nClimate change is already affecting the entire global population, and Alaska residents are experiencing the impacts in the Arctic. To ensure a cohesive Federal approach, implementation activities must be aligned with the Executive Order on Preparing the United States for the Impacts of Climate Change while executing the Strategy. In addition to the guiding principles, the following approaches are important in implementing the activities across all of the lines of effort:\n\u2022 Foster Partnerships with Arctic Stakeholders. As outlined in the Strategy, all lines of effort must involve Arctic partners, particularly the State of Alaska and Alaska Natives in the Arctic region. Federal agencies, the State of Alaska, tribal communities, local governments, and academia will work with other nations, industry stakeholders, non-governmental organizations, and research partners to address emerging challenges and opportunities in the Arctic environment. The Federal Government should strive to maintain the free flow of communication and cooperation with the State of Alaska to support national priorities.\n\u2022 Coordinate and Integrate Activities across the Federal Government. Multiple Federal bodies currently have authority for Arctic policy (e.g., the National Ocean Council (NOC), Arctic Policy Group, and Interagency Arctic Research Policy Committee (IARPC)). The National Security Council Staff will develop an Executive Order through the interagency process to maximize efficiency, align interagency initiatives, and create unity of effort among all Federal entities conducting activities in the Arctic.\nThe plan outlines about 36 specific initiatives. For each, it presents a brief statement of the objective, a list of next steps to be taken, a brief statement about measuring progress in achieving the objective, and the names of the lead and supporting federal agencies to be involved.\nOn March 9, 2016, the Obama Administration released three documents discussing the implementation of the national strategy for the Arctic: (1) a report entitled 2015 Year in Review\u2014Progress Report on the Implementation of the National Strategy for the Arctic Region ; (2) an appendix to that report entitled Appendix A, Implementation Framework for the National Strategy for the Arctic Region : and (3) another appendix to that report entitled Appendix B, Interagency Arctic Research Policy Committee 5-Year Plan Collaboration Teams: 2015 Summary of Accomplishments and 2016 Priorities .\n\n\t\t\tJanuary 2015 Executive Order for Enhancing Coordination of Arctic Efforts\n\nOn January 21, 2015, then-President Obama issued Executive Order 13689, entitled \"Enhancing Coordination of National Efforts in the Arctic.\" The order states the following in part:\nAs the United States assumes the Chairmanship of the Arctic Council, it is more important than ever that we have a coordinated national effort that takes advantage of our combined expertise and efforts in the Arctic region to promote our shared values and priorities.\nAs the Arctic has changed, the number of Federal working groups created to address the growing strategic importance and accessibility of this critical region has increased. Although these groups have made significant progress and achieved important milestones, managing the broad range of interagency activity in the Arctic requires coordinated planning by the Federal Government, with input by partners and stakeholders, to facilitate Federal, State, local, and Alaska Native tribal government and similar Alaska Native organization, as well as private and nonprofit sector, efforts in the Arctic....\nThere is established an Arctic Executive Steering Committee (Steering Committee), which shall provide guidance to executive departments and agencies (agencies) and enhance coordination of Federal Arctic policies across agencies and offices, and, where applicable, with State, local, and Alaska Native tribal governments and similar Alaska Native organizations, academic and research institutions, and the private and nonprofit sectors....\n... the Steering Committee will meet quarterly, or as appropriate, to shape priorities, establish strategic direction, oversee implementation, and ensure coordination of Federal activities in the Arctic....\nThe Steering Committee, in coordination with the heads of relevant agencies and under the direction of the Chair, shall:\n(a) provide guidance and coordinate efforts to implement the priorities, objectives, activities, and responsibilities identified in National Security Presidential Directive 66\/Homeland Security Presidential Directive 25, Arctic Region Policy, the National Strategy for the Arctic Region and its Implementation Plan, and related agency plans;\n(b) provide guidance on prioritizing Federal activities, consistent with agency authorities, while the United States is Chair of the Arctic Council, including, where appropriate, recommendations for resources to use in carrying out those activities; and\n(c) establish a working group to provide a report to the Steering Committee by May 1, 2015, that:\n(i) identifies potential areas of overlap between and within agencies with respect to implementation of Arctic policy and strategic priorities and provides recommendations to increase coordination and reduce any duplication of effort, which may include ways to increase the effectiveness of existing groups; and\n(ii) provides recommendations to address any potential gaps in implementation....\nIt is in the best interest of the Nation for the Federal Government to maximize transparency and promote collaboration where possible with the State of Alaska, Alaska Native tribal governments and similar Alaska Native organizations, and local, private-sector, and nonprofit-sector stakeholders. To facilitate consultation and partnerships with the State of Alaska and Alaska Native tribal governments and similar Alaska Native organizations, the Steering Committee shall:\n(a) develop a process to improve coordination and the sharing of information and knowledge among Federal, State, local, and Alaska Native tribal governments and similar Alaska Native organizations, and private-sector and nonprofit-sector groups on Arctic issues;\n(b) establish a process to ensure tribal consultation and collaboration, consistent with my memorandum of November 5, 2009 (Tribal Consultation). This process shall ensure meaningful consultation and collaboration with Alaska Native tribal governments and similar Alaska Native organizations in the development of Federal policies that have Alaska Native implications, as applicable, and provide feedback and recommendations to the Steering Committee;\n(c) identify an appropriate Federal entity to be the point of contact for Arctic matters with the State of Alaska and with Alaska Native tribal governments and similar Alaska Native organizations to support collaboration and communication; and\n(d) invite members of State, local, and Alaska Native tribal governments and similar Alaska Native organizations, and academic and research institutions to consult on issues or participate in discussions, as appropriate and consistent with applicable law.\nAs stated in the above-quoted passage, Executive Order 13689, among other things, established an Arctic Executive Steering Committee (AESC) to \"provide guidance to executive departments and agencies (agencies) and enhance coordination of Federal Arctic policies across agencies and offices, and, where applicable, with State, local, and Alaska Native tribal governments and similar Alaska Native organizations, academic and research institutions, and the private and nonprofit sectors.\" Regarding the AESC, a February 28, 2019, press report states the following: \"Although the [executive] order has not been rescinded, the Trump administration has left the committee dormant for the past two years.\"\n\n\t\tU.S. Special Representative for the Arctic (Currently Vacant)\n\nOn July 16, 2014, during the Obama Administration, then-Secretary of State John Kerry announced the appointment of retired Coast Guard Admiral Robert J. Papp Jr., who served as Commandant of the Coast Guard from May 2010 to May 2014, as the first U.S. Special Representative for the Arctic. Under the Obama Administration, the duties of this position involved, among other things, interacting with ambassadors to the Arctic region from other countries. Papp served as the U.S. Special Representative until January 20, 2017, the final day of the Obama Administration and the first day of the Trump Administration; the position has gone unfilled since then.\n\n\t\tArctic Council37\n\n\t\t\tOverview\n\nA series of meetings initiated by Finland in 1989 led in 1996 to the creation of the Arctic Council via the Ottawa Declaration of September 19, 1996. The council is \"the leading intergovernmental forum promoting cooperation, coordination and interaction among the Arctic States, Arctic indigenous communities and other Arctic inhabitants on common Arctic issues, in particular on issues of sustainable development and environmental protection in the Arctic.\" Specific issues addressed by the council include regional development, the environment, emergency response, climate change, and natural resource extraction. The council states that its mandate, \"as articulated in the Ottawa Declaration, explicitly excludes military security.\" The council's standing Secretariat formally became operational in 2013 in Troms\u00f8, Norway.\n\n\t\t\tOrganization and Operations\n\n\t\t\t\tEight Member States\n\nThe Arctic Council's membership consists of the eight countries that have sovereign territory within the Arctic Circle: the United States, Canada, Russia, Iceland, Norway, Sweden, Finland, and Denmark (by virtue of its territory Greenland). The council states that \"decisions at all levels in the Arctic Council are the exclusive right and responsibility\" of these eight states.\n\n\t\t\t\tIndigenous Permanent Participants\n\nIn addition to the eight member states, \"six organizations representing Arctic indigenous peoples have status as Permanent Participants. The category of Permanent Participant was created to provide for active participation and full consultation with the Arctic indigenous peoples within the council. They include: the Aleut International Association, the Arctic Athabaskan Council, Gwich'in Council International, the Inuit Circumpolar Council, Russian Association of Indigenous Peoples of the North and the Saami Council.\"\n\n\t\t\t\tObservers\n\nThirteen states have been approved as observers to the Arctic Council: Germany, the Netherlands, Poland, and the United Kingdom (approved in 1998); France (2000); Spain (2006); China, India, Italy, Japan, Singapore, and South Korea (2013); and Switzerland (2017). In addition, 13 intergovernmental and interparliamentary organizations and 13 nongovernmental organizations have been approved as observers, making for a total of 39 observer states or organizations.\n\n\t\t\t\tWorking Groups\n\nThe Arctic Council's work is carried out primarily in six working groups that focus on Arctic contaminants; Arctic monitoring and assessment; conservation of Arctic flora and fauna; emergency prevention, preparedness and response; protection of the Arctic marine environment; and sustainable development. The council may also establish task forces or expert groups for specific projects.\n\n\t\t\t\tChairmanships\n\nThe council has a two-year chairmanship that rotates among the eight member states. The United States held the chairmanship from April 24, 2015, to May 11, 2017, a period which began during the Obama Administration and continued into the first 16 weeks of the Trump Administration. The United States had previously held the chairmanship from 1998 to 2000, and will next hold it in 2031-2033. During the Obama Administration's portion of the period of U.S. chairmanship, the U.S. chairmanship team was led by then-Secretary of State John Kerry. For a statement from the Obama Administration regarding U.S. goals for the Obama Administration's portion of the U.S. period of chairmanship, see Appendix E .\nOn May 11, 2017, the chairmanship of the Arctic Council was transferred from the United States to Finland. A May 11, 2017, press report states the following: \"Finland's chairmanship program emphasizes climate change and ways the Paris emissions targets can mitigate it, said Timo Soini, Finland's foreign minister. 'We recognize that global warming is the main driver of change in the Arctic,' Soini said.\"\n\n\t\t\t\tSenior Arctic Officials (SAOs)\n\nEach member state is represented by a Senior Arctic Official (SAO), who is usually drawn from that country's foreign ministry. The SAOs hold meetings every six months. The council convenes ministerial-level meetings every two years, at the end of each chairmanship, while the working groups meet more frequently.\n\n\t\t\tLimits of Arctic Council as a Governing Body\n\nRegarding the limits of the Arctic Council as a governing body, the council states that it \"does not and cannot implement or enforce its guidelines, assessments or recommendations. That responsibility belongs to each individual Arctic State.\" In addition, as mentioned earlier, the council states that \"the Arctic Council's mandate, as articulated in the [1996] Ottawa Declaration [establishing the Council], explicitly excludes military security.\"\n\n\t\tThe Arctic and the U.N. Convention on Law of the Sea (UNCLOS)49\n\n\t\t\tBackground to UNCLOS\n\nIn November 1994, the United Nations Convention on the Law of the Sea (UNCLOS) entered into force. UNCLOS establishes a treaty regime to govern activities on, over, and under the world's oceans. It builds on four 1958 law of the sea conventions to which the United States is a party, and sets forth a framework for future activities in parts of the oceans that are beyond national jurisdiction. As of December 13, 2018, 168 nations were party to the treaty. The 1982 Convention and its 1994 Agreement relating to Implementation of Part XI of the Convention were transmitted to the Senate on October 6, 1994. In the absence of Senate advice and consent to adherence, the United States is not a party to the convention and agreement.\n\n\t\t\tPart VI of UNCLOS and Commission on Limits of Continental Shelf\n\nPart VI of the convention, dealing with the Continental Shelf, and Annex II, which established a Commission on the Limits of the Continental Shelf, are most pertinent to the Arctic as it becomes more accessible ocean space, bordered by five coastal states. The convention gives a coastal state sovereign jurisdiction over the resources, including oil and gas, of its continental shelf. Under Article 76 of the convention, a coastal state with a broad continental margin may establish a shelf limit beyond 200 nautical miles. This jurisdiction is subject to the submission of the particulars of the intended limit and supporting scientific and technical data by the coastal state to the commission for review and recommendation. The commission reviews the documentation and, by a two-thirds majority, approves its recommendations to the submitting state. Coastal states agree to establish the outer limits of their continental shelf, in accordance with this process and with their national laws. In instances of disagreement with the commission's recommendations, the coastal state may make a revised or new submission. The actions of the commission \"shall not prejudice matters relating to delimitation of boundaries between States with opposite or adjacent coasts.\" The \"limits established by a coastal State on the basis of these recommendations shall be final and binding.\"\n\n\t\t\tExtended Continental Shelf and United States as a Nonparty to UNCLOS\n\nThe U.S. government's State Department-led interagency Extended Continental Shelf Project makes the following points regarding the extended continental shelf and the United States as a nonparty to UNCLOS:\nAs a nonparty to UNCLOS, U.S. nationals may not serve as members of the Commission on the Limits of the Continental Shelf. The question of whether nonparties may make a submission to the commission has not been resolved. Becoming a party to UNCLOS would help the United States maximize international recognition and legal certainty regarding the outer limits of the U.S. continental shelf. Even for nonparties to UNCLOS, however, customary international law, as reflected in UNCLOS, confers on coastal states rights and obligations relating to the continental shelf. This view is well supported in international law. The International Court of Justice, for example, has already declared Article 76(1) to have the status of customary international law (Nicaragua v. Colombia, 2012). Article 76(1) provides that the continental shelf extends to \"the outer edge of the continental margin or to a distance of 200 nautical miles,\" whichever is further. Paragraphs 2 through 7 of Article 76 set forth the detailed rules for determining the precise outer limits of the continental shelf in those areas where the continental margin extends beyond 200 nautical miles from shore. The United States, like other countries, is using these provisions to determine its continental shelf limits. As a matter of customary international law, the United States also respects the continental shelf limits of other countries that abide by Article 76. The commission is not a claims process, and continental shelf entitlement does not depend on going through this procedure. The mandate of the commission is instead to make \"recommendations\" on the \"outer limits\" of the continental shelf. The word \"claim\" does not appear in Article 76, Annex II, or the commission's rules. Article 77(3) and the case law of the International Court of Justice indicate that continental shelf rights exist as a matter of fact and do not need to be expressly claimed. Delineating the continental shelf is a very complex and technical exercise, and the commission's process is important for obtaining international recognition and legal certainty of the outer limits of the continental shelf. The United States has potentially overlapping extended continental shelf areas with two countries in the Arctic\u2014Russia and Canada. The United States and the Soviet Union (now Russia) agreed to a maritime boundary, including in the Arctic, in 1990. The treaty was approved by the U.S. Senate in 1991; it has not been approved by Russia's Duma. Pending the treaty's entry into force, the two countries continue to provisionally apply the terms of the treaty. In determining its extended continental shelf limits, Russia has respected this agreement. Russia has not asserted an extended continental shelf in any areas that might be considered part of the U.S. extended continental shelf. The Russian submission to the commission respects the U.S.-Russia maritime boundary. Canada and the United States have not yet established a maritime boundary in the Arctic. The United States and Canada have cooperated extensively to collect the data necessary to define the continental shelf in the Arctic Ocean. The areas where the continental shelf of the United States and Canada overlap will not be fully known until both countries determine the extent of their extended continental shelf in the Arctic Ocean. Once those areas are identified, the United States and Canada will address the maritime boundary on a bilateral basis at an appropriate time.\nOver the years, the United States has submitted observations on submissions to the commission made by other states, requesting that those observations be made available online and to the commission. In addition, since 2001, the United States has gathered and analyzed data to determine the outer limits of its extended continental shelf. Starting in 2007, this effort became the Extended Continental Shelf Project.\n\n\t\t\tAdditional Points\n\nSome observers have suggested that a separate international legal regime be negotiated to address the changing circumstances in the Arctic. They maintain that these changing circumstances were not envisioned at the time UNCLOS was negotiated. Other observers suggest that the Arctic region above a certain parallel be designated a wilderness area. As precedent, they cite Article 4 of the Antarctic Treaty, under which any current claims to sovereign territory are frozen and \nNo acts or activities taking place while the present Treaty is in force shall constitute a basis for asserting, supporting or denying a claim to territorial sovereignty in Antarctica or create any rights of sovereignty in Antarctica. No new claim, or enlargement of an existing claim, to territorial sovereignty in Antarctica shall be asserted while the present Treaty is in force.\nSupporters of UNCLOS maintain that changing circumstances in the Arctic strengthen their argument that the United States should become a party to the convention. In this way, they argue, the United States can be best situated to protect and serve its national interests, under both Article 76 and other parts of UNCLOS.\nThe Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see discussion above) includes, as one of its 36 or so initiatives, one entitled \"Accede to the Law of the Sea Convention.\" Under this initiative, the State Department and other federal agencies are to \"continue to seek the Senate's advice and consent to accede to the Law of the Sea Convention.\" The document states that \"the [Obama] Administration is committed, like the last three Administrations, to pursuing accession to the Convention on the Law of the Sea and will continue to place a priority on attaining Senate advice and consent to accession.\"\n\n\t\tSenate Arctic Caucus\n\nOn March 4 and 5, 2015, Senator Lisa Murkowski and Senator Angus King announced the formation of a Senate Arctic Caucus \"to spotlight this region and open up a wider conversation about the nation's future in the region as America prepares to accede to the Chair of the Arctic Council.\"\n\n\tIssues for Congress\n\n\t\tClimate Change and Loss of Arctic Sea Ice64\n\nRecord low extents of Arctic sea ice in 2012 and 2007 have focused scientific and policy attention on climate changes in the high north, and on the implications of projected ice-free seasons in the Arctic within decades. The Arctic has been projected by several scientists to be ice-free in most late summers as soon as the 2030s. This opens opportunities for transport through the Northwest Passage and the Northern Sea Route, extraction of potential oil and gas resources, and expanded fishing and tourism ( Figure 3 ).\nMore broadly, physical changes in the Arctic include warming ocean, soil, and air temperatures; melting permafrost; shifting vegetation and animal abundances; and altered characteristics of Arctic cyclones. All these changes are expected to affect traditional livelihoods and cultures in the region and survival of polar bear and other animal populations, and raise risks of pollution, food supply, safety, cultural losses, and national security. Moreover, linkages (\"teleconnections\") between warming Arctic conditions and extreme events in the mid-latitude continents are increasingly evident, identified in such extreme events as the heat waves and fires in Russia in 2010; severe winters in the eastern United States and Europe in 2009\/2010 and in Europe in 2011\/2012; and Indian summer monsoons and droughts. Hence, changing climate in the Arctic suggests important implications both locally and across the Hemisphere.\nLike the rest of the globe, temperatures in the Arctic have varied but show a significant warming trend since the 1970s, and particularly since 1995. The annual average temperature for the Arctic region (from 60 o to 90 o N) is now about 1.8 o F warmer than the \"climate normal\" (the average from 1961 to 1990). Temperatures in October-November are now about 9 o F above the seasonal normal. Scientists have concluded that most of the global warming of the last three decades is very likely caused by human-related emissions of greenhouse gases (GHG, mostly carbon dioxide); they expect the GHG-induced warming to continue for decades, even if, and after, GHG concentrations in the atmosphere have been stabilized. The extra heat in the Arctic is amplified by processes there (the \"polar amplification\") and may result in irreversible changes on human timescales.\nThe observed warmer temperatures along with rising cyclone size and strength in the Arctic have reduced sea ice extent, thickness, and ice that persists year-round (\"perennial ice\"); natural climate variability has likely contributed to the record low ice extents of 2007 and 2012. The 2007 minimum sea ice extent was influenced by warm Arctic temperatures and warm, moist winds blowing from the North Pacific into the central Arctic, contributing to melting and pushing ice toward and into the Atlantic past Greenland. Warm winds did not account for the near-record sea ice minimum in 2008. In early August 2012, an unusually large storm with low pressure developed over the Arctic, helping to disperse the already weak ice into warmer waters and accelerating its melt rate. By August 24, 2012, sea ice extent had shrunk below the previous observed minimum of late September 2007.\nModeling of GHG-induced climate change is particularly challenging for the Arctic, but it consistently projects warming through the 21 st century, with annual average Arctic temperature increases ranging from +1\u00b0 to +9.0\u00b0 C (+2\u00b0 to +19.0\u00b0 F), depending on the GHG scenario and model used. While such warming is projected by most models throughout the Arctic, some models project slight cooling localized in the North Atlantic Ocean just south of Greenland and Iceland. Most warming would occur in autumn and winter, \"with very little temperature change projected over the Arctic Ocean\" in summer months.\nDue to observed and projected climate change, scientists have concluded that the Arctic will have changed from an ice-covered environment to a recurrent ice-free ocean (in summers) as soon as the late 2030s. The character of ice cover is expected to change as well, with the ice being thinner, more fragile, and more regionally variable. The variability in recent years of both ice quantity and location could be expected to continue.\n\n\t\tExtended Continental Shelf Submissions, Territorial Disputes, and Sovereignty Issues74\n\n\t\t\tExtended Continental Shelf Submissions\n\nMotivated in part by a desire to exercise sovereign control over the Arctic region's increasingly accessible oil and gas reserves (see \" Oil, Gas, and Mineral Exploration \"), the four Arctic coastal states other than the United States\u2014Canada, Russia, Norway, and Denmark (of which Greenland is a territory)\u2014have made or are in the process of preparing submissions to the Commission on the Limits of the Continental Shelf regarding the outer limits of their extended continental shelves. (For further discussion of the commission, see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS .\")\nRussia has been attempting to chart the Arctic Ocean's enormous underwater Lomonosov Ridge in an attempt to show that it is an extension of Russia's continental margin. The ridge spans a considerable distance across the Arctic Ocean. A 2001 submission by Russia was rejected as insufficiently documented. Canada views a portion of the ridge as part of its own continental shelf.\nIn August 2007, a Russian submersible on a research expedition deposited an encased Russian Federation flag on the seabed of the presumed site of the North Pole. The action captured worldwide attention, but analysts note that it did not constitute an official claim to the Arctic seabed or the waters above it, that it has no legal effect, and that it therefore was a purely symbolic act.\nAt a May 2008 meeting in Ilulissat, Greenland, the five Arctic coastal states reaffirmed their commitment to the UNCLOS legal framework for the establishment of extended continental shelf limits in the Arctic. (For further discussion, see \" Extent of the Continental Margin \" in \" Oil, Gas, and Mineral Exploration .\")\n\n\t\t\tTerritorial Disputes and Sovereignty Issues\n\nIn addition to this process, there are four unresolved Arctic territorial disputes:\nScientists have forecast that in coming decades, global warming will reduce the ice pack in Canada's northern archipelago sufficiently to permit ships to use the trans-Arctic shipping route known as the Northwest Passage during the summer months (see \" Commercial Sea Transportation \"). The prospect of such traffic raises a major jurisdictional question. Ottawa maintains that such a passage would be an inland waterway, and would therefore be sovereign Canadian territory subject to Ottawa's surveillance, regulation, and control. The United States, the European Union, and others assert that the passage would constitute an international strait between two high seas. The United States and Canada are negotiating over a binational boundary in the Beaufort Sea. The United States and Russia in 1990 signed an agreement regarding a disputed area of the Bering Sea; the U.S. Senate ratified the pact the following year, but the Russian Duma has yet to approve the accord. Denmark and Canada disagree over which country has the territorial right to Hans Island, a tiny, barren piece of rock between Greenland and Canada's Ellesmere Island. Some analysts believe the two countries are vying for control over a future sea lane that might be created if the Arctic ice were to melt sufficiently to create a Northwest Passage. Others claim that the governments are staking out territorial claims in the event that future natural resource discoveries make the region economically valuable.\nIn addition to these disputes, Norway and Russia had been at odds for decades over the boundary between the two in the so-called \"Grey Zone\" in the Barents Sea, an area believed to hold rich undersea deposits of petroleum. On September 15, 2010, Norwegian Prime Minister Jens Stoltenberg and Russian President Dmitry Medvedev signed an agreement in Murmansk, a Russian city near the Norwegian border. The accord awards roughly half of the 175,000-square-kilometer area to each country; it spells out fishing rights, and provides for the joint development of future oil and gas finds that straddle the boundary line. Some observers believe it is noteworthy that Russia would concede sovereignty over such a large, resource-rich area to a small, neighboring country. But others have noted that Moscow may be hoping for Norwegian cooperation in developing offshore resources, and eventually in winning approval when Russia makes its Article 76 UNCLOS submission.\nIn August 2010, Canadian Foreign Minister Lawrence Cannon announced a new \"Statement of Canada's Arctic Policy,\" which reaffirmed the government's commitment to Canada's sovereignty in the region, to economic and social development, to environmental protection, and to empowerment of the peoples in the north. The statement also emphasized the government's intention to negotiate settlements to its disputes with the United States over the Beaufort Sea boundary, and with Denmark over Hans Island. Minister Cannon declared that \"making progress on outstanding boundary issues will be a top priority.\" Also, despite their dispute over Hans Island, Canada and Denmark have been working together on Arctic issues. In May 2010, the two countries' military chiefs of staffs signed a memorandum of understanding on Arctic Defense, Security, and Operational Cooperation, committing the two countries to \"enhanced consultation, information exchange, visits, and exercises.\"\n\n\t\tCommercial Sea Transportation81\n\n\t\t\tBackground\n\nThe search for a shorter route from the Atlantic to Asia has been the quest of maritime powers since the Middle Ages. The melting of Arctic ice raises the possibility of saving several thousands of miles and several days of sailing between major trading blocs. If the Arctic were to become a viable shipping route, the ramifications could extend far beyond the Arctic. For example, lower shipping costs could be advantageous for China (at least its northeast region), Japan, and South Korea because their manufactured products exported to Europe or North America could become less expensive relative to other emerging manufacturing centers in Southeast Asia, such as India. Melting ice could potentially open up two trans-Arctic routes (see Figure 3 ):\nThe Northern Sea Route (NSR, a.k.a. the \"Northeast Passage\"), along Russia's northern border from Murmansk to Provideniya, is about 2,600 nautical miles in length. It was opened by the Soviet Union to domestic shipping in 1931 and to transit by foreign vessels in 1991. This route would be applicable for trade between northeast Asia (north of Singapore) and northern Europe. In recent summers, less than a handful of large, non-Russian-flagged cargo ships have transited the NSR. Russia reportedly seeks to reserve carriage of oil and gas extracted along the NSR to Russian-flagged ships. The Northwest Passage (NWP) runs through the Canadian Arctic Islands. The NWP actually consists of several potential routes. The southern route is through Peel Sound in Nunavut, which has been open in recent summers and contains mostly one-year ice. However, this route is circuitous, contains some narrow channels, and is shallow enough to impose draft restrictions on ships. The more northern route, through McClure Strait from Baffin Bay to the Beaufort Sea north of Alaska, is much more direct and therefore more appealing to ocean carriers, but more prone to ice blockage. The NWP is potentially applicable for trade between northeast Asia (north of Shanghai) and the northeast of North America, but it is less commercially viable than the NSR. Cargo ship transits have been extremely rare but cruise vessel excursions and research vessels are more common. \n\n\t\t\t\tDestination Traffic, Not Trans-Arctic Traffic\n\nMost cargo ship activity currently taking place in the Arctic is to transport natural resources from the Arctic or to deliver general cargo and supplies to communities and natural resource extraction facilities. Thus, cargo ship traffic in the Arctic presently is mostly regional, not trans-Arctic. While there has been a recent uptick in Arctic shipping activity, this activity has more to do with a spike in commodity prices than it does with the melting of Arctic ice. Even so, fewer ships ply the Arctic seas now than in the past. The NSR continues to account for the bulk of Arctic shipping activity. \n\n\t\t\t\tUnpredictable Ice Conditions Hinder Trans-Arctic Shipping\n\nArctic waters do not necessarily have to be ice free to be open to shipping. Multiyear ice can be over 10 feet thick and problematic even for icebreakers, but one-year ice is typically 3 feet thick or less. This thinner ice can be more readily broken up by icebreakers or ice-class ships (cargo ships with reinforced hulls and other features for navigating in ice-infested waters). However, more open water in the Arctic has resulted in another potential obstacle to shipping: unpredictable ice flows. In the NWP, melting ice and the opening of waters that were once covered with one-year ice has allowed blocks of multiyear ice from farther north and icebergs from Greenland to flow into potential sea lanes. The source of this multiyear ice is not predicted to dissipate in spite of climate change. Moreover, the flow patterns of these ice blocks are very difficult to forecast. Thus, the lack of ice in potential sea lanes during the summer months can add even greater unpredictability to Arctic shipping. This is in addition to the extent of ice versus open water, which is also highly variable from one year to the next and seasonally. \nThe unpredictability of ice conditions is a major hindrance for trans-Arctic shipping in general, but can be more of a concern for some types of ships than it is for others. For instance, it would be less of a concern for cruise ships, which may have the objective of merely visiting the Arctic rather than passing through and could change their route and itinerary depending on ice conditions. On the other hand, unpredictability is of the utmost concern for container ships that carry thousands of containers from hundreds of different customers, all of whom expect to unload or load their cargo upon the ship's arrival at various ports as indicated on the ship's advertised schedule. The presence of even small blocks of ice or icebergs from a melting Greenland ice sheet requires slow sailing and could play havoc with schedules. Ships carrying a single commodity in bulk from one port to another for just one customer have more flexibility in terms of delivery windows, but would not likely risk an Arctic passage under prevailing conditions.\nIce is not the sole impediment to Arctic shipping. The region frequently experiences adverse weather, including not only severe storms, but also intense cold, which can impair deck machinery. During the summer months when sea lanes are open, heavy fog is common in the Arctic. \nCommercial ships would face higher operating costs on Arctic routes than elsewhere. Ship size is an important factor in reducing freight costs. Many ships currently used in other waters would require two icebreakers to break a path wide enough for them to sail through; ship owners could reduce that cost by using smaller vessels in the Arctic, but this would raise the cost per container or per ton of freight. Also, icebreakers or ice-class cargo vessels burn more fuel than ships designed for more temperate waters and would have to sail at slower speeds. The shipping season in the Arctic only lasts for a few weeks, so icebreakers and other special required equipment would sit idle the remainder of the year. None of these impediments by themselves may be enough to discourage Arctic passage but they do raise costs, perhaps enough to negate the savings of a shorter route. Thus, from the perspective of a shipper or a ship owner, shorter via the Arctic does not necessarily mean cheaper and faster.\n\n\t\t\t\tBasic Navigation Infrastructure Is Lacking\n\nConsiderable investment in navigation-related infrastructure would be required if trans-Arctic shipping were to become a reality. Channel marking buoys and other floating visual aids are not possible in Arctic waters because moving ice sheets will continuously shift their positions. Therefore, vessel captains would need to rely on marine surveys and ice charts. For some areas in the Arctic, however, these surveys and charts are out of date or not sufficiently accurate. To remedy this problem, aviation reconnaissance of ice conditions and satellite images would need to become readily available for ship operators. Ship-to-shore communication infrastructure would need to be installed where possible. Refueling stations may be needed, as well as, perhaps, transshipment ports where cargo could be transferred to and from ice-capable vessels at both ends of Arctic routes. Shipping lines would need to develop a larger pool of mariners with ice navigation experience. Marine insurers would need to calculate the proper level of risk premium for polar routes, which would require more detailed information about Arctic accidents and incidents in the past. \nThe U.S. Army Corps of Engineers, along with the state of Alaska, has studied the feasibility of a \"deep-draft\" port in the Arctic (accommodating ships with a draft of up to 35 feet). The northern and northwestern coastlines of Alaska are exceptionally shallow, generally limiting harbor and near-shore traffic to shallow-draft barges. Coast Guard cutters and icebreakers have drafts of 35 to 40 feet while NOAA research vessels have drafts of 16 to 28 feet, so at present these vessels are based outside the Arctic and must sail considerable distances to reach Arctic duty stations. Supply vessels supporting offshore oil rigs typically have drafts over 20 feet. A deep-draft port could serve as a base of operations for larger vessels, facilitating commercial maritime traffic in the Arctic. The study concluded that the existing harbors of Nome or Port Clarence on Alaska's west coast may be the most suitable for deepening because of their proximity to the Bering Strait and deeper water. However, at a July 2016 hearing, the Coast Guard indicated its preferred strategy was to rely on mobile assets (vessels and aircraft) and seasonal bases of operation rather than pursue a permanent port in the Arctic.\nThe U.S. Committee on the Marine Transportation System, a Cabinet-level committee of federal agencies with responsibilities for marine transportation, identified a list of infrastructure improvements for Arctic navigation in a 2013 report. The report prioritizes improvements to information infrastructure (weather forecasting, nautical charting, ship tracking) and emergency response capabilities for ships in distress. \n\n\t\t\t\tRegulation of Arctic Shipping\n\nDue to the international nature of the shipping industry, maritime trading nations have adopted international treaties that establish standards for ocean carriers in terms of safety, pollution prevention, and security. These standards are agreed upon by shipping nations through the International Maritime Organization (IMO), a United Nations agency that first met in 1959. \nKey conventions that the 168 IMO member nations have adopted include the Safety of Life at Sea Convention (SOLAS), which was originally adopted in response to the Titanic disaster in 1912 but has since been revised several times; the Prevention of Pollution from Ships (MARPOL), which was adopted in 1973 and modified in 1978; and the Standards for Training, Certification, and Watchkeeping for Seafarers (SCTW), which was adopted in 1978 and amended in 1995. It is up to ratifying nations to enforce these standards. The United States is a party to these conventions, and the U.S. Coast Guard enforces them when it boards and inspects ships and crews arriving at U.S. ports and the very few ships engaged in international trade that sail under the U.S. flag. \nLike the United States, most of the other major maritime trading nations lack the ability to enforce these regulations as a \"flag state\" because much of the world's merchant fleet is registered under so-called \"flags of convenience.\" While most ship owners and operators are headquartered in major economies, they often register their ships in Panama, Liberia, the Bahamas, the Marshall Islands, Malta, and Cyprus, among other \"open registries,\" because these nations offer more attractive tax and employment regulatory regimes. Because of this development, most maritime trading nations enforce shipping regulations under a \"port state control\" regime\u2014that is, they require compliance with these regulations as a condition of calling at their ports. The fragmented nature of ship ownership and operation can be a further hurdle to regulatory enforcement. It is common for cargo ships to be owned by one company, operated by a second company (which markets the ship's space), and managed by a third (which may supply the crew and other services a ship requires to sail), each of which could be headquartered in different countries. \n\n\t\t\t\tNew Arctic Polar Code\n\nWhile SOLAS and other IMO conventions include provisions regarding the operation of ships in ice-infested waters, they were not specific to the polar regions. To supplement these requirements, a new IMO polar code went into effect on January 1, 2017. The code applies to passenger and cargo ships of 500 gross tons or more engaged in international voyages. It does not apply to fishing vessels, military vessels, pleasure yachts, or smaller cargo ships. The polar requirements are intended to improve safety and prevent pollution in the Arctic, and they include provisions on ship construction, ship equipment related to navigation, and crew training and ship operation. The code requires ships to carry fully or partially enclosed lifeboats. The code requires that the crew have training in ice navigation. Nations can enforce additional requirements on ships arriving at their ports or sailing through their coastal waters. For instance, U.S. Coast Guard regulations largely follow IMO conventions but mandate additional requirements in some areas. U.S. coastal states can require ships calling at their ports to take additional safety and pollution prevention safeguards. Canada and Russia have additional pollution regulations for Arctic waters exceeding MARPOL. The U.S. Coast Guard has studied and has recommended a specific vessel traffic separation scheme for the Bering Strait between Alaska and Russia, which experiences over 400 transits per year. The U.S. Coast Guard is seeking IMO approval of this routing scheme.\n\n\t\tOil, Gas, and Mineral Exploration102\n\nDecreases in summer polar ice may alter options for oil, gas, and mineral exploration in Arctic offshore or onshore areas. Offshore of Alaska, the U.S. outer continental shelf (OCS) covers more than 1 billion acres, including some areas with high oil and gas potential. Even with warmer temperatures, exploration and development in the Arctic are still subject to harsh conditions, especially in winter. This makes it costly and challenging to develop the infrastructure necessary to produce, store, and transport oil, gas, and minerals from newly discovered deposits. Severe weather poses challenges to several ongoing offshore operations as well as to new exploration. \nOffshore oil and gas exploration is affected by efforts to map the margins of the U.S. OCS. Shrinking sea ice cover in the Arctic has intensified interest in surveying and mapping the continental margins of multiple countries with lands in the Arctic. Delineating the extent of the continental margins beyond the 200 nautical mile Exclusive Economic Zone (EEZ) could lead to consideration of development on substantial amounts of submerged lands. Mapping projects are underway, by individual countries and through cooperative government studies, to support submissions to the Commission on the Limits of the Continental Shelf, including for areas that may contain large amounts of oil, natural gas, methane hydrates, or minerals. \nWith respect to onshore development, shrinking glaciers could expose land containing economic deposits of gold, iron ore, or other minerals previously covered by glacial ice. At the same time, warming that causes permafrost to melt could pose challenges to oil, gas, and mineral activities because ground structures, such as pipelines and other infrastructure that depend on footings sunk into the permafrost for support, could be compromised. In addition, warmer temperatures shorten the ice road transport seasons for oil, gas, and mineral development, creating transportation challenges.\n\n\t\t\tOffshore Oil and Gas Exploration\n\nThe shrinking Arctic ice cap, or conversely, the growing amount of ice-free ocean in the summertime, has increased interest in exploring for offshore oil and gas in the Arctic. Reduced sea ice in the summer means that ships towing seismic arrays can explore regions of the Arctic Ocean, Chukchi Sea, Beaufort Sea, and other offshore regions for longer periods of time with less risk of colliding with floating sea ice. Less sea ice over longer periods compared to previous decades also means that the seasonal window for offshore Arctic drilling remains open longer in the summer, increasing the chances for making a discovery. \nIn addition to the improved access to larger portions of the Arctic afforded by shrinking sea ice, interest in Arctic oil and gas was fueled by a 2008 U.S. Geological Survey (USGS) appraisal of undiscovered oil and gas north of the Arctic Circle. The USGS stated that the \"extensive Arctic continental shelves may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth.\" In the report, the USGS estimated that 90 billion barrels of oil, nearly 1,700 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids may remain to be discovered in the Arctic (including both U.S. and international resources north of the Arctic Circle). A 2009 article in Science magazine indicated that 30% of the world's undiscovered natural gas and 13% of the world's undiscovered oil may be found north of the Arctic Circle. In terms of U.S. resources specifically, DOI's Bureau of Ocean Energy Management (BOEM) estimated in 2016 that the Alaska portions of the U.S. OCS contain undiscovered, technically recoverable resources of approximately 27 billion barrels of oil and 131 trillion cubic feet of natural gas (although not all of these resources may be economically viable to recover). A 2015 report by the National Petroleum Council stated that U.S. offshore oil and gas exploration in the Arctic over the next 35 years \"would help sustain domestic supplies as production of U.S. shale oil and tight oil may decline.\"\nDespite the warming trend in the Arctic, severe weather and sea ice continue to pose challenges to exploration. In addition, any discovery of new oil and gas deposits far from existing storage, pipelines, and shipping facilities could not be developed until infrastructure is built to extract and transport the petroleum.\nSome have expressed interest in expanding America's ocean energy portfolio in the region. Currently, among 15 federal planning areas in the region, the Beaufort Sea and Cook Inlet are the only two areas with active federal leases, and only the Beaufort Sea has any producing wells in federal waters (from a joint federal-state unit). The Trump Administration has stated its interest in promoting offshore development in the region. In January 2018, the Administration issued a draft five-year offshore oil and gas leasing program for 2019-2024 that would schedule lease sales in all 15 Alaska planning areas, including three sales in the Beaufort Sea and three in the Chukchi Sea. Current lease sales on the Alaska OCS are governed by the Obama Administration's leasing program for 2017-2022, which includes one lease sale in the Cook Inlet (scheduled for 2021) and none in other Alaska planning areas. \nActivities on existing federal leases in the region have fluctuated as industry weighs changing oil prices, development costs, and regulations. For example, in 2015, Shell Oil Company announced its decision to cease exploration in offshore Alaska for the foreseeable future. Shell cited several reasons for the decision, including insufficient indications of oil and gas at its Burger J well in the Chukchi Sea, the high costs associated with Arctic exploration, and the \"challenging and unpredictable\" federal regulatory environment for offshore Alaska. BOEM also reported that, between February and November 2016, companies relinquished more than 90% of leases they had held in the Beaufort and Chukchi Sea planning areas, in the midst of a slump in oil prices. While there were 450 active leases in the Chukchi Sea planning area at the end of 2015, at the end of 2018 there were none. More recently, some activities have indicated stronger industry interest in the region. For example, in November 2017, the Trump Administration approved an application for permit to drill (APD) on a lease in the Beaufort Sea held by the Eni U.S. Operating Company. In October 2018, BOEM issued conditional approval to Hilcorp Alaska LLC for an oil and gas development and production plan in the Beaufort Sea, which would be the region's first production facility entirely in federal waters. \nThe evolving federal regulatory environment for Arctic offshore activities has been shaped by concerns about industry's ability to respond to potential oil spills, given the region's remoteness and harsh conditions. The section of this report on \" Oil Pollution Implications of Arctic Change \" discusses this issue in greater detail. In July 2016, BOEM and the Bureau of Safety and Environmental Enforcement (BSEE) released final safety regulations for Arctic exploratory drilling that include multiple requirements for companies to reduce the risks of potential oil spills\u2014for example, the requirement that companies have a separate rig available at drill sites to drill a relief well in case of a loss of well control. Some Members of Congress and industry stakeholders opposed the regulations as overly prescriptive and unnecessarily burdensome, while other Members and environmental organizations asserted that the rules did not go far enough in protecting the region from potential environmental damage and addressing the potential contributions of Arctic oil and gas activities to climate change. In a 2017 executive order, President Trump directed the Secretary of the Interior to review the Arctic regulations, and in 2018 the Department of the Interior announced work on rule revisions. Legislation was introduced in the 115 th Congress both to repeal the Obama Administration's version of the Arctic rule and, conversely, to codify it in law. \nConcerns about the impacts of oil and gas activities have led in the past to bans by both Congress and the President on leasing in certain Arctic Ocean areas deemed especially sensitive. For example, congressional and presidential moratoria since the 1980s effectively banned federally regulated planning and permitting in the Bristol Bay area of the North Aleutian Basin. Congress allowed most statutory bans in the region to expire in 2004. President Obama reinstated the moratorium in the North Aleutian Basin, indefinitely withdrawing acreage located in Bristol Bay from eligibility for oil and gas leasing. Also, in December 2016, President Obama indefinitely withdrew from leasing disposition other large portions of the U.S. Arctic, including the entire Chukchi Sea planning area and almost all of the Beaufort Sea planning area. President Obama separately withdrew from leasing consideration planning areas in the North Bering Sea. In April 2017, President Trump issued Executive Order 13795, which modified President Obama's withdrawals so as to open all of these areas for leasing consideration except for the North Aleutian Basin. \n\n\t\t\tExtent of the Continental Margin\n\nIncreased interest in developing offshore resources in the Arctic has sparked efforts by nations bordering the Arctic Ocean to map the extent of their continental margins beyond the 200-mile EEZ limit. As discussed earlier (see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS \"), under Article 76 of UNCLOS, nations can make a submission to the Commission on the Limits of the Continental Shelf (hereinafter referred to as the Commission) concerning the extent of their continental shelves. Under Article 76, the extent of the continental margin beyond the 200-mile limit depends on the position of the foot of the continental slope, the thickness of sediments, and the depth of water. Also, the continental margin could include geologic features that extend from the continent out to sea, which may include undersea ridges continuing for hundreds of miles offshore.\nArctic border countries have conducted complex investigations needed to support submissions to the Commission for an extended continental shelf in the Arctic. Submissions have been made by several countries, including the Russian Federation, which made its initial UNCLOS submission to a portion of the Arctic continental shelf in 2001. Russia's 2001 submission included the Lomonosov Ridge, an undersea feature spanning the Arctic from Russia to Canada, as an extension of its continental margin. The submission demonstrated Russia's bid to extend activities in Arctic regions. The Russian Federation presented a revised submission in 2015 to the Commission that included not only the Lomonosov Ridge but also the Mendeleev Rise\u2014another subsea feature claimed by Russia to be a natural part of their continental margin\u2014as components of the extended Russian continental shelf. The Commission has not rendered a decision on the revised Russian Federation submission as of early 2018.\nThe United States has started to gather and analyze data for a potential submission through an initiative called the Extended Continental Shelf (ECS) Project. The U.S. ECS project has also assisted more than 30 countries with their efforts to delineate their extended continental shelves worldwide. Canada and the United States share overlapping regions of the seabed as part of the extended continental margin of both nations. Much of the data to delineate the ECS for both countries was collected in a two-ship operation involving the U.S. Coast Guard Cutter Healy and the Canadian Coast Guard ship Louis S. Saint Laurent . The two-ship operation collected more than 13,000 linear kilometers (about 8,078 miles) of seismic data over four field seasons in the Arctic beginning in 2007. The data collected will help each country delineate the extent of their own ECS, which should then enable the countries to determine the amount of overlap in the seabed and ultimately establish a maritime boundary in the Arctic. \nThe United States also has potentially overlapping ECS areas with Russia. Russia (then the Soviet Union) and the United States agreed to a maritime boundary in 1990, and so far Russia has not asserted its ECS in any areas that might be considered part of the U.S. ECS.\n\n\t\t\tOnshore Mineral Development\n\nA warming Arctic means new opportunities and challenges for mineral exploration and development onshore. Receding glaciers expose previously ice-covered land that could host economic mineral deposits that were previously undetectable and unmineable below the ice. Longer summers would also extend exploration seasons for areas that are not currently ice-covered but are only accessible for ground surveys during the warmer months. In some parts of the Arctic, such as Baffin Island, Canada, less sea ice allows ships to transport heavy equipment to remote locations, and to convey ore from mines to the market further south. Some railway and mining operators are considering developing railroads and other infrastructure to transport ore year-round. As with onshore oil and gas development, however, mining infrastructure that depends on footings sunk into permafrost could become unstable if the permafrost melts in response to warmer temperatures. Also, as with oil and gas development, mineral deposits that may be technically recoverable with current technology may not be economically profitable.\nSome industry commentators suggest that mining might offer better long-term economic development opportunities compared to oil and gas development because of a larger permanent workforce and project lifetimes of several decades. Similar to oil and gas, however, industry observers note that uncertainties and knowledge gaps exist in the understanding of environmental change in the Arctic, and how to deal with the risks associated with significant Arctic industrial activity.\nOne important part of the current infrastructure in the Arctic that supports oil, gas, and mineral development is the construction and use of ice roads\u2014built and used during the winter, but not passable during the warmer months. Warmer temperatures are shortening the ice road transport seasons and creating transportation challenges. For example, the opening date for tundra roads in northern Alaska usually occurred in early November prior to 1991 and has shifted to January in recent years.\n\n\t\tOil Pollution and Pollution Response142\n\n\t\t\tOil Pollution Implications of Arctic Change\n\nClimate change impacts in the Arctic, particularly the decline of sea ice and retreating glaciers, have stimulated human activities in the region, many of which have the potential to create oil pollution. A primary concern is the threat of a large oil spill in the area. Although a major oil spill has not occurred in the Arctic region, recent economic activity, such as oil and gas exploration and tourism (cruise ships), increases the risk of oil pollution (and other kinds of pollution) in the Arctic. Significant spills in high northern latitudes (e.g., the 1989 Exxon Valdez spill in Alaska and spills in the North Sea) suggest that the \"potential impacts of an Arctic spill are likely to be severe for Arctic species and ecosystems.\"\n\n\t\t\t\tRisk of Oil Pollution in the Arctic\n\nA primary factor determining the risk of oil pollution in the Arctic is the level and type of human activity being conducted in the region. Although climate changes in the Arctic are expected to increase access to natural resources and shipping lanes, the region will continue to present logistical challenges that may hinder human activity in the region. For example (as discussed in another section of this report), the unpredictable ice conditions may discourage trans-Arctic shipping. If trans-Arctic shipping were to occur on a frequent basis, it would represent a considerable portion of the overall risk of oil pollution in the region. In recent decades, many of the world's largest oil spills have been from oil tankers, which can carry millions of gallons of oil.\nAlthough the level of trans-Arctic shipping is uncertain, many expect oil exploration and extraction activities to intensify in the region. Oil well blowouts from offshore oil extraction operations have been a source of major oil spills, eclipsing the largest tanker spills. The largest unintentional oil spill in recent history was from the 2010 Deepwater Horizon incident in the Gulf of Mexico. During that incident, the uncontrolled well released (over an 87-day period) approximately 200 million gallons of crude oil. The second-largest unintentional oil spill in recent history\u2014the IXTOC I , estimated at 140 million gallons\u2014was due to an oil well blowout in Mexican Gulf Coast waters in 1979.\nUntil the 2010 Deepwater Horizon incident, the spill record for offshore platforms in U.S. federal waters had shown improvement from prior years. A 2003 National Research Council (NRC) study of oil and gas activities on Alaska's North Slope stated \"blowouts that result in large spills are unlikely.\" Similar conclusions were made in federal agency documents regarding deepwater drilling in the Gulf of Mexico before the 2010 Deepwater Horizon event. Some would likely contend that the underlying analyses behind these conclusions should be adjusted to account for the 2010 Gulf oil spill. However, others may argue that the proposed activities in U.S. Arctic waters present less risk of an oil well blowout than was encountered by the Deepwater Horizon drill rig, because the proposed U.S. Arctic operations would be in shallower waters (150 feet) than the deepwater well (approximately 5,000 feet) that was involved in the 2010 Gulf oil spill. In addition, Shell Oil has stated that the pressures in the Chukchi Sea (the location of Shell's recent interest) would be two to three times less than they were in well involved in the 2010 Gulf oil spill. Regardless of these differences, even under the most stringent control systems, some oil spills and other accidents are likely to occur from equipment failure or human error. \n\n\t\t\t\tPotential Impacts\n\nNo oil spill is entirely benign. Even a relatively minor spill, depending on the timing and location, can cause significant harm to individual organisms and entire populations. Regarding aquatic spills, marine mammals, birds, bottom-dwelling and intertidal species, and organisms in early developmental stages\u2014eggs or larvae\u2014are especially vulnerable. However, the effects of oil spills can vary greatly. Oil spills can cause impacts over a range of time scales, from only a few days to several years, or even decades in some cases.\nConditions in the Arctic may have implications for toxicological effects that are not yet understood. For example, oil spills on permafrost may persist in an ecosystem for relatively long periods of time, potentially harming plant life through their root systems. Moreover, little is known about the effects of oil spills on species that are unique to the Arctic, particularly, species' abilities to thrive in a cold environment and the effect temperature has on toxicity.\nThe effects of oil spills in high-latitude, cold-ocean environments may last longer and cause greater damage than expected. Some recent studies have found that oil spills in lower latitudes have persisted for longer than initially expected, thus raising the concern that the persistence of oil in the Arctic may be understated. In terms of wildlife, population recovery may take longer in the Arctic because many of the species have longer life spans and reproduce at a slower rate.\n\n\t\t\tResponse and Cleanup Challenges in the Arctic Region\n\nClimate changes in the Arctic are expected to increase human activities in the region, many of which impose a risk of oil pollution, particularly from oil spills. Conditions in the Arctic region impose unique challenges for personnel charged with (1) oil spill response, the process of getting people and equipment to the incident, and (2) cleanup duties, either recovering the spilled oil or mitigating the contamination so that it poses less harm to the ecosystem. These challenges may play a role in the policy development for economic activities in the Arctic.\n\n\t\t\t\tSpill Response Challenges\n\nResponse time is a critical factor for oil spill recovery. With each hour, spilled oil becomes more difficult to track, contain, and recover, particularly in icy conditions, where oil can migrate under or mix with surrounding ice. Most response techniques call for quick action, which may pose logistical challenges in areas without prior staging equipment or trained response professionals. Many stakeholders are concerned about a \"response gap\" for oil spills in the Arctic region. A response gap is a period of time in which oil spill response activities would be unsafe or infeasible. The response gap for the northern Arctic latitudes is likely to be extremely high compared to other regions. \nAccording to a 2014 National Research Council (NRC) report, \"the lack of infrastructure in the Arctic would be a significant liability in the event of a large oil.\" The Coast Guard has no designated air stations north of Kodiak, AK, which is almost 1,000 miles from the northernmost point of land along the Alaskan coast in Point Barrow, AK. Although some of the communities have airstrips capable of landing cargo planes, no roads connect these communities. Vessel infrastructure is also limited. The nearest major port is in the Aleutian Islands, approximately 1,300 miles from Point Barrow. Two of the major nonmechanical recovery methods\u2014in situ burning and dispersant application\u2014may be limited (or \"precluded\") by the Arctic conditions and lack of logistical support: aircraft, vessels, and other infrastructure.\nA 2010 Government Accountability Office (GAO) report identified further logistical obstacles that would hinder an oil spill response in the region, including \"inadequate\" ocean and weather information for the Arctic and technological problems with communications. A 2014 GAO report highlighted steps taken by some groups (e.g., the National Oceanic and Atmospheric Administration) to improve some of these logistical elements. \n\n\t\t\t\tOil Spill Cleanup Challenges\n\nThe history of oil spill response in the Aleutian Islands highlights the challenges and concerns for potential spills in the Arctic region: \nThe past 20 years of data on response to spills in the Aleutians has also shown that almost no oil has been recovered during events where attempts have been made by the responsible parties or government agencies, and that in many cases, weather and other conditions have prevented any response at all.\nThe behavior of oil spills in cold and icy waters is not as well understood as oil spills in more temperate climates. The 2014 NRC report highlights some recent advancements in understanding oil spill behavior in arctic climates. At the same time, the report recommends further study in multiple areas.\nThe 2014 NRC report states that in colder water temperatures or sea ice, \"the processes that control oil weathering\u2014such as spreading, evaporation, photo-oxidation, emulsification, and natural dispersion\u2014are slowed down or eliminated for extended periods of time.\" In some respects, the slower weathering processes may provide more time for response strategies, such as in situ burning or skimming. On the other hand, the longer the oil remains in an ecosystem, the more opportunity there is for exposure.\nIn addition, the 2014 report states the following:\nArctic conditions impose many challenges for oil spill response\u2014low temperatures and extended periods of darkness in the winter, oil that is encapsulated under ice or trapped in ridges and leads, oil spreading due to sea ice drift and surface currents, reduced effectiveness of conventional containment and recovery systems in measurable ice concentrations, and issues of life and safety of responders.\n\n\t\t\t\tExisting Policy Framework\n\nConsidering both the recent increase in human activity in the region (and expectation of further interest) and the response and recovery challenges that an oil spill would impose in Arctic waters, many would assert that the region warrants particular attention in terms of governance. However, the existing framework for international governance of maritime operations in the Arctic region lacks legally binding requirements. While the Safety of Life at Sea Convention (SOLAS) and other International Maritime Organization (IMO) conventions include provisions regarding ships in icy waters, the provisions are not specific to the polar regions. Although the IMO has \"Guidelines for Ships Operating in Arctic,\" a 2009 NOAA report described the nonbinding IMO provisions as \"inconsistent with the hazards of Arctic navigation and the potential for environmental damage from such an incident.\"\nIn 2013, the member states of the Arctic Council signed an Agreement on Cooperation on Marine Oil Pollution Preparedness and Response in the Arctic. The agreement's objective is to \"strengthen cooperation, coordination, and mutual assistance ... on oil pollution preparedness and response in the Arctic.\" \nIn addition, the United States has separate bilateral agreements with Canada and Russia that address oil spill response operations. The agreement with Canada was established in 1974 for the Great Lakes and has been amended several times to add more geographic areas, including Arctic waters. According to the 2014 NRC report: \"Formal contingency planning and exercises with Canada have enabled both the United States and Canada to refine procedures and legal requirements for cross-border movement of technical experts and equipment in the event of an emergency.\" \nThe U.S.-Russian agreement was made in 1989 and applies to oil spills in Arctic waters. However, the 2014 NRC report asserts that the agreement has not been tested to the same extent as the U.S.-Canada agreement.\n\n\t\tFisheries171\n\nThe effects of climate change such as increasing sea surface temperatures and decreasing permanent sea ice are altering the composition of marine ecosystems in the Arctic. These changes are likely to affect the ranges and productivity of living marine resources including species that support marine fisheries. Furthermore, as a greater portion of the waters in the central Arctic Ocean become open for longer periods, the region's resources will become more accessible to commercial fishing. Large commercial fisheries already exist in the Arctic, including in the Barents and Norwegian Seas north of Europe, the Central North Atlantic off Greenland and Iceland, the Bering Sea off Russia and the United States (Alaska), and the Newfoundland and Labrador Seas off northeastern Canada. As environmental changes occur, fisheries managers will be challenged to adjust management measures for existing fisheries. Uncertainties related to these changes and potential new fisheries in the central Arctic Ocean have prompted many fishery managers to support precautionary approaches to fisheries management in the region. \nOn June 1, 2008, Congress passed a joint resolution ( P.L. 110-243 ) that directed \"the United States to initiate international discussions and take necessary steps with other nations to negotiate an agreement for managing migratory and transboundary fish stocks in the Arctic Ocean.\" The joint resolution also supported establishment of a new international fisheries management organization or organizations for the region. International cooperation is necessary to manage Arctic resources because fish stocks are shared to some degree among the five adjacent jurisdictional zones of the Arctic rim nations. Further, a large portion of the central Arctic Ocean lies outside the Exclusive Economic Zones (EEZ) of these nations. Ideally, regional management would recognize the need to coordinate management for those fish populations that move among these national jurisdictional zones and high seas.\nFor waters under U.S. jurisdiction, in 2009, the National Marine Fisheries Service in the Department of Commerce's National Oceanic and Atmospheric Administration implemented the North Pacific Council's Fishery Management Plan for Fish Resources of the Arctic Management Area. The management area includes marine waters in the U.S. EEZ of the Chukchi and Beaufort Seas. The plan initially prohibits commercial fishing in the Arctic Management Area and moves the northern boundary of the Bering Sea\/Aleutian Islands king and tanner crab fishery management plan out of the Arctic Management Area south to the Bering Strait. The plan takes a precautionary approach by requiring the collection of more information before developing commercial fisheries in the region. \nOn July 16, 2015, the five nations that surround the Arctic Ocean signed a declaration to prevent unregulated commercial fishing in the high seas portion of the central Arctic Ocean. The five nations agree that a precautionary approach to fishing is needed because there is limited scientific knowledge of marine resources in the region. Currently, there is no commercial fishing in central Arctic Ocean and it is questionable whether existing fisheries resources could sustain a fishery. The declaration includes the following interim measures:\nto authorize our vessels to conduct commercial fishing in the high seas area only pursuant to one or more marine regional or subregional fisheries management organizations or arrangements that are or may be established to manage such fishing in accordance with recognized international standards; to establish a joint program of scientific research with the aim of improving understanding of the ecosystems of this area and promote cooperation with relevant scientific bodies; to promote compliance with these interim measures and with relevant international law, including by coordinating our monitoring, control, and surveillance activities in this area; and to ensure that any noncommercial fishing in this area does not undermine the purpose of the interim measures, is based on scientific advice and is monitored, and that data obtained through any such fishing is shared.\nThe declaration also recognizes the interests of indigenous peoples and the need to encourage other countries to take actions that are consistent with the interim measures. It appears that future management arrangements may include China, the EU, Iceland, Japan, and South Korea. Iceland has stated it regrets that although it has repeatedly asked to participate in the collaboration, the five states decided to keep Iceland outside consultations on the declaration. It remains an open question as to whether an Arctic Ocean regional fishery management organization will be established, which countries would be included in such an arrangement, and if commercial fisheries will be developed in the central Arctic Ocean.\n\n\t\tProtected Species177\n\nConcern over development of the Arctic relates to how such development might affect threatened and endangered species. Under the Endangered Species Act (ESA, 16 U.S.C. \u00a7\u00a71531-1543), the polar bear was listed as threatened on May 15, 2008. The failure by the Fish and Wildlife Service (FWS) to make a 90-day finding on a 2008 petition to list Pacific walrus led to submission of 60-days' notice of a future citizen suit. However, eventually walruses were listed as candidate species under ESA; this status means that federal agencies carrying out actions that may affect the species must confer with FWS though they are not necessarily obliged to modify their actions. Both polar bears and walruses are heavily dependent during their life cycles on thick sea ice, making them especially susceptible to the shrinking Arctic ice cap. \nOn December 30, 2008, the National Marine Fisheries Service (NMFS) determined that a listing of ribbon seal as threatened or endangered was not warranted. On October 22, 2010, NMFS listed the southern distinct population segment (DPS) of spotted seals as threatened. Listing of two other DPS (Okhotsk and Bering Sea) had earlier been determined to not be warranted. On December 10, 2010, NMFS proposed that (1) four subspecies of ringed seal be listed as threatened, and (2) that two DPS of one subspecies of bearded seal be listed as threatened.\nIn either terrestrial or marine environments, the extreme pace of change makes a biological response many times more difficult. For species with adaptations for a specific optimum temperature for egg development, or production of young timed to match the availability of a favored prey species, or seed dispersal in predictable fire regimes, etc., evolutionary responses may well not keep pace with the rate of change. While species of plants and animals farther south might migrate, drift, or be transplanted from warming habitats to more northerly sites that may continue to be suitable, once a terrestrial species reaches the Arctic Ocean, it is very literally at the end of the line. No more northern or colder habitat is available.\nThe Marine Mammal Protection Act (MMPA; 16 U.S.C. \u00a7\u00a71361 et seq.) protects whales, seals, walruses, and polar bears. The MMPA established a moratorium on the \"taking\" of marine mammals in U.S. waters and by U.S. nationals on the high seas, including the Arctic. The MMPA protects marine mammals from \"clubbing, mutilation, poisoning, capture in nets, and other human actions that lead to extinction.\" Under the MMPA, the Secretary of Commerce, acting through National Marine Fisheries Service, is responsible for the conservation and management of whales and seals. The Secretary of the Interior, acting through the Fish and Wildlife Service, is responsible for walruses and polar bears. Despite the MMPA's general moratorium on taking, the MMPA allows U.S. citizens to apply for and obtain authorization for taking small numbers of mammals incidental to activities other than commercial fishing (e.g., offshore oil and gas exploration and development) if the taking would have only a negligible impact on any marine mammal species or stock, provided that monitoring requirements and other conditions are met.\n\n\t\tIndigenous People Living in the Arctic187\n\nPeople have been living in the Arctic for thousands of years, and indigenous peoples developed highly specialized cultures and economies based on the physical and biological conditions of the long-isolated region. However, with trade, the influx of additional populations especially since the 19 th century, and ongoing physical changes in the Arctic, indigenous populations have already experienced substantial change in their lifestyles and economies. Over the past two decades, greater political organization across indigenous populations has increased their demands for international recognition and broader rights, as well as attention to the economic, health, and safety implications of climate change in the North.\n\n\t\t\tBackground\n\nSeven of the eight Arctic nations have indigenous peoples, whose predecessors were present in parts of the Arctic over 10,000 years ago, well before the arrival of peoples with European backgrounds. Current Arctic indigenous peoples comprise dozens of diverse cultures and speak dozens of languages from eight or more non-Indo-European language families. \nBefore the arrival of Europeans, Arctic indigenous peoples lived in economies that were chiefly dependent, in varying proportions, on hunting land and marine mammals, catching salt- and fresh-water fish, herding reindeer (in Eurasia), and gathering, for their food, clothing, and other products. Indigenous peoples' interaction with and knowledge of Arctic wildlife and environments has developed over millennia and is the foundation of their cultures.\nThe length of time that Arctic indigenous peoples were in contact with Europeans varied across the Arctic. As recorded by Europeans, contact began as early as the 9 th century CE, if not before, in Fennoscandia and northwestern Russia, chiefly for reasons of commerce (especially furs); it progressed mostly west-to-east across northern Asia, reaching northeastern Arctic Asia by the 17 th century. North American Arctic indigenous peoples' contact with Europeans started in Labrador in the 16 th century and in Alaska in the 18 th century, and was not completed until the early 20 th century. Greenland's indigenous peoples first saw European-origin peoples in the late 10 th century, but those Europeans died out during the 15 th or 16 th century and Europeans did not return permanently until the 18 th century. \nContact led to significant changes in Arctic indigenous economies, political structures, foods, cultures, and populations, starting especially in the 20 th century. For example, life expectancy among Alaska Natives has increased from 47 years in 1950 to over 69 years in 2000 (though it still lags behind that of U.S. residents overall, at 77 years). \nAlso, at present, most Arctic indigenous peoples have become minorities in their countries' Arctic areas, except in Greenland and Canada. (One source estimates that, around 2003, about 10% of an estimated 3.7 million people in the Arctic were indigenous.) While many Arctic indigenous communities remain heavily dependent on hunting, fishing, and herding and are more likely to depend on traditional foods than nonindigenous Arctic inhabitants, there is much variation. Most Arctic indigenous people may no longer consume traditional foods as their chief sources of energy and nutrition. Major economic change is also relatively recent but ongoing. Many Arctic indigenous communities have developed a mixture of traditional economic activities and wage employment. The economics of subsistence and globalization will be key factors in the effects of climate change on Arctic indigenous peoples, and on their reactions to Arctic climate change. \nArctic indigenous peoples' current political structures vary, as do their relationships with their national governments. Some indigenous groups govern their own unique land areas within the national structure, as in the United States and Canada; others have special representative bodies, such as the Saami parliaments in Norway, Finland, and Sweden; a few areas have general governments with indigenous majorities, such as Greenland (a member country of Denmark), Nunavut territory in Canada, and the North Slope and Northwest Arctic boroughs in Alaska. Control of land, through claims and ownership, also varies among Arctic indigenous peoples, as do rights to fishing, hunting, and resources. Arctic indigenous peoples' political relationships to their national and local governments, and their ownership or claims regarding land, are also significant factors in the responses to Arctic climate change by the indigenous peoples and by Arctic nations' governments. \n\n\t\t\tEffects of Climate Change\n\nArctic climate change is expected to affect the economies, population, subsistence, health, infrastructure, societies, and cultures of Arctic indigenous peoples. Changes in sea ice and sea level, permafrost, tundra, weather, and vegetation distributions, as well as increased commercial shipping, mineral extraction, and tourism, will affect the distribution of land and sea mammals, of freshwater and marine fish, and of forage for reindeer. These will in turn affect traditional subsistence activities and related indigenous lifestyles. Arctic indigenous peoples' harvesting of animals is likely to become riskier and less predictable, which may increase food insecurity, change diets, and increase dependency on outside, nontraditional foods. Food cellars in many locations have thawed during summers, threatening food safety. Related health risks of diabetes, obesity, and mental illness have been associated with these changes. \nSea, shoreline ice, and permafrost changes have damaged infrastructure and increased coastal and inland erosion, especially in Alaska, where GAO found in 2003 that \"coastal villages are becoming more susceptible to flooding and erosion caused in part by rising temperatures.\" In response, Congress funded the U.S. Army Corps of Engineers to conduct a Baseline Erosion Assessment that identified and prioritized among the 178 communities identified at risk from erosion. (Risks from flooding were not examined.) GAO concluded in 2009 that many Native villages must relocate, but even those facing imminent threats have been impeded by various barriers, including difficulties identifying appropriate new sites, piecemeal programs for state and federal assistance, and obstacles to eligibility for certain federal programs. The Alaska Federation of Natives placed among its 2010 federal priorities a request to Congress to mitigate flooding and erosion in Alaska Native villages and to fund relocation of villages where necessary. However, \"the cost is extraordinary,\" acknowledges Senator Lisa Murkowski.\nOil, gas, and mineral exploration and development are expected to increase, as are other economic activities, such as forestry and tourism, and these are expected to increase economic opportunities for all Arctic residents, including indigenous peoples. Pressures to increase participation in the wage economy, however, may speed up changes in indigenous cultures. Increased economic opportunities may also lead to a rise in the nonindigenous population, which may further change the circumstances of indigenous cultures. Some representatives of Arctic indigenous people have related a \"conflicting desire between combating climate change and embracing the potential for economic growth through foreign investment.\"\nAlthough important advances in public health have occurred in indigenous communities over past decades, some health problems may increase with continued Arctic climate change. Economic development may exacerbate Arctic pollution problems, including higher exposure to mercury, air pollution, and food contamination. The influx and redistribution of contaminants in the air, oceans, and land may change in ways that are now poorly understood. Warmer temperatures and longer warm seasons may increase insect- and wildlife-borne diseases. Climate change may lead to damage to water and sanitation systems, reducing protection against waterborne diseases. Changes in Arctic indigenous cultures may increase mental stress and behavioral problems. \nThe response to climate change by Arctic indigenous peoples has included international activities by Arctic indigenous organizations and advocacy before their national governments. As one report noted, \"the rise of solidarity among indigenous peoples organizations in the region is surely a development to be reckoned with by all those interested in policy issues in the Arctic.\" Six national or international indigenous organizations are permanent participants of the Arctic Council, the regional intergovernmental forum. Due in part to advocacy by Arctic indigenous people, the United Nations General Assembly adopted in 2007 the Declaration on the Rights of Indigenous Peoples. In April 2009, the Inuit Circumpolar Council (an organization of Inuit in the Arctic regions of Alaska, Canada, Greenland, and Russia) hosted in Alaska the worldwide \"Indigenous Peoples Global Summit on Climate Change.\" The conference report, forwarded to the Copenhagen Conference of the Parties of the U.N. Framework Convention on Climate Change (December 2009), noted \"accelerating\" climate change caused by \"unsustainable development\" and, among several recommendations, called for a greater indigenous role in national and international decisions on climate change, including a greater role for indigenous knowledge in climate change research, monitoring, and mitigation.\n\n\t\tPolar Icebreaking225\n\n\t\t\tPolar Icebreaker Operations\n\nWithin the U.S. government, the Coast Guard is the U.S. agency responsible for polar icebreaking. U.S. polar ice operations conducted in large part by the Coast Guard's polar icebreakers support nine of the Coast Guard's 11 statutory missions. The roles of U.S. polar icebreakers can be summarized as follows:\nconducting and supporting scientific research in the Arctic and Antarctic; defending U.S. sovereignty in the Arctic by helping to maintain a U.S. presence in U.S. territorial waters in the region; defending other U.S. interests in polar regions, including economic interests in waters that are within the U.S. exclusive economic zone (EEZ) north of Alaska; monitoring sea traffic in the Arctic, including ships bound for the United States; and conducting other typical Coast Guard missions (such as search and rescue, law enforcement, and protection of marine resources) in Arctic waters, including U.S. territorial waters north of Alaska.\nThe Coast Guard's large icebreakers are called polar icebreakers rather than Arctic icebreakers because they perform missions in both the Arctic and Antarctic. Operations to support National Science Foundation (NSF) research activities in both polar regions account for a significant portion of U.S. polar icebreaker operations.\nSupporting NSF research in the Antarctic focuses on performing an annual mission, called Operation Deep Freeze (ODF), to break through Antarctic sea ice so as to reach and resupply McMurdo Station, the large U.S. Antarctic research station located on the shore of McMurdo Sound, near the Ross Ice Shelf. The Coast Guard states that Polar Star , the Coast Guard's only currently operational heavy polar icebreaker, \"spends the [northern hemisphere] winter [i.e., the southern hemisphere summer] breaking ice near Antarctica in order to refuel and resupply McMurdo Station. When the mission is complete, the Polar Star returns to dry dock [in Seattle] in order to complete critical maintenance and prepare it for the next ODF mission. Once out of dry dock, it's back to Antarctica, and the cycle repeats itself.\" In terms of the maximum thickness of the ice to be broken, the annual McMurdo resupply mission generally poses the greatest icebreaking challenge for U.S. polar icebreakers, though Arctic ice can frequently pose its own significant icebreaking challenges for U.S. polar icebreakers. The Coast Guard's medium polar icebreaker, Healy , spends most of its operational time in the Arctic supporting NSF research activities and performing other operations.\nAlthough polar ice is diminishing due to climate change, observers generally expect that this development will not eliminate the need for U.S. polar icebreakers, and in some respects might increase mission demands for them. Even with the diminishment of polar ice, there are still significant ice-covered areas in the polar regions, and diminishment of polar ice could lead in coming years to increased commercial ship, cruise ship, and naval surface ship operations, as well as increased exploration for oil and other resources, in the Arctic\u2014activities that could require increased levels of support from polar icebreakers, particularly since waters described as \"ice free\" can actually still have some amount of ice. Changing ice conditions in Antarctic waters have made the McMurdo resupply mission more challenging since 2000.\n\n\t\t\tCurrent Polar Icebreaker Fleet\n\nThe operational U.S. polar icebreaking fleet currently consists of one heavy polar icebreaker, Polar Star , and one medium polar icebreaker, Healy . In addition to Polar Star , the Coast Guard has a second heavy polar icebreaker, Polar Sea . Polar Sea , however, suffered an engine casualty in June 2010 and has been nonoperational since then. Polar Star and Polar Sea entered service in 1976 and 1978, respectively, and are now well beyond their originally intended 30-year service lives. The Coast Guard has used Polar Sea as a source of spare parts for keeping Polar Star operational.\n\n\t\t\tPolar Security Cutter (PSC) Program\n\nA Department of Homeland Security (DHS) Mission Need Statement (MNS) approved in June 2013 states that \"current requirements and future projections ... indicate the Coast Guard will need to expand its icebreaking capacity, potentially requiring a fleet of up to six icebreakers (3 heavy and 3 medium) to adequately meet mission demands in the high latitudes....\"\nThe Coast Guard initiated in its FY2013 budget a program to acquire three new heavy polar icebreakers, to be followed by the acquisition of up to three new medium polar icebreakers. The program was originally referred to as the polar icebreaker program but is now referred to as the Polar Security Cutter (PSC) program. The Coast Guard wants to begin construction of the first new heavy polar icebreaker in FY2019 and have it enter service in 2023. \nThe acquisition cost of a new heavy polar icebreaker had earlier been estimated informally at roughly $1 billion, but the Coast Guard and Navy now believe that three heavy polar icebreakers could be acquired for a total cost of about $2.1 billion, or an average of about $700 million per ship. The first ship will cost more than the other two because it will incorporate design costs for the class and be at the start of the production learning curve for the class.\nThe PSC program received about $359.6 million in procurement funding through FY2018, including $300 million provided through the Navy's shipbuilding account (which is part of the Department of Defense's budget) and $59.6 million provided through the Coast Guard's procurement account (which is part of the Department of Homeland Security's [DHS's] budget). The FY2019 DHS appropriations act (Division A of H.J.Res 31 \/ P.L. 116-6 of February 15, 2019) provides an additional $675 million for the PSC program through the Coast Guard's procurement account, including $20 million for the procurement of long leadtime materials (LLTM) for the second ship in the program.\nThe PSC program has thus received a total of $1,034.6 million (i.e., about $1.0 billion) in procurement funding through FY2019. Excluding the $20 million provided for the procurement of LLTM for the second ship in the program, the remaining total of $1,014.6 million appears to be enough (or perhaps more than enough) to fully fund the design and construction of the first ship in the program while also funding FY2019 and prior-year program administrative expenses. The Coast Guard's FY2019 five-year (FY2019-FY2023) Capital Investment Plan (CIP) projected that the Coast Guard's FY2020 budget would request an additional $125 million in FY2020 procurement funding for the PSC program, most of which would presumably be used as a second increment of procurement funding for the second ship in the class.\nIssues for Congress for the PSC program include, inter alia, whether to approve, reject, or modify the Coast Guard's annual procurement funding requests for the program; whether to use a contract with options or a block buy contract to procure the ships; whether to continue providing at least some of the procurement funding for the PSC program through the Navy's shipbuilding account; technical, schedule, and cost risk in the PSC program; and whether to procure heavy and medium polar icebreakers to a common basic design.\n\n\t\tSearch and Rescue (SAR)233\n\n\t\t\tOverview\n\nIncreasing\u00a0sea and air traffic through\u00a0Arctic waters has increased concerns regarding Arctic-area search and rescue (SAR) capabilities. Table 1 presents figures on ship casualties in Arctic Circle waters from 2005 to 2014, as shown in the 2015 edition of an annual report on shipping and safety by the insurance company Allianz Global Corporate & Specialty.\nGiven the location of current U.S. Coast Guard operating bases, it could take Coast Guard aircraft several hours, and\u00a0Coast Guard cutters days or even weeks, to reach a ship in distress or a downed aircraft in\u00a0Arctic waters. In addition, the harsh climate complicates SAR operations in the region. Particular concern has been expressed about cruise\u00a0ships carrying large numbers of civilian passengers that may experience problems and need assistance. There have already been incidents of this kind with cruise ships in recent years in waters off Antarctica, and a Russian-flagged passenger ship with 162 people on board ran aground on Canada's Northwest Passage on August 24, 2018. Coast Guard officials have noted the long times that would be needed to respond to potential emergency situations in certain parts the Arctic. The Coast Guard is participating in exercises focused on improving Arctic SAR capabilities.\nIncreasing U.S. Coast Guard SAR capabilities for the Arctic could require\u00a0one or more of the following: enhancing or creating new Coast Guard operating bases in the region; procuring additional Arctic-capable aircraft, cutters, and rescue boats for the Coast Guard; and adding systems to improve Arctic maritime communications, navigation, and domain awareness. It may also entail enhanced forms of cooperation with navies and coast guards of other Arctic countries.\n\n\t\t\t2017 Arctic SAR Capabilities Survey\n\nA 2017 survey of Arctic SAR capabilities conducted as part of the Finnish Border Guard's Arctic Maritime Safety Cooperation project in cooperation with the Arctic Coast Guard Forum stated the following:\nThe key challenges for Arctic search and rescue identified in this survey include long distances, severe weather, ice and cold conditions, a poor communications network, lack of infrastructure and lack of resource presence in the region. In addition, the capacity to host patients, achieving situational awareness, and unsuitable evacuation and survival equipment pose major challenges for maritime safety and SAR in the Arctic.\nThe Arctic SAR authorities have recognized a need to further develop advanced information sharing between coast guards, emergency authorities, and other stakeholders involved in SAR operations. In addition, joint training and systematic sharing of lessons learned, as well as technological innovation in communications networks and connections, navigation, survival and rescue equipment, and healthcare services are being called for in order to improve SAR capabilities in the Arctic.\nThe survey recommends enhancing practical cooperation between various stakeholders involved in Arctic SAR such as coast guards, rescue centers, other authorities, industry groups, private operators, academia and volunteer organizations. It encourages further information sharing on infrastructure projects and resource assets, Automatic Identification System and weather data, emergency plans and standard operating procedures, as well as exercises and lessons learned via a common database. Furthermore, developing joint courses specifically intended for Arctic SAR and establishing a working group that examines new innovations and technological developments, are recommended as potential initiatives for improving practical international cooperation.\n\n\t\t\tMay 2011 Arctic Council Agreement on Arctic SAR\n\nOn May 12, 2011, representatives from the member states of the Arctic Council, meeting in Nuuk, Greenland, signed an agreement on cooperation on aeronautical and maritime SAR in the Arctic. Key features of the agreement include the following:\nArticle 3 and the associated Annex to the agreement essentially divide the Arctic into SAR areas within which each party has primary responsibility for conducting SAR operations, stating that \"the delimitation of search and rescue regions is not related to and shall not prejudice the delimitation of any boundary between States or their sovereignty, sovereign rights or jurisdiction,\" and that \"each Party shall promote the establishment, operation and maintenance of an adequate and effective search and rescue capability within its area.\" Article 4 and the associated Appendix I to the agreement identify the competent authority for each party. For the United States, the competent authority is the Coast Guard. Article 5 and the associated Appendix II to the agreement identify the agencies responsible for aeronautical and maritime SAR for each party. For the United States, those agencies are the Coast Guard and the Department of Defense. Article 6 and the associated Appendix III to the agreement identify the aeronautical and\/or maritime rescue coordination centers (RCCs) for each party. For the United States, the RCCs are Joint Rescue Coordination Center Juneau (JRCC Juneau) and Aviation Rescue Coordination Center Elmendorf (ARCC Elmendorf). Article 12 states that \"unless otherwise agreed, each Party shall bear its own costs deriving from its implementation of this Agreement,\" and that \"implementation of this Agreement shall be subject to the availability of relevant resources.\"\n Figure 4 shows an illustrative map of the national areas of SAR responsibility based on the geographic coordinates listed in the Annex to the agreement.\nAn October 12, 2015, press report states the following:\nMore people are wishing to explore icy environments, says Peter Hellberg, manager responsible for the SAR process at the Swedish Maritime Administration. Hellberg is part of an IMO\/International Civil Aviation Organization (ICAO) working group that is re-evaluating search and rescue (SAR) operations in Polar waters as a result of this push.\nThe working group includes both a maritime and aeronautical perspective, and it has identified a need for more detailed guidance for SAR organizations which will be achieved through an update of the International Aeronautical and Maritime Search and Rescue Manual (IAMSAR) planned for 2019. \nWhile the IAMSAR manual is not mandatory, it is followed by most SAR organizations around the world. It provides the framework for setting up a multi-national SAR, giving different parties guidance on the necessary arrangements for Arctic areas. \nThe guidance will be expanded on based on the Polar Code and other recent IMO regulatory updates, and from an aeronautical perspective, from lessons learned after the disappearance of Malaysian Airlines' MH370.\n\n\t\t\t\tJohn S. McCain National Defense Authorization Act for Fiscal Year 2019 (H.R. 5515\/S. 2987)\n\nThe Senate Armed Services Committee, in its report ( S.Rept. 115-262 of June 5, 2018) on S. 2987 , states the following:\nArctic search and rescue\nThe committee is aware that growing international interest and changing environmental conditions in the Arctic have led to increased commercial and governmental activity in the High North. With this steady surge, the committee remains concerned by the limited capabilities of the United States to conduct search-and-rescue operations throughout the Arctic region. The committee notes that the Department of Defense's Report to Congress on Strategy to Protect United States National Security Interests in the Arctic Region, a report required in section 1068 of the National Defense Authorization Act for Fiscal Year 2016 (Public-Law 114\u201392), identified the need for additional personnel recovery capability in this region. Specifically, the report calls for \"forward-deployed\/based assets in a sustainable location and\/or rapidly deployable air drop response\/sustainment packages suitable to remote land, cold water, or ice pack operating environments.\" (Pages 139-140)\nThe committee understands that the 176th Wing of the Alaska National Guard is the closest dedicated response force with the only refueling capability to respond to a search-and-rescue incident in the Arctic. The unit currently possesses two air-dropped, palletized Arctic Sustainment Packages (ASPs) to enable the survival of 50 individuals for 3 or more days in extreme Arctic conditions. The ASP is rapidly deployable over varied terrain, and allows personnel to survive and operate in the High North. Each ASP requires considerable resources for sustainability, demanding 500 man-hours to re-pack ASPs after testing and to continually keep contents viable. In light of the increased activity in this region, the committee believes that this capability could benefit from additional sustainment funding to maintain the two existing ASPs, and encourages the Secretary of Defense to prioritize its resourcing. (Pages 139-140)\n\n\t\tGeopolitical Environment242\n\n\t\t\tShift to Era of Renewed Great Power Competition\n\nA principal factor affecting the geopolitical environment for the Arctic is the shift that has occurred in recent years from the post-Cold War era that began in the late 1980s and early 1990s, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different international security environment that features, among other things, renewed great power competition with China and Russia and challenges by these two countries and others to elements of the U.S.-led international order that has operated since World War II. This shift in the international security environment, combined with the diminishment of Arctic ice and the resulting increase in human activities in the Arctic, has several potential implications for the geopolitical environment for the Arctic, which are discussed in the following sections.\n\n\t\t\tArctic Tradition of Cooperation and Low Tensions\n\nThe shift in the international security environment has raised a basic question as to whether the Arctic in coming years will continue to be a region generally characterized by cooperation and low tensions, as it was during the post-Cold War era, or instead become a region characterized at least in part by competition and increased tensions, as it was during the Cold War. In this regard, the shift in the international security environment poses a potential challenge to the tradition of cooperation, low tensions, peaceful resolution of disputes, and respect for international law that has characterized the approach used by the Arctic states, particularly since the founding of the Arctic Council in 1996, for managing Arctic issues.\nSome observers argue that the Arctic states and other Arctic stakeholders should attempt to maintain the region's tradition of cooperation and low tensions, and work to prevent the competition and tensions that have emerged in Europe, Asia, and elsewhere in recent years from crossing over into the Arctic. These observers argue that the Arctic tradition of cooperation and low tensions has proven successful in promoting the interests of the Arctic states and other Arctic stakeholders on a range of issues, that it has served as a useful model for other parts of the world to follow, and that in light of tensions and competition elsewhere in the world, this model is needed more now than ever.\nOther observers could argue that, notwithstanding the efforts of Arctic states and other Arctic stakeholders to maintain the Arctic as a region of cooperation and low tensions, it is unreasonable to expect that the Arctic can be kept fully isolated from the competition and tensions that have arisen in other parts of the world. As a consequence, these observers could argue, the Arctic states and other Arctic stakeholders should begin taking steps to prepare for increased competition and higher tensions in the Arctic, precisely so that Arctic issues can continue to be resolved as successfully as conditions may permit, even in a situation of competition and increased tensions.\nStill other observers might argue that a policy of attempting to maintain the Arctic as a region of cooperation and low tensions, though well-intentioned, could actually help encourage aggressive behavior by Russia or China in other parts of the world by giving those two countries confidence that their aggressive behavior in other parts of the world would not result in punitive costs being imposed on them in the Arctic. These observers might argue that maintaining the Arctic as a region of cooperation and low tensions in spite of aggressive Russian or Chinese actions elsewhere could help legitimize those aggressive actions and provide little support to peaceful countries elsewhere that might be attempting to resist them. This, they could argue, could facilitate a divide-and-conquer strategy by Russia or China in their relations with other countries, which in the long run could leave Arctic states with fewer allies and partners in other parts of the world for resisting unwanted Russian or Chinese actions in the Arctic.\nStill others might argue that there is merit in some or all of the above perspectives, and that the challenge is to devise an approach that best mixes the potential strengths of each perspective.\n\n\t\t\tArctic Governance\n\n\t\t\t\tSpotlight on Arctic Governance and Limits of Arctic Council\n\nThe shift in the international security environment to a situation of renewed great power competition may put more of a spotlight on the issue of Arctic governance and the limits of the Arctic Council as a governing body. As noted earlier in this report, regarding the limits of the Arctic Council as a governing body, the council states that it \"does not and cannot implement or enforce its guidelines, assessments or recommendations. That responsibility belongs to each individual Arctic State.\" In addition, the council states that \"the Arctic Council's mandate, as articulated in the [1996] Ottawa Declaration [establishing the Council], explicitly excludes military security.\"\nDuring the post-Cold War era\u2014the period when the Arctic Council was established and began operating\u2014the limits of the Arctic Council as a governing body may have been less evident or problematic, due to the post-Cold War era's general situation of lower tensions and reduced overt competition between the great powers. In the new situation of renewed great power competition, however, it is possible that these limits could become more evident or problematic, particularly with regard to addressing Arctic-related security issues.\nIf the limits of the Arctic Council as a governing body are judged as having become more evident or problematic, one option might be to amend the rules of the council to provide for some mechanism for enforcing its guidelines, assessments, or recommendations. Another option might be to expand the council's mandate to include an ability to address military security issues. \nSupporters of such options might argue that they could help the council adapt to the major change in the Arctic's geopolitical environment brought about the shift in the international security environment, and thereby help maintain the council's continued relevance in coming years. They might also argue that continuing to exclude military security from the council's mandate risks either leaving Arctic military security issues unaddressed, or shifting them to a different forum that might have traditions weaker than those of the Arctic Council for resolving disputes peacefully and with respect for international law.\nOpponents of such options might argue that they could put at risk council's ability to continue addressing successfully nonmilitary security issues pertaining to the Arctic. They might argue that there is little evidence to date that the council's limits as a governing body have become problematic, and that in light of the council's successes since its founding, the council should be viewed as an example of the admonition, \"if it isn't broke, don't fix it.\"\nSome relatively little-publicized multilateral discussions of Arctic security issues have taken place. For example, in mid-2011, the U.S. European Command (EUCOM), in cooperation with the Norwegian Ministry of Defense, established the Arctic Security Forces Roundtable (ASFR), consisting of high-ranking military officers from the eight members of the Arctic Council, plus France, Germany, the Netherlands, and the UK. Another newly formed venue at which military leaders discuss Arctic issues is the Northern Chiefs of Defense conference, which held its first meeting in May 2012, with military representatives from the eight Arctic Council governments in attendance.\nA February 9, 2019, blog post stated\nThe function of the Arctic Council has been largely defined by the form imposed upon it in the [1996] Ottawa Declaration on the Establishment of the Arctic Council. Arguably, among its most distinctive features are:\n\u2022 The inheritance of the Working Groups from the 1991 Arctic Environmental Protection Strategy;\n\u2022 A lack of legal personality as an international organisation;\n\u2022 A lack of defined financial contributions;\n\u2022 The inclusion of Indigenous representatives as Permanent Participants;\n\u2022 Its constitution as a consensus based forum; and\n\u2022 The exclusion of military security from its agenda.\nThe Arctic and the global context have evolved substantially since regional cooperation was initiated over two decades ago. Therefore, it is worthwhile to ask what reforms of the Arctic Council are required given the governance needs of the contemporary political situation, yet still practicable given the constraints of path dependence.\nThe Arctic Council itself has recognized the need to reassess its form to allow for improved function. Most recently, the 2017 Fairbanks Declaration saw the Arctic States\nRecognize that the Arctic Council continues to evolve, responding to new opportunities and challenges in the Arctic, and instruct the Senior Arctic Officials to develop a strategic plan based on the Arctic Council's foundational documents and subsidiary body strategies and guiding documents, for approval by Ministers in 2019.\nIt is in this context that we submit for consideration an analysis of what works well in the Arctic Council, where there are inadequacies, and what role it can most effectively play in Arctic politics\u2026.\nAlthough the Arctic Council has a good foundation, it is constrained in significant ways. The first of these is funding. While the Arctic Council Secretariat seems adequately funded (1.24 million USD in 2017, with Norway contributing half), it has very little discretionary funding. Similarly, the Working Groups rely on one or two states to fund a secretariat but have limited ongoing project funds. Almost all activities are funded on an ad hoc basis by the states who advocated for them and by individual experts who secure their own funding through national channels. Thus, all too often it is funding that drives projects, not projects that drive funding\u2026.\nWhile the Arctic Council has made good progress on becoming more transparent in recent years through its open access archive, it still struggles to be accountable to stakeholders, northerners, and taxpayers.\u2026\nThere has been perennial confusion about the role and relationship of Observers, especially with regard to non-Arctic states\u2026.\nRelated to this is the rather muted role of northern regional governments such as Alaska, Greenland, the Canadian territories, northern Nordic municipalities, and Russian Arctic okrugs, republics, krais, and oblasts\u2026.\nRespecting sustainable development, it would be difficult to argue that the Arctic Council has had a broad impact.\u2026 in practice environmental protection has received the lion's share of attention, resources and outcomes. Education, health services, and local infrastructure\u2014the fundamentals of developmen\u2014are expensive public services that the Arctic Council has neither the funding nor the mandate to address. Development in the Arctic has a local and subnational nature that any international-level organization is unsuited to address.\u2026\nWith regards to economic development, the very topic was relatively taboo in regional politics until recent years, as it was synonymous in the Arctic with resource exploitation. Efforts to promote economic development have been mostly relegated to the Arctic Economic Council (AEC), an independent organization of business representatives facilitated by the Arctic Council in 2014. The AEC has limited capacity and its relationship with the Arctic Council\u2014participation, reporting, support, etc.\u2014remains ambiguous\u2026.\nThe elephant in the room in regional Arctic politics is climate change.\u2026 the Arctic Council has no expert group, no task force, and no working group devoted exclusively to it. The frequent reluctance of American and Russian, and occasionally other, governments to openly accept and commit to mitigating climate change through reducing greenhouse gases, let alone discuss the challenges of adapting to a necessary post-petroleum future, has precluded the Council from addressing one of the major threats to sustainable development and environmental protection in the region\u2026.\nThe Working Group structure was inherited from the 1991 Arctic Environmental Protection Strategy (AEPS)\u2026 [it is] a product of the particular challenges and opportunities that were becoming apparent at the time of the fall of the Soviet Union, especially regarding pollution in the Barents region and long-range transport of persistent pollutants\u2026.\nThe Ottawa Declaration called on states to \"oversee and coordinate the programs established under the AEPS\"; nonetheless, as a forum, it proscribed no formal reporting structure or hierarchy. As it happened, the Working Groups have developed unique and divergent organizational designs, largely dependent on the incorporation laws of the states which host their secretariats and the amount of funding they receive. Working Groups conduct many projects and meetings, but it is difficult to measure their relative effectiveness. As mentioned, the category of Task Force was established in 2009 seemingly to provide the Arctic Council with a better means by which to advance time-sensitive, policy-oriented initiatives\u2026.\nMuch has been made about the Arctic Council's lack of legal personality as an international organization; as a condition of US involvement in the 1990s, the Arctic Council was established as a consensus-based forum, not a treaty organization. States have not committed to abide by its decisions nor have they granted the organization any independent law-making authority. Thus, there are no 'votes' because no state is obliged to go along with the will of the majority of the group. The three legally binding agreements to come out of the Arctic Council are described as falling 'under its auspices'.\nThere is an argument to be made that a more formal legal structure would strengthen the Arctic Council, and allow it to be more vigorous in implementing and monitoring policies such as environmental regulations. However, the informal nature of the partnership has allowed it to be flexible, accommodate the interests of different states, and adapt to varying levels of readiness to adopt and enforce new national legislation (e.g. stricter environmental regulations). Importantly, it has also allowed for the full involvement of the Permanent Participants, whereas a legal international institution would by definition exclude them from decision-making, as they have no obligations under international law.\nIt is also worth noting that the Arctic Council's lack of a legal personality as an international organization has not prevented it from being involved in discussions, primarily through its Working Groups, that have led the Arctic states to enter into legally binding agreements outside of the forum's parameters\u2026.\nThe Ottawa Declaration set in place the Arctic Council's two year rotating Chairmanship, which began with Canada in 1998 and ended with Sweden in 2013 before beginning the cycle anew. The short-term length has its detractors, as it has led to a lack of continuity in the Arctic Council's work\u2026.\nAt the same time, the rotating Chairmanship has ensured that every state, at least periodically, becomes heavily invested in the success of the Council, and develops familiarity with the forum and its inner workings. The establishment of the permanent Secretariat in Troms\u00f8 in 2013 removed many of the most glaring issues with the rotating Chairmanship\u2026.\nBased on this assessment of the Arctic Council's strengths and weaknesses, we offer these recommendations to improve the Arctic Council's form and function as it undergoes a strategic planning process:\n1. Evaluate, and if warranted overhaul, the Working Group structure\u2026.\n2. Ensure that the Arctic Council has the appropriate capacity and resources, through a Working Group, Task Force or some other dedicated mechanism, to take on the key challenge of climate change mitigation.\n3. Address capacity issues with more stable core funding and the creation of a substantial project fund to enhance the timeliness, sustainability, and effectiveness of what are determined to be the Council's most vital activities.\u2026\n4. Limit the Arctic Council's role to functions which only it can perform, and be more comfortable devolving work and resources to more appropriate bodies as needed (as has been done with e.g. fisheries and shipping).\n5. More formally engage with sub-national governments by encouraging states to support their participation in relevant Working Groups projects.\n6. Expand the Amarok tracking tool to more comprehensively evaluate, rather than simply track, the performance and outcomes of Arctic Council projects. Avoid having reports as a project outcome in and of themselves.\n7. Embrace a knowledge transfer role, as opposed to a policy development role, on relevant issues of sustainable development, such as sanitation, local energy infrastructure, internet connectivity, economic development, cold climate technologies, and adaptation to future changes in climate and the global energy system.\n8. Continue to maintain good international relations and compartmentalize global geopolitical issues outside the Council.\n\n\t\t\t\tChina and Arctic Governance\n\nThe shift in the international security environment to a situation of renewed great power competition may put more of a spotlight on differing perspectives between China and the eight member states of the Arctic Council regarding Arctic governance. A July 6, 2018, press report states that Russia and China\ndiverge on the fundamental question of who makes international law in the Arctic. For a long time, admittedly, China wasn't interested: Way back in 1925, the Nationalist government [of China] signed the critical Spitsbergen Treaty granting non-Arctic nations rights in the northern seas, [said Sun Yun, the Stimson's Center's China program director], but his Communist successors didn't actually realize they'd inherited those rights until 1991, [which was] \"a pleasant surprise.\" In the '90s, however, the eight Arctic Council nations\u2014the US, Canada, Iceland, Finland, Russia, Sweden, Norway, and Denmark, which owns Greenland\u2014set up a system of governance that largely sidelined other states. 13 countries do rate observer status on the Council, including China as of 2013 (even stranger bedfellows include Italy, India, and Singapore). But the eight voting members are generally not keen on diluting their control.\nChina, by contrast, sees itself as a rising global superpower with commensurate influence everywhere on earth. It declared itself a near-Arctic state in January [2018]\u2014a term actually coined by Great Britain but not widely recognized. China wants non-Arctic nations, especially \"near-Arctic\" ones, to have greater influence and more rights in the Arctic, with binding international law based on the UN Convention on the Law of the Sea (UNCLOS) rather than the current patchwork of mostly voluntary regional arrangements. Indeed, said Sun, \"what they would like to argue is the format and the content of the Arctic governance system currently is not effective.\"\nNaturally the Russians, US, Canada, and Nordics disagree. \"The Arctic states would argue there is very little governance gap,\" said Norway-based expert Elana Wilson Rowe, as they did in 2008 when they rejected an Antarctica-style treaty regime. Though the key agreements up north are admittedly non-binding, she said, the Arctic has become \"a fairly heavily governed landscape.\"\nAn October 15, 2018, blog post states that\nChina's interest in the Arctic extends beyond the purely economic: it is also pressing for a greater role in its governance. Compared to the Antarctic\u2014where governance is heavily institutionalized, governance of the Arctic is much less developed, largely due to their distinctly different natures\u2026.\nThe legal framework [for the Arctic] is a patchwork affair, drawn from various treaties of global application (including the UN Charter and the UN Convention on the Law of the Sea), the Svalbard Treaty(recognizing Norway's sovereignty over the eponymous Arctic archipelago), as well as customary international law and general principles of law. So far, the Arctic Council has been the forum for the conclusion of only three legally binding agreements.\nChina sees a gap for new ideas, rules and participants in this space. A white paper released by the government in January [2018] contains sophisticated and detailed analysis of the international legal framework applicable to the Arctic and demonstrates China's increasing knowledge and capability in this area, as reflected in the growing number of Chinese international lawyers specializing in Arctic matters. \nThe white paper seeks to justify China's involvement in Arctic affairs as a 'near Arctic state', noting that the Arctic's climate, environment and ecology are of concern for all states. The white paper uses familiar phrases from China's vision for its foreign policy\u2014such as the 'shared future of mankind' and 'mutual benefit'\u2014to argue for a pluralist (i.e. global, regional and bilateral) approach to Arctic governance\u2026.\n\u2026 As an observer state, China has very limited rights in the council, but has been creatively using other routes to influence Arctic governance, including active engagement within the International Maritime Organization (IMO) and the International Seabed Commission. \nChina participated in the formation of the IMO's Polar Code of January 2017, which sets out rules for ships operating in polar waters. China was also one of ten states involved in the recent adoption of the Agreement to Prevent Unregulated High Seas Fisheries in the Central Arctic Ocean, which took place outside the umbrella of the Arctic Council. \nAt a recent roundtable in Beijing co-hosted by Chatham House, Chinese experts noted China's aspirations to develop the international rule of law in the Arctic through playing an active role in developing new rules in areas currently under (or un-) regulated, for example, through a treaty to strengthen environmental protection in the region. It was also suggested that China may also seek to clarify the meaning of existing rules through its own practice. \nChina also has ambitions to contribute to the research of the Arctic Council's Working Groups, which develop proposals for Arctic Council projects and rules. It remains to be seen to what extent Arctic states, protective of theirown national interests in an increasingly fertile area, will cede space for China to participate.\nChina's push to be a rule shaper in the Arctic fits into a wider pattern of China seeking a more influential role in matters of global governance. This trend is particularly apparent in areas where the rules are still emerging and thus where China feels more confident than in areas traditionally dominated by Western powers.\nA similar assertiveness by China is increasingly visible in other emerging areas of international law, such as the international legal framework applicable to cyber operations and international dispute settlement mechanisms relating to trade and investment.\nChina's approach to Arctic governance offers an interesting litmus test as to how far China intends to deploy international law to assert itself on governance issues with significant global economic, environmental, and security implications \u2013 along with the degree to which it will be perceived as acting in the common interest in doing so.\nA November 22, 2018, press report states\nChina has become a \"rule maker\" in the global governance of the Arctic, a blue paper said Thursday, calling on the country to \"stay calm\" and respond with action in the face of the hyped-up \"China threat\" theory. \nJointly released by Beijing-based Social Sciences Academic Press and Qingdao-based Ocean University of China on Thursday, the blue paper said China's role in promoting global governance in the region cannot be ignored.\nIn terms of global governance of the Arctic, China's role has shifted from a \"rule follower\" to a \"rule maker,\" said the blue paper.\nChina has led the governance philosophy and is taking the initiative in shaping the global governance agenda in the Arctic, it stressed.\nChina is a \"near-Arctic country\" geographically. The natural conditions and changes in the Arctic have a direct impact on China' s climate system and ecological environment, which in turn affects China's economic interests in the fields of agriculture, forestry, fisheries and oceans, the blue paper said. \nArctic countries also have concerns, of which China is aware, said the blue paper, stressing that maintaining regional security and promoting world peace has been the basic rule of China's diplomatic policies. \nThe associate editor of the blue paper, Dong Yue, who is the deputy head of the Law School of Ocean University of China, told the Global Times on Thursday that the paper's call for China to \"stay calm\" means China won't take any \"radical\" action. \nThe paper said that China holds the principle of respecting the sovereignty of Arctic states, not hurting their basic rights and guaranteeing the decision-making powers of the Arctic Council. China has been an observer member at the council since 2013. \nThe \"China threat theory\" may mean other countries will unfairly raise the threshold for Chinese enterprises to become involved in the development of the Arctic, Zhang Xia, director of the Shanghai-based Polar Strategy Center at the Polar Research Institute of China, told the Global Times on Thursday.\nA November 29, 2018, statement to a committee of the Canadian parliament states that China\nis not the only non-Arctic state to develop an Arctic policy and look for a deeper commitment to the region. Most other observer states to the Arctic Council have an Arctic strategy, a polar strategy, or at least some official guidelines regarding their Arctic policy.\u2026 It remains to be seen whether, like China, these non-Arctic nations see themselves as \"near Arctic states\" that cannot leave the leadership of a strategic region to eight nations only; and whether they might find it advantageous to coalesce as a group of like-minded countries to seek more political and decisional weight both within the Arctic Council and in other international fora.\nSo far, the approach of Arctic states has been to coopt non-Arctic states rather than exclude them. Most have been eventually accepted as observer states in the Arctic Council, and they are participating in the development of new rules for the Arctic.\u2026 Yet Arctic nations have made clear that the broader legal background for such development should remain the United Nations Convention on the Law of the Sea and other existing principles of international law. As stated in the 2008 Ilulissat Declaration, they reject the development of new international rules specifically for the Arctic\u2014an equivalent of the Antarctica Treaty\u2014as such a treaty would require painful negotiations and would likely be less advantageous for them than the current system.\n\n\t\t\tArctic and World Order\n\nAnother potential implication for the Arctic of the shift in the international security environment concerns the new environment's challenges to elements of the U.S.-led international order that has operated since World War II. One element of the U.S.-led international order that has come under challenge is the principle that force or threat of force should not be used as a routine or first-resort measure for settling disputes between countries. Another is the principle of freedom of the seas (i.e., that the world's oceans are to be treated as an international commons). If either of these elements of the U.S.-led international order is weakened or overturned, it could have potentially major implications for the future of the Arctic, given the Arctic's tradition of peaceful resolution of disputes and respect for international law and the nature of the Arctic as a region with an ocean at its center that washes up against most of the Arctic states.\nMore broadly, some observers assess that the U.S.-led international order in general may be eroding or collapsing, and that the nature of the successor international order that could emerge in its wake is uncertain. An erosion or collapse of the U.S.-led international order, and its replacement by a new international order of some kind, could have significant implications for the Arctic, since the Arctic's tradition of cooperation and low tensions, and the Arctic Council itself, can be viewed as outgrowths of the U.S.-led order.\n\n\t\t\tRelative Priority of Arctic in U.S. Policymaking\n\nThe shift in the international security environment has raised a question concerning the priority that should be given to the Arctic in overall U.S. policymaking. During the post-Cold War era, when the Arctic was generally a region of cooperation and low tensions, there may have been less need to devote U.S. policymaker attention and resources to the Arctic. Given how renewed great power competition and challenges to elements of the U.S.-led international order might be expressed in the Arctic in terms of issues like resource exploration, disputes over sovereignty and navigation rights, and military forces and operations, it might be argued that there is now, other things held equal, more need for devoting U.S. policymaker attention and resources to the Arctic.\nOn the other hand, renewed great power competition and challenges to elements of the U.S.-led international order are also being expressed in Europe, the Middle East, the Indo-Pacific, Africa, and Latin America. As a consequence, it might be argued, some or all these other regions might similarly be in need of increased U.S. policymaker attention and resources. In a situation of constraints on total U.S. policymaker attention and resources, the Arctic would need to compete against these other regions for U.S. policymaker attention and resources.\n\n\t\t\tU.S., Canadian, and Nordic Relations with Russia in Arctic\n\nThe shift in the international security environment to a situation of renewed great power competition raises a question for U.S., Canadian, and Nordic policymakers regarding the mix of cooperation and competition to pursue (or expect to experience) with Russia in the Arctic. In considering this question, geographic points that can be noted include the following:\nRussia, according to one assessment, \"has at least half of the Arctic in terms of area, coastline, population and probably mineral wealth.\" Russia has numerous cities and towns in its Arctic, uses its coastal Arctic waters as a maritime highway for supporting its Arctic communities, is promoting the Northern Sea Route that runs along Russia's Arctic coast for use by others, and is keen to capitalize on natural resource development in the region, both onshore and offshore. In this sense, of all the Arctic states, Russia might have the most at stake in the Arctic in absolute terms. Arctic ice is diminishing more rapidly or fully on the Russian side of the Arctic than it is on the Canadian side. Consequently, the Northern Sea Route along Russia's coast is opening up more quickly for trans-Arctic shipping than is the Northwest Passage through the Canadian archipelago.\nOn the one hand, the United States, Canada, and the Nordic countries continue cooperate with Russia on a range of issues in the Arctic, including, to cite just one example, search and rescue (SAR) under the May 2011 Arctic Council agreement on Arctic SAR (see \" Search and Rescue (SAR) \"). More recently, the United States and Russia cooperated in creating a scheme for managing two-way shipping traffic through the Bering Strait and Bering Sea. A July 17, 2018, opinion piece states that\nIt's likely that few, if any, of either [President Trump's or President Putin's] advisors, let alone commentators, are looking to the Arctic\u2014yes, the Arctic\u2014as a starting point for common ground and improving relations going forward\u2026.\nYet, other than the International Space Station, the Far North is perhaps the only setting in which the United States and the Russian Federation cooperate today on a wide variety of issues.\nThese two practical examples of cooperation might provide a foundation upon which both sides can regain some trust and positive momentum in their bilateral relationship (that is, if there is will on both sides to do so).\nIf such momentum could be sustained over any meaningful period of time, it may create a more functional context to address other pressing and multilateral issues of global importance\u2026.\nClearly the recent agreements on Central Arctic Ocean fishing and research provide pathways for cooperation. Perhaps a joint Arctic marine expedition in the remote Central Arctic Ocean in support of the new fisheries agreement could be proposed? \nThe U.S. and Russia could take the lead in the Arctic Coast Guard Forum (now chaired by Finland) in exploring enforcement issues with the new IMO International Code for Ships Operating in Polar Waters.\nRenewed military-to-military cooperation could be feasible if the joint meetings were to focus on Arctic emergency operations, something more likely as shipping and development activities increase. \nPresidents Trump and Putin could support renewed friendship flights and cultural exchanges between the indigenous communities that border our shared Bering and Chukchi Seas.\nOn the other hand, as discussed later in this report, a significant increase in Russian military capabilities and operations in the Arctic in recent years has prompted growing concerns among U.S., Canadian, and Nordic observers that the Arctic might once again become a region of military tension and competition, as well as concerns about whether the United States, Canada, and the Nordic countries are adequately prepared militarily to defend their interests in the region.\nIn protest of Russia's forcible occupation and annexation of Crimea and its actions elsewhere in Ukraine, Canada announced that it would not participate in an April 2014 working-level-group Arctic Council meeting in Moscow. In addition, former Secretary of State Hillary Clinton, during whose tenure a \"reset\" in relations with Russia was sought, reportedly stated that Arctic cooperation may be jeopardized if Russia pursues expansionist policies in the high north. More recently, economic sanctions that the United States imposed on Russia in response to Russian actions in Ukraine could affect Russian Arctic offshore oil exploration.\nAnother potential concern for U.S. policymakers in connection with Russia in the Arctic relates to the Northern Sea Route. Russia considers certain parts of the Northern Sea Route to be internal Russian waters\u2014a position that creates a potential source of tension with the United States, which may consider at least some of those waters to be international waters. A dispute over this issue could have implications not only for the Arctic, but for other parts of the world as well, since international law is universal in its application, and a successful challenge to international waters in one part of the world can serve as a precedent for challenging it in other parts of the world. A November 30, 2018, press report states\nRussia plans to restrict the passage of foreign warships in the Arctic Ocean next year, a top defense official has said\u2026.\nOn Friday [November 30], Defense Ministry spokesman Mikhail Mizintsev said that Russia's ministries were working on amending legislation that would require foreign warships to notify Russia before being able to pass through the Arctic.\nThe work will be completed by the time the waters are navigable in 2019, Mizintsev was cited by Interfax as saying at a conference on Friday.\n\n\t\t\tNATO, the EU, and the Arctic\n\nThe shift in the international security environment has led to a renewal of NATO interest in NATO's more northerly areas. During the Cold War, NATO member Norway and its adjacent sea areas were considered to be the northern flank of NATO's defensive line against potential aggression by the Soviet-led Warsaw Pact alliance. With the end of the Cold War and the shift to the post-Cold War era, NATO planning efforts shifted away from defending against potential aggression by Russia, which was considered highly unlikely, and toward other concerns, such as the question of how NATO countries might be able to contribute to their own security and that of other countries by participating in out-of-area operations, meaning operations in areas outside Europe.\nWith the ending of the post-Cold War era and the shift in the international security environment to a period of renewed great power competition, NATO is now once again focusing more on the question of how to deter potential Russian aggression against NATO countries. As one consequence of that, Norway and its adjacent sea areas are once again receiving more attention in NATO planning. For example, a NATO exercise called Trident Juncture 18 that was held from October 25 to November 7, 2018, in Norway and adjacent waters of the Baltic and the Norwegian Sea, with participation by all 29 NATO members plus Sweden and Finland, was described as NATO's largest exercise since the Cold War, and featured a strong Arctic element, including the first deployment of a U.S. Navy aircraft carrier above the Arctic Circle since 1991.\nThe question of NATO's overall involvement in the Arctic, however, has been a matter of debate within NATO. A 2012 report stated that \"[t]here is currently no consensus within the alliance that NATO has any role to play in the Arctic, as Canada strongly opposes any NATO involvement on sovereignty grounds and other NATO members are concerned with negative Russian reaction.\" A 2013 NATO Parliamentary Assembly report noted that \"50% of the territory surrounding the Arctic Sea is a territory of a NATO member state,\" and suggested that \"NATO could serve as a forum for dialogue on military issues.... \" The report argued that the alliance is well-equipped to play a key role in addressing security challenges that will likely emerge, particularly those that involve surveillance, search-and-rescue, and environmental cleanup. However, observers stated that the lack of unanimity over a NATO presence in the Arctic was reflected by the fact that the high north was not mentioned in either in NATO's 2010 strategic concept, nor in the final declaration of NATO's 2012 Chicago summit. On May 8, 2013, following a visit to Norway, then-NATO Secretary General Rasmussen stated that \"at the present time,\" the alliance had \"no intention of raising its presence and activities in the High North.\"\nIn May 2017, it was reported that NATO \"may revive a Cold War naval command to counter Moscow's increased submarine activity in the Arctic and protect Atlantic sea lanes in the event of a conflict, according to allied diplomats and officials briefed on the planning work.\"\nAn April 4, 2018, press report states the following:\nDespite rising tensions with Russia in Eastern Europe, the Baltics and more recently in the United Kingdom, NATO would like to keep the Arctic an area of low tensions, the chief of the North Atlantic Alliance said Wednesday [April 4].\n\"We used to say that in the High North we have low tensions,\" NATO Secretary General Jens Stoltenberg told reporters during a joint press conference with Prime Minister Justin Trudeau. \"And I think we should continue to strive for avoiding an arms race and higher tensions in the High North.\"\nAt the same time the alliance needs to respond to the increased Russian military presence in the North Atlantic and the Arctic regions with more of its own naval forces, said Stoltenberg who was in Ottawa for a two-day visit.\n\"Therefore part of the adaptation of NATO is that we are also increasing our naval capabilities, including the High North,\" Stoltenberg said.\nTwo observers state in a June 27, 2018, policy paper that\nThe North Atlantic Treaty Organization (NATO) summit in Brussels on July 11 and 12 is an opportunity for the Alliance to finally focus on a region it has long ignored: the Arctic\u2026.\nNATO has no agreed common position on its role in the Arctic region. The [July 2016 NATO] Warsaw Summit Declaration did not mention the word Arctic, and neither does the Alliance's most recent Strategic Concept published in 2010.\nNATO has been internally divided on the role that the Alliance should play in the High North. Norway is the leading voice inside the Alliance for promoting NATO's role in the Arctic. It is the only country in the world that has its permanent military headquarters above the Arctic Circle, and it has invested extensively in Arctic defense capabilities.\nCanada has likewise invested heavily in Arctic defense capabilities. However, unlike Norway, Canada has stymied past efforts by NATO to take a larger role in the region. Generally speaking, there is a concern inside Canada that an Alliance role in the Arctic would afford non-Arctic NATO countries influence in an area where they otherwise would have none.\nA July 2, 2018, opinion piece by another observer stated the following:\nSince 2014, the alliance has adapted to focus on Russia's actions in eastern Europe, notably in the Baltic region and in Poland\u2026.\nBut strengthening NATO's eastern flank is not enough. Little has been done to work out a coherent vision for how to protect NATO interests in the Arctic or in the Black Sea. This is worrying since Russia is emboldened in both regions, as seen through brinksmanship such as provocative air manoeuvring, an assertive force posture and constant military drilling\u2026.\nThe Kremlin defined its Arctic strategy back in 2008 and named the High North a region of strategic importance in its 2017 naval doctrine\u2026.\nNATO by contrast lacks any comparable strategy for the High North: its 2010 Strategic Concept does not even mention the region and discussions on the North Atlantic do not automatically include the High North. The creation of a new NATO North Atlantic Joint Force Command this February, without a proper Arctic angle, proves this point. Furthermore, the 'GIUK gap' (Greenland, Iceland and the UK), connecting the North Atlantic to the Arctic region, is often overlooked.\nThe European Union (EU) is also showing increased interest in the Arctic. A February 20, 2019, press report states that\nJust as it is in Russia and in China, the Arctic is rapidly rising to the top of the political agenda of the European Union. Increased geopolitical focus on the Arctic is creating renewed urgency in Brussels when it comes to securing a proper role for the EU in the Arctic and to increasing European access to Arctic oil, gas, minerals, fish stocks and shipping routes.\u2026\nThe EU has played for a number of years an increasing, if somewhat disjointed role in the Arctic. Sweden and Finland, both members of the EU, embrace large Arctic regions that are subject to EU legislation. The Kingdom of Denmark consists of Denmark, which is a EU member country, and the Faroe Islands and Greenland, both territories that are not part of the EU.\u2026\nThe Faroe Islands and Greenland are both influenced by economic ties to the EU and by a number of international agreements involving the EU. The two non-EU-countries Norway and Iceland, both members of the Arctic Council, are members of the European Economic Area and thus part of the inner market of the European Union and its customs regime. The EU is an important importer of Arctic fish, shrimp, minerals and gas and a central sponsor of Arctic science programs. The EU is a key signatory to the recent moratorium on fishing in the central parts of the Arctic Ocean, the Polar Code of the IMO and several other key international regimes (and European industry contributes significantly to emission of carbon dioxide and black carbon that accelerates climate change in the Arctic).\nBut recently, the EU has taken a more urgent interest in the region, Vilen says.\nEU Commission President Jean Claude Juncker has personally positioned the Arctic in the very foreground of policy making in Brussels by commissioning a policy paper on the EU's Arctic priorities. The timing of this initiative is a point in itself. The forthcoming policy paper, due in the early part of May [2019], will have the potential to influence not only electoral campaigns prior to the elections to the European Parliament later that month, but also the next EU Commission, which is to be formed most likely late this year, and the next seven-year budget of the European Union, which is currently very much on the table\u2026.\n\"The Arctic policy importance comes with the change of the geopolitical setting of the Arctic,\" Vilen told me. \"The position of the Arctic is different today due to China's increased interest, Russia's increased interest, increased American policy positions and because of the needs and demand for natural resources, gas, oils, minerals and fishing stocks. The Arctic has changed, but what has not changed is the European positions and assessments on how we should be engaged. I am trying to argue that the European Union should be ready to take a leadership role in the Arctic, because if we don't do it, someone else will try to.\"\u2026\nAfter years of preparation, the European Commission and the EU's High Representative for Foreign Affairs and Security Policy adopted in 2016 the European Union's first comprehensive Arctic strategy, the \"Integrated Arctic Policy,\" legally binding for all 28 member states. Such a policy would normally not be overhauled for another four or five years, but Juncker has obviously seen a need for a quicker update.\nThe upcoming policy paper will not be legally binding for the member states, nor will it formally change the policy adopted in 2016, but as Vilen explained it will likely strengthen focus, priorities and overall attention to the Arctic in Brussels at a conspicuous moment in European affairs\u2026.\nThe wish to secure European access to oil, gas, minerals, fishing stocks, shipping routes and other Arctic resources is a main pillar of Vilen's approach\u2026.\nTraditionally, the EU has not involved itself in Arctic security and Vilen has no intention to change this approach. The EU is engaged in a prolonged and deep sanctions standoff with Russia following Russia's military annexation of Crimea in 2014, but like the Arctic states and the Arctic Council, the EU still treasures its dialogue with Russia on Arctic affairs; this allows for the dialogue that is otherwise missing. Russia is still blocking the EU's admission as a formal observer to the Arctic Council, but Vilen downplays this aspect of the EU's Russia relations:\n\"In practice, it has not affected the European Union's engagement in any way. We continue to work as a de facto observer in the working groups [of the Arctic Council], and a lot of the material information to the groups come from the European Commission services and also a lot of the financing for the projects. So we are in. The de jure position is not here, but our de facto position is in place,\" he said.\n\n\t\t\tChina in the Arctic\n\n\t\t\t\tChina's Growing Activities in Arctic\n\nChina's activities in the Arctic have grown steadily in recent years. As noted earlier in this report, China was one of six non-Arctic states that were approved for observer status by the Arctic Council in 2013. China in recent years has engaged in growing diplomatic activities with the Nordic countries, and has increased the size of its diplomatic presences in some of them. In April 2013, China and Iceland signed a free trade agreement\u2014China's first such pact with a European government\u2014and has pursued the possibility of oil exploration in waters off Iceland. China has also engaged in growing economic discussions with Greenland, a territory of Denmark that might be moving toward eventual independence.\nChina has an Arctic-capable icebreaker, Xue Long (Snow Dragon), that in recent years has made several transits of Arctic waters\u2014operations that China describes as research expeditions. China is completing construction of its second Arctic-capable icebreaker (the first that China has built domestically), to be named Xue Long 2 , and has announced an intention to eventually build a 30,000-ton nuclear-powered icebreaker, which would make China only the second country (along with Russia) to operate a nuclear-powered icebreaker. Like several other nations, China has established a research station in the Svalbard archipelago.\nChina in January 2018 released a white paper on China's Arctic policy that refers to China as a \"near-Arctic state.\" (China's northernmost territory, northeast of Mongolia, is at about the same latitude as the Aleutian Islands in Alaska, which, as noted earlier in this report, the United States includes in its definition of the Arctic for purposes of U.S. law.) The white paper refers to trans-Arctic shipping routes as the Polar Silk Road, and identifies these routes as a third major transportation corridor for the Belt and Road Initiative (BRI), China's major geopolitical initiative, first announced by China in 2013, to knit Eurasia and parts of Africa together in a Chinese-anchored or Chinese-led infrastructure and economic network.\nChina appears to be interested in using the Northern Sea Route (NSR) linking Europe and Asia via waters running along Russia's Arctic coast to shorten commercial shipping times between Europe and China and perhaps also to reduce China's dependence on southern sea routes (including those going to the Persian Gulf) that pass through the Strait of Malacca\u2014a maritime choke point that China appears to regard as vulnerable to being closed off by other parties (such as the United States) in time of crisis or conflict. China reportedly reached an agreement with Russia on July 4, 2017, to create an \"Ice Silk Road,\" and in June 2018, China and Russia agreed to a credit agreement between Russia's Vnesheconombank (VEB) and the China Development Bank that could provide up to $9.5 billion in Chinese funds for the construction of select infrastructure projects, including in particular projects along the NSR. In September 2013, the Yong Shen , a Chinese cargo ship, became the first commercial vessel to complete the voyage from Asia to Rotterdam via the NSR. \nChina is interested in oil and gas exploration in the Arctic, and has made significant investments in Russia's Arctic oil and gas industry. In March 2013, it was announced that Russia and China had signed an agreement under which China would purchase oil from Russia in exchange for exploration licenses in the Arctic. China's investments in Russia's Arctic oil and gas industry include an ownership stake of at least 20% in the Yamal natural gas megaproject located on Russia's Yamal Peninsula in the Arctic. The facility includes onshore and offshore natural gas wells, a deepwater port, liquefied natural gas (LNG) storage and feeder lines, permafrost-resilient support buildings, and rail lines. In July 2018, an LNG shipment reportedly arrived in China from the Yamal LNG facility, via the NSR, for the first time.\nChina is also interested in mining opportunities in the Arctic seabed and in Greenland. Given Greenland's very small population, China may view Greenland as an entity that China can seek to engage using an approach similar to ones that China has used for engaging with small Pacific and Indian Ocean island states. China may also be interested in Arctic fishing grounds.\nChina's growing activities in the Arctic may also reflect a view that as a major world power, China should, like other major world powers, be active in the polar regions for conducting research and other purposes. (Along with its growing activities in the Arctic, China has recently increased the number of research stations in maintains in the Antarctic.) Particularly since China published its Arctic white paper in January 2018, observers have expressed curiosity or concern about China's exact mix of motivations for its growing activities in the Arctic, and about what China's ultimate goals for the Arctic might be.\n\n\t\t\t\tArctic States' Response\n\nThe shift in the international security environment to a situation of renewed great power competition underscores a question for the Arctic states regarding whether and how to respond to China's growing activities in the Arctic. China's growing activities in the Arctic could create new opportunities for cooperation between China and the Arctic states. They also, however, have the potential for posing challenges to the Arctic states in terms of defending their own interests in the Arctic.\nFor U.S. policymakers, a general question is how to integrate China's activities in the Arctic into the overall equation of U.S.-China relations, and whether and how, in U.S. policymaking, to link China's activities in the Arctic to its activities in other parts of the world. One specific question concerns potential areas for U.S.-Chinese cooperation in the Arctic. Another specific question could be whether to impose punitive costs on China in the Arctic for unwanted actions that China takes elsewhere. As one hypothetical example of such a cost-imposing action, U.S. policymakers could consider moving to suspend China's observer status on the Arctic Council as a punitive cost-imposing measure for unwanted Chinese actions in the South China Sea. In February 2019, it was reported that the United States in 2018 had urged Denmark to finance airports that China had offered to build in Greenland, so as to counter China's attempts to increase its presence and influence there.\nFor Russia, the question of whether and how to respond to China's activities in the Arctic may pose particular complexities. On the one hand, Russia is promoting the NSR for use by others, in part because Russia sees significant economic opportunities in offering icebreaker escorts, refueling posts, and supplies to the commercial ships that will ply the waterway. In that regard, Russia presumably would welcome increased use of the route by ships moving between Europe and China. More broadly, Russia and China have increased their cooperation on security and other issues in recent years, in no small part as a means of balancing or countering the United States in international affairs, and Russian-Chinese cooperation in the Arctic can both reflect and contribute to that cooperation.\nOn the other hand, Russian officials are said to be wary of China's continued growth in wealth and power, and of how that might eventually lead to China becoming the dominant power in Eurasia, and to Russia being relegated to a secondary or subordinate status in Eurasian affairs relative to China. Increased use by China of the NSR could accelerate the realization of that scenario: As noted above, the NSR forms part of China's geopolitical Belt and Road Initiative (BRI). Some observers argue that actual levels of Sino-Russian cooperation in the Arctic are not as great as Chinese or Russian announcements about such cooperation might suggest. A July 6, 2018, press report states the following:\nChina and Russia are working together ever more closely in the Arctic, exploiting a policy vacuum in the US, an international panel of experts said here. But Sino-Russian cooperation is almost entirely commercial, focused on trade routes, offshore oil, telecommunications (most satellites don't cover the Arctic), and tourism. A military alliance is unlikely given Russia's deep ambivalence about China's growing influence in general and their very different views on who should run the Arctic in particular: the eight circumpolar countries alone\u2014including both Russia and the US [through the Arctic Council]\u2014or a larger group that includes self-declared \"near-Arctic\" nations like China.\nA July 12, 2018, press report states the following:\nChina's actions both before and especially since [it published its Arctic white paper in January 2018] suggest that it is actually seeking not equality with others in the global frozen North, but rather a dominant position. And this prospect has already prompted some Russian commentators to suggest China wants to reduce Russia to the status of \"a younger brother\" in the Arctic\u2026.\nChina's expansive moves in the region have, to date, taken three forms. First, it is increasing its share of orders for goods carried across Arctic waters by the ships of other countries\u2014especially those of the Russian Federation\u2014something that gives it clout in Moscow in particular\u2026. Moreover, China is boosting its ownership stake in ships flying the Russian flag. Second, it has launched a program to build both ice breakers and ice-capable ships so that it will be able to carry more of the goods and raw materials it wants with its own vessels rather than having to rely on anyone else's. And third\u2014and perhaps most dramatically in terms of Beijing's long-term goals\u2014Chinese firms are establishing drilling platforms in areas of the Arctic Ocean that Moscow claims as part of its exclusive economic zone (EEZ). Similarly, it is building port facilities on Russian territory that are located far from China and that may soon eclipse Russian ones.\nAll three of these developments merit close attention, both for what they say about China's intentions as well as Beijing's increasing upper hand regarding a region and waterway Moscow has long insisted are exclusively Russian.\nA November 7, 2018, press report states\nAn article published on October 5 by the Russian International Affairs Council (RIAC) discusses Russia's strategy in the Arctic region and the evolving role of China therein\u2026. It frames the United States and the European Union as Russia's main regional competitor. But China is notably presented as a \"strategic partner\" for whom \"the Arctic region is not a top strategic priority\" and whose efforts to build up its naval strength are related to a desire to challenge the US, not Russia. The sentiments expressed in the above-mentioned RIAC article appear to reflect how Moscow views the prior concrete steps the Russian Federation and People's Republic of China (PRC) have been taking to strengthen bilateral cooperation in the Arctic.\u2026 Nonetheless, Chinese ambitions in the Arctic seem to extend beyond the level of such joint initiatives\u2026.\n\u2026 Russia's expectations in this matter are premised on three assumptions:\n\u2013 China will save Russia's stagnant north\u2026\n\u2013 China has no alternatives but to work with Russia \u2026.\n\u2013 China will be unable to \"sideline\" Russia (Topwar.ru, January 30, 2018), given Russia's dominant position in the Arctic and the nature of relations between Beijing and Moscow\u2026.\nHowever, these assumptions appear questionable at best:\nFirst, the NEP [Northeast Passage, aka Northern Sea Route] still requires a staggering amount of infrastructure investment\u2014realistic estimates run in the trillions of US dollars\u2014before it can start yielding profits\u2026. Moreover, the facts do not bear out the Russian conviction that Beijing can choose only between the NEP and the NWP, with no available alternative\u2026.\nSecond, Russia is not China's only potential partner in the Arctic. The PRC white paper clearly points to the fact that Chinese involvement there will be a multilateral, not a bilateral affair\u2026.\nThird, China is likely to ultimately sideline Russia. As rightfully pointed out by Dr. Pavel Gudev, a senior research fellow at the Institute of World Economy and International Relations (IMEMO), China's strategy in the Arctic region is dictated by the desire to \"downplay exclusivity in relations between Arctic nations\" and \"internationalize the Arctic as much as possible,\" which \"runs counter to Russia's national interests in the region\"\u2026.\nAnd finally, international competition by other Arctic players may further outflank Russian efforts.\nA November 29, 2018, statement to a committee of the Canadian parliament states\nSo far, Arctic nations have cautiously welcomed China's willingness to play a larger role in the Arctic.\u2026\nArctic nations are also setting limits. In 2011, Iceland blocked the sale of a large plot of land to a Chinese investor; in 2016, Denmark declined to sell a vacant naval base in Greenland to a Chinese mining company; and in that same year, a projected Chinese resort in Svalbard, under Norwegian sovereignty, was canceled. Each Arctic state\u2014often under public pressure\u2014is setting its own limits when it comes to welcoming Chinese presence.\nRussia's approach toward China shows a similar mix of interest and caution. China is a key investor in Russia's Yamal LNG project, and Chinese funds are particularly welcome, as Russia has been shunned by some of its more traditional investors since its annexation of Crimea. Russia also welcomes Chinese interest in developing port infrastructure along the NSR. Yet Russia is also very much intent on keeping the NSR under its control. This may eventually create tensions with China, as China sees the NSR as one element of the Belt and Road Initiative and will resent obstacles to its free use of the route (the alternative route, the Northwestern Passage along the northern shore of Canada, is not considered a viable replacement because of poor navigation conditions and a lack of infrastructure). While Russia and China are formally allies through the Shanghai Cooperation Organization, Russia remains wary of China's military power on its southern border and, as an Arctic nation, is irritated by the intrusion in Arctic affairs of non-Arctic states, as evidenced by its long-standing reluctance to grant observer status to these countries in the Arctic Council.\nA policy paper released in December 2018 states\nSince 2017, a series of events have raised optimism about the potential for Sino-Russian cooperation in the Arctic region, including unilateral and bilateral statements between Beijing and Moscow about their shared vision for and commitment to joint development of the Arctic energy resources and shipping lane. China's economic interests in natural resources extractions and alternative transportation routes largely align with Russia's stated goals to revitalize its Arctic territory\u2026.\nDespite the rhetorical enthusiasm from the two governments, concrete, substantive joint projects on the Northern Sea Route are lacking, especially in key areas such as infrastructure development. A careful examination of Chinese views on joint development of the Northern Sea Route reveals divergent interests, conflicting calculations and vastly different cost-benefit analyses. From the Chinese perspective, the joint development of the Northern Sea Route is a Russian proposal to which China reacted primarily out of strategic and political considerations rather than practical economic ones. While China is in principle interested in the Northern Sea Route, the potential and practicality of this alternative transportation route remains tentative and yet to be realized. For China, their diverging interests, especially over what constitutes mutually beneficial compromises, will be the biggest obstacle to future progress. Moscow needs to demonstrate much more sincerity or flexibility in terms of improving China's cost-benefit spreadsheet. In this sense, expectations and assessments of the impact of Sino-Russian cooperation specifically on the Northern Sea Route should be focused on moderate, concrete plans rather than glorified rhetoric\u2026.\nAlthough the Chinese are fond of optimistically discussing the potential for Sino-Russian cooperation on the Northern Sea Route, they have been unable to reach an optimistic conclusion for its viability, feasibility, and practicality. China and Russia have identified their converging interests in such cooperation. However, their diverging interests, especially over what constitutes mutually beneficial compromises, will be the biggest obstacle to future progress. China's view of the economic practicality of the Northern Sea Route remains a lofty future ambition that is steeped in hopes of the project's potential. In the best-case scenario, few Chinese experts see the Northern Sea Route as a viable substitute\/alternative to traditional shipping routes. Instead, the Northern Sea Route is seen primarily as a potential supplement. The unfavorable assessment of the economic practicality of the Northern Sea Route underscores the fact that there has been more discussion about development than actual projects on the ground.\nChina has demonstrated greater interest in other areas of infrastructure cooperation, such as on the Primorye International Transportation Corridor and energy development projects. However, interest regarding joint development of the Northern Sea Route has been markedly less impressive or present. China's apparent enthusiasm on Northern Sea Route cooperation with Russia is motivated primarily by political and strategic considerations. Cooperation helps to pave China's entry into the otherwise relatively exclusive Arctic region and affords China an advantaged and prioritized position in the projects for which Russia is accepting or seeking international cooperation. Russia's options for other international partners might expand after international sanctions are lifted and\/or if the United States identifies China as the biggest threat and Russia as a partner in the Sino-U.S.-Russian strategic triangle. However, such hypotheticals do not appear to be coming to fruition anytime soon.\nA 2019 report on China's strategic ambitions stated the following:\nThe Sino-Russian partnership has both supported China's Arctic ambitions and at times acted as a check on them. Broadly speaking, the region serves as a testing ground for key goals of [Chinese leader] Xi Jinping's foreign policy agenda\u2026. Focusing on climate change, sustainable development, and global governance, [China's Arctic] white paper downplays China's security interests in the region, especially the link between the projection of power in the polar region and the development of naval capabilities needed for great-power status. The PLA [People's Liberation Army\u2014China's military], however, has been integral to the development of China's Arctic capabilities, and the changing Arctic (and China's evolving role in it) are becoming a key part of the country's maritime strategy\u2026.\nChina faces several obstacles to fulfilling its Arctic ambitions. At present, the country has limited experience in cold-water navigation and polar research, though the Chinese government has been making substantial investments, particularly in the latter. In the short term, fears about Russia in Northern Europe may contribute to greater receptivity to China's activities in the Arctic, but this may no longer be the case if China seeks to play a more substantial role\u2026.\nChina's ambitions in the Arctic could also complicate its relations with Russia. China's entry into the region has been importantly facilitated by Russia's acceptance of Chinese investments and provision of Arctic navigation training (though\u2026 Russia was initially wary of China's quest for observer status in the Arctic Council). Yet China may not need a gatekeeper in the region for much longer if Arctic ice continues to recede. If the NSR [Northern Sea Route] is no longer frozen, then Russia may lose its legal rationale for administering the waterway, potentially leading to tensions with China and other users hoping to avoid Russian oversight and fees\u2026. \n\u2026 China's relationship with Russia is central to its Arctic ambitions, though Russia's positions on Arctic shipping also set limits to the Chinese role\u2026.\nAlthough Russia is China's key partner in the Arctic, Chinese officials have sought to improve relations with all the Arctic states. As an observer in the Arctic Council, China depends on members to put forward its proposals and will only be able to participate in Arctic resource development in cooperation with these states\u2026.\nChina's Arctic ambitions have elicited concern among regional states for two sets of reasons. First, countries like Russia that view Arctic coastal waterways as subject to their own jurisdiction are apprehensive about China's position. Second, most of the Arctic states have significant resource deposits or coastal access to such stores and are concerned about the consequences of China's investments and economic power in the region. This is particularly acute for smaller Arctic states such as Iceland, where a large infusion of Chinese funds might have an outsized political and economic impact\u2026.\nWhile Canada, which views the Northwest Passage as internal waters, and Russia, with its assertion of administrative rights over the still ice-covered NSR, have had some reservations about China playing a greater role in the Arctic, Nordic countries have largely welcomed its growing interest in the region. Chinese policy toward these states has involved multilateralism, as well as bilateral diplomacy and investments under BRI [the Belt and Road Initiative]\u2026.\nChinese investments in Greenland have been especially controversial due to its strategic location and domestic pressures for political independence from Denmark\u2026.\nWhile Chinese officials and analysts have been cautiously avoiding discussion of Greenland's political future, China's approach to the Nordic states is in keeping with its general approach to Europe\u2026.\nChina is playing a long game in the Arctic, slowly building up its presence, scientific capacity, and naval capabilities in anticipation of future economic bounties as the ice recedes. China has had to tread carefully as an outsider, however \"near-Arctic\" it claims to be, because even small steps by Chinese investors could have a big impact on small Arctic states. While somewhat wary of China's intentions and protective of its own status as an Arctic littoral state, Russia has provided an important entry point, via transit through the NSR and investment opportunities in the Russian Arctic. Nonetheless, China has to balance its aspirations with the need to be mindful of Russian sensitivities on Arctic issues\u2026.\nFor China, the Arctic is a promised land of untapped resources and an opportunity to exert its influence in global governance, yet these benefits are largely promised to insiders. However loudly China proclaims itself to be a near-Arctic state, it nonetheless has to demonstrate its presence through economic, scientific, and political activities. These same activities raise concerns among Arctic states about China's intentions and willingness to accept the status quo, which for Russia means the authority to administer currently ice-covered waterways. The Arctic is not a static environment, however, and its melting ice will have profound political consequences as well as environmental ones.\nFor Xi, the Arctic and polar regions more broadly are the testing grounds for his global ambitions, both as a maritime power and as a participant in the development of new forms of global governance.\n\n\t\t\t\tLinkages Between Arctic and South China Sea\n\nAnother potential implication of the shift in the international security environment to a situation of great power competition is a linkage that is sometimes made between the Arctic and the South China Sea relating to international law of the sea or the general issue of international cooperation and competition. One aspect of this linkage relates to whether China's degree of compliance with international law of the sea in the South China Sea has any implications for understanding potential Chinese behavior regarding its compliance with international law of the sea (and international law generally) in the Arctic.\nA second aspect of this linkage, mentioned earlier, is whether the United States should consider the option of moving to suspend China's observer status on the Arctic Council as a punitive cost-imposing measure for unwanted Chinese actions in the South China Sea.\nA third aspect of this linkage concerns the question of whether the United States should become a party to UNCLOS: Discussions of that issue sometimes mention both the situation in the South China Sea and the extended continental shelf issue in the Arctic (see \" Extended Continental Shelf and United States as a Nonparty to UNCLOS \").\n\n\t\tU.S. Military Forces and Operations307\n\n\t\t\tOverview\n\nDuring the Cold War, the Arctic was an arena of military competition between the United States and the Soviet Union, with both countries, for example, operating nuclear-powered submarines, long-range bombers, and tactical aircraft in the region. The end of the Cold War and the collapse of most elements of the Russian military establishment following the dissolution of the Soviet Union in December 1991 greatly reduced this competition and led to a reduced emphasis on the Arctic in U.S. military planning.\nRenewed tensions with Russia following its seizure and annexation of Crimea in March 2014, combined with a significant increase in Russian military capabilities and operations in the Arctic in recent years, have led to growing concerns among observers that the Arctic is once again becoming a region of military tension and competition, and to concerns about whether the United States is adequately prepared militarily to defend its interests in the region.\nU.S. military officials, military officials from other Arctic states, and other observers have stressed the cooperative aspects of how the Arctic states have addressed Arctic issues, and have sometimes suggested that the competitive aspects of the situation have been exaggerated in some press accounts. Some observers argue that that Russia's recent military investment in the Arctic is being exaggerated, or reflects normal modernization of aging capabilities, or is intended partly for domestic Russian consumption. Even so, U.S. military forces (and U.S. intelligence agencies) are paying renewed attention to the Arctic. This is particularly true in the case of the Navy and Coast Guard, for whom diminishment of Arctic sea ice is opening up potential new operating areas for their surface ships. The U.S. Air Force, Army, and Marine Corps, too, are now focusing more on Arctic operations. Canada, the UK, and the Nordic countries are taking or contemplating steps to increase their own military presence and operations in the region.\n\n\t\t\tDOD in General\n\n\t\t\t\t2010 QDR (Submitted February 2010)\n\nDOD's report on the 2010 QDR, submitted to Congress in February 2010, states the following:\nThe effect of changing climate on the Department's operating environment is evident in the maritime commons of the Arctic. The opening of the Arctic waters in the decades ahead[,] which will permit seasonal commerce and transit[,] presents a unique opportunity to work collaboratively in multilateral forums to promote a balanced approach to improving human and environmental security in the region. In that effort, DoD must work with the Coast Guard and the Department of Homeland Security to address gaps in Arctic communications, domain awareness, search and rescue, and environmental observation and forecasting capabilities to support both current and future planning and operations. To support cooperative engagement in the Arctic, DoD strongly supports accession to the United Nations Convention on the Law of the Sea.\n\n\t\t\t\tApril 2011 Change to DOD Unified Command Plan\n\nIn April 2011, President Obama assigned responsibility for the Arctic to U.S. Northern Command. Previously, U.S. Northern Command, U.S. European Command, and U.S. Pacific Command had shared responsibility for the Arctic. The April 2011 change in DOD's Unified Command Plan also assigned Alaska to U.S. Northern Command. Previously, U.S. Northern Command and U.S. Pacific Command had shared responsibility for Alaska and adjacent waters. \n\n\t\t\t\tMay 2011 DOD Report to Congress\n\nIn May 2011, DOD submitted a report to Congress on Arctic operations and the Northwest Passage that was prepared at congressional direction. A January 2012 GAO report reviewed the May 2011 DOD report.\n\n\t\t\t\tNovember 2013 DOD Arctic Strategy\n\nOn November 22, 2013, DOD released a DOD strategy for the Arctic that was subsequently updated by the December 2016 report to Congress on Arctic strategy discussed below.\n\n\t\t\t\tJanuary 2014 Implementation Plan for National Strategy for Arctic Region\n\nThe Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") makes DOD the lead federal agency for one of the plan's 36 or so specific initiatives, and a supporting agency for 18 others. The initiative for which DOD is designated the lead federal agency is entitled \"Develop a framework of observations and modeling to support forecasting and prediction of sea ice.\"\n\n\t\t\t\t2014 Quadrennial Defense Review (QDR) (Submitted March 2014)\n\nThe Department of Defense's (DOD's) report on the 2014 Quadrennial Defense Review (QDR), submitted to Congress in March 2014, states the following:\nClimate change also creates both a need and an opportunity for nations to work together, which the Department will seize through a range of initiatives. We are developing new policies, strategies, and plans, including the Department's Arctic Strategy and our work in building humanitarian assistance and disaster response capabilities, both within the Department and with our allies and partners.\n\n\t\t\t\t2015 National Security Strategy\n\nThe February 2015 National Security Strategy mentions the Arctic three times, stating that \"the present day effects of climate change are being felt from the Arctic to the Midwest. Increased sea levels and storm surges threaten coastal regions, infrastructure, and property.\" It also states that \"we seek to build on the unprecedented international cooperation of the last few years, especially in the Arctic as well as in combatting piracy off the Horn of Africa and drug-smuggling in the Caribbean Sea and across Southeast Asia,\" and that \"we will also stay engaged with global suppliers and our partners to reduce the potential for energy-related conflict in places like the Arctic and Asia.\"\n\n\t\t\t\tJune 2015 GAO Report\n\nA June 2015 Government Accountability Office (GAO) report states the following:\nRecent strategic guidance on the Arctic issued by the [Obama] administration and the Department of Defense (DOD) establish a supporting role for the department relative to other federal agencies, based on a low level of military threat expected in the region. In January 2014 the [Obama] administration issued the Implementation Plan to the National Strategy for the Arctic Region that designated DOD as having a largely supporting role for the activities outlined in the plan. Additionally, DOD's Arctic Strategy issued in November 2013 and the Navy's Arctic Roadmap 2014-2030 issued in February 2014 emphasize that, as sea ice diminishes and the Arctic Ocean opens to more activity, the department may be called upon more frequently to support other federal agencies and work with partners to ensure a secure and stable region. To further its role, DOD participates in a number of forums focused on military security cooperation in the Arctic, including the Arctic Security Forces Roundtable, a senior-level event aimed at encouraging discussion among the security forces of Arctic and non-Arctic nations. In addition, DOD leads training exercises focused on building partner capacity in the region, including Arctic Zephyr, a multilateral scenario-based exercise. DOD continues to monitor the security environment in the region and is tracking indicators that could change its threat assessment and affect DOD's future role.\nDOD has taken actions, along with interagency partners, to address some near-term capabilities needed in the Arctic, such as maritime domain awareness and communications. In recent years, DOD has conducted a number of studies to identify near-term capabilities the department needs to operate in the Arctic. The Implementation Plan to the National Strategy for the Arctic Region created an interagency framework and identified activities to address many of these needed capabilities. For example, as the lead agency for Arctic sea ice forecasting, DOD has established an interagency team to focus on improved sea ice modeling. DOD has also begun other efforts within the department to address capability needs. For example, the Navy's Arctic Roadmap prioritizes near-term actions to enhance its ability to operate in the Arctic and includes an implementation plan and timeline for operations and training, facilities, equipment, and maritime domain awareness, among other capabilities.\nU.S. Northern Command\u2014the DOD advocate for Arctic capabilities\u2014stated that it is in the process of updating its regional plans for the Arctic and is conducting analysis to determine future capability needs. For example, Northern Command is updating the Commander's Estimate for the Arctic, which establishes the commander's intent and missions in the Arctic and identifies near-, mid-, and long-term goals. Additionally, the command is conducting studies of various Arctic mission areas, such as maritime homeland defense and undersea surveillance, to identify future capability needs. However, according to DOD's Arctic Strategy, uncertainty remains around the pace of change and commercial activity in the region that may affect its planning timelines. Difficulty in developing accurate sea ice models, variability in the Arctic's climate, and the uncertain rate of activity in the region create challenges for DOD to balance the risk of having inadequate capabilities or insufficient capacity when required to operate in the region with the cost of making premature or unnecessary investments. According to its Arctic Strategy, DOD plans to mitigate this risk by monitoring the changing Arctic conditions to determine the appropriate timing for capability investments.\n\n\t\t\t\tJune 2016 DOD Report on Funding for 2013 Arctic Strategy\n\nA June 2016 DOD report to Congress on resourcing the Arctic Strategy states that DOD\nis making investments in research, military infrastructure, and capabilities to execute the 2013 Arctic Strategy and support the development of the Arctic as a secure and stable region where U.S. national interests are safeguarded, the U.S. homeland is protected, and nations work cooperatively to address challenges. Fiscal year (FY) 2017 investments focus mainly on capabilities, followed by long-term investments in research and development of next-generation capabilities. The Department's challenge is balancing the risk of being late-to-need with the opportunity cost of making Arctic investments for potential future contingencies at the expense of resourcing other urgent military requirements....\nData provided by the Combatant Commands and Military Departments from the FY 2017 budget identifies about $6 billion of FY 2017 investments....\nThe report includes a summary table showing that of $6.032 billion requested by DOD for FY2017 for implementing the Arctic strategy, about $461.3 million is for Army, Navy, and Air Force research and development work, $362.2 million is for Air Force military construction (MILCON) work, and about $5.209 billion is for Army, Navy, Air Force, defense-wide, and classified capabilities. Within the $5.209 billion figure, about 85% is accounted for by Air Force operations and maintenance (O&M), with about $2.281 billion, Air Force procurement, with about $1.109 billion, and Army military personnel (MILPERS) costs, with about $1.036 billion.\n\n\t\t\t\tDecember 2016 Report to Congress on Arctic Strategy\n\nA December 2016 report to Congress on strategy to protect U.S. national security interests in the Arctic region that was required by Section 1068 of FY2016 National Defense Authorization Act ( S. 1356 \/ P.L. 114-92 of November 25, 2015) states the following (italics and bold as in original):\nThe Department of Defense (DoD) remains committed to working collaboratively with allies and partners to promote a balanced approach to improving security in the Arctic region. DoD's strategy in the Arctic builds upon the 2009 National Security Presidential Directive 66\/Homeland Security Presidential Directive 25, Arctic Region Policy , and the 2013 National Strategy for the Arctic Region (NSAR).\nDoD's 2013 Arctic Strategy nested under those two overarching national-level guidance documents. DoD's 2016 Arctic Strategy updates DoD's 2013 Arctic Strategy as required by Section 1068 of the National Defense Authorization Act for FY 2016 ( P.L. 114-92 ) in light of significant changes in the international security environment. It refines DoD's desired end-state for the Arctic: a secure and stable region where U.S. national interests are safeguarded, the U.S. homeland is defended, and nations work cooperatively to address challenges. The two main supporting objectives remain unchanged: 1) Ensure security, support safety, promote defense cooperation; and 2) prepare to respond to a wide range of challenges and contingencies\u2014operating in conjunction with like-minded nations when possible and independently if necessary\u2014in order to maintain stability in the region. This update also adds a classified annex.\nIn this strategy, near-term refers to the timeframe from the present to 2023, during which DoD will operate with current forces and execute resources programmed across the Future Years Defense Program (FYDP). The mid-term (2023-2030) and far-term (beyond 2030) are also addressed where relevant to global posture and force development. Timeframes are approximate due to uncertainty about future environmental, economic, and geopolitical conditions and the pace at which human activity in the Arctic region will increase.\nThe 2016 Arctic Strategy also updates the ways and means DoD intends to use to achieve its objectives as it implements the NSAR. These include\n--Enhance the capability of U.S. forces to defend the homeland and exercise sovereignty;\n--Strengthen deterrence at home and abroad;\n--Strengthen alliances and partnerships;\n--Preserve freedom of the seas in the Arctic;\n--Engage public, private, and international partners to improve domain awareness in the Arctic;\n--Evolve DoD Arctic infrastructure and capabilities consistent with changing conditions and needs;\n--Provide support to civil authorities, as directed;\n--Partner with other departments, agencies, and nations to support human and environmental security; and\n--Support international institutions that promote regional cooperation and the rule of law.\nDoD's strategic approach is guided by its main objectives of ensuring security, supporting safety, and promoting defense cooperation as it prepares to respond to a wide range of challenges and contingencies in the Arctic in the years to come. Alliances and strategic partnerships remain the center of gravity in achieving DoD's desired end-state and ensuring that the Arctic remains a secure and stable region. Wherever possible, DoD will continue to seek innovative, cost-effective, small-footprint ways to achieve its objectives. DoD will also continue to apply the four overarching principles articulated in the NSAR: working with allies and partners to safeguard peace and stability; making decisions using the best available scientific information; pursuing innovative partnerships to develop needed capabilities and capacity over time; and following established Federal and DoD tribal consultation policy as applicable.\n\n\t\t\t\tFY2018 National Defense Authorization Act (H.R. 2810\/P.L. 115-91)\n\nSection 1054 of the conference version ( H.Rept. 115-404 of November 9, 2017) of H.R. 2810 \/ P.L. 115-91 of December 12, 2017, requires DOD to submit a report on steps DOD is taking to resolve Arctic security capability and resource gaps, and the requirements and investment plans for military infrastructure required to protect U.S. national security interests in the Arctic region.\n\n\t\t\t\t2017 National Security Strategy\n\nThe December 2017 National Security Strategy mentions the Arctic once, stating that \"a range of international institutions establishes the rules for how states, businesses, and individuals interact with each other, across land and sea, the Arctic, outer space, and the digital realm. It is vital to U.S. prosperity and security that these institutions uphold the rules that help keep these common domains open and free.\"\n\n\t\t\t\t2018 National Defense Strategy\n\nThe January 2018 unclassified summary of the 2018 National Defense Strategy does not specifically mention the Arctic.\n\n\t\t\t\tJohn S. McCain National Defense Authorization Act for Fiscal Year 2019 (H.R. 5515\/S. 2987)\n\nIn the conference report ( H.Rept. 115-874 of July 25, 2018) on H.R. 5515 , Section 1071 states the following:\nSEC. 1071. REPORT ON AN UPDATED ARCTIC STRATEGY.\n(a) REPORT ON AN UPDATED STRATEGY.\u2014Not later than June 1, 2019, the Secretary of Defense shall submit to the congressional defense committees a report on an updated Arctic strategy to improve and enhance joint operations.\n(b) ELEMENTS.\u2014The report required by subsection (a) shall include the following:\n(1) A description of United States national security interests in the Arctic region.\n(2) An assessment of the threats and security challenges posed by adversaries operating in the Arctic region, including descriptions of such adversaries' intents and investments in Arctic capabilities.\n(3) A description of the roles and missions of each military service in the Arctic region in the context of joint operations to support the Arctic strategy, including\u2014\n(A) a description of a joint Arctic strategy for sea operations, including all military and Coast Guard vessels available for Arctic operations;\n(B) a description of a joint Arctic strategy for air operations, including all rotor and fixed wing military aircraft platforms available for Arctic operations; and\n(C) a description of a joint Arctic strategy for ground operations, including all military ground forces available for Arctic operations.\n(4) A description of near-term and long-term training, capability, and resource gaps that must be addressed to fully execute each mission described in the Arctic strategy against an increasing threat environment.\n(5) A description of the level of cooperation between the Department of Defense, any other departments and agencies of the United States Government, State and local governments, and tribal entities related to the defense of the Arctic region.\n(c) FORM OF REPORT.\u2014The report required by subsection (a) shall be submitted in unclassified form, but may include a classified annex.\nH.Rept. 115-874 also states the following:\nThe conferees direct the Secretary of Defense to submit a report to the congressional defense committees not later than 180 days after the date of enactment of this Act on current cold weather capabilities and readiness of the United States Armed Forces. The report shall contain the following elements:\n(1) A description of current cold weather capabilities and training to support United States military operations in cold climates across the joint force;\n(2) A description of anticipated requirements for United States military operations in cold and extreme cold weather in the Arctic, Northeast Asia, and Northern and Eastern Europe;\n(3) A description of the current cold weather readiness of the joint force, the ability to increase cold weather training across the joint force, and any equipment, infrastructure, personnel, or resource limitations or gaps that may exist;\n(4) An analysis of potential opportunities to expand cold weather training for the Army, the Navy, the Air Force, and the Marine Corps and the resources or infrastructure required for such expansion; and\n(5) An analysis of potential partnerships with State, local, Tribal, and private entities to maximize training potential and to utilize local expertise, including traditional indigenous knowledge. (Pages 835-836)\n\n\t\t\t\tFY2019 DOD Appropriations Act (S. 3159)\n\nThe Senate Appropriations Committee, in its report ( S.Rept. 115-290 of June 28, 2018) on S. 3159 , states the following:\nArctic Broadband Infrastructure .\u2014The Committee is concerned that broadband infrastructure in the Arctic, particularly in northern Alaska and the Aleutian Islands, is not capable of supporting current military operations. Therefore, the Committee directs the Secretary of Defense to conduct an evaluation of broadband infrastructure in the United States Arctic and provide a report to the congressional defense committees not later than 180 days after enactment of this act. The report shall list an inventory of all existing broadband and communications infrastructure in the Aleutian Is land chain and Alaska's northwest and northern slope communities, as well as present limitations and needs for the future. (Pages 35-36)\n\n\t\t\t\tDOD Cooperation with Canada and Other Countries\n\nDOD has been taking a number of steps in recent years to strengthen U.S.-Canadian cooperation and coordination regarding military operations in the Arctic.\n\n\t\t\tNavy and Coast Guard in General\n\nThe Navy and Coast Guard are exploring the potential implications that increased human activities in the Arctic may have for Navy and Coast Guard required numbers of ships and aircraft, ship and aircraft characteristics, new or enlarged Arctic bases, and supporting systems, such as navigation and communication systems. The Navy and Coast Guard have sponsored or participated in studies and conferences to explore these implications, the Coast Guard annually deploys cutters and aircraft into the region to perform missions and better understand the implications of operating such units there, and the Navy has deployed ships to the region.\nPoints or themes that have emerged in studies, conferences, and deployments regarding the potential implications for the U.S. Navy and Coast Guard of diminished Arctic sea ice include but are not limited to the following:\nThe diminishment of Arctic ice is creating potential new operating areas in the Arctic for Navy surface ships and Coast Guard cutters. U.S. national security interests in the Arctic include \"such matters as missile defense and early warning; deployment of sea and air systems for strategic sealift, strategic deterrence, maritime presence, and maritime security operations; and ensuring freedom of navigation and overflight.\" SAR in the Arctic is a mission of increasing importance, particularly for the Coast Guard, and one that poses potentially significant operational challenges (see \" Search and Rescue (SAR) \" above). More complete and detailed information on the Arctic is needed to more properly support expanded Navy and Coast Guard ship and aircraft operations in the Arctic. The Navy and the Coast Guard currently have limited infrastructure in place in the Arctic to support expanded ship and aircraft operations in the Arctic. Expanded ship and aircraft operations in the Arctic may require altering ship and aircraft designs and operating methods. Cooperation with other Arctic countries will be valuable in achieving defense and homeland security goals.\n\n\t\t\tNavy\n\n\t\t\t\tNovember 2009 Navy Arctic Roadmap\n\nThe Navy issued its first Arctic roadmap on November 10, 2009. The document, dated October 2009, was intended to guide the service's activities regarding the Arctic for the period FY2010-FY2014. The document has now been succeeded by the 2014-2030 Navy Arctic roadmap (see discussion below).\n\n\t\t\t\tAugust 2011 Navy Arctic Environmental Assessment and Outlook Report\n\nIn August 2011, the Navy released an Arctic environment assessment and outlook report. The report states the following:\nAs the Arctic environment continues to change and human activity increases, the U.S. Navy must be prepared to operate in this region. It is important to note that even though the Arctic is opening up, it will continue to be a harsh and challenging environment for the foreseeable future due to hazardous sea ice, freezing temperatures and extreme weather. Although the Navy submarine fleet has decades of experience operating in the Arctic, the surface fleet, air assets, and U.S. Marine Corps ground troops have limited experience there. The Navy must now consider the Arctic in terms of future policy, strategy, force structure, and investments.\n\n\t\t\t\tNovember 2013 DOD Arctic Strategy\n\nThe November 2013 DOD Arctic strategy (see discussion above in the section on DOD) states that \"The Department of the Navy, in its role as DoD Executive Agent for Maritime Domain Awareness, will lead DoD coordination on maritime detection and tracking,\" and that \"DoD will take steps to work with other Federal departments and agencies to improve nautical charts, enhance relevant atmospheric and oceanic models, improve accuracy of estimates of ice extent and thickness, and detect and monitor climate change indicators. In particular, the Department of the Navy will work in partnership with other Federal departments and agencies (e.g., DHS, the Department of Commerce) and international partners to improve hydrographic charting and oceanographic surveys in the Arctic.\"\n\n\t\t\t\tJanuary 2014 Implementation Plan for National Strategy for Arctic Region\n\nThe Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") mentions the Navy by name only once, as one of several agencies that will \"collaborate to improve marine charting in the Arctic (Integrated Ocean and Coastal Mapping) and topographic mapping (Alaska Mapping Executive Committee).\" As noted above in the discussion of DOD in general, however, the January 2014 implementation plan makes DOD the lead federal agency for one of the plan's 36 or so specific initiatives and a supporting agency for 18 others. The Navy will likely be a prominent participant in DOD's activities for a number of these 19 initiatives.\n\n\t\t\t\tFebruary 2014 Updated Navy Arctic Roadmap for 2014-2030\n\nOn February 24, 2014, the Navy released an updated Arctic roadmap intended to guide Navy activities regarding the Arctic for the period 2014-2030. The document is the successor to the November 2009 Navy Arctic roadmap (see discussion above). The executive summary of the 2014-2030 Navy Arctic roadmap states the following:\nThe United States Navy, as the maritime component of the Department of Defense, has global leadership responsibilities to provide ready forces for current operations and contingency response that include the Arctic Ocean. The Arctic Region remains a challenging operating environment, with a harsh climate, vast distances, and little infrastructure. These issues, coupled with limited operational experience, are just a few substantial challenges the Navy will have to overcome in the Arctic Region. While the Region is expected to remain a low threat security environment where nations resolve differences peacefully, the Navy will be prepared to prevent conflict and ensure national interests are protected....\nNavy functions in the Arctic Region are no different from those in other maritime regions; however, the Arctic Region environment makes the execution of many of these functions much more challenging....\nIn support of National and Department of Defense aims, the Navy will pursue the following strategic objectives:\n\u2022 Ensure United States Arctic sovereignty and provide homeland defense ;\n\u2022 Provide ready naval forces to respond to crisis and contingencies;\n\u2022 Preserve freedom of the seas ; and\n\u2022 Promote partnerships within the United States Government and with international allies and partners....\nResource constraints and competing near-term mission demands require that naval investments be informed, focused, and deliberate. Proactive planning today allows the Navy to prepare its forces for Arctic Region operations. This Roadmap emphasizes low-cost, long-lead activities that position the Navy to meet future demands. In the near to mid-term, the Navy will concentrate on improving operational capabilities, expertise, and capacity, extending reach, and will leverage interagency and international partners to achieve its strategic objectives. The Roadmap recognizes the need to guide investments by prudently balancing regional requirements with national goals....\nThis Roadmap provides direction to the Navy for the near-term (present-2020), mid-term (2020-2030), and far-term (beyond 2030), placing particular emphasis on near-term actions necessary to enhance Navy's ability to operate in the Arctic Region in the future. In the near-term, there will be low demand for additional naval involvement in the Region. Current Navy capabilities are sufficient to meet near-term operational needs. Navy will refine doctrine, operating procedures, and tactics, techniques, and procedures to guide future potential operations in the Arctic Region. In the mid-term, the Navy will provide support to the Combatant Commanders, United States Coast Guard, and other United States Government agencies. In the far-term, increased periods of ice-free conditions could require the Navy to expand this support on a more routine basis.\nRegarding \"United States Navy Ways and Means for Near-Term, Mid-Term, and Far-Term Operations,\" the roadmap states the following:\nNear-term: Present to 2020.\nThe Navy will continue to provide capability and presence primarily through undersea and air assets. Surface ship operations will be limited to open water operations in the near-term. Even in open water conditions, weather factors, including sea ice, must be considered in operational risk assessments. During shoulder seasons, the Navy may employ ice strengthened Military Sealift Command (MSC) ships to conduct Navy missions.\nBy 2020, the Navy will increase the number of personnel trained in Arctic operations. The Navy will grow expertise in all domains by continuing to participate in exercises, scientific missions, and personnel exchanges in Arctic-like conditions. Personnel exchanges will provide Sailors with opportunities to learn best practices from other United States' military services, interagency partners, and international allies and partners.\nThe Navy will refine or develop the necessary strategy, policy, plans, and requirements for the Arctic Region. Additionally, the Navy will continue to study and make informed decisions on pursuing investments to better facilitate Arctic operations. The Navy will emphasize low cost, long-lead time activities to match capability and capacity to future demands. The Navy will update operating requirements and procedures for personnel, ships, and aircraft to operate in the Region with interagency partners and allies. Through ongoing exercises, such as Ice Exercise (ICEX) and Scientific Ice Expeditions (SCICEX) research, and transits through the region by Navy submarines, aircraft and surface vessels, the Navy will continue to learn more about the evolving operating environment. The Navy will focus on areas where it provides unique capabilities and will leverage joint and coalition partners to fill identified gaps and seams.\nMid-term: 2020 to 2030.\nBy 2030, the Navy will have the necessary training and personnel to respond to contingencies and emergencies affecting national security. As the Arctic Ocean becomes increasingly ice-free, surface vessels will operate in the expanding open water areas. The Navy will improve its capabilities by participating in increasingly complex exercises and training with regional partners. While primary risks in the mid-term will likely be meeting search and rescue or disaster response mission demands, the Navy may also be called upon to ensure freedom of navigation in Arctic Ocean waters. The Navy will work to mitigate the gaps and seams and transition its Arctic Ocean operations from a capability to provide periodic presence to a capability to operate deliberately for sustained periods when needed.\nFar-term: Beyond 2030.\nIn the far-term, Navy will be capable of supporting sustained operations in the Arctic Region as needed to meet national policy guidance. The Navy will provide trained and equipped personnel, along with surface, subsurface, and air capabilities, to achieve Combatant Commander's objectives. The high confidence of diminished ice coverage and navigable waterways for much of the year will enable naval forces to operate forward, ready to respond to any potential threat to national security, or to provide contingency response. Far-term risks include increased potential for search and rescue and DSCA [Defense Support of Civil Authorities], but may also require naval forces to have a greater focus on maritime security and freedom of navigation in the Region.\n\n\t\t\t\t2018 Reestablishment of 2nd Fleet for North Atlantic and Arctic\n\nIn May 2018, the Navy announced that it would reestablish the 2 nd Fleet, which was the Navy's fleet during the Cold War for countering Soviet naval forces in the North Atlantic. The fleet's formal reestablishment occurred in August 2018. The 2 nd Fleet was created in 1950 and disestablished in September 2011. In its newly reestablished form, it is described as focusing on countering Russian naval forces not only in the North Atlantic but in the Arctic as well.\n\n\t\t\t\tUpcoming Freedom of Navigation (FON) Operation in Arctic\n\nIn January 2019, the Navy announced that \"in coming months\" it will send a Navy warship through Arctic waters on a freedom of navigation (FON) operation to assert U.S. navigational rights under international law in Arctic waters. The U.S. government's FON program was established in 1979 and annually includes multiple U.S. Navy FON operations conducted in various parts of the world. The upcoming FON operation in the Arctic, however, will reportedly be the Navy's first ever FON operation in the Arctic.\n\n\t\t\tCoast Guard\n\n\t\t\t\tOverview\u2014November 2015 Coast Guard Testimony\n\nAt a November 17, 2015, hearing on Arctic operations before two subcommittees of the House Foreign Affairs Committee, the Coast Guard testified that\nThe Coast Guard has been operating in the Arctic Ocean since 1867, when Alaska was purchased from Russia. Then, as now, our mission is to enforce U.S. laws and regulations, conduct search and rescue, assist scientific exploration, and foster navigation safety and environmental stewardship. The Coast Guard uses mobile command and control platforms including large cutters and ocean-going ice-strengthened buoy tenders, as well as seasonal air and communications capabilities to execute these missions within more than 950,000 square miles of ocean off the Alaskan coast.\nSince 2008, the Coast Guard has conducted operations in the Arctic Region to assess our capabilities and mission requirements as maritime activity and environmental conditions warrant. These operations have included establishing small, temporary Forward Operating Locations along the North Slope to test our capabilities with boats, helicopters, and personnel. Each year from April to November we also fly aerial sorties to evaluate activities in the region. We will continue to deploy a suite of Coast Guard cutters to test our equipment, train our crews, and increase our awareness of Arctic activity.\n\n\t\t\t\tCoast Guard High Latitude Study Provided to Congress in July 2011\n\nIn July 2011, the Coast Guard provided to Congress a study on the Coast Guard's missions and capabilities for operations in high-latitude (i.e., polar) areas. The study, commonly known as the High Latitude Study, is dated July 2010 on its cover. The High Latitude Study concluded the following:\n[The study] concludes that future [Coast Guard] capability and capacity gaps will significantly impact four [Coast Guard] mission areas in the Arctic: Defense Readiness, Ice Operations, Marine Environmental Protection, and Ports, Waterways, and Coastal Security. These mission areas address the protection of important national interests in a geographic area where other nations are actively pursuing their own national goals. U.S. national policy and laws define the requirements to assert the nation's jurisdiction over its territory and interests; to ensure the security of its people and critical infrastructure; to participate fully in the collection of scientific knowledge; to support commercial enterprises with public utility; and to ensure that the Arctic environment is not degraded by increased human activity.\nThe Coast Guard's ability to support Defense Readiness mission requirements in the Arctic is closely linked to DoD responsibilities. The Coast Guard presently possesses the only surface vessels capable of operating in ice-covered and ice-diminished waters. The Coast Guard supports (1) DoD missions such as the resupply of Thule Air Base in Greenland and logistics support (backup) for McMurdo Station in Antarctica and (2) Department of State (DoS) directed Freedom of Navigation Operations. These unique Coast Guard capabilities have been noted by the Joint Chiefs of Staff, the Navy's Task Force Climate Change, and the recently issued Naval Operations Concept 2010.\nThe common and dominant contributor to these significant mission impacts is the gap in polar icebreaking capability....\nOther capability gaps contributing to the impact on Coast Guard ability to carry out its missions in the Arctic include\n\u2022 Communications System Capability \u2013 Continuous coverage along Alaska's West Coast, the Bering Strait, and throughout the North Slope is required for exchanging voice and data communications with Coast Guard units and other government and commercial platforms offshore.\n\u2022 Forward Operating Locations - No suitable facilities currently exist on the North Slope or near the Bering Strait with facilities sufficient to support extended aircraft servicing and maintenance. Aircraft must travel long distances and expend significant time transiting to and from adequate facilities. This gap reduces on-scene presence and capability to support sustained operations in the region.\n\u2022 Environmental response in ice-covered waters - The technology and procedures for assessment and mitigation measures for oil spills in ice-covered waters are not fully developed or tested.\nCapability gaps in the Arctic region have moderate impacts on [the Coast Guard's] Aids to Navigation (AtoN), Search and Rescue (SAR), and Other Law Enforcement (OLE) missions. Both AtoN and SAR involve the safety of mariners and will gain more importance not only as commerce and tourism cause an increase in maritime traffic, but as U.S. citizens in northern Alaska face more unpredictable conditions. Performance of OLE will be increasingly necessary to ensure the integrity of U.S. living marine resources from outside pressures....\nIn addition to the assessment of polar icebreaking needs, the Arctic mission analysis examined a set of theoretical mixes (force packages) of Coast Guard assets consisting of icebreakers, their embarked helicopters, and deployment alternatives using aviation forward operating locations in Arctic Alaska....\nAll [six] of the force mixes [considered in the study] add assets to the existing Coast Guard Alaska Patrol consisting of (1) a high-endurance cutter (not an icebreaker) deployed in the Bering Sea carrying a short range recovery helicopter, and (2) medium range recovery helicopters located at Kodiak in the Gulf of Alaska, and seasonally deployed to locations in Cold Bay and St. Paul Island....\nThese force packages and associated risk assessment provide a framework for acquisition planning as the Coast Guard implements a strategy for closing the capability gaps. By first recapitalizing the aging icebreakers, the Coast Guard provides a foundation for buildout of these force mixes. In addition to the cost of the icebreakers, the force packages require investment in forward operating locations and in medium range helicopters. The mission analysis reports developed rough order-of-magnitude cost estimates for forward operating locations at approximately $36M [million] each and for helicopters at $9M each....\nThe analysis shows that the current Coast Guard deployment posture is not capable of effective response in northern Alaska and that response may be improved through a mix of deployed cutters, aircraft, and supporting infrastructure including forward operating locations and communications\/navigation systems.\n\n\t\t\t\tMay 2013 Coast Guard Arctic Strategy\n\nOn May 21, 2013, the Coast Guard released a strategy document for the Arctic. The executive summary of the document states the following in part:\nThe U.S. Coast Guard, as the maritime component of the U.S. Department of Homeland Security (DHS), has specific statutory responsibilities in U.S. Arctic waters. This strategy outlines the ends, ways, and means for achieving strategic objectives in the Arctic over the next 10 years. The Coast Guard is responsible for ensuring safe, secure, and environmentally responsible maritime activity in U.S. Arctic waters. Our efforts must be accomplished in close coordination with DHS components, and involve facilitating commerce, managing borders, and improving resilience to disasters.\nThe Coast Guard's current suite of cutters, boats, aircraft, and shore infrastructure must meet a number of near-term mission demands. The Coast Guard employs mobile command and control platforms such as large cutters and ocean-going ice-strengthened buoy tenders, as well as seasonal air and communications capabilities through leased or deployable assets and facilities. These mobile and seasonal assets and facilities have proven to be important enablers for front-line priorities in the region, including search and rescue operations, securing the maritime border, collecting critical intelligence, responding to potential disasters, and protecting the marine environment....\nAlthough winter sea travel is still severely limited due to extensive ice coverage across the region, recent summer and early autumn sea ice extent record lows have made seasonal maritime navigation more feasible. Economic development, in the forms of resource extraction, adventure tourism, and trans-Arctic shipping drives much of the current maritime activity in the region.\n[Oil and gas exploration] activities [in the region] bring risk, which can be mitigated through appropriate maritime governance. Additionally, tourism is increasing rapidly in the Arctic. Due to undeveloped shore-based infrastructure, much of the increased tourism is expected to involve transportation via passenger vessel, further increasing near- and offshore activities in Arctic waters.\nThis document outlines three strategic objectives in the Arctic for the U.S. Coast Guard over the next 10 years:\n\u2022 Improving Awareness\n\u2022 Modernizing Governance\n\u2022 Broadening Partnerships\nImproving Awareness: Coast Guard operations require precise and ongoing awareness of activities in the maritime domain. Maritime awareness in the Arctic is currently restricted due to limited surveillance, monitoring, and information system capabilities. Persistent awareness enables identification of threats, information-sharing with front-line partners, and improved risk management. Improving awareness requires close collaboration within DHS, as well as with the Departments of State, Defense, Interior, the National Science Foundation and other stakeholders to enhance integration, innovation, and fielding of emerging technologies. The Intelligence Community and non-federal partners are also vital stakeholders.\nModernizing Governance: The concept of governance involves institutions, structures of authority, and capabilities necessary to oversee maritime activities while safeguarding national interests. Limited awareness and oversight challenge maritime sovereignty, including the protection of natural resources and control of maritime borders. The Coast Guard will work within its authorities to foster collective efforts, both domestically and internationally, to improve Arctic governance. In so doing, the Coast Guard will review its own institutions and regimes of governance to prepare for future missions throughout the Arctic.\nBroadening Partnerships: Success in the Arctic requires a collective effort across both the public and private sectors. Such a collective effort must be inclusive of domestic regulatory regimes; international collaborative forums such as the Arctic Council, International Maritime Organization (IMO), and Inuit Circumpolar Council; domestic and international partnerships; and local engagements in Arctic communities focusing on training and volunteer service. Success in the Arctic also depends upon close intergovernmental cooperation to support national interests, including working closely within DHS, as well as with the Department of State, Department of Interior and other Federal partners as the U.S. prepares to assume Chairmanship of the Arctic Council in 2015.\nBeyond these three strategic objectives, there are a number of additional factors that will position the Coast Guard for long-term success. These factors include building national awareness of the Arctic and its opportunities, strengthening maritime regimes, improving public-private relationships through a national concept of operations, seeking necessary authorities, and identifying future requirements and resources to shape trends favorably. This strategy outlines a number of priorities, ranging from capabilities and requirements to advances in science and technology that will facilitate our Nation's success in the region. Specifically, the strategy advocates to leverage the entire DHS enterprise and component capabilities to secure our borders, prevent terrorism, adapt to changing environmental conditions, enable community resilience and inform future policy.\nOperating in the Arctic is not a new venture for the Coast Guard. However, adapting to changing conditions will require foresight, focus, and clear priorities. This strategy will ensure we attain the aim of safe, secure, and environmentally responsible maritime activity in the Arctic by improving awareness, modernizing governance, and broadening partnerships to ensure long-term success.\n\n\t\t\t\tJanuary 2014 Implementation Plan for National Strategy for Arctic Region\n\nThe Obama Administration's January 2014 implementation plan for its national strategy for the Arctic region (see \" Background \") makes \"Department of Homeland Security (United States Coast Guard)\" the lead federal agency for 6 of the plan's 36 or so specific initiatives, and a supporting agency for 13 others. The six initiatives where the Coast Guard is designated the lead federal agency include \nenhance Arctic domain awareness; improve hazardous material spill prevention, containment, and response; promote Arctic oil pollution preparedness, prevention, and response internationally; enhance Arctic SAR; expedite International Maritime Organization (IMO) Polar Code development and adoption; and promote Arctic waterways management.\nFor the second initiative above\u2014\"Improve Hazardous Material Spill Prevention, Containment, and Response\"\u2014the Coast Guard shares lead-agency status with the Environmental Protection Agency (EPA), with the Coast Guard being the lead federal agency for open ocean and coastal spills, and EPA being the lead federal agency for inland spills.\n\n\t\t\t\tOctober 2015 Agreement on Arctic Coast Guard Forum (ACGF)\n\nThe Coast Guard, working with coast guards of other Arctic nations, in October 2015 established an Arctic Coast Guard Forum (ACGF). The Coast Guard states that\nThe Arctic Coast Guard Forum (ACGF), modeled after the successful North Pacific Coast Guard Forum, is a unique maritime governance group where Principals of all eight Arctic countries discuss coordination of exercises, strengthen relationships, and share best practices. Complimentary to the Arctic Council, the chairmanship of the ACGF will reside with the country holding the rotating chair of the Arctic Council. The first \"experts-level\" meetings of the ACGF in 2014 garnered enthusiastic approval of the concept. Representatives of the eight Arctic nations finalized and agreed on a Terms of Reference document, determined working groups (Secretariat and Combined Operations), and drafted a Joint Statement. The first ever \"Heads of Arctic Coast Guards\" meeting took place on October 28-30, 2015 at the U.S. Coast Guard Academy, and the participating nations approved the Terms of Reference and released the Joint Statement.\n\n\t\t\t\tJune 2016 GAO Report on Coast Guard Arctic Capabilities\n\nA June 2016 GAO report on Coast Guard Arctic capabilities states the following:\nThe U.S. Coast Guard, within the Department of Homeland Security, reported making progress implementing its Arctic strategy. For example, the Coast Guard reported conducting exercises related to Arctic oil spill response and search and rescue, and facilitating the formation of a safety committee in the Arctic, among other tasks in its strategy. To track the status of these efforts, the Coast Guard is developing a web-based tool and anticipates finalizing the tool in mid-2016.\nThe Coast Guard assessed its capability to perform its Arctic missions and identified various capability gaps\u2014including communications, infrastructure, and icebreaking, and has worked to mitigate these gaps with its Arctic partners, such as other federal agencies. Specifically, Coast Guard officials stated that the agency's actions to implement the various Arctic strategies and carry out annual Arctic operations have helped to mitigate Arctic capability gaps. However, the Coast Guard has not systematically assessed the extent to which its actions agency-wide have helped to mitigate these gaps. Coast Guard officials attributed this, in part, to not being able to unilaterally close the gaps. While mitigating these gaps requires joint efforts among Arctic partners, the Coast Guard has taken actions in the Arctic that are specific to its missions and therefore has responsibility for assessing the extent to which these actions have helped to mitigate capability gaps. By systematically assessing and measuring its progress, the Coast Guard will better understand the status of these gaps and be better positioned to effectively plan its Arctic operations.\nThe Coast Guard has been unable to fulfill some of its polar icebreaking responsibilities with its aging icebreaker fleet, which currently includes two active polar icebreakers. In 2011 and 2012, the Coast Guard was unable to maintain assured, year-round access to the Arctic and did not meet 4 of 11 requests for polar icebreaking services. With its one active heavy icebreaker\u2014which has greater icebreaking capability\u2014nearing the end of its service life, the Coast Guard initiated a program in 2013 to acquire a new one and is working to determine the optimal acquisition strategy. However, the Coast Guard's efforts to acquire an icebreaker, whether by lease or purchase, will be limited by legal and operational requirements. In addition, current projections show that the Coast Guard is likely to have a 3- to 6-year gap in its heavy icebreaking capability before a new icebreaker becomes operational.... The Coast Guard is developing a strategy to determine how to best address this expected gap.\n\n\t\t\t\tMarch 2017 Arctic Coast Guard Forum Joint Statement\n\nA March 24, 2017, press report states the following:\nCoast guard leaders from the world's eight Arctic nations met in Boston Friday [March 24] to sign a joint statement for cooperation on emergency maritime response and combined operations in the high northern seas.\nU.S. Coast Guard Commandant Adm. Paul Zukunft joined leaders representing Canada, Denmark, Finland, Iceland, Norway, Sweden and the Russian Federation in the signing, and a ceremony handing off chairmanship of the group from the U.S. to the Finnish Border Guard.\nMaritime and environmental groups alike have stressed the need for closer international cooperation, as more Arctic shipping routes became navigable with retreating ice, opening access for shipping, energy and mineral exploration and commercial tourism.\nThe statement adopts doctrine, tactics, procedures and information-sharing protocols for emergency maritime response and combined operations in the Arctic. It culminated two years of international collaboration, as working groups established strategies, objectives and tactics aimed towards achieving common operational goals in the region.\nSo far, nation representatives have participated in table top exercises in Reykjavik, Iceland, and the District of Columbia. A live exercise in the Arctic is planned for later this year. Coast Guard officials describe the forum as \"an operationally-focused, consensus-based organization with the purpose of leveraging collective resources to foster safe, secure and environmentally responsible maritime activity in the Arctic.\"\n\"This forum \u2014 one of many ways in which the Coast Guard uses our unique roles to enhance our Nation's diplomacy \u2014 has quickly established itself as a premier platform for fostering safe, secure and environmentally responsible maritime activity in the Arctic,\" said Zukunft.\nIn testimony to U.S. senators earlier this week, Zukunft spoke of the need to engage with other Arctic nations, characterizing it as a clear preference for cooperation over competition. Nevertheless, he stressed the need for the U.S. to press forward with building a new fleet of three heavy and three medium icebreakers.\n\n\t\t\t\tFY2019 DHS Appropriations Act (S. 3109)\n\nThe Senate Appropriations Committee, in its report ( S.Rept. 115-283 of June 21, 2108) on S. 3109 , states the following:\nArctic Program Office .\u2014Recognizing the growing national security imperatives for an enhanced U.S. presence in the Arctic, the Committee is pleased that the Coast Guard has established an Arctic Strategy, an Arctic Strategy Implementation Plan, and an Arctic Program Office. This office has furthered the Nation's national defense and security interests in the Arctic through its extensive participation, coordination, and collaboration with other international, Federal, and SLTT partners to improve awareness, broaden partnerships, and modernize governance in the Arctic. Most recently, the office supported the completion of the Bering Strait Port Access Route Study, a study that resulted in a joint recommendation by the United States and the Russian Federation to the International Maritime Organization [IMO] to establish a common vessel traffic measure. Recently approved by the IMO, the traffic measure is the first IMO-approved measure for navigation safety in polar waters. The Coast Guard is to report to the Committee if additional resources are needed for the Arctic Program Office to further its important mission. (Pages 61-62)\n\n\tCRS Reports on Specific Arctic-Related Issues\n\nCRS Report RL34266, Climate Change: Science Highlights , by Jane A. Leggett\nCRS Report RS21890, The U.N. Law of the Sea Convention and\u00a0the\u00a0United States: Developments Since\u00a0October\u00a02003 , by Marjorie Ann Browne\nCRS Report RL33872, Arctic National Wildlife Refuge (ANWR): An Overview , by M. Lynne Corn, Michael Ratner, and Laura B. Comay \nCRS Report RL32838, Arctic National Wildlife Refuge (ANWR): Votes and Legislative Actions Since the 95th Congress , by M. Lynne Corn and Beth Cook\nCRS Report RL34547, Possible Federal Revenue from Oil Development of ANWR and Nearby Areas , by Salvatore Lazzari\nCRS Report RL33705, Oil Spills: Background and Governance , by Jonathan L. Ramseur\nCRS Report RL33941, Polar Bears: Listing Under the Endangered Species Act , by Eugene H. Buck, M. Lynne Corn, and Kristina Alexander\nCRS Report RL34391, Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for Congress , by Ronald O'Rourke \nCRS Report RL34342, Homeland Security: Roles and Missions for United States Northern Command , by William Knight\nAppendix A. Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 )\nThe text of the Arctic Research and Policy Act (ARPA) of 1984 (Title I of P.L. 98-373 of July 31, 1984) is as follows:\nTITLE I \u2013 ARCTIC RESEARCH AND POLICY\nSHORT TITLE\nSEC. 101. This title may be cited as the \"Arctic Research and Policy Act of 1984\".\nFINDINGS AND PURPOSES\nSEC. 102. (a) The Congress finds and declares that-\n(1) the Arctic, onshore and offshore, contains vital energy resources that can reduce the Nation's dependence on foreign oil and improve the national balance of payments;\n(2) as the Nation's only common border with the Soviet Union, the Arctic is critical to national defense;\n(3) the renewable resources of the Arctic, specifically fish and other seafood, represent one of the Nation's greatest commercial assets;\n(4) Arctic conditions directly affect global weather patterns and must be understood in order to promote better agricultural management throughout the United States;\n(5) industrial pollution not originating in the Arctic region collects in the polar air mass, has the potential to disrupt global weather patterns, and must be controlled through international cooperation and consultation;\n(6) the Arctic is a natural laboratory for research into human health and adaptation, physical and psychological, to climates of extreme cold and isolation and may provide information crucial for future defense needs;\n(7) atmospheric conditions peculiar to the Arctic make the Arctic a unique testing ground for research into high latitude communications, which is likely to be crucial for future defense needs;\n(8) Arctic marine technology is critical to cost-effective recovery and transportation of energy resources and to the national defense;\n(9) the United States has important security, economic, and environmental interests in developing and maintaining a fleet of icebreaking vessels capable of operating effectively in the heavy ice regions of the Arctic;\n(10) most Arctic-rim countries, particularly the Soviet Union, possess Arctic technologies far more advanced than those currently available in the United States;\n(11) Federal Arctic research is fragmented and uncoordinated at the present time, leading to the neglect of certain areas of research and to unnecessary duplication of effort in other areas of research;\n(12) improved logistical coordination and support for Arctic research and better dissemination of research data and information is necessary to increase the efficiency and utility of national Arctic research efforts;\n(13) a comprehensive national policy and program plan to organize and fund currently neglected scientific research with respect to the Arctic is necessary to fulfill national objectives in Arctic research;\n(14) the Federal Government, in cooperation with State and local governments, should focus its efforts on the collection and characterization of basic data related to biological, materials, geophysical, social, and behavioral phenomena in the Arctic;\n(15) research into the long-range health, environmental, and social effects of development in the Arctic is necessary to mitigate the adverse consequences of that development to the land and its residents;\n(16) Arctic research expands knowledge of the Arctic, which can enhance the lives of Arctic residents, increase opportunities for international cooperation among Arctic-rim countries, and facilitate the formulation of national policy for the Arctic; and\n(17) the Alaskan Arctic provides an essential habitat for marine mammals, migratory waterfowl, and other forms of wildlife which are important to the Nation and which are essential to Arctic residents.\n(b) The purposes of this title are-\n(1) to establish national policy, priorities, and goals and to provide a Federal program plan for basic and applied scientific research with respect to the Arctic, including natural resources and materials, physical, biological and health sciences, and social and behavioral sciences;\n(2) to establish an Arctic Research Commission to promote Arctic research and to recommend Arctic research policy;\n(3) to designate the National Science Foundation as the lead agency responsible for implementing Arctic research policy; and\n(4) to establish an Interagency Arctic Research Policy Committee to develop a national Arctic research policy and a five year plan to implement that policy.\nARCTIC RESEARCH COMMISSION\nSEC. 103. (a) The President shall establish an Arctic Research Commission (hereafter referred to as the \"Commission\").\n(b)(1) The Commission shall be composed of five members appointed by the President, with the Director of the National Science Foundation serving as a nonvoting, ex officio member. The members appointed by the President shall include-\n(A) three members appointed from among individuals from academic or other research institutions with expertise in areas of research relating to the Arctic, including the physical, biological, health, environmental, social, and behavioral sciences;\n(B) one member appointed from among indigenous residents of the Arctic who are representative of the needs and interests of Arctic residents and who live in areas directly affected by Arctic resource development; and\n(C) one member appointed from among individuals familiar with the Arctic and representative of the needs and interests of private industry undertaking resource development in the Arctic.\n(2) The President shall designate one of the appointed members of the Commission to be chairperson of the Commission.\n(c)(1) Except as provided in paragraph (2) of this subsection, the term of office of each member of the Commission appointed under subsection (b)(1) shall be four years.\n(2) Of the members of the Commission originally appointed under subsection (b)(1)-\n(A) one shall be appointed for a term of two years;\n(B) two shall be appointed for a term of three years; and\n(C) two shall be appointed for a term of four years.\n(3) Any vacancy occurring in the membership of the Commission shall be filled, after notice of the vacancy is published in the Federal Register, in the manner provided by the preceding provisions of this section, for the remainder of the unexpired term.\n(4) A member may serve after the expiration of the member's term of office until the President appoints a successor.\n(5) A member may serve consecutive terms beyond the member's original appointment.\n(d)(1) Members of the Commission may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5, United States Code. A member of the Commission not presently employed for compensation shall be compensated at a rate equal to the daily equivalent of the rate for GS-16 of the General Schedule under section 5332 of title 5, United States Code, for each day the member is engaged in the actual performance of his duties as a member of the Commission, not to exceed 90 days of service each year. Except for the purposes of chapter 81 of title 5 (relating to compensation for work injuries) and chapter 171 of title 28 (relating to tort claims), a member of the Commission shall not be considered an employee of the United States for any purpose.\n(2) The Commission shall meet at the call of its Chairman or a majority of its members.\n(3) Each Federal agency referred to in section 107(b) may designate a representative to participate as an observer with the Commission.\nThese representatives shall report to and advise the Commission on the activities relating to Arctic research of their agencies.\n(4) The Commission shall conduct at least one public meeting in the State of Alaska annually.\nDUTIES OF COMMISSION\nSEC. 104. (a) The Commission shall-\n(1) develop and recommend an integrated national Arctic research policy;\n(2) in cooperation with the Interagency Arctic Research Policy Committee established under section 107, assist in establishing a national Arctic research program plan to implement the Arctic research policy;\n(3) facilitate cooperation between the Federal Government and State and local governments with respect to Arctic research;\n(4) review Federal research programs in the Arctic and suggest improvements in coordination among programs;\n(5) recommend methods to improve logistical planning and support for Arctic research as may be appropriate and in accordance with the findings and purposes of this title;\n(6) suggest methods for improving efficient sharing and dissemination of data and information on the Arctic among interested public and private institutions;\n(7) offer other recommendations and advice to the Interagency Committee established under section 107 as it may find appropriate; and\n(8) cooperate with the Governor of the State of Alaska and with agencies and organizations of that State which the Governor may designate with respect to the formulation of Arctic research policy.\n(b) Not later than January 31 of each year, the Commission shall-\n(1) publish a statement of goals and objectives with respect to Arctic research to guide the Interagency Committee established under section 107 in the performance of its duties; and\n(2) submit to the President and to the Congress a report describing the activities and accomplishments of the Commission during the immediately preceding fiscal year.\nCOOPERATION WITH THE COMMISSION\nSEC. 105. (a)(1) The Commission may acquire from the head of any Federal agency unclassified data, reports, and other nonproprietary information with respect to Arctic research in the possession of the agency which the Commission considers useful in the discharge of its duties.\n(2) Each agency shall cooperate with the Commission and furnish all data, reports, and other information requested by the Commission to the extent permitted by law; except that no agency need furnish any information which it is permitted to withhold under section 552 of title 5, United States Code.\n(b) With the consent of the appropriate agency head, the Commission may utilize the facilities and services of any Federal agency to the extent that the facilities and services are needed for the establishment and development of an Arctic research policy, upon reimbursement to be agreed upon by the Commission and the agency head and taking every feasible step to avoid duplication of effort.\n(c) All Federal agencies shall consult with the Commission before undertaking major Federal actions relating to Arctic research.\nADMINISTRATION OF THE COMMISSION\nSEC. 106. The Commission may-\n(1) in accordance with the civil service laws and subchapter III of chapter 53 of title 5, United States Code, appoint and fix the compensation of an Executive Director and necessary additional staff personnel, but not to exceed a total of seven compensated personnel;\n(2) procure temporary and intermittent services as authorized by section 3109 of title 5, United States Code;\n(3) enter into contracts and procure supplies, services, and personal property; and\n(4) enter into agreements with the General Services Administration for the procurement of necessary financial and administrative services, for which payment shall be made by reimbursement from funds of the Commission in amounts to be agreed upon by the Commission and the Administrator of the General Services Administration.\nLEAD AGENCY AND INTERAGENCY ARCTIC RESEARCH POLICY COMMITTEE\nSEC. 107. (a) The National Science Foundation is designated as the lead agency responsible for implementing Arctic research policy, and the Director of the National Science Foundation shall insure that the requirements of section 108 are fulfilled.\n(b)(1) The President shall establish an Interagency Arctic Research Policy Committee (hereinafter referred to as the \"Interagency Committee\").\n(2) The Interagency Committee shall be composed of representatives of the following Federal agencies or offices:\n(A) the National Science Foundation;\n(B) the Department of Commerce;\n(C) the Department of Defense;\n(D) the Department of Energy;\n(E) the Department of the Interior;\n(F) the Department of State;\n(G) the Department of Transportation;\n(H) the Department of Health and Human Services;\n(I) the National Aeronautics and Space Administration;\n(J) the Environmental Protection Agency; and\n(K) any other agency or office deemed appropriate.\n(3) The representative of the National Science Foundation shall serve as the Chairperson of the Interagency Committee.\nDUTIES OF THE INTERAGENCY COMMITTEE\nSEC. 108. (a) The Interagency Committee shall-\n(1) survey Arctic research conducted by Federal, State, and local agencies, universities, and other public and private institutions to help determine priorities for future Arctic research, including natural resources and materials, physical and biological sciences, and social and behavioral sciences;\n(2) work with the Commission to develop and establish an integrated national Arctic research policy that will guide Federal agencies in developing and implementing their research programs in the Arctic;\n(3) consult with the Commission on-\n(A) the development of the national Arctic research policy and the 5-year plan implementing the policy;\n(B) Arctic research programs of Federal agencies;\n(C) recommendations of the Commission on future Arctic research; and\n(D) guidelines for Federal agencies for awarding and administering Arctic research grants;\n(4) develop a 5-year plan to implement the national policy, as provided for in section 109;\n(5) provide the necessary coordination, data, and assistance for the preparation of a single integrated, coherent, and multiagency budget request for Arctic research as provided for in section 110;\n(6) facilitate cooperation between the Federal Government and State and local governments in Arctic research, and recommend the undertaking of neglected areas of research in accordance with the findings and purposes of this title;\n(7) coordinate and promote cooperative Arctic scientific research programs with other nations, subject to the foreign policy guidance of the Secretary of State;\n(8) cooperate with the Governor of the State of Alaska in fulfilling its responsibilities under this title;\n(9) promote Federal interagency coordination of all Arctic research activities, including-\n(A) logistical planning and coordination; and\n(B) the sharing of data and information associated with Arctic research, subject to section 552 of title 5, United States Code; and\n(10) provide public notice of its meetings and an opportunity for the public to participate in the development and implementation of national Arctic research policy.\n(b) Not later than January 31, 1986, and biennially thereafter, the Interagency Committee shall submit to the Congress through the President, a brief, concise report containing-\n(1) a statement of the activities and accomplishments of the Interagency Committee since its last report; and\n(2) a description of the activities of the Commission, detailing with particularity the recommendations of the Commission with respect to Federal activities in Arctic research.\n5-YEAR ARCTIC RESEARCH PLAN\nSEC. 109. (a) The Interagency Committee, in consultation with the Commission, the Governor of the State of Alaska, the residents of the Arctic, the private sector, and public interest groups, shall prepare a comprehensive 5-year program plan (hereinafter referred to as the \"Plan\") for the overall Federal effort in Arctic research. The Plan shall be prepared and submitted to the President for transmittal to the Congress within one year after the enactment of this Act and shall be revised biennially thereafter.\n(b) The Plan shall contain but need not be limited to the following elements:\n(1) an assessment of national needs and problems regarding the Arctic and the research necessary to address those needs or problems;\n(2) a statement of the goals and objectives of the Interagency Committee for national Arctic research;\n(3) a detailed listing of all existing Federal programs relating to Arctic research, including the existing goals, funding levels for each of the 5 following fiscal years, and the funds currently being expended to conduct the programs;\n(4) recommendations for necessary program changes and other proposals to meet the requirements of the policy and goals as set forth by the Commission and in the Plan as currently in effect; and\n(5) a description of the actions taken by the Interagency Committee to coordinate the budget review process in order to ensure interagency coordination and cooperation in (A) carrying out Federal Arctic research programs, and (B) eliminating unnecessary duplication of effort among these programs.\nCOORDINATION AND REVIEW OF BUDGET REQUESTS\nSEC. 110. (a) The Office of Science and Technology Policy shall-\n(1) review all agency and department budget requests related to the Arctic transmitted pursuant to section 108(a)(5), in accordance with the national Arctic research policy and the 5-year program under section 108(a)(2) and section 109, respectively; and\n(2) consult closely with the Interagency Committee and the Commission to guide the Office of Science and Technology Policy's efforts.\n(b)(1) The Office of Management and Budget shall consider all Federal agency requests for research related to the Arctic as one integrated, coherent, and multiagency request which shall be reviewed by the Office of Management and Budget prior to submission of the President's annual budget request for its adherence to the Plan. The Commission shall, after submission of the President's annual budget request, review the request and report to Congress on adherence to the Plan.\n(2) The Office of Management and Budget shall seek to facilitate planning for the design, procurement, maintenance, deployment, and operations of icebreakers needed to provide a platform for Arctic research by allocating all funds necessary to support icebreaking operations, except for recurring incremental costs associated with specific projects, to the Coast Guard.\nAUTHORIZATION OF APPROPRIATIONS; NEW SPENDING AUTHORITY\nSEC. 111. (a) There are authorized to be appropriated such sums as may be necessary for carrying out this title.\n(b) Any new spending authority (within the meaning of section 401 of the Congressional Budget Act of 1974) which is provided under this title shall be effective for any fiscal year only to such extent or in such amounts as may be provided in appropriation Acts.\nDEFINITION\nSEC. 112. As used in this title, the term \"Arctic\" means all United States and foreign territory north of the Arctic Circle and all United States territory north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers; all contiguous seas, including the Arctic Ocean and the Beaufort, Bering, and Chukchi Seas; and the Aleutian chain.\nAppendix B. P.L. 101-609 of 1990, Amending Arctic Research and Policy Act (ARPA) of 1984\nThe Arctic Research and Policy Act (ARPA) of 1984 (see Appendix A ) was amended by P.L. 101-609 of November 16, 1990. The text of P.L. 101-609 is as follows:\nSECTION 1. Except as specifically provided in this Act, whenever in this Act an amendment or repeal is expressed as an amendment to, or repeal of a provision, the reference shall be deemed to be made to the Arctic Research and Policy Act of 1984.\nSEC. 2. Section 103(b)(1) (15 U.S.C. 4102(b)(1)) is amended\u2014\n(1) in the text above clause (A), by striking out `five' and inserting in lieu thereof `seven';\n(2) in clause (A), by striking out `three' and inserting in lieu thereof `four'; and\n(3) in clause (C), by striking out `one member' and inserting in lieu thereof `two members'.\nSEC. 3. Section 103(d)(1) (15 U.S.C. 4102(d)(1)) is amended by striking out `GS-16' and inserting in lieu thereof `GS-18'.\nSEC. 4. (a) Section 104(a) (15 U.S.C. 4102(a)) is amended\u2014\n(1) in paragraph (4), by striking out `suggest' and inserting in lieu thereof `recommend';\n(2) in paragraph (6), by striking out `suggest' and inserting in lieu thereof `recommend';\n(3) in paragraph (7), by striking out `and' at the end thereof;\n(4) in paragraph (8), by striking out the period and inserting in lieu thereof a semicolon; and\n(5) by adding at the end thereof the following new paragraphs:\n'(9) recommend to the Interagency Committee the means for developing international scientific cooperation in the Arctic; and\n'(10) not later than January 31, 1991, and every 2 years thereafter, publish a statement of goals and objectives with respect to Arctic research to guide the Interagency Committee established under section 107 in the performance of its duties.'.\n(b) Section 104(b) is amended to read as follows:\n'(b) Not later than January 31 of each year, the Commission shall submit to the President and to the Congress a report describing the activities and accomplishments of the Commission during the immediately preceding fiscal year.'.\nSEC. 5. Section 106 (15 U.S.C. 4105) is amended\u2014\n(1) in paragraph (3), by striking out 'and' at the end thereof;\n(2) in paragraph (4), by striking out the period at the end thereof and inserting in lieu thereof; and'; and\n(3) by adding at the end thereof the following new paragraph:\n'(5) appoint, and accept without compensation the services of, scientists and engineering specialists to be advisors to the Commission. Each advisor may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5, United States Code. Except for the purposes of chapter 81 of title 5 (relating to compensation for work injuries) and chapter 171 of title 28 (relating to tort claims) of the United States Code, an advisor appointed under this paragraph shall not be considered an employee of the United States for any purpose.'\nSEC. 6. Subsection (b)(2) of section 108 (15 U.S.C. 4107(b)(2)) is amended to read as follows:\n'(2) a statement detailing with particularity the recommendations of the Commission with respect to Federal interagency activities in Arctic research and the disposition and responses to those recommendations.'\nAppendix C. January 2009 Arctic Policy Directive (NSPD 66\/HSPD 25)\nOn January 12, 2009, the George W. Bush Administration released a presidential directive establishing a new U.S. policy for the Arctic region. The directive, dated January 9, 2009, was issued as National Security Presidential Directive 66\/Homeland Security Presidential Directive 25 (NSPD 66\/HSPD 25). The text of NSPD 66\/HSPD 25 is as follows:\nSUBJECT: Arctic Region Policy\nI. PURPOSE\nA. This directive establishes the policy of the United States with respect to the Arctic region and directs related implementation actions. This directive supersedes Presidential Decision Directive\/NSC-26 (PDD-26; issued 1994) with respect to Arctic policy but not Antarctic policy; PDD-26 remains in effect for Antarctic policy only.\nB. This directive shall be implemented in a manner consistent with the Constitution and laws of the United States, with the obligations of the United States under the treaties and other international agreements to which the United States is a party, and with customary international law as recognized by the United States, including with respect to the law of the sea.\nII. BACKGROUND\nA. The United States is an Arctic nation, with varied and compelling interests in that region. This directive takes into account several developments, including, among others: \n1. Altered national policies on homeland security and defense;\n2. The effects of climate change and increasing human activity in the Arctic region; \n3. The establishment and ongoing work of the Arctic Council; and\n4. A growing awareness that the Arctic region is both fragile and rich in resources. \nIII. POLICY\nA. It is the policy of the United States to:\n1. Meet national security and homeland security needs relevant to the Arctic region;\n2. Protect the Arctic environment and conserve its biological resources;\n3. Ensure that natural resource management and economic development in the region are environmentally sustainable;\n4. Strengthen institutions for cooperation among the eight Arctic nations (the United States, Canada, Denmark, Finland, Iceland, Norway, the Russian Federation, and Sweden);\n5. Involve the Arctic's indigenous communities in decisions that affect them; and\n6. Enhance scientific monitoring and research into local, regional, and global environmental issues.\nB. National Security and Homeland Security Interests in the Arctic\n1. The United States has broad and fundamental national security interests in the Arctic region and is prepared to operate either independently or in conjunction with other states to safeguard these interests. These interests include such matters as missile defense and early warning; deployment of sea and air systems for strategic sealift, strategic deterrence, maritime presence, and maritime security operations; and ensuring freedom of navigation and overflight.\n2. The United States also has fundamental homeland security interests in preventing terrorist attacks and mitigating those criminal or hostile acts that could increase the United States vulnerability to terrorism in the Arctic region.\n3. The Arctic region is primarily a maritime domain; as such, existing policies and authorities relating to maritime areas continue to apply, including those relating to law enforcement.[1] Human activity in the Arctic region is increasing and is projected to increase further in coming years. This requires the United States to assert a more active and influential national presence to protect its Arctic interests and to project sea power throughout the region.\n4. The United States exercises authority in accordance with lawful claims of United States sovereignty, sovereign rights, and jurisdiction in the Arctic region, including sovereignty within the territorial sea, sovereign rights and jurisdiction within the United States exclusive economic zone and on the continental shelf, and appropriate control in the United States contiguous zone.\n5. Freedom of the seas is a top national priority. The Northwest Passage is a strait used for international navigation, and the Northern Sea Route includes straits used for international navigation; the regime of transit passage applies to passage through those straits. Preserving the rights and duties relating to navigation and overflight in the Arctic region supports our ability to exercise these rights throughout the world, including through strategic straits.\n6. Implementation: In carrying out this policy as it relates to national security and homeland security interests in the Arctic, the Secretaries of State, Defense, and Homeland Security, in coordination with heads of other relevant executive departments and agencies, shall:\na. Develop greater capabilities and capacity, as necessary, to protect United States air, land, and sea borders in the Arctic region;\nb. Increase Arctic maritime domain awareness in order to protect maritime commerce, critical infrastructure, and key resources; \nc. Preserve the global mobility of United States military and civilian vessels and aircraft throughout the Arctic region;\nd. Project a sovereign United States maritime presence in the Arctic in support of essential United States interests; and\ne. Encourage the peaceful resolution of disputes in the Arctic region.\nC. International Governance\n1. The United States participates in a variety of fora, international organizations, and bilateral contacts that promote United States interests in the Arctic. These include the Arctic Council, the International Maritime Organization (IMO), wildlife conservation and management agreements, and many other mechanisms. As the Arctic changes and human activity in the region increases, the United States and other governments should consider, as appropriate, new international arrangements or enhancements to existing arrangements.\n2. The Arctic Council has produced positive results for the United States by working within its limited mandate of environmental protection and sustainable development. Its subsidiary bodies, with help from many United States agencies, have developed and undertaken projects on a wide range of topics. The Council also provides a beneficial venue for interaction with indigenous groups. It is the position of the United States that the Arctic Council should remain a high-level forum devoted to issues within its current mandate and not be transformed into a formal international organization, particularly one with assessed contributions. The United States is nevertheless open to updating the structure of the Council, including consolidation of, or making operational changes to, its subsidiary bodies, to the extent such changes can clearly improve the Council's work and are consistent with the general mandate of the Council.\n3. The geopolitical circumstances of the Arctic region differ sufficiently from those of the Antarctic region such that an \"Arctic Treaty\" of broad scope\u2014along the lines of the Antarctic Treaty\u2014is not appropriate or necessary. \n4. The Senate should act favorably on U.S. accession to the U.N. Convention on the Law of the Sea promptly, to protect and advance U.S. interests, including with respect to the Arctic. Joining will serve the national security interests of the United States, including the maritime mobility of our Armed Forces worldwide. It will secure U.S. sovereign rights over extensive marine areas, including the valuable natural resources they contain. Accession will promote U.S. interests in the environmental health of the oceans. And it will give the United States a seat at the table when the rights that are vital to our interests are debated and interpreted.\n5. Implementation: In carrying out this policy as it relates to international governance, the Secretary of State, in coordination with heads of other relevant executive departments and agencies, shall:\na. Continue to cooperate with other countries on Arctic issues through the United Nations (U.N.) and its specialized agencies, as well as through treaties such as the U.N. Framework Convention on Climate Change, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Convention on Long Range Transboundary Air Pollution and its protocols, and the Montreal Protocol on Substances that Deplete the Ozone Layer;\nb. Consider, as appropriate, new or enhanced international arrangements for the Arctic to address issues likely to arise from expected increases in human activity in that region, including shipping, local development and subsistence, exploitation of living marine resources, development of energy and other resources, and tourism; \nc. Review Arctic Council policy recommendations developed within the ambit of the Council's scientific reviews and ensure the policy recommendations are subject to review by Arctic governments; and\nd. Continue to seek advice and consent of the United States Senate to accede to the 1982 Law of the Sea Convention.\nD. Extended Continental Shelf and Boundary Issues\n1. Defining with certainty the area of the Arctic seabed and subsoil in which the United States may exercise its sovereign rights over natural resources such as oil, natural gas, methane hydrates, minerals, and living marine species is critical to our national interests in energy security, resource management, and environmental protection. The most effective way to achieve international recognition and legal certainty for our extended continental shelf is through the procedure available to States Parties to the U.N. Convention on the Law of the Sea.\n2. The United States and Canada have an unresolved boundary in the Beaufort Sea. United States policy recognizes a boundary in this area based on equidistance. The United States recognizes that the boundary area may contain oil, natural gas, and other resources.\n3. The United States and Russia are abiding by the terms of a maritime boundary treaty concluded in 1990, pending its entry into force. The United States is prepared to enter the agreement into force once ratified by the Russian Federation.\n4. Implementation: In carrying out this policy as it relates to extended continental shelf and boundary issues, the Secretary of State, in coordination with heads of other relevant executive departments and agencies, shall:\na. Take all actions necessary to establish the outer limit of the continental shelf appertaining to the United States, in the Arctic and in other regions, to the fullest extent permitted under international law; \nb. Consider the conservation and management of natural resources during the process of delimiting the extended continental shelf; and \nc. Continue to urge the Russian Federation to ratify the 1990 United States-Russia maritime boundary agreement.\nE. Promoting International Scientific Cooperation\n1. Scientific research is vital for the promotion of United States interests in the Arctic region. Successful conduct of U.S. research in the Arctic region requires access throughout the Arctic Ocean and to terrestrial sites, as well as viable international mechanisms for sharing access to research platforms and timely exchange of samples, data, and analyses. Better coordination with the Russian Federation, facilitating access to its domain, is particularly important.\n2. The United States promotes the sharing of Arctic research platforms with other countries in support of collaborative research that advances fundamental understanding of the Arctic region in general and potential Arctic change in particular. This could include collaboration with bodies such as the Nordic Council and the European Polar Consortium, as well as with individual nations.\n3. Accurate prediction of future environmental and climate change on a regional basis, and the delivery of near real-time information to end-users, requires obtaining, analyzing, and disseminating accurate data from the entire Arctic region, including both paleoclimatic data and observational data. The United States has made significant investments in the infrastructure needed to collect environmental data in the Arctic region, including the establishment of portions of an Arctic circumpolar observing network through a partnership among United States agencies, academic collaborators, and Arctic residents. The United States promotes active involvement of all Arctic nations in these efforts in order to advance scientific understanding that could provide the basis for assessing future impacts and proposed response strategies.\n4. United States platforms capable of supporting forefront research in the Arctic Ocean, including portions expected to be ice-covered for the foreseeable future, as well as seasonally ice-free regions, should work with those of other nations through the establishment of an Arctic circumpolar observing network. All Arctic nations are members of the Group on Earth Observations partnership, which provides a framework for organizing an international approach to environmental observations in the region. In addition, the United States recognizes that academic and research institutions are vital partners in promoting and conducting Arctic research.\n5. Implementation: In carrying out this policy as it relates to promoting scientific international cooperation, the Secretaries of State, the Interior, and Commerce and the Director of the National Science Foundation, in coordination with heads of other relevant executive departments and agencies, shall:\na. Continue to play a leadership role in research throughout the Arctic region;\nb. Actively promote full and appropriate access by scientists to Arctic research sites through bilateral and multilateral measures and by other means;\nc. Lead the effort to establish an effective Arctic circumpolar observing network with broad partnership from other relevant nations; \nd. Promote regular meetings of Arctic science ministers or research council heads to share information concerning scientific research opportunities and to improve coordination of international Arctic research programs;\ne. Work with the Interagency Arctic Research Policy Committee (IARPC) to promote research that is strategically linked to U.S. policies articulated in this directive, with input from the Arctic Research Commission; and\nf. Strengthen partnerships with academic and research institutions and build upon the relationships these institutions have with their counterparts in other nations.\nF. Maritime Transportation in the Arctic Region\n1. The United States priorities for maritime transportation in the Arctic region are:\na. To facilitate safe, secure, and reliable navigation; \nb. To protect maritime commerce; and \nc. To protect the environment.\n2. Safe, secure, and environmentally sound maritime commerce in the Arctic region depends on infrastructure to support shipping activity, search and rescue capabilities, short- and long-range aids to navigation, high-risk area vessel-traffic management, iceberg warnings and other sea ice information, effective shipping standards, and measures to protect the marine environment. In addition, effective search and rescue in the Arctic will require local, State, Federal, tribal, commercial, volunteer, scientific, and multinational cooperation.\n3. Working through the International Maritime Organization (IMO), the United States promotes strengthening existing measures and, as necessary, developing new measures to improve the safety and security of maritime transportation, as well as to protect the marine environment in the Arctic region. These measures may include ship routing and reporting systems, such as traffic separation and vessel traffic management schemes in Arctic chokepoints; updating and strengthening of the Guidelines for Ships Operating in Arctic Ice-Covered Waters; underwater noise standards for commercial shipping; a review of shipping insurance issues; oil and other hazardous material pollution response agreements; and environmental standards. \n4. Implementation: In carrying out this policy as it relates to maritime transportation in the Arctic region, the Secretaries of State, Defense, Transportation, Commerce, and Homeland Security, in coordination with heads of other relevant executive departments and agencies, shall:\na. Develop additional measures, in cooperation with other nations, to address issues that are likely to arise from expected increases in shipping into, out of, and through the Arctic region;\nb. Commensurate with the level of human activity in the region, establish a risk-based capability to address hazards in the Arctic environment. Such efforts shall advance work on pollution prevention and response standards; determine basing and logistics support requirements, including necessary airlift and icebreaking capabilities; and improve plans and cooperative agreements for search and rescue;\nc. Develop Arctic waterways management regimes in accordance with accepted international standards, including vessel traffic-monitoring and routing; safe navigation standards; accurate and standardized charts; and accurate and timely environmental and navigational information; and\nd. Evaluate the feasibility of using access through the Arctic for strategic sealift and humanitarian aid and disaster relief.\nG. Economic Issues, Including Energy\n1. Sustainable development in the Arctic region poses particular challenges. Stakeholder input will inform key decisions as the United States seeks to promote economic and energy security. Climate change and other factors are significantly affecting the lives of Arctic inhabitants, particularly indigenous communities. The United States affirms the importance to Arctic communities of adapting to climate change, given their particular vulnerabilities.\n2. Energy development in the Arctic region will play an important role in meeting growing global energy demand as the area is thought to contain a substantial portion of the world's undiscovered energy resources. The United States seeks to ensure that energy development throughout the Arctic occurs in an environmentally sound manner, taking into account the interests of indigenous and local communities, as well as open and transparent market principles. The United States seeks to balance access to, and development of, energy and other natural resources with the protection of the Arctic environment by ensuring that continental shelf resources are managed in a responsible manner and by continuing to work closely with other Arctic nations.\n3. The United States recognizes the value and effectiveness of existing fora, such as the Arctic Council, the International Regulators Forum, and the International Standards Organization. \n4. Implementation: In carrying out this policy as it relates to economic issues, including energy, the Secretaries of State, the Interior, Commerce, and Energy, in coordination with heads of other relevant executive departments and agencies, shall: \na. Seek to increase efforts, including those in the Arctic Council, to study changing climate conditions, with a view to preserving and enhancing economic opportunity in the Arctic region. Such efforts shall include inventories and assessments of villages, indigenous communities, subsistence opportunities, public facilities, infrastructure, oil and gas development projects, alternative energy development opportunities, forestry, cultural and other sites, living marine resources, and other elements of the Arctic's socioeconomic composition; \nb. Work with other Arctic nations to ensure that hydrocarbon and other development in the Arctic region is carried out in accordance with accepted best practices and internationally recognized standards and the 2006 Group of Eight (G-8) Global Energy Security Principles;\nc. Consult with other Arctic nations to discuss issues related to exploration, production, environmental and socioeconomic impacts, including drilling conduct, facility sharing, the sharing of environmental data, impact assessments, compatible monitoring programs, and reservoir management in areas with potentially shared resources; \nd. Protect United States interests with respect to hydrocarbon reservoirs that may overlap boundaries to mitigate adverse environmental and economic consequences related to their development;\ne. Identify opportunities for international cooperation on methane hydrate issues, North Slope hydrology, and other matters; \nf. Explore whether there is a need for additional fora for informing decisions on hydrocarbon leasing, exploration, development, production, and transportation, as well as shared support activities, including infrastructure projects; and\ng. Continue to emphasize cooperative mechanisms with nations operating in the region to address shared concerns, recognizing that most known Arctic oil and gas resources are located outside of United States jurisdiction. \nH. Environmental Protection and Conservation of Natural Resources\n1. The Arctic environment is unique and changing. Increased human activity is expected to bring additional stressors to the Arctic environment, with potentially serious consequences for Arctic communities and ecosystems. \n2. Despite a growing body of research, the Arctic environment remains poorly understood. Sea ice and glaciers are in retreat. Permafrost is thawing and coasts are eroding. Pollutants from within and outside the Arctic are contaminating the region. Basic data are lacking in many fields. High levels of uncertainty remain concerning the effects of climate change and increased human activity in the Arctic. Given the need for decisions to be based on sound scientific and socioeconomic information, Arctic environmental research, monitoring, and vulnerability assessments are top priorities. For example, an understanding of the probable consequences of global climate variability and change on Arctic ecosystems is essential to guide the effective long-term management of Arctic natural resources and to address socioeconomic impacts of changing patterns in the use of natural resources.\n3. Taking into account the limitations in existing data, United States efforts to protect the Arctic environment and to conserve its natural resources must be risk-based and proceed on the basis of the best available information.\n4. The United States supports the application in the Arctic region of the general principles of international fisheries management outlined in the 1995 Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of December 10, 1982, relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks and similar instruments. The United States endorses the protection of vulnerable marine ecosystems in the Arctic from destructive fishing practices and seeks to ensure an adequate enforcement presence to safeguard Arctic living marine resources.\n5. With temperature increases in the Arctic region, contaminants currently locked in the ice and soils will be released into the air, water, and land. This trend, along with increased human activity within and below the Arctic, will result in increased introduction of contaminants into the Arctic, including both persistent pollutants (e.g., persistent organic pollutants and mercury) and airborne pollutants (e.g., soot).\n6. Implementation: In carrying out this policy as it relates to environmental protection and conservation of natural resources, the Secretaries of State, the Interior, Commerce, and Homeland Security and the Administrator of the Environmental Protection Agency, in coordination with heads of other relevant executive departments and agencies, shall:\na. In cooperation with other nations, respond effectively to increased pollutants and other environmental challenges;\nb. Continue to identify ways to conserve, protect, and sustainably manage Arctic species and ensure adequate enforcement presence to safeguard living marine resources, taking account of the changing ranges or distribution of some species in the Arctic. For species whose range includes areas both within and beyond United States jurisdiction, the United States shall continue to collaborate with other governments to ensure effective conservation and management;\nc. Seek to develop ways to address changing and expanding commercial fisheries in the Arctic, including through consideration of international agreements or organizations to govern future Arctic fisheries;\nd. Pursue marine ecosystem-based management in the Arctic; and \ne. Intensify efforts to develop scientific information on the adverse effects of pollutants on human health and the environment and work with other nations to reduce the introduction of key pollutants into the Arctic.\nIV. Resources and Assets\nA. Implementing a number of the policy elements directed above will require appropriate resources and assets. These elements shall be implemented consistent with applicable law and authorities of agencies, or heads of agencies, vested by law, and subject to the availability of appropriations. The heads of executive departments and agencies with responsibilities relating to the Arctic region shall work to identify future budget, administrative, personnel, or legislative proposal requirements to implement the elements of this directive.\n\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\n[1] These policies and authorities include Freedom of Navigation (PDD\/NSC-32), the U.S. Policy on Protecting the Ocean Environment (PDD\/NSC-36), Maritime Security Policy (NSPD-41\/HSPD-13), and the National Strategy for Maritime Security (NSMS).\nAppendix D. May 2013 National Strategy for Arctic\u00a0Region\nOn May 10, 2013, the Obama Administration released a document entitled National Strategy for the Arctic Region . The executive summary of the document is reprinted earlier in this report (see \" May 2013 National Strategy for Arctic Region \" in \" Background \"). This appendix reprints the main text of the document. The main text states the following:\nIntroduction\nWe seek an Arctic region that is stable and free of conflict, where nations act responsibly in a spirit of trust and cooperation, and where economic and energy resources are developed in a sustainable manner that also respects the fragile environment and the interests and cultures of indigenous peoples.\nAs the United States addresses these opportunities and challenges, we will be guided by our central interests in the Arctic region, which include providing for the security of the United States; protecting the free flow of resources and commerce; protecting the environment; addressing the needs of indigenous communities; and enabling scientific research. In protecting these interests, we draw from our long-standing policy and approach to the global maritime spaces in the 20 th century, including freedom of navigation and overflight and other internationally lawful uses of the sea and airspace related to these freedoms; security on the oceans; maintaining strong relationships with allies and partners; and peaceful resolution of disputes without coercion.\nTo achieve this vision, the United States is establishing an overarching national approach to advance national security interests, pursue responsible stewardship of this precious and unique region, and serve as a basis for cooperation with other Arctic states and the international community as a whole to advance common interests.\nEven as we work domestically and internationally to minimize the effects of climate change, the effects are already apparent in the Arctic. Ocean resources are more readily accessible as sea ice diminishes, but thawing ground is threatening communities as well as hindering land-based activities, including access to resources. Diminishing land and sea ice is altering ecosystems and the services they provide. As an Arctic nation, the United States must be proactive and disciplined in addressing changing regional conditions and in developing adaptive strategies to protect its interests. An undisciplined approach to exploring new opportunities in this frontier could result in significant harm to the region, to our national security interests, and to the global good.\nWhen implementing this strategy, the United States will proceed in a thoughtful, responsible manner that leverages expertise, resources, and cooperation from the State of Alaska, Alaska Natives, and stakeholders across the entire nation and throughout the international community. We will encourage and use science-informed decisionmaking to aid this effort. We will endeavor to do no harm to the sensitive environment or to Alaska native communities and other indigenous populations that rely on Arctic resources. Just as a common spirit and shared vision of peaceful partnership led to the development of an international space station, we believe much can be achieved in the Arctic region through collaborative international efforts, coordinated investments, and public-private partnerships.\nStructure of the Strategy\nThrough this National Strategy for the Arctic Region, we seek to guide, prioritize, and synchronize efforts to protect U.S. national and homeland security interests, promote responsible stewardship, and foster international cooperation.\nThis strategy articulates three priority lines of effort. It also identifies guiding principles as a foundation for Arctic region activities. Through a deliberate emphasis on the priority lines of effort and objectives, it aims to achieve a national unity of effort that is consistent with our domestic and international legal rights, obligations, and commitments and that is well coordinated with our Arctic neighbors and the international community. These lines of effort identify common themes where specific emphasis and activities will be focused to ensure that strategic priorities are met. The three lines of effort, as well as the guiding principles are meant to be acted upon as a coherent whole.\nChanging Conditions\nWhile the Arctic region has experienced warming and cooling cycles over millennia, the current warming trend is unlike anything previously recorded. The reduction in sea ice has been dramatic, abrupt, and unrelenting. The dense, multi-year ice is giving way to thin layers of seasonal ice, making more of the region navigable year-round. Scientific estimates of technically recoverable conventional oil and gas resources north of the Arctic Circle total approximately 13 percent of the world's undiscovered oil and 30 percent of the world's undiscovered gas deposits, as well as vast quantities of mineral resources, including rare earth elements, iron ore, and nickel. These estimates have inspired fresh ideas for commercial initiatives and infrastructure development in the region. As portions of the Arctic Ocean become more navigable, there is increasing interest in the viability of the Northern Sea Route and other potential routes, including the Northwest Passage, as well as in development of Arctic resources.\nFor all of the opportunities emerging with the increasing accessibility and economic and strategic interests in the Arctic, the opening and rapid development of the Arctic region presents very real challenges. On the environmental front, reduced sea ice is having an immediate impact on indigenous populations as well as on fish and wildlife. Moreover, there may be potentially profound environmental consequences of continued ocean warming and Arctic ice melt. These consequences include altering the climate of lower latitudes, risking the stability of Greenland's ice sheet, and accelerating the thawing of the Arctic permafrost in which large quantities of methane \u2013 a potent driver of climate change \u2013 as well as pollutants such as mercury are stored. Uncoordinated development \u2013 and the consequent increase in pollution such as emissions of black carbon or other substances from fossil fuel combustion \u2013 could have unintended consequences on climate trends, fragile ecosystems, and Arctic communities. It is imperative that the United States proactively establish national priorities and objectives for the Arctic region.\nLines of Effort\nTo meet the challenges and opportunities in the Arctic region, and in furtherance of established Arctic Region Policy, we will pursue the following lines of effort and supporting objectives in a mutually reinforcing manner that incorporates the broad range of U.S. current activities and interests in the Arctic region.\n1. Advance United States Security Interests\nOur highest priority is to protect the American people, our sovereign territory and rights, natural resources, and interests of the United States. To this end, the United States will identify, develop, and maintain the capacity and capabilities necessary to promote safety, security, and stability in the region through a combination of independent action, bilateral initiatives, and multilateral cooperation. We acknowledge that the protection of our national security interests in the Arctic region must be undertaken with attention to environmental, cultural, and international considerations outlined throughout this strategy. As many nations across the world aspire to expand their role in the Arctic, we encourage Arctic and non-Arctic states to work collaboratively through appropriate fora to address the emerging challenges and opportunities in the Arctic region, while we remain vigilant to protect the security interests of the United States and our allies.\nTo accomplish this line of effort, the United States Government will seek to:\n\u2022 Evolve Arctic Infrastructure and Strategic Capabilities \u2013 Working cooperatively with the State of Alaska, local, and tribal authorities, as well as public and private sector partners, we will develop, maintain, and exercise the capacity to execute Federal responsibilities in our Arctic waters, airspace, and coastal regions, including the capacity to respond to natural or man-made disasters. We will carefully tailor this regional infrastructure, as well as our response capacity, to the evolving human and commercial activity in the Arctic region.\n\u2022 Enhance Arctic Domain Awareness \u2013 We seek to improve our awareness of activities, conditions, and trends in the Arctic region that may affect our safety, security, environmental, or commercial interests. The United States will endeavor to appropriately enhance sea, air, and space capabilities as Arctic conditions change, and to promote maritime-related information sharing with international, public, and private sector partners, to support implementation of activities such as the search-and-rescue agreement signed by Arctic states.\n\u2022 Preserve Arctic Region Freedom of the Seas \u2013 The United States has a national interest in preserving all of the rights, freedoms, and uses of the sea and airspace recognized under international law. We will enable prosperity and safe transit by developing and maintaining sea, under-sea, and air assets and necessary infrastructure. In addition, the United States will support the enhancement of national defense, law enforcement, navigation safety, marine environment response, and search-and-rescue capabilities. Existing international law provides a comprehensive set of rules governing the rights, freedoms, and uses of the world's oceans and airspace, including the Arctic. The law recognizes these rights, freedoms, and uses for commercial and military vessels and aircraft. Within this framework, we shall further develop Arctic waterways management regimes, including traffic separation schemes, vessel tracking, and ship routing, in collaboration with partners. We will also encourage other nations to adhere to internationally accepted principles. This cooperation will facilitate strategic partnerships that promote innovative, low-cost solutions that enhance the Arctic marine transportation system and the safe, secure, efficient and free flow of trade.\n\u2022 Provide for Future United States Energy Security \u2013 The Arctic region's energy resources factor into a core component of our national security strategy: energy security. The region holds sizable proved and potential oil and natural gas resources that will likely continue to provide valuable supplies to meet U.S. energy needs. Continuing to responsibly develop Arctic oil and gas resources aligns with the United States \"all of the above\" approach to developing new domestic energy sources, including renewables, expanding oil and gas production, and increasing efficiency and conservation efforts to reduce our reliance on imported oil and strengthen our nation's energy security. Within the context of this broader energy security strategy, including our economic, environmental and climate policy objectives, we are committed to working with stakeholders, industry, and other Arctic states to explore the energy resource base, develop and implement best practices, and share experiences to enable the environmentally responsible production of oil and natural gas as well as renewable energy.\n2. Pursue Responsible Arctic Region Stewardship\nResponsible stewardship requires active conservation of resources, balanced management, and the application of scientific and traditional knowledge of physical and living environments. As Arctic environments change, increased human activity demands precaution, as well as greater knowledge to inform responsible decisions. Together, Arctic nations can responsibly meet new demands \u2013 including maintaining open sea lanes for global commerce and scientific research, charting and mapping, providing search-and-rescue services, and developing capabilities to prevent, contain, and respond to oil spills and accidents \u2013 by increasing knowledge and integrating Arctic management. We must improve our ability to forecast future conditions in the Arctic while being mindful of the potential for unexpected developments.\nTo realize this line of effort, we will pursue the specific objectives outlined below:\n\u2022 Protect the Arctic Environment and Conserve Arctic Natural Resources \u2013 Protecting the unique and changing environment of the Arctic is a central goal of U.S. policy. Supporting actions will promote healthy, sustainable, and resilient ecosystems over the long term, supporting a full range of ecosystem services. This effort will be risk-based and proceed on the basis of best available information. The United States in the Arctic will assess and monitor the status of ecosystems and the risks of climate change and other stressors to prepare for and respond effectively to environmental challenges.\n\u2022 Use Integrated Arctic Management to Balance Economic Development, Environmental Protection, and Cultural Values \u2013 Natural resource management will be based on a comprehensive understanding of environmental and cultural sensitivities in the region, and address expectations for future infrastructure needs and other development-related trends. This endeavor can promote unity of effort and provide the basis for sensible infrastructure and other resource management decisions in the Arctic. We will emphasize science-informed decisionmaking and integration of economic, environmental, and cultural values. We will also advance coordination among Federal departments and agencies and collaboration with partners engaged in Arctic stewardship activities.\n\u2022 Increase Understanding of the Arctic through Scientific Research and Traditional Knowledge \u2013 Proper stewardship of the Arctic requires understanding of how the environment is changing, and such understanding will be based on a holistic earth system approach. Vast areas of the Arctic Ocean are unexplored, and we lack much of the basic knowledge necessary to understand and address Arctic issues. The changes in the Arctic cannot be understood in isolation and must be viewed in a global context. As we learn more about the region, we have identified several key subcomponents of the Arctic that require urgent attention: land ice and its role in changing sea level; sea-ice and its role in global climate, fostering biodiversity, and supporting Arctic peoples; and, the warming permafrost and its effects on infrastructure and climate. Better earth system-level knowledge will also help us meet operational needs such as weather and ice forecasting. We can make faster progress through a well-coordinated and transparent national and international exploration and research agenda that reduces the potential for duplication of effort and leads to better leveraging of resources.\n\u2022 Chart the Arctic region \u2013 We will continue to make progress in charting and mapping the Arctic region's ocean and waterways, so long obscured by perennial ice, and mapping its coastal and interior lands according to reliable, modern standards. Given the vast expanse of territory and water to be charted and mapped, we will need to prioritize and synchronize charting efforts to make more effective use of resources and attain faster progress. In so doing, we will make navigation safer and contribute to the identification of ecologically sensitive areas and reserves of natural resources.\n3. Strengthen International Cooperation\nWhat happens in one part of the Arctic region can have significant implications for the interests of other Arctic states and the international community as a whole. The remote and complex operating conditions in the Arctic environment make the region well-suited for collaborative efforts by nations seeking to explore emerging opportunities while emphasizing ecological awareness and preservation. We will seek to strengthen partnerships through existing multilateral fora and legal frameworks dedicated to common Arctic issues. We will also pursue new arrangements for cooperating on issues of mutual interest or concern and addressing unique and unprecedented challenges, as appropriate.\nU.S. efforts to strengthen international cooperation and partnerships will be pursued through four objectives:\n\u2022 Pursue Arrangements that Promote Shared Arctic State Prosperity, Protect the Arctic Environment, and Enhance Security \u2013 We will seek opportunities to pursue efficient and effective joint ventures, based on shared values that leverage each Arctic state's strengths. This collaboration will assist in guiding investments and regional activities, addressing dynamic trends, and promoting sustainable development in the Arctic region.\nArctic nations have varied commercial, cultural, environmental, safety, and security concerns in the Arctic region. Nevertheless, our common interests make these nations ideal partners in the region. We seek new opportunities to advance our interests by proactive engagement with other Arctic nations through bilateral and multilateral efforts using of a wide array of existing multilateral mechanisms that have responsibilities relating to the Arctic region.\nAs appropriate, we will work with other Arctic nations to develop new coordination mechanisms to keep the Arctic region prosperous, environmentally sustainable, operationally safe, secure, and free of conflict, and will protect U.S., allied, and regional security and economic interests.\n\u2022 Work through the Arctic Council to Advance U.S. Interests in the Arctic Region \u2013 In recent years, the Arctic Council has facilitated notable achievements in the promotion of cooperation, coordination, and interaction among Arctic states and Arctic indigenous peoples. Recent successes of the Council include its advancement of public safety and environmental protection issues, as evidenced by the 2011 Arctic Search-and-Rescue Agreement and by the 2013 Arctic Marine Oil Pollution Preparedness and Response Agreement. The United States will continue to emphasize the Arctic Council as a forum for facilitating Arctic states' cooperation on myriad issues of mutual interest within its current mandate.\n\u2022 Accede to the Law of the Sea Convention \u2013 Accession to the Convention would protect U.S. rights, freedoms, and uses of the sea and airspace throughout the Arctic region, and strengthen our arguments for freedom of navigation and overflight through the Northwest Passage and the Northern Sea Route. The United States is the only Arctic state that is not party to the Convention. Only by joining the Convention can we maximize legal certainty and best secure international recognition of our sovereign rights with respect to the U.S. extended continental shelf in the Arctic and elsewhere, which may hold vast oil, gas, and other resources. Our extended continental shelf claim in the Arctic region could extend more than 600 nautical miles from the north coast of Alaska.\nIn instances where the maritime zones of coastal nations overlap, Arctic states have already begun the process of negotiating and concluding maritime boundary agreements, consistent with the Law of the Sea Convention and other relevant international law. The United States supports peaceful management and resolution of disputes, in a manner free from coercion. While the United States is not currently a party to the Convention, we will continue to support and observe principles of established customary international law reflected in the Convention.\n\u2022 Cooperate with other Interested Parties \u2013 A growing number of non-Arctic states and numerous non-state actors have expressed increased interest in the Arctic region. The United States and other Arctic nations should seek to work with other states and entities to advance common objectives in the Arctic region in a manner that protects Arctic states' national interests and resources. One key example relates to the promotion of safe, secure, and reliable Arctic shipping, a goal that is best pursued through the International Maritime Organization in coordination with other Arctic states, major shipping states, the shipping industry and other relevant interests.\nGuiding Principles\nThe U.S. approach to the Arctic region must reflect our values as a nation and as a member of the global community. We will approach holistically our interests in promoting safety and security, advancing economic and energy development, protecting the environment, addressing climate change and respecting the needs of indigenous communities and Arctic state interests. To guide our efforts, we have identified the following principles to serve as the foundation for U.S. Arctic engagement and activities.\n\u2022 Safeguard Peace and Stability by working to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. This principle will include United States action, and the actions of other interested countries, in supporting and preserving international legal principles of freedom of navigation and overflight and other uses of the sea related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes. The United States will rely on existing international law, which provides a comprehensive set of rules governing the rights, freedoms, and uses of the world's oceans and airspace, including the Arctic.\n\u2022 Make Decisions Using the Best Available Information by promptly sharing \u2013 nationally and internationally \u2013 the most current understanding and forecasts based on up-to-date science and traditional knowledge.\n\u2022 Pursue Innovative Arrangements to support the investments in scientific research, marine transportation infrastructure requirements, and other support capability and capacity needs in this region. The harshness of the Arctic climate and the complexity associated with developing, maintaining, and operating infrastructure and capabilities in the region necessitate new thinking on public-private and multinational partnerships.\n\u2022 Consult and Coordinate with Alaska Natives consistent with tribal consultation policy established by Executive Order. This policy emphasizes trust, respect, and shared responsibility. It articulates that tribal governments have a unique legal relationship with the United States and requires Federal departments and agencies to provide for meaningful and timely input by tribal officials in development of regulatory policies that have tribal implications. This guiding principle is also consistent with the Alaska Federation of Natives Guidelines for Research.\nConclusion\nWe seek a collaborative and innovative approach to manage a rapidly changing region. We must advance U.S. national security interests, pursue responsible stewardship, and strengthen international collaboration and cooperation, as we work to meet the challenges of rapid climate-driven environmental change. The melting of Arctic ice has the potential to transform global climate and ecosystems as well as global shipping, energy markets, and other commercial interests. To address these challenges and opportunities, we will align Federal activities in accordance with this strategy; partner with the State of Alaska, local, and tribal entities; and work with other Arctic nations to develop complementary approaches to shared challenges. We will proactively coordinate regional development. Our economic development and environmental stewardship must go hand-in-hand. The unique Arctic environment will require a commitment by the United States to make judicious, coordinated infrastructure investment decisions, informed by science. To meet this challenge, we will need bold, innovative thinking that embraces and generates new and creative public-private and multinational cooperative models.\nAppendix E. Obama Administration Statement Regarding U.S. Chairmanship of Arctic Council\nThis appendix presents the text of a statement from the Obama Administration regarding the two-year period of U.S. chairmanship of the Arctic Council that began in April 2015. The text of the statement is as follows:\nGiven the increased strategic importance of the region, the next two years offers the United States an unprecedented opportunity to make significant progress on our Arctic policy objectives, which were first laid out in the National Strategy for the Arctic Region released by the White House in May 2013 and followed by an Implementation Plan in January 2014.\nThe U.S. will be chairing the Arctic Council at a crucial moment when the effects of climate change are bringing a myriad of new environmental, human and economic opportunities and challenges to the Arctic. During the U.S. Chairmanship, the State Department will focus the Arctic work it carries out through the Arctic Council, various international scientific cooperation mechanisms and, in some cases, domestic initiatives led by U.S. states or other U.S. government agencies. The three thematic areas of the U.S. Chairmanship are: improving economic and living conditions in Arctic communities; Arctic Ocean safety, security and stewardship; and addressing the impacts of climate change. The theme of the U.S. Chairmanship of the Arctic Council is \"One Arctic: Shared Opportunities, Challenges and Responsibilities,\" which recognizes the peaceful and stable nature of the Arctic. The U.S. chairmanship will conclude in spring 2017 with a Ministerial meeting in Alaska, at which point the United States will hand the chairmanship to Finland.\nTo guide U.S. engagement on the Arctic during this crucial period, U.S. Secretary of State John Kerry appointed the former Commandant of the U.S. Coast Guard, Admiral Robert J. Papp, Jr., as the first-ever U.S. Special Representative for the Arctic in July 2014.\nThe U.S. has developed an ambitious and balanced program for its Arctic Council Chairmanship that focuses on three crucial areas: improving economic and living conditions; Arctic Ocean safety, security and stewardship; and addressing the impacts of climate change.\n1. Improving Economic and Living Conditions in Arctic Communities\nRemote Arctic communities face a number of threats to the health and well-being of their citizens, including food and water security, safe water, sewer and sanitation, affordable and renewable energy, adequate mental health services, and the need to ensure the continued economic viability of their communities. \nOur work in this area will aim to:\n\u2014Promote the development of renewable energy technology, such as modular micro-grid systems, to spur public-private partnerships and improve energy affordability;\n\u2014Provide a better understanding of freshwater security in the Arctic, including through the creation of a Water Resources Vulnerability Index; \n\u2014Coordinate an Arctic-wide telecommunications infrastructure assessment to promote the build-out of commercial infrastructure in the region;\n\u2014Support mental wellness , including suicide prevention and resilience; \n\u2014Harness the expertise and resources of the Arctic Economic Council to inform the Arctic Council's work on economic and living conditions; \n\u2014Mitigate public health risks and reduce black carbon output in Arctic communities;\n\u2014Promote better community sanitation and public health by facilitation collaboration between industry, researchers and public policy experts to increase access to and reduce the operating costs of in-home running water and sewer in remote communities.\n2. Arctic Ocean Safety, Security and Stewardship \nThe acceleration of maritime activity in the Arctic increases risk in an already harsh and challenging environment. U.S. Chairmanship priorities include building upon existing preparedness and response programs; enhancing the ability of Arctic states to execute their search and rescue responsibilities; and emphasizing safe, secure, and environmentally sound shipping as a matter of high priority. To ensure that future maritime development avoids negative impacts, particularly in areas of ecological and cultural significance, the Arctic Council is also continuing its work towards a network of marine protected areas and enhanced international cooperation in the Arctic Ocean. Ocean acidification is one of the most urgent issues facing the world's ocean today and the Arctic Council is responding by supporting research to improve the capability to monitor and track acidification in the Arctic Ocean. \nOur work in this area will aim to:\n\u2014Better prepare those responsible to better address search and rescue challenges in the Arctic; \n\u2014Ensure marine environmental protection, including working toward the establishment of a network of marine protected areas ;\n\u2014Explore the creation of a Regional Seas Program of the Arctic Ocean; \n\u2014Create a better understanding of Arctic Ocean acidification and its effects on Arctic organisms and the economies that rely on them; \n\u2014Encourage all parties take the steps necessary to allow for the proper implementation of the Agreement on Cooperation on Marine Oil Pollution, Preparedness and response in the Arctic .\n3. Addressing the Impacts of Climate Change\nThe impacts of climate change affect the Arctic and the many people, wildlife, and plants that depend on the region for survival. The United States recognizes that we need to reduce black carbon (soot) and methane emissions, which disproportionally impact the Arctic. The Arctic Council is addressing the impacts of climate change by facilitating cooperation on action to reduce black carbon and methane emissions. Arctic Council activities to enhance access to adaptation and resilience tools, and promote the development of climate change indicators and high-resolution mapping are also priorities of the U.S. chairmanship that will increase scientists', communities', policymakers' and the public's understanding of the impacts of climate change. \nOur work in this area will aim to:\n\u2014Target short-lived climate pollutants through reductions in black carbon and methane emissions; \n\u2014Support Arctic climate adaptation and resilience efforts including the creation of an Early Warning Indicator System; \n\u2014Create a Pan-Arctic Digital Elevation Map that will increase our understanding of the impacts of climate change on shorelines and surface areas in the Arctic.","output":"The diminishment of Arctic sea ice has led to increased human activities in the Arctic, and has heightened interest in, and concerns about, the region's future. The United States, by virtue of Alaska, is an Arctic country and has substantial interests in the region.\nRecord low extents of Arctic sea ice over the past decade have focused scientific and policy attention on links to global climate change and projected ice-free seasons in the Arctic within decades. These changes have potential consequences for weather in the United States, access to mineral and biological resources in the Arctic, the economies and cultures of peoples in the region, and national security.\nThe five Arctic coastal states\u2014the United States, Canada, Russia, Norway, and Denmark (of which Greenland is a territory)\u2014have made or are in the process of preparing submissions to the Commission on the Limits of the Continental Shelf regarding the outer limits of their extended continental shelves. The Russian submission includes the underwater Lomonosov Ridge, a feature that spans a considerable distance across the center of the Arctic Ocean.\nThe diminishment of Arctic ice could lead in coming years to increased commercial shipping on two trans-Arctic sea routes\u2014the Northern Sea Route close to Russia, and the Northwest Passage\u2014though the rate of increase in the use of these routes might not be as great as sometimes anticipated in press accounts. International guidelines for ships operating in Arctic waters have been recently updated.\nChanges to the Arctic brought about by warming temperatures will likely allow more exploration for oil, gas, and minerals. Warming that causes permafrost to melt could pose challenges to onshore exploration activities. Increased oil and gas exploration and tourism (cruise ships) in the Arctic increase the risk of pollution in the region. Cleaning up oil spills in ice-covered waters will be more difficult than in other areas, primarily because effective strategies for cleaning up oil spills in ice-covered waters have yet to be developed.\nLarge commercial fisheries exist in the Arctic. The United States is currently meeting with other countries regarding the management of Arctic fish stocks. Changes in the Arctic could affect threatened and endangered species, and could result in migration of fish stocks to new waters. Under the Endangered Species Act, the polar bear was listed as threatened on May 15, 2008. Arctic climate change is also expected to affect the economies, health, and cultures of Arctic indigenous peoples.\nTwo of the Coast Guard's three polar icebreakers\u2014Polar Star and Polar Sea\u2014have exceeded their intended 30-year service lives, and Polar Sea is not operational. The Coast Guard has initiated a project to build up to three new heavy polar icebreakers. On May 12, 2011, representatives from the member states of the Arctic Council signed an agreement on cooperation on search and rescue in the Arctic.\nAlthough there is significant international cooperation on Arctic issues, the Arctic is increasingly being viewed by some observers as a potential emerging security issue. Some of the Arctic coastal states, particularly Russia, have announced an intention or taken actions to enhance their military presences in the high north. U.S. military forces, particularly the Navy and Coast Guard, have begun to pay more attention to the region in their planning and operations."}
{"id":"gao_GAO-19-128","pid":"gao_GAO-19-128_0","input":"\tBackground\n\n\t\tWeapon Systems Are Unique In Many Ways, but Face Common Cyber Vulnerabilities\n\nCybersecurity issues can vary widely across different types of systems,  so weapon systems cybersecurity challenges may be very different than  those of some IT systems. Despite variation across systems,  cybersecurity can be described using common terminology, such as the  key terms below used by the National Research Council.\nKey Concept  Security Controls are safeguards or  countermeasures to protect the confidentiality,  integrity, and availability of a system and its  information.   For example, a firewall is a common control  to allow or block traffic based on a set of  rules. Because it is impossible to define a rule  for every scenario, attackers look for ways to  access a system that are not covered by the  rules. For example, a firewall may block traffic  from a specific country, but attackers may  make it appear that they are in a country that  is not blocked. They may use tools to avoid  the firewall, such as embedding malicious  software in an e-mail and waiting for a user to  open it and inadvertently install the code.\nA cyber vulnerability is a weakness in a system that could be  exploited to gain access or otherwise affect the system\u2019s  confidentiality, integrity, and availability.\nA cybersecurity threat is anything that can exploit a vulnerability to  harm a system, either intentionally or by accident.\nCybersecurity risk is a function of the threat (intent and capabilities),  vulnerabilities (inherent or introduced), and consequences (fixable or  fatal).\nAlthough some weapon systems are purely IT systems, most\u2014such as  aircraft, missiles, and ships\u2014are what the National Institute of Standards  and Technology (NIST) and sometimes DOD refer to as \u201ccyber-physical  systems.\u201d NIST defines these systems as \u201cco-engineered interacting  networks of physical and computational components.\u201d These cyber  systems can affect the physical world so the consequences of a cyber  attack may be greater than those of attacks on other types of systems.  For example, an attack on a weapon system could have physical  consequences that may even result in loss of life.\nNevertheless, weapon systems share many of the same cyber  vulnerabilities as other types of automated information systems. Weapon  systems are large, complex, systems of systems that have a wide variety  of shapes and sizes, with varying functionality. Despite obvious  differences in form, function, and complexity, weapon systems and other  types of systems are similar in some important, if not obvious, ways. For  example, DOD reports state that many weapon systems rely on  commercial and open source software and are subject to any cyber  vulnerabilities that come with them. Weapon systems also rely on  firewalls and other common security controls to prevent cyberattacks.  Weapon system security controls can also be exploited or bypassed if the  system is not properly configured. Finally, weapon systems are operated  by people\u2014a significant source of cybersecurity vulnerability for any  system.\n\n\t\tAnatomy of a Cyber Attack\n\nOne common way to discuss cybersecurity is through the activities  necessary to defend (or attack) a system. System developers and  operators take steps to protect the system from cyber attacks, while  attackers attempt to defeat those protections as depicted in figure 1. The  cyber attack sequence is also referred to as a cyber kill chain or cyber  attack lifecycle. There are multiple models for understanding cyber  attacks, each with their own terminology and sequence of steps. The  attack sequence below is simpler, but generally consistent with existing  cybersecurity models. We identified the defend sequence below based  on the steps included in cybersecurity test reports that we reviewed.\n\n\t\tAttack Sequence: Discover \uf0e0 Implement \uf0e0 Exploit\n\nExample: Importance of Patching in a  Timely Manner  In the 2017 Equifax cyber attack, personal  data for over 145 million people were  exposed. Attackers took advantage of a  vulnerability in a commonly used web  application to access Equifax\u2019s credit  reporting system. A patch for the vulnerability  was available in March, but Equifax had not  applied it by the time of the attack\u2014in mid- May.\nA cyber attacker looks for ways to get around security controls in order to  obtain full or partial control of the system. An attacker typically starts by  learning as much as possible about the system\u2014potentially through cyber  reconnaissance\u2014to identify vulnerabilities in the system. The more  attackers know about the system, the more options they have when  designing an attack. An attacker may identify a previously unknown  vulnerability that the system owner is unaware of. Or the attacker could  look for system components that had not applied known security  updates\u2014also called \u201cpatches.\u201d Developers of commercial components  usually publicly announce any security patches and, ironically, provide a  roadmap for an attacker to attack a system or component.\nAn attack may not happen all at once\u2014an attacker may find the easiest  way to gain initial access and then look for ways to expand their access  until they reach their ultimate goal. Even once they achieve full access to  a system, an attacker may wait for an opportune time to attack the  confidentiality, integrity, or availability of a system. Types of attacks are  described in appendix II.\n\n\t\tSecurity Goals: Protect \uf0e0 Detect \uf0e0 Respond\/Recover\n\nThe system owner wants to prevent, or at least limit, attempts to  adversely affect the confidentiality, integrity, or availability of the system.  The owner implements security controls such as firewalls, role-based  access controls, and encryption to reduce the number of potential attack  points. Many controls need to be designed into the system early in the  development cycle. Ideally, the controls are designed to work together  and there may be layers of controls that an attacker would have to defeat  in order to gain control of the system\u2014referred to as \u201cdefense in depth.\u201d\nKey Concepts   Role-based access entails allowing users to  only access information and features  necessary to carry out their job.  Encryption is a way of transforming  information so that only authorized users are  able to read it.\nProtecting a system also includes administrative processes, such as  requiring users to regularly change their passwords and applying patches  on a regular schedule\u2014referred to as cyber hygiene. However, no system  can be completely secure, so system owners must also constantly  monitor their systems for suspicious activity. Logging is a common  system feature that automatically records system activity. Unusual  patterns such as numerous failed log-in attempts from a remote location  could indicate that an unauthorized person is trying to gain access to the  system. Once such a cyber activity is detected, the system owner needs  to take steps to end the attack and restore any system capabilities that  were degraded as a result of the attacker\u2019s actions.\n\n\t\tAttack Sophistication Levels\n\nWe reported in 2015 that federal and contractor systems face an evolving  array of cyber-based threats, including criminals, hackers, adversarial  nations, and terrorists. Threats can range from relatively unskilled \u201cscript  kiddies\u201d who only use existing computer scripts or code to hack into  computers, to well-resourced and highly skilled advanced threats who not  only have sophisticated hacking skills, but also normally gather detailed  knowledge of the systems they attack. Table 1 provides brief descriptions  of the terminology DOD uses to categorize threats.\n\n\t\tDOD Weapon Systems Requirements and Acquisition Processes\n\nWeapons systems are developed, acquired, and deployed within the  defense acquisition system, a system of statutes and regulations. Subject  to control of the DOD, the Army, Air Force, Navy, and Marine Corps by  law have authority to \u201corganize, train, and equip\u201d their services. Their  decisions regarding what to develop and how best to do so are informed  by documents and deliberations under DOD\u2019s requirements and  acquisition processes respectively. Early in the acquisition lifecycle, the  requirements process identifies what capabilities are needed and  evaluates options to best meet those needs. The acquisition process is  a gated review process that assesses programs against established  review criteria, such as the program\u2019s cost, schedule, performance, and  whether the weapon system is ready to move forward in the acquisition  process. Numerous military-service entities are involved in these  processes. Key enterprise-level organizations include the Joint Staff and  Office of the Secretary of Defense organizations, such as the Office of the  Under Secretary of Defense (Acquisition and Sustainment), Office of the  Under Secretary of Defense (Research and Engineering), and the  Director of Operational Test and Evaluation (DOT&E).\n\n\t\tOrganizations Responsible for Weapon Systems Cybersecurity\n\nExample: Increased Reliance on Software  In the 2015 JEEP Cherokee cyber attack,  researchers remotely took physical control of  a JEEP, including shutting off the engine and  controlling the brakes. In 2016, we reported  that electronic systems control multiple  passenger vehicle functions and that vehicles  include multiple interfaces that leave them  vulnerable to cyber attacks.   Researchers studied a JEEP to understand its  systems, including the characteristics of its  software code and its \"CAN Bus,\" which  connects to units that control core vehicle  functions. They remotely accessed an  Internet-connected component and used it as  an initial entry point to access the vehicle's  CAN Bus, which then allowed them to control  many of the JEEP\u2019s functions.\nJust as many DOD organizations are responsible for weapon systems  acquisitions, many have responsibilities related to cybersecurity during  the acquisition process. For example, program offices are responsible  for planning and implementing cybersecurity measures for the system  under development. Authorizing officials are responsible for overseeing  programs\u2019 adherence to security controls and for authorizing a system\u2019s  entry into operations based on the system having an acceptable level of  cyber risk. At key decision points, the Office of the Under Secretary of  Defense (Research and Engineering) is responsible for advising the  Secretary of Defense and providing independent technical risk  assessments that address a variety of topics, including the system\u2019s  cybersecurity posture. Military test organizations conduct cybersecurity  assessments of weapon systems. DOT&E oversees those tests and is  funding research on the cybersecurity of some weapon system  components that pose particular cybersecurity challenges.\nOrganizations that are traditionally associated with cybersecurity, such as  NSA and Cyber Command, support some aspects of weapon systems  cybersecurity. However, they are not responsible for reviewing the  designs of most weapon systems to identify potential vulnerabilities,  although NSA officials said that they will provide advice to acquisition  programs if asked to do so. More information about these roles and  responsibilities is included in appendix III.\n\n\tMultiple Factors Make Weapon Systems Cybersecurity Increasingly Difficult, but DOD Is Just Beginning to Grapple with the Challenge\n\nMultiple factors contribute to the current state of DOD weapon systems  cybersecurity, including: the increasingly computerized and networked  nature of DOD weapons, DOD\u2019s past failure to prioritize weapon systems  cybersecurity, and DOD\u2019s nascent understanding of how best to develop  more cyber secure weapon systems. Specifically, DOD weapon systems  are more software and IT dependent and more networked than ever  before. This has transformed weapon capabilities and is a fundamental  enabler of the United States\u2019 modern military capabilities. Yet this change  has come at a cost. More weapon components can now be attacked  using cyber capabilities. Furthermore, networks can be used as a  pathway to attack other systems. We and others have warned of these  risks for decades. Nevertheless, until recently, DOD did not prioritize  cybersecurity in weapon systems acquisitions. In part because DOD  historically focused on the cybersecurity of its networks but not weapon  systems themselves, DOD is in the early stage of trying to understand  how to apply cybersecurity to weapon systems. Several DOD officials  explained that it will take some time, and possibly some missteps, for the  department to learn what works and does not work with respect to  weapon systems cybersecurity.\n\n\t\tDOD Weapon Systems Are Increasingly Complex and Networked, Increasing Cyber Vulnerabilities\n\nDOD\u2019s weapon systems are increasingly dependent on software and IT to  achieve their intended performance. The amount of software in today\u2019s  weapon systems is growing exponentially and is embedded in numerous  technologically complex subsystems, which include hardware and a  variety of IT components, as depicted in figure 2.\nNearly all weapon system functions are enabled by computers\u2014ranging  from basic life support functions, such as maintaining stable oxygen  levels in aircraft, to intercepting incoming missiles. DOD has actively  sought ways to introduce this automation into weapon systems. For  example, we have reported that for decades, the Navy has sought to  reduce ship crew size based, in part, on the assumption that some  manual tasks could be automated and fewer people would be needed to  operate a ship.\nYet this growing dependence on software and IT comes at a price. It  significantly expands weapons\u2019 attack surfaces. According to DOT&E,  any exchange of information is a potential access point for an adversary.  Even \u201cair gapped\u201d systems that do not directly connect to the Internet for  security reasons could potentially be accessed by other means, such as  USB devices and compact discs. Weapon systems have a wide variety of  interfaces, some of which are not obvious, that could be used as  pathways for adversaries to access the systems, as is shown in figure 3.\nDOD systems are also more connected than ever before, which can  introduce vulnerabilities and make systems more difficult to defend.  According to the DSB, nearly every conceivable component in DOD is  networked. Weapon systems connect to DOD\u2019s extensive set of  networks\u2014called the DOD Information Network\u2014and sometimes to  external networks, such as those of defense contractors. Technology  systems, logistics, personnel, and other business-related systems  sometimes connect to the same networks as weapon systems.  Furthermore, some weapon systems may not connect directly to a  network, but connect to other systems, such as electrical systems, that  may connect directly to the public Internet, as is depicted in figure 4.\nThese connections help facilitate information exchanges that benefit  weapon systems and their operators in many ways\u2014such as command  and control of the weapons, communications, and battlespace  awareness. If attackers can access one of those systems, they may be  able to reach any of the others through the connecting networks. Many  officials we met with stated that including weapon systems on the same  networks with less protected systems puts those weapon systems at risk.  Furthermore, the networks themselves are vulnerable. DOT&E found that  some networks were not survivable in a cyber-contested environment and  the DSB reported in 2013 that \u201cthe adversary is in our networks.\u201d\nFurther complicating matters, weapon systems are dependent on external  systems, such as positioning and navigation systems and command and  control systems in order to carry out their missions\u2014and their missions  can be compromised by attacks on those other systems. A successful  attack on one of the systems the weapon depends on can potentially limit  the weapon\u2019s effectiveness, prevent it from achieving its mission, or even  cause physical damage and loss of life.\n\n\t\tDespite Warnings, Cybersecurity Has Not Been a Focus of Weapon Systems Acquisitions\n\nWe and other organizations have identified risks associated with  increased reliance on software and networking since at least the early  1990s, as is shown in table 2.\nNevertheless, DOD has only recently begun prioritizing weapon systems  cybersecurity. Instead, for many years, DOD focused cybersecurity efforts  on protecting networks and traditional IT systems, such as accounting  systems, rather than weapons. Experts we interviewed as well as officials  from program offices, the Office of the Secretary of Defense, and some  military test organizations explained that, until around 2014, there was a  general lack of emphasis on cybersecurity throughout the weapon  systems acquisition process. Others have reported similar findings. For  example, the DSB reported in 2013 that although DOD had taken great  care to secure the use and operation of the hardware of its weapon  systems, it had not devoted the same level of resources and attention to  IT systems that support and operate those weapons and critical IT  capabilities embedded within the weapon systems. The National  Research Council reported in 2014 that much broader and more  systematic attention to cybersecurity was needed in the acquisition  process and that the Navy was in the \u201ccrawl\u201d stage of a \u201ccrawl-walk-run\u201d  journey. Similarly, the Navy reported in 2015 that there was a lack of  attention to cybersecurity in the acquisition process and platform IT  systems were not engineered with cybersecurity as a key component.\nIn the past, consideration of cybersecurity was not a focus of the key  processes governing the development of weapon systems. It was not a  focus of key acquisition and requirements policies nor was it a focus of  key documents that inform decision-making. For example, until a few  years ago, DOD\u2019s main requirements policy did not call for programs to  factor cyber survivability into their key performance parameters. Key  performance parameters are the most important system capabilities,  called \u201crequirements,\u201d that must be met when developing weapon  systems. They are established early on in an acquisition program and  drive system design decisions. They are also used as a benchmark to  measure program performance and are reviewed during acquisition  decisions and other oversight processes. Because cybersecurity key  performance parameters were not required, Joint Staff officials and some  program officials said that many current weapon systems had no high- level cybersecurity requirements when they began, which in turn limited  emphasis on cybersecurity during weapon system design, development,  and oversight. In addition, Joint Staff officials said that, historically,  cybersecurity was not a factor in analyses of alternatives. This analysis is  an important early step in acquiring a new weapon system and informs  decisions about the relative effectiveness, costs, and risks of potential  systems that could be developed. By not considering cybersecurity in  these analyses, decisions about which system to develop were made  without consideration of whether one proposed system might be more  inherently vulnerable from a cyber perspective than others.\nPrograms\u2019 lack of cybersecurity requirements may have also contributed  to challenges with incorporating cybersecurity into weapon systems  testing. Specifically, DOT&E and service test agencies said that prior to  around 2014, program offices tried to avoid undergoing cybersecurity  assessments because they did not have cybersecurity requirements and  therefore thought they should not be evaluated. Furthermore, test officials  said that many within DOD did not believe cybersecurity applied to  weapon systems. As a result, fewer cybersecurity assessments were  conducted at that time in comparison to recent years.\nBy not incorporating cybersecurity into key aspects of the requirements  and acquisition processes, DOD missed an opportunity to give  cybersecurity a more prominent role in key acquisition decisions.  Numerous officials we met with said that this failure to address weapon  systems cybersecurity sooner will have long-lasting effects on the  department. Due to this lack of focus on weapon systems cybersecurity,  DOD likely has an entire generation of systems that were designed and  built without adequately considering cybersecurity. Bolting on  cybersecurity late in the development cycle or after a system has been  deployed is more difficult and costly than designing it in from the  beginning. Not only is the security of those systems and their missions at  risk, the older systems may put newer systems in jeopardy. Specifically, if  DOD is able to make its newer systems more secure, but connects them  to older systems, this puts the newer systems at risk. Furthermore, even if  they are not connected, if the newer systems depend on the older  systems to help fulfill their missions, those missions may be at risk.\n\n\t\tDOD Is Still Learning How to Address Weapon Systems Cybersecurity\n\nDOD is still determining how best to address weapon systems  cybersecurity given weapon systems\u2019 different and particularly  challenging cybersecurity needs. Although there are similarities between  weapon systems and traditional IT systems, DOD has acknowledged that  it may not be appropriate to apply the same cybersecurity approach to  weapon systems as traditional IT systems. RAND reported and several  program officials we met with stated that DOD\u2019s security controls were  developed with IT systems, and not weapon systems, in mind. DOD  policies and guidance acknowledge that tailoring may be warranted, but  they do not yet specify how the approaches to the security controls  should differ.\nKey Concept  Industrial control system is a general term  that encompasses several types of control  systems including supervisory control and  data acquisition systems, distributed control  systems, and programmable logic controllers.  Industrial control systems monitor or control  other systems and processes and may be  used to automate tasks such as opening and  closing valves.\nDOD is still in the process of determining how to make weapon system  components with particular cyber vulnerabilities as secure as possible.  For example, many weapon systems use industrial control systems to  monitor and control equipment, and like computers, they include software.  Many weapon systems use such systems to carry out essential functions.  For example, a ship may use industrial control systems to control engines  and fire suppression systems. According to NIST, industrial control  systems were originally designed for use in trusted environments, so  many did not incorporate security controls. Government and industry  reports state that attacks on these systems are increasing. However,  DOD officials said that program offices may not know which industrial  control systems are embedded in their weapons or what the security  implications of using them are. Over the past few years, DOD has begun  funding work to improve its understanding of how to best secure these  systems. In addition, Office of the Secretary of Defense officials informed  us that, in response to section 1650 of the National Defense Authorization  Act for Fiscal Year 2017, they are working to better understand the  dependency of industrial control systems on mission impact, including  other key infrastructure nodes that could be vulnerable to a cyber attack  and have significant impact to mission accomplishment.\nKey Concept  Vulnerability chaining is when attackers  take advantage of multiple vulnerabilities\u2014 which could be low or moderate risk in  isolation\u2014to perform a more significant attack  on a system.\nSeveral weapon system-specific factors make it important to tailor  cybersecurity approaches, but also make cybersecurity difficult. Because  weapon systems can be very large, complex, systems of systems with  many interdependencies, updating one component of a system can  impact other components. A patch or software enhancement that causes  problems in an email system is inconvenient, whereas one that affects an  aircraft or missile system could be catastrophic. Officials from one  program we met with said they are supposed to apply patches within 21  days of when they are released, but fully testing a patch can take months  due to the complexity of the system. Even when patches have been  tested, applying the patches may take additional time. Further, weapon  systems are often dispersed or deployed throughout the world. Some  deployed systems may only be patched or receive software  enhancements when they return to specific locations. Although there are  valid reasons for delaying or forgoing weapon systems patches, this  means some weapon systems are operating, possibly for extended  periods, with known vulnerabilities.\nExacerbating matters, some program offices may also not yet have a  solid understanding of the cybersecurity implications of their systems\u2019  designs, including their systems\u2019 connectivity. This situation makes it  difficult to secure the system. Experts and officials from some test  organizations we met with stated that programs have generally not  understood the multitude of ways that information flows in and out of their  systems, although this may be improving. Several program officials we  met with felt that weapon systems were more secure than other types of  systems and noted that they typically did not have direct connections to  the Internet. In fact, weapon systems have more potential avenues of  attack than may be apparent, such as radio communications receivers  and radar receivers. Furthermore, the National Research Council  reported in 2014 that individual warfare domains do not fully grasp risks  within their own domain, let alone those that can be introduced through  other domains. For example, if a space system is connected to a land  system\u2014even indirectly\u2014an attacker may be able to move from one to  the other or limit the operations of one by attacking the other.\n\n\tTests Revealed that Most Weapon Systems Under Development Have Major Vulnerabilities, and DOD Likely Does Not Know the Full Extent of the Problems\n\nWe found that from 2012 to 2017, DOD testers routinely found mission- critical cyber vulnerabilities in nearly all weapon systems that were under  development. Using relatively simple tools and techniques, testers were  able to take control of these systems and largely operate undetected. In  some cases, system operators were unable to effectively respond to the  hacks. Furthermore, DOD does not know the full scale of its weapon  system vulnerabilities because, for a number of reasons, tests were  limited in scope and sophistication.\n\n\t\tWeapon Systems Cybersecurity Assessments Identified Mission-Critical Vulnerabilities\n\nNearly all major acquisition programs that were operationally tested  between 2012 and 2017 had mission-critical cyber vulnerabilities that  adversaries could compromise. DOT&E\u2019s 2017 annual report stated that  tests consistently discovered mission-critical vulnerabilities in acquisition  programs, echoing a similar finding by the DSB in 2013 about DOD IT  systems and networks. Cybersecurity test reports that we reviewed  showed that test teams were able to gain unauthorized access and take  full or partial control of these weapon systems in a short amount of time  using relatively simple tools and techniques. We saw widespread  examples of weaknesses in each of the four security objectives that  cybersecurity tests normally examine: protect, detect, respond, and  recover.\n\n\t\t\tProtect\n\nKey Concepts  An insider is a user who is authorized to use  a system (e.g., has a username and  password) and has physical access to all or  parts of a system.  A near-sider is an unauthorized user who has  physical access to all or part of a system. For  example, someone taking a tour of a Navy  ship would be a near-sider.  A remote user is not authorized to use the  system and does not have physical access to  the system.\nTest teams were able to defeat weapon systems cybersecurity controls  meant to keep adversaries from gaining unauthorized access to the  systems. In one case, it took a two-person test team just one hour to gain  initial access to a weapon system and one day to gain full control of the  system they were testing. Some programs fared better than others. For  example, one assessment found that the weapon system satisfactorily  prevented unauthorized access by remote users, but not insiders and  near-siders. Once they gained initial access, test teams were often able  to move throughout a system, escalating their privileges until they had  taken full or partial control of a system. In one case, the test team took  control of the operators\u2019 terminals. They could see, in real-time, what the  operators were seeing on their screens and could manipulate the system.  They were able to disrupt the system and observe how the operators  responded. Another test team reported that they caused a pop-up  message to appear on users\u2019 terminals instructing them to insert two  quarters to continue operating. Multiple test teams reported that they  were able to copy, change, or delete system data including one team that  downloaded 100 gigabytes, approximately 142 compact discs, of data.\nExample: Poor Password Management  The 2016 cyber attack on Dyn, a company  that serves as a key intermediary in directing  Internet traffic, disabled websites, such as  Twitter, Netflix, and CNN and brought down  the Internet in some regions. The attack used  malware to search the Internet for unsecured  devices, such as those that used factory- default usernames and passwords, and then  used those devices to send junk traffic to  online targets until they could not function.\nThe test reports indicated that test teams used nascent to moderate tools  and techniques to disrupt or access and take control of weapon systems.  For example, in some cases, simply scanning a system caused parts of  the system to shut down. One test had to be stopped due to safety  concerns after the test team scanned the system. This is a basic  technique that most attackers would use and requires little knowledge or  expertise. Poor password management was a common problem in the  test reports we reviewed. One test report indicated that the test team was  able to guess an administrator password in nine seconds. Multiple  weapon systems used commercial or open source software, but did not  change the default password when the software was installed, which  allowed test teams to look up the password on the Internet and gain  administrator privileges for that software. Multiple test teams reported  using free, publicly available information or software downloaded from the  Internet to avoid or defeat weapon system security controls.\nTest reports we reviewed make it clear that simply having cybersecurity  controls does not mean a system is secure. How the controls are  implemented can significantly affect cybersecurity. For example, one test  report we reviewed indicated that the system had implemented role- based access control, but internal system communications were  unencrypted. Because the system\u2019s internal communications were  unencrypted, a regular user could read an administrator\u2019s username and  password and use those credentials to gain greater access to the system  and the ability to affect the confidentiality, integrity, or availability of the  system.\nPrograms Had Not Addressed Some Previously Identified  Vulnerabilities  Program offices were aware of some of the weapon system vulnerabilities  that test teams exploited because they had been identified in previous  cybersecurity assessments. For example, one test report indicated that  only 1 of 20 cyber vulnerabilities identified in a previous assessment had  been corrected. The test team exploited the same vulnerabilities to gain  control of the system. When asked why vulnerabilities had not been  addressed, program officials said they had identified a solution, but for  some reason it had not been implemented. They attributed it to contractor  error. Another test report indicated that the test team exploited 10  vulnerabilities that had been identified in previous assessments.\n\n\t\t\tDetect\n\nExample: Poor Detection  In the 2014 Office of Personnel  Management (OPM) cyber attack, attackers  exfiltrated personnel files of 4.2 million  government employees, security clearance  background information on 21 million  individuals, and fingerprint data of 5.6 million  of these individuals. Attackers used a  contractor\u2019s OPM credentials to log into the  OPM system, installed malware, and created  a backdoor to the network. These attackers  were in OPM\u2019s networks for at least 14  months. Over 2,000 pieces of malware were  later identified on OPM devices. detection. One test team emulated a denial of service attack by  rebooting the system, ensuring the system could not carry out its mission  for a short period of time. Operators reported that they did not suspect a  cyber attack because unexplained crashes were normal for the system.  Another test report indicated that the intrusion detection system correctly  identified test team activity, but did not improve users\u2019 awareness of test  team activities because it was always \u201cred.\u201d Warnings were so common  that operators were desensitized to them.\nA common way to detect cyber activity is to review logs of system activity  looking for unusual occurrences. Multiple test reports indicated that test  team activity was documented in system logs, but operators did not  review them. One test report noted that the system had no documented  procedures for reviewing logs.\n\n\t\t\tRespond\/Recover\n\nMultiple test reports indicated that operators did not effectively respond to  test team activities. In multiple tests, operators did not respond because,  as noted above, they were simply unaware of the test team activities. In  some cases, however, operators were unable to effectively respond even  when they identified or were notified that the test team had carried out an  attack. One test report indicated that operators identified test team  intrusion attempts and took steps to block the test team from accessing  the system. However, the test team was able to easily circumvent the  steps the operators took. In another case, the test team was able to  compromise a weapon system and the operators needed outside  assistance to restore the system.\n\n\t\tDOD Has Limited Insight into Weapon Systems Cybersecurity\n\nDOD does not know the full extent of its weapon systems cyber  vulnerabilities due to limitations on tests that have been conducted.  Cybersecurity assessments do not identify all vulnerabilities of the  systems that are tested. This is, in part, because cybersecurity  assessments do not reflect the full range of threats that weapon systems  may face in operation. Test teams reported that they portray realistic  threats and environments. However, the nature of tests imposes  limitations on testers that do not apply to potential adversaries. For  example, DOD officials said that most cybersecurity assessments are  conducted over a few days to a few weeks. One test report indicated that  the cybersecurity assessment was cut short due to external factors so the  test team only had 41 hours to work with the system. In contrast, DOD  officials we spoke to said that a determined adversary could spend  months or years targeting our systems.\nFurther, because test teams have a limited amount of time with a system,  they look for the easiest or most effective way to gain access, according  to DOD officials we met with and test reports we reviewed. They do not  identify all of the vulnerabilities that an adversary could exploit. DOT&E  noted that longer-term tests generally identify more cyber vulnerabilities  than shorter tests. DOD officials we spoke to said that the department has  increased the amount of long-term assessments it conducts in recent  years. Weapon systems cybersecurity assessments may also be limited  in the types of attacks that are portrayed so entire categories of  vulnerabilities are not currently addressed in some cyber assessments.  The test reports we reviewed tended to portray nascent to moderate  threats and generally did not target special components like industrial  control systems and non-Internet enabled devices which our adversaries  could target. Similarly, counterfeit parts pose cybersecurity risks to  weapon systems, but were not within the scope of the cybersecurity tests  that we reviewed.\nSystem-specific limitations can also affect test results. Officials from one  service test agency noted that in at least one case, they could not fully  assess a system\u2019s cybersecurity because portions of the system\u2019s  networks and data were proprietary. The system utilized the contractor\u2019s  corporate networks, which the test team was not allowed to attack. In  several tests, a weapon system\u2019s connections to external systems were  either limited or had to be simulated. One test report we reviewed noted  that the test team was not allowed to use classified networks to attack a  weapon system due to security concerns. Another test was conducted in  a lab environment so the test team had to simulate external  communications. Although there are practical reasons for limiting the  duration and scope of cybersecurity assessments, these limitations mean  that DOD may not fully understand the extent of weapon system cyber  vulnerabilities, as is reflected in figure 5.\nMany program officials we met with indicated that their systems were  secure, including some with programs that had not had a cybersecurity  assessment. Some systems have not yet undergone testing either  because they are not far enough along in the acquisition process,  because they were fielded prior to DOD\u2019s emphasis on penetration  testing, or out of concern that cybersecurity tests would interfere with  operations. Systems that have not been tested are not necessarily more  or less secure than systems that have been assessed. DOD does not  know the extent to which these systems have cyber vulnerabilities.\nProgram officials cited the security controls they applied as the basis for  their belief that their systems were secure. For example, officials from a  DOD agency we met with expressed confidence in the cybersecurity of  their systems, but could not point to test results to support their beliefs.  Instead, they identified a list of security controls they had implemented.  However, security controls must be properly designed and implemented  in order to be effective. As we noted earlier, test teams routinely found  and defeated poorly implemented security controls. Officials we spoke to  stated that controls are necessary, but not sufficient, and penetration test  results\u2014rather than compliance documentation\u2014are better indicators of  a system\u2019s security.\nFor programs that have had cybersecurity assessments, some program  officials we met with questioned the validity of the results because of  concerns about the realism of the assessments. For example, officials  from one program noted that the testers were given more system  information and access than an adversary would have. Officials from  another program noted that testers asked for detailed information about  the system\u2019s design. These officials stated that cyber assessments were  unrealistic if they relied on the program office to identify problem areas for  the test team. However, test organizations and NSA officials we met with  dismissed these observations, noting that adversaries are not subject to  the types of limitations imposed on test teams, such as time constraints  and limited funding\u2014and this information and access are granted to  testers to more closely simulate moderate to advanced threats.\n\n\tDOD Has Begun Taking Steps to Improve Weapon Systems Cybersecurity\n\nOver the past few years, DOD has taken several major steps to improve  weapon systems cybersecurity. DOD issued and updated numerous  policies and guidance to improve the department\u2019s development of cyber  resilient systems. These include improvements such as specifying that  cybersecurity policies apply to weapon systems and requiring more focus  on cybersecurity throughout a weapon system\u2019s acquisition life cycle.  DOD and Congress have also begun promising initiatives to help DOD  improve its understanding of its weapon systems cyber vulnerabilities and  take steps to mitigate their risks. However, DOD faces barriers that may  limit its ability to achieve desired improvements. For example, DOD is  struggling to hire and retain cybersecurity personnel, who are essential to  implementing these changes. In addition, DOD faces barriers to  information sharing, which hinder its ability to share vulnerability and  threat information within and across programs. To improve the state of  weapon systems cybersecurity, it is essential that DOD sustain its  momentum in developing and implementing key initiatives.\n\n\t\tDOD Has Issued and Updated Policies and Guidance\n\nSince 2014, DOD has issued or updated at least 15 department-wide  policies, guidance documents, and memorandums intended to promote  more cyber secure weapon systems, some of which are highlighted in  table 3.\nOne of the more significant changes is that DOD\u2019s existing cybersecurity  policies now explicitly apply to weapon systems. DOD officials said the  department has had cybersecurity policies in place for decades, but  applied them to weapon systems only in the past few years. For example,  DOD\u2019s Risk Management Framework (RMF) is similar to its  predecessor\u2014DOD\u2019s Information Assurance Certification and  Accreditation Process\u2014which called for application of an extensive series  of controls to protect DOD networks and information systems. However,  RMF applies these controls more widely to weapon systems  cybersecurity. Another important change is that, in recognition that  systems cannot be 100 percent secure, DOD has begun to emphasize  cyber resiliency in some of its policies. The idea behind cyber resiliency is  to identify and protect key elements of a system to ensure that they can  continue to operate, possibly with limited capabilities, during a cyber  attack. This entails designing in features such as durability, redundancy,  and added protections for certain components.\nLastly, key policies that govern the requirements and acquisition  processes now address cybersecurity. These changes have the potential  to bring greater attention to cybersecurity in weapon systems  acquisitions. Rather than being treated as distinct from the acquisition  process, cybersecurity is to be integrated into key acquisition activities,  such as requirements development, technology maturation, and testing.  Examples of this, as called for in various policies, include the following:\nRequirements. Identify cybersecurity requirements and how the  information flows into, out of, and through the systems. This helps  identify the system\u2019s attack surface and informs the system\u2019s design  and cybersecurity controls. Cybersecurity should become part of the  requirements trade space.\nTechnology maturation. Focus early prototyping in part on buying  down cybersecurity risks prior to system development. Cybersecurity  controls should be applied and assessed during prototyping to  evaluate cyber risks and inform down-selection and adjustment of  requirements.\nDepartment of Defense, DOD Program Manager\u2019s Guidebook for Cybersecurity (Sept.  2015).\nDevelopmental testing. Test the cybersecurity of weapon systems  as they are developed, including integration of larger subsystems and,  ultimately, the entire system. Perform cybersecurity assessments in  representative operating environments during developmental testing.\nOperational testing. Conduct operational cybersecurity testing of  weapon systems to include other systems that exchange information  with the system under test (system-of-systems to include the network  environment), end users, administrators, and cyber defenders. Reflect  representative cyber threats.\nThese extensive changes to policies and guidance, which adopt a similar  risk-based framework to that already generally in place government-wide,  appear to be a step in the right direction to increase the department\u2019s  emphasis on weapon systems cybersecurity. However, they are also  relatively new for DOD, so it is too early to assess whether they are  resulting in improved weapon systems cybersecurity. For example,  changes to the requirements process apply primarily to new programs so  it could be many years before systems that have gone through the new  process undergo operational testing and are fielded.\n\n\t\tDOD Has Undertaken Initiatives, in Part Directed by Congress, to Help Understand and Address Weapon Systems\u2019 Cyber Vulnerabilities\n\nSection 1647 of the National Defense Authorization Act for Fiscal Year  2016 requires the Secretary of Defense to evaluate the cyber  vulnerabilities of each DOD weapon system by the end of 2019 and  develop strategies to mitigate risks stemming from those vulnerabilities.  In response to this direction and The DOD Cyber Strategy, which also  calls for DOD to assess and initiate improvements to the cybersecurity of  current and future weapons systems, DOD is taking steps to improve its  understanding of its weapon systems\u2019 vulnerabilities, determine how to  mitigate risks from those vulnerabilities, and inform future development of  more secure systems. The Office of the Under Secretary of Defense  (Acquisition and Sustainment) is leading this initiative in collaboration with  military test organizations. DOD is compiling existing vulnerability  information and conducting some new tests to provide information about  the cybersecurity posture of individual systems, concentrating mostly on  fielded systems. These assessments are important, in part because some  of those systems did not undergo cybersecurity testing prior to fielding  and DOD does not have a permanent process in place to periodically  assess the cybersecurity of fielded systems. Furthermore, vulnerabilities  and risks can change after fielding as system software becomes obsolete.\nAs part of this initiative, for two mission areas, the Office of the Under  Secretary of Defense (Acquisition and Sustainment) has been trying to  incorporate cybersecurity into large scale military exercises to take a  more integrated look at impacts of vulnerabilities across systems. The  goal is to understand how vulnerabilities in some systems may affect  DOD\u2019s ability to achieve its mission and to identify what other options are  available to complete a mission if certain capabilities were disabled or  degraded. This work is also important, but for different reasons. DOD\u2019s  developmental and operational tests focus primarily on vulnerabilities in  individual systems rather than across broader mission areas. However,  as previously discussed, attackers do not necessarily limit themselves to  one system and may move from one system to others. Furthermore, DOD  has not previously had a process in place to examine how cyber attacks  on one system could affect entire missions.\nTaken together, the system-specific and mission-focused activities could  help DOD develop a more comprehensive understanding of its  cybersecurity posture\u2014the overall strength of its cybersecurity. Officials  working on these assessments plan to use what they learn to help inform  the acquisition of future weapon systems. Specifically, they plan to share  lessons with DOD test organizations, the Office of the Chief Information  Officer, Office of the Under Secretary of Defense (Research and  Engineering), and others in the Office of the Under Secretary of Defense  (Acquisition and Sustainment).\nSimilarly, the military services have established weapon system  cybersecurity-focused offices to improve their cybersecurity posture,  which are described briefly in table 4.\nAlthough all of these activities promise to help DOD improve its  cybersecurity posture over time, they are also relatively new for DOD.  They will need sustained momentum to achieve changes over the  lifecycle of acquisition programs, so it is too early to tell if they will be  successful over the long term. According to multiple agency officials and  our analysis of policy and guidance changes since 2014, DOD leadership  has become more aware of cybersecurity issues over the past several  years and has driven many of these cybersecurity activities. However, our  prior work has found sustained leadership support of DOD initiatives to be  key to maintaining their momentum. We also reported that there is risk  that DOD will not fully implement some tasks it has begun to improve  weapon systems cybersecurity if leadership does not continue to monitor  their progress. For example, we reported in 2017 that DOD\u2019s Principal  Cyber Advisor closed out the task on assessing weapon systems called  for under The DOD Cyber Strategy. We recommended that the Cyber Advisor modify criteria for closing tasks to reflect whether tasks have  been implemented and re-evaluate tasks that have been previously  determined to be completed.\n\n\t\tDOD Faces Systemic Barriers to Improving Weapon Systems Cybersecurity\n\nDOD faces barriers that will challenge its ability to develop more cyber  resilient weapon systems and make it more difficult for DOD\u2019s recent  policy changes and new initiatives to be as effective as possible.\n\n\t\t\tCybersecurity Workforce Challenges\n\nDOD struggles to hire and retain cybersecurity personnel, particularly  those with weapon systems cybersecurity expertise. Our prior work has  shown that maintaining a cybersecurity workforce is a challenge  government-wide and that this issue has been a high-priority across the  government for years. Program officials from a majority of the programs  and test organizations we met with said they have difficulty hiring and  retaining people with the right expertise, due to issues such as a shortage  of qualified personnel and private sector competition. Test officials said  that once their staff members have gained experience in DOD, they tend  to leave for the private sector, where they can command much higher  salaries. According to a 2014 RAND study, personnel at the high end of  the capability scale, who are able to detect the presence of advanced  threats, or finding the hidden vulnerabilities in software and systems, can  be compensated above $200,000 to $250,000 a year, which greatly  exceeds DOD\u2019s pay scale.\nEven when cybersecurity positions are filled, it may not necessarily be  with the right expertise. Officials from some program offices said that  general cybersecurity expertise is not the same as weapon systems  cybersecurity expertise. For example, officials said that professional IT  certifications are not the same as systems security engineering expertise,  which is essential to designing cyber-resilient systems. According to  various program officials, weapon systems cybersecurity is a specialized  area. Cybersecurity subject matter experts require knowledge of (1)  DOD\u2019s acquisition process; (2) technical knowledge of the specific  weapon system\u2014such as radar or aircraft, and (3) cybersecurity  knowledge. However, it is difficult to hire and maintain a workforce with  the needed knowledge due to its highly specialized nature. Without this  expertise, it will be difficult for programs to effectively implement  cybersecurity policies and guidance. For example, the RMF allows  programs to determine which controls are most appropriate to apply, but  a knowledgeable workforce is necessary for making such decisions.\nDOD has various efforts underway to recruit and develop the skills of  DOD\u2019s cybersecurity workforce, according to several DOD officials. For  example, the services are aiming to recruit cybersecurity analysts by  using internships and engaging in partnerships with secondary schools  and universities. In addition, the services are developing and offering  courses to grow expertise within their existing acquisition workforce. DOD  is determining how to share specialized expertise related to weapon  systems cybersecurity. Specific efforts related to this include the Cyber  Developmental Test Cross Service Working Group that meets quarterly  and invites industry expertise to present cutting edge techniques as well  as a \u201ccapture the flag\u201d competition, which will now be offered to other  services as well. In addition, Navy Systems Commands employees  participate in periodic regional cyber competitions to hone knowledge  learned in classroom environments and use training funds to pursue  additional or higher degrees and cyber certificate programs.\nOfficials from many of the offices we interviewed, as well as the National  Research Council, DSB, and RAND have expressed concerns about  barriers to information sharing. It is difficult to find the correct balance  between protecting information, so that it is not accessible to potential  adversaries, and sharing it, so that DOD has an informed workforce. For  example, classification is important because it protects information about  vulnerabilities, and in some cases, intelligence methods. Access to  information about vulnerabilities makes it easier for potential adversaries  to attack DOD systems. Similarly, limiting the distribution of classified  information to those who have the need to know is likewise important  because it reduces the likelihood that internal and external threats will  access it. Although DOD officials explained that there is no DOD-wide  cybersecurity classification guidance, Air Force guidance and DOD  officials indicated that vulnerabilities in fielded systems are typically  classified as at least Top Secret or Top Secret\/Sensitive Compartmented  Information, and details of threats are more restricted. This high level of  classification for weapon systems cyber vulnerabilities and threats helps  protect sensitive information, but it makes it difficult for DOD to share  information about aspects of weapon systems cybersecurity with  cybersecurity personnel across DOD. For example, some experts told us  that flawed designs can still be found in new systems if their designers  were not aware that they resulted in vulnerabilities in other systems. More  generally, because they are not sharing vulnerability and threat  information across programs, programs are unaware of their full risk  exposure and DOD may have less insight into vulnerabilities across its  weapon systems portfolio. Officials from most organizations we spoke to,  including NSA, acknowledged challenges with sharing information across  all levels within DOD. Examples of these challenges are listed in table 5.\nAlthough limitations to information sharing can lead to inefficiencies and  other challenges, DOD has so far opted to favor protection of  information\u2014perhaps because the stakes are so high if it does not. As we  mentioned previously, one of the reasons potential adversaries collect  information on weapon systems is because the better they understand a  weapon system, and especially what vulnerabilities it may have, the more  options they have to attack it. Reports over the years about cyber  espionage attacks on defense contractors show that concerns about  protecting sensitive information are warranted.\n\n\tAgency Comments\n\nWe provided a draft of this report to DOD for review and comment. DOD  provided technical comments, which we incorporated where appropriate.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; and the Secretaries of the Army,  Navy, and Air Force. In addition, the report will be available at no charge  on GAO\u2019s website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at 202-512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV.\n\nAppendix I: Scope and Methodology\n\nTo identify factors that contribute to the current state of Department of  Defense (DOD) weapon systems cybersecurity, we reviewed reports  published from 1991 to the present on software, information technology,  networking, and weapon systems from the National Research Council,  the Defense Science Board, GAO, DOD\u2019s Director of Operational Test  and Evaluation, DOD\u2019s Joint Chiefs of Staff, and the RAND Corporation.  To inform our discussion of networking, we also reviewed concepts of  operations for selected systems of systems. To determine the extent to  which DOD focused on cybersecurity in weapon system acquisitions, we  analyzed selected information assurance, acquisition, requirements, and  testing policies and guidance. For this and all other objectives, we  conducted interviews with or obtained written responses from the  following organizations:\nOffice of the Secretary of Defense organizations: Office of the  Director, Operational Test and Evaluation; Office of the Deputy  Assistant Secretary of Defense for Developmental Test and  Evaluation; Office of the Chief Information Officer including the  Defense Information Systems Agency; Office of the Chairman of the  Joint Chiefs of Staff; Office of the Under Secretary of Defense  (Acquisition and Sustainment); and Office of the Under Secretary of  Defense (Research and Engineering).\nMilitary service test organizations: Air Force Operational Test and  Evaluation Center, Army Operational Test and Evaluation Command,  Navy\u2019s Commander Operational Test and Evaluation Force, and  Marine Corps Operational Test and Evaluation Activity.\nSelected program offices reflecting a purposeful sample of nine major  defense acquisition program offices. We identified a variety of  program offices to represent each service, multiple domains, and  programs that are extensively connected to other weapons systems.  We are not listing the names of these offices for sensitivity reasons.\nOther key DOD organizations with cybersecurity responsibilities: the  National Security Agency, Defense Information Systems Agency, and  U.S. Cyber Command.\nSelected organizations with cybersecurity expertise, referred to as  \u201cexperts\u201d in the report: Carnegie Melon\u2019s Software Engineering  Institute, the MITRE Corporation, the RAND Corporation, Pacific  Northwest National Laboratory, Sandia National Laboratory, and  Renaissance Strategic Advisors. We selected these based on their  research or roles advising DOD on weapon systems cybersecurity- related topics.\nTo identify vulnerabilities in weapon systems under development, we  reviewed cyber assessment reports of selected weapon systems  conducted between 2012 and 2017. We selected at least one program  from each service as well as different types of weapon systems (e.g.,  aircraft vs ships vs communication systems). To gain further insights into  assessment findings and understand their limitations, we interviewed  officials from the Office of the Secretary of Defense and military test  service organizations. We discussed the cybersecurity of individual  programs, implementation of controls, and assessment findings with  program offices. We also interviewed officials from several organizations  with cybersecurity expertise to discuss weapon system vulnerabilities and  test limitations. Vulnerabilities for specific weapon systems are classified,  so we have not identified the programs covered in these test reports. The  examples we cite are unique to each weapon system and are not  applicable to all weapon systems. Furthermore, cybersecurity  assessment findings are as of a specific date so vulnerabilities identified  during system development may no longer exist when the system is  fielded.\nTo determine the steps DOD is taking to develop more cyber resilient  weapon systems, we analyzed key DOD information  assurance\/cybersecurity, acquisition, requirements, and testing policies  and guidance that have been updated since 2014 to better address  weapon systems cybersecurity. We selected 2014 because DOD began  revising several policies at that time. These include DOD\u2019s Risk  Management Framework, Department of Defense Instruction 8500.01,  Cybersecurity; the Department of Defense Instruction 5000.2, Operation  of the Defense Acquisition System; DOD Program Manager\u2019s Guidebook  for Integrating the Cybersecurity Risk Management Framework into the  System Acquisition Lifecycle; the Joint Capabilities Integration and  Development System Manual; the Cyber Survivability Endorsement  Implementation Guide; and the DOD Cybersecurity Test and Evaluation  Guidebook. To identify barriers DOD faces in developing cyber resilient  systems and implementing updated cybersecurity policies and guidance,  we interviewed Office of the Secretary of Defense, military service test  organizations, selected program offices, other DOD organizations,  experts, and operators.\nWe took additional precautions to avoid revealing sensitive information.  We illustrated some concepts using notional depictions. In some cases,  we were deliberately vague and excluded details from examples to avoid  identifying specific weapon systems. We also presented examples of  publicly known attacks in sidebars to illustrate how poor cybersecurity can  enable cyber attacks. DOD conducted a security review of the report and  approved it for public release.\n\nAppendix II: Examples of Types of Cyber Attacks\n\nAppendix III: Roles and Responsibilities for Cybersecurity in the Department of Defense\n\n\tCybersecurity Roles and Responsibilities\n\nThe Department of Defense (DOD) is responsible for defending the U.S.  homeland and interests from attack, including those that occur in  cyberspace and has developed capabilities for cyber operations. In order  to achieve this objective, the department must be able to defend its own  networks, systems, and information from cyber attack. To establish a  cybersecurity program to protect and defend DOD information and  information technology, DOD has assigned some of its components and  senior officials with a variety of cybersecurity responsibilities, some of  which are described below.\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nCristina T. Chaplain (202) 512-4841 or chaplainc@gao.gov.\n\n\tStaff Acknowledgements\n\nIn addition to the contact named above, Raj Chitikila (Assistant Director),  Brandon Booth, Laura Greifner, L.T. Holliday, Katherine Pfeiffer, James  Tallon, Jacqueline Wade, and Robin Wilson made key contributions to  this report. Assistance was also provided by Tommy Baril, Nabajyoti  Barkakati, Mark Canter, Virginia Chanley, Kurt Gurka, Joseph  Kirschbaum, Jeff Knott, Duc Ngo, and Gregory Wilshusen.","output":"Why GAO Did This Study\n\nDOD plans to spend about $1.66 trillion to develop its current portfolio of major weapon systems. Potential adversaries have developed advanced cyber-espionage and cyber-attack capabilities that target DOD systems. Cybersecurity\u2014the process of protecting information and information systems\u2014can reduce the likelihood that attackers are able to access our systems and limit the damage if they do.\nGAO was asked to review the state of DOD weapon systems cybersecurity. This report addresses (1) factors that contribute to the current state of DOD weapon systems' cybersecurity, (2) vulnerabilities in weapons that are under development, and (3) steps DOD is taking to develop more cyber resilient weapon systems.\nTo do this work, GAO analyzed weapon systems cybersecurity test reports, policies, and guidance. GAO interviewed officials from key defense organizations with weapon systems cybersecurity responsibilities as well as program officials from a non-generalizable sample of nine major defense acquisition program offices.\n\nWhat GAO Found\n\nThe Department of Defense (DOD) faces mounting challenges in protecting its weapon systems from increasingly sophisticated cyber threats. This state is due to the computerized nature of weapon systems; DOD's late start in prioritizing weapon systems cybersecurity; and DOD's nascent understanding of how to develop more secure weapon systems. DOD weapon systems are more software dependent and more networked than ever before (see figure).\nAutomation and connectivity are fundamental enablers of DOD's modern military capabilities. However, they make weapon systems more vulnerable to cyber attacks. Although GAO and others have warned of cyber risks for decades, until recently, DOD did not prioritize weapon systems cybersecurity. Finally, DOD is still determining how best to address weapon systems cybersecurity.\nIn operational testing, DOD routinely found mission-critical cyber vulnerabilities in systems that were under development, yet program officials GAO met with believed their systems were secure and discounted some test results as unrealistic. Using relatively simple tools and techniques, testers were able to take control of systems and largely operate undetected, due in part to basic issues such as poor password management and unencrypted communications. In addition, vulnerabilities that DOD is aware of likely represent a fraction of total vulnerabilities due to testing limitations. For example, not all programs have been tested and tests do not reflect the full range of threats.\nDOD has recently taken several steps to improve weapon systems cybersecurity, including issuing and revising policies and guidance to better incorporate cybersecurity considerations. DOD, as directed by Congress, has also begun initiatives to better understand and address cyber vulnerabilities. However, DOD faces barriers that could limit the effectiveness of these steps, such as cybersecurity workforce challenges and difficulties sharing information and lessons about vulnerabilities. To address these challenges and improve the state of weapon systems cybersecurity, it is essential that DOD sustain its momentum in developing and implementing key initiatives. GAO plans to continue evaluating key aspects of DOD's weapon systems cybersecurity efforts.\n\nWhat GAO Recommends\n\nGAO is not making any recommendations at this time. GAO will continue to evaluate this issue."}
{"id":"crs_RL33243","pid":"crs_RL33243_0","input":"\tIntroduction\n\nEstablished in 1953, the Small Business Administration's (SBA's) origins can be traced to the Great Depression of the 1930s and World War II, when concerns about unemployment and war production were paramount. The SBA assumed some of the functions of the Reconstruction Finance Corporation (RFC), which had been created by the federal government in 1932 to provide funding for businesses of all sizes during the Depression and later financed war production. During the early 1950s, the RFC was disbanded following charges of political favoritism in the granting of loans and contracts.\nIn 1953, Congress passed the Small Business Act (P.L. 83-163), which authorized the SBA. The act specifies that the SBA's mission is to promote the interests of small businesses to enhance competition in the private marketplace:\nIt is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.\nThe SBA currently administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in these programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs.\nThis report provides an overview of the SBA's programs and funding. It also references other CRS reports that examine the SBA's programs in greater detail.\nThe SBA's FY2020 congressional budget justification document includes funding and program costs for the following programs and offices:\n1. entrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, Entrepreneurial Education, Native American Outreach, PRIME, the State Trade Expansion Program, and veterans' programs); 2. disaster assistance; 3. capital access programs (including the 7(a) loan guaranty program, the 504\/Certified Development Company [CDC] loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); 4. contracting programs (including the 7(j) Management and Technical Assistance program, the 8(a) Minority Small Business and Capital Ownership Development program, the Historically Underutilized Business Zones [HUBZones] program, the Prime Contract Assistance program, the Women's Business program, the Subcontracting program, and the Surety Bond Guarantee program); 5. regional and district offices (counseling, training, and outreach services); 6. the Office of Inspector General (OIG); 7. capital investment programs (including the Small Business Investment Company [SBIC] program, the New Market Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators); 8. the Office of Advocacy; and 9. executive direction programs (the National Women's Business Council, Office of Ombudsman, and Faith-Based Initiatives).\n Table 1 shows the SBA's estimated costs in FY2019 for these program areas. Program costs often differ from new budget authority provided in annual appropriations acts because the SBA has specified authority to carry over appropriations from previous fiscal years. The SBA also has limited, specified authority to shift appropriations among various programs.\n\n\tDisaster Loans\n\n\t\tOverview4\n\nSBA disaster assistance is provided in the form of loans, not grants, which must be repaid to the federal government. The SBA's disaster loans are unique in two respects: they are the only loans made by the SBA that (1) go directly to the ultimate borrower and (2) are not limited to small businesses.\nSBA disaster loans are available to individuals, businesses, and nonprofit organizations in declared disaster areas. About 80% of the SBA's direct disaster loans are issued to individuals and households (renters and property owners) to repair and replace homes and personal property. In recent years, the SBA Disaster Loan Program has been the subject of regular congressional and media attention because of concerns expressed about the time it takes the SBA to process disaster loan applications. The SBA disbursed $401 million in disaster loans in FY2016, $889 million in FY2017, and $3.59 billion in FY2018.\n\n\t\tTypes of Disaster Loans\n\nThe SBA Disaster Loan Program includes the following categories of loans for disaster-related losses: home disaster loans, business physical disaster loans, and economic injury disaster loans.\n\n\t\t\tDisaster Loans to Homeowners, Renters, and Personal Property Owners\n\nHomeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to the SBA for loans to help recover losses from a declared disaster. Only victims located in a declared disaster area (and contiguous counties) are eligible to apply for disaster loans. Disaster declarations are \"official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills.\" Five categories of declarations put the SBA Disaster Loan Program into effect. These include two types of presidential major disaster declarations as authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) and three types of SBA declarations.\nThe SBA's Home Disaster Loan Program falls into two categories: personal property loans and real property loans. These loans are limited to uninsured losses. The maximum term for SBA disaster loans is 30 years, but the law restricts businesses with credit available elsewhere to a maximum 7-year term. The SBA sets the installment payment amount and corresponding maturity based upon each borrower's ability to repay.\n\n\t\t\tPersonal Property Loans\n\nA personal property loan provides a creditworthy homeowner or renter with up to $40,000 to repair or replace personal property items, such as furniture, clothing, or automobiles, damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences and cannot be used to replace extraordinarily expensive or irreplaceable items, such as antiques or recreational vehicles. Interest rates vary depending on whether applicants are able to obtain credit elsewhere. For applicants who can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants who cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year.\n\n\t\t\tReal Property Loans\n\nA creditworthy homeowner may apply for a real property loan of up to $200,000 to repair or restore his or her primary residence to its predisaster condition. The loans may not be used to upgrade homes or build additions, unless upgrades or changes are required by city or county building codes. The interest rate for real property loans is determined in the same way as it is determined for personal property loans. \n\n\t\t\tDisaster Loans to Businesses and Nonprofit Organizations\n\nSeveral types of loans, discussed below, are available to businesses and nonprofit organizations located in counties covered by a presidential disaster declaration. In certain circumstances, the SBA will also make these loans available when a governor, the Secretary of Agriculture, or the Secretary of Commerce makes a disaster declaration. Physical disaster loans are available to almost any nonprofit organization or business. Other business disaster loans are limited to small businesses.\n\n\t\t\tPhysical Disaster Loan\n\nAny business or nonprofit organization, regardless of size, can apply for a physical disaster business loan of up to $2 million for repairs and replacements to real property, machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Physical disaster loans for businesses may use up to 20% of the verified loss amount for mitigation measures in an effort to prevent loss from a similar disaster in the future. Nonprofit organizations that are rejected or approved by the SBA for less than the requested amount for a physical disaster loan are, in some circumstances, eligible for grants from the Federal Emergency Management Agency (FEMA). For applicants that can obtain credit without SBA assistance, the interest rate may not exceed 8% per year. For applicants that cannot obtain credit without SBA assistance, the interest rate may not exceed 4% per year.\n\n\t\t\tEconomic Injury Disaster Loans\n\nEconomic injury disaster loans (EIDLs) are limited to small businesses as defined by the SBA's size regulations, which vary from industry to industry. If the Secretary of Agriculture designates an agriculture production disaster, small farms and small cooperatives are eligible. EIDLs are available in the counties included in a presidential disaster declaration and contiguous counties. The loans are designed to provide small businesses with operating funds until those businesses recover. The maximum loan is $2 million, and the terms are the same as personal and physical disaster business loans. The loan can have a maturity of up to 30 years and has an interest rate of 4% or less.\n\n\tEntrepreneurial Development Programs17\n\nThe SBA's entrepreneurial development (ED) noncredit programs provide a variety of management and training services to small businesses. Initially, the SBA provided its own management and technical assistance training programs. Over time, the SBA has come to rely increasingly on third parties to provide that training. \nThe SBA receives appropriations for seven ED programs and two ED initiatives:\nSmall Business Development Centers (SBDCs); the Microloan Technical Assistance Program; Women Business Centers (WBCs); SCORE; the Program for Investment in Microentrepreneurs (PRIME); Veterans Programs (including Veterans Business Outreach Centers, Boots to Business, Veteran Women Igniting the Spirit of Entrepreneurship [VWISE], Entrepreneurship Bootcamp for Veterans with Disabilities, and Boots to Business: Reboot); the Native American Outreach Program (NAO); the Entrepreneurial Development Initiative (Regional Innovation Clusters); and the Entrepreneurship Education Initiative.\nFY2019 appropriations for these programs are $131 million for SBDCs, $31 million for the Microloan Technical Assistance Program, $18.5 million for WBCs, $11.7 million for SCORE, $5 million for PRIME, $12.7 million for Veterans Programs, $2 million for NAO, $5 million for the Entrepreneurial Development Initiative (Regional Innovation Clusters), and $3.5 million for the Entrepreneurship Education Initiative.\nFour additional programs are provided recommended funding in appropriations acts under ED programs, but are discussed in other sections of this report because of the nature of their assistance: (1) the SBA's Growth Accelerators Initiative ($2 million in FY2019) is a capital investment program and is discussed in the capital access programs section; (2) the SBA's 7(j) Technical Assistance Program ($2.8 million in FY2019) provides contacting assistance and is discussed in the contracting programs section; (3) the National Women's Business Council ($1.5 million in FY2019) is a bipartisan federal advisory council and is discussed in the executive direction programs section; and (4) the State Trade Expansion Program (STEP, $18 million in FY2019) provides grants to states to support export programs that assist small business concerns. STEP is discussed in the capital access programs' international trade and export promotion programs subsection.\nThe SBA reports that over 1 million aspiring entrepreneurs and small business owners receive training from an SBA-supported resource partner each year. Some of this training is free, and some is offered at low cost.\nSBDCs provide free or low-cost assistance to small businesses using programs customized to local conditions. SBDCs support small business in marketing and business strategy, finance, technology transfer, government contracting, management, manufacturing, engineering, sales, accounting, exporting, and other topics. SBDCs are funded by grants from the SBA and matching funds. There are 63 lead SBDC service centers, one located in each state (four in Texas and six in California), the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and American Samoa. These lead SBDC service centers manage more than 900 SBDC outreach locations.\nThe SBA's Microloan Technical Assistance program is part of the SBA's Microloan program but receives a separate appropriation. It provides grants to Microloan intermediaries to offer management and technical training assistance to Microloan program borrowers and prospective borrowers. There are currently 147 active Microloan intermediaries serving 49 states, the District of Columbia, and Puerto Rico. \nWBCs are similar to SBDCs, except they concentrate on assisting women entrepreneurs. There are currently 121 WBCs, with at least one WBC in most states and territories.\nSCORE was established on October 5, 1964, by then-SBA Administrator Eugene P. Foley as a national, volunteer organization, uniting more than 50 independent nonprofit organizations into a single, national nonprofit organization. SCORE's 320 chapters and more than 800 branch offices are located throughout the United States and partner with more than 11,000 volunteer counselors, who are working or retired business owners, executives, and corporate leaders, to provide management and training assistance to small businesses.\nPRIME provides SBA grants to nonprofit microenterprise development organizations or programs that have \"a demonstrated record of delivering microenterprise services to disadvantaged entrepreneurs; an intermediary; a microenterprise development organization or program that is accountable to a local community, working in conjunction with a state or local government or Indian tribe; or an Indian tribe acting on its own, if the Indian tribe can certify that no private organization or program referred to in this paragraph exists within its jurisdiction.\"\nThe SBA's Office of Veterans Business Development (OVBD) administers several management and training programs to assist veteran-owned businesses, including 22 Veterans Business Outreach Centers which provide \"entrepreneurial development services such as business training, counseling and resource partner referrals to transitioning service members,\u00a0veterans,\u00a0National Guard & Reserve members and military spouses interested in starting or growing a small business.\"\nThe SBA's Office of Native American Affairs provides management and technical educational assistance to Native Americans (American Indians, Alaska natives, native Hawaiians, and the indigenous people of Guam and American Samoa) to start and expand small businesses.\nThe SBA reports that \"regional innovation clusters are on-the-ground collaborations between business, research, education, financing and government institutions that work to develop and grow the supply chain of a particular industry or related set of industries in a geographic region.\" The SBA has supported the Entrepreneurial Development Initiative (Regional Innovation Clusters) since FY2009, and the initiative has received recommended appropriations from Congress since FY2010.\nThe SBA's Entrepreneurship Education initiative provides assistance to high-growth small businesses in underserved communities through the Emerging Leaders initiative and the SBA Learning Center. The Emerging Leaders initiative is a seven\u2010month executive leader education series consisting of \"more than 100 hours of specialized training, technical support, access to a professional network, and other resources to strengthen their businesses and promote economic development.\" At the conclusion of the training, \"participants produce a three\u2010year strategic growth action plan with benchmarks and performance targets that help them access the necessary support and resources to move forward for the next stage of business growth.\" The Learning Center is the SBA's primary online training service, which offers free online courses on business planning, marketing, government contracting, accounting, and social media, providing learners an \"opportunity to access entrepreneurship education resources through toolkits, fact sheets, infographic tip sheets, instructor guides, and audio content.\"\n\n\tCapital Access Programs\n\n\t\tOverview\n\nThe SBA has authority to make direct loans but, with the exception of disaster loans and loans to Microloan program intermediaries, has not exercised that authority since 1998. The SBA indicated that it stopped issuing direct business loans primarily because the subsidy rate was \"10 to 15 times higher\" than the subsidy rate for its loan guaranty programs. Instead of making direct loans, the SBA guarantees loans issued by approved lenders to encourage those lenders to provide loans to small businesses \"that might not otherwise obtain financing on reasonable terms and conditions.\" With few exceptions, to qualify for SBA assistance, an organization must be both a business and small.\n\n\t\t\tWhat Is a Business?\n\nTo participate in any of the SBA programs, a business must meet the Small Business Act's definition of small business . This is a business that\nis organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; is not dominant in its field on a national basis; and does not exceed size standards established, and updated periodically, by the SBA. \nThe business may be a sole proprietorship, partnership, corporation, or any other legal form.\n\n\t\t\tWhat Is Small?32\n\nThe SBA uses two measures to determine if a business is small: SBA-derived industry specific size standards or a combination of the business's net worth and net income. For example, businesses participating in the SBA's 7(a) loan guaranty program are deemed small if they either meet the SBA's industry-specific size standards for firms in 1,047 industrial classifications in 18 subindustry activities described in the North American Industry Classification System (NAICS) or do not have more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carryover losses) for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard.\nThe SBA's industry size standards vary by industry, and they are based on one of the following four measures: the firm's (1) average annual receipts in the previous three years, (2) number of employees, (3) asset size, or (4) for refineries, a combination of number of employees and barrel per day refining capacity. Historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small and average annual receipts for most other industries.\nThe SBA's size standards are designed to encourage competition within each industry; they are derived through an assessment of the following four economic factors: \"average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms.\" The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\" \n\n\t\tLoan Guarantees\n\n\t\t\tOverview\n\nThe SBA provides loan guarantees for small businesses that cannot obtain credit elsewhere. Its largest loan guaranty programs are the 7(a) loan guaranty program, the 504\/CDC loan guaranty program, international trade and export promotion programs, and the Microloan program.\nThe SBA's loan guaranty programs require personal guarantees from borrowers and share the risk of default with lenders by making the guaranty less than 100%. In the event of a default, the borrower owes the amount contracted less the value of any collateral liquidated. The SBA can attempt to recover the unpaid debt through administrative offset, salary offset, or IRS tax refund offset. Most types of businesses are eligible for loan guarantees, but a few are not. A list of ineligible businesses (such as insurance companies, real estate investment firms, firms involved in financial speculation or pyramid sales, and businesses involved in illegal activities) is contained in 13 C.F.R. Section 120.110. With one exception, nonprofit and charitable organizations are also ineligible.\nAs shown in the following tables, most of these programs charge fees to help offset program costs, including costs related to loan defaults. In most instances, the fees are set in statute. For example, for 7(a) loans with a maturity exceeding 12 months, the SBA is authorized to charge lenders an up-front guaranty fee of up to 2% for the SBA guaranteed portion of loans of $150,000 or less, up to 3% for the SBA guaranteed portion of loans exceeding $150,000 but not more than $700,000, and up to 3.5% for the SBA guaranteed portion of loans exceeding $700,000. Lenders with a 7(a) loan that has a SBA guaranteed portion in excess of $1 million can be charged an additional fee not to exceed 0.25% of the guaranteed amount in excess of $1 million. \n7(a) loans are also subject to an ongoing servicing fee not to exceed 0.55% of the outstanding balance of the guaranteed portion of the loan. In addition, lenders are authorized to collect fees from borrowers to offset their administrative expenses.\nIn an effort to assist small business owners, in FY2019, the SBA is waiving\nthe annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019; and pursuant to P.L. 114-38 , the Veterans Entrepreneurship Act of 2015, the up-front, one-time guaranty fee on all veteran loans under the 7(a) SBAExpress program (up to and including $350,000).\nThe SBA's goal is to achieve a zero subsidy rate, meaning that the appropriation of budget authority for new loan guaranties is not required. \nAs shown in Table 2 , the SBA's fees and proceeds from loan liquidations do not always generate sufficient revenue to cover loan losses, resulting in the need for additional appropriations to account for the shortfall. However, \"due to the continued improvement in performance in the loan portfolio,\" the SBA did not request funding for credit subsidies for the 7(a) and 504\/CDC loan guaranty programs in FY2016-FY2019. \n\n\t\t\t7(a) Loan Guaranty Program42\n\nThe 7(a) loan guaranty program is named after the section of the Small Business Act that authorizes it. These are loans made by SBA lending partners (mostly banks but also some other financial institutions) and partially guaranteed by the SBA.\nIn FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. In FY2018, there were 1,810 active lending partners providing 7(a) loans.\nThe 7(a) program's current guaranty rate is 85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a maximum guaranty of $3.75 million\u201475% of $5 million). Although the SBA's offer to guarantee a loan provides an incentive for lenders to make the loan, lenders are not required to do so.\nLenders are permitted to charge borrowers fees to recoup specified expenses and are allowed to charge borrowers \"a reasonable fixed interest rate\" or, with the SBA's approval, a variable interest rate. The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register .\nMaximum interest rates allowed on variable-rate 7(a) loans are pegged to either the prime rate, the 30-day London Interbank Offered Rate (LIBOR) plus 3%, or the SBA optional peg rate, which is a weighted average of rates that the federal government pays for loans with maturities similar to the guaranteed loan. The allowed spread over the prime rate, LIBOR base rate, or SBA optional peg rate depends on the loan amount and the loan's maturity (under seven years or seven years or more). The adjustment period can be no more than monthly and cannot change over the life of the loan.\n Table 3 provides information on the 7(a) program's key features, including its eligible uses, maximum loan amount, loan maturity, fixed interest rates, and guarantee fees.\n\n\t\t\t\tVariations on the 7(a) Program\n\nThe 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress program (for loans of $350,000 or less), the Export Express program (for loans of up to $500,000 for entering or expanding an existing export market), and the Community Advantage pilot program (for loans of $250,000 or less). The SBA also has a Small Loan Advantage program (for loans of $350,000 or less), but it is currently being used as the 7(a) program's model for processing loans of $350,000 or less and exists as a separate, specialized program in name only.\nThe SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P.L. 108-447 , the Consolidated Appropriations Act, 2005). The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guarantee on loans. It provides a 50% loan guarantee on loan amounts of $350,000 or less. The loan proceeds can be used for the same purposes as the 7(a) program, except participant debt restructuring cannot exceed 50% of the project and may be used for revolving credit. The program's fees and loan terms are the same as the 7(a) program, except the term for a revolving line of credit cannot exceed seven years. \nThe Community Advantage pilot program began operations on February 15, 2011, and is limited to mission-focused lenders targeting underserved markets. Originally scheduled to cease operations on March 15, 2014, the program has been extended several times and is currently scheduled to operate through September 30, 2022. As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans. The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults.\nLenders must receive SBA approval to participate in these 7(a) specialized programs.\n\n\t\t\t\tSpecial Purpose Loan Guaranty Programs\n\nIn addition to the 7(a) loan guaranty program, the SBA has special purpose loan guaranty programs for small businesses adjusting to the North American Free Trade Agreement (NAFTA), to support Employee Stock Ownership Program trusts, pollution control facilities, and working capital.\nCommunity Adjustment and Investment Program. The Community Adjustment and Investment Program (CAIP) uses federal funds to pay the fees on 7(a) and 504\/CDC loans to businesses located in communities that have been adversely affected by NAFTA.\nEmployee Trusts. The SBA will guarantee loans to Employee Stock Ownership Plans (ESOPs) that are used either to lend money to the employer or to purchase control from the owner. ESOPs must meet regulations established by the IRS, Department of the Treasury, and Department of Labor. These are 7(a) loans.\nPollution Control. In 1976, the SBA was provided authorization to guarantee the payment of rentals or other amounts due under qualified contracts for pollution control facilities. P.L. 100-590 , the Small Business Reauthorization and Amendment Act of 1988, eliminated the revolving fund for pollution control guaranteed loans and transferred its remaining funds to the SBA's business loan and investment revolving fund. Since 1989, loans for pollution control have been guaranteed under the 7(a) loan guaranty program.\nCAPLines. CAPLines are five special 7(a) loan guaranty programs designed to meet the requirements of small businesses for short-term or cyclical working capital. The maximum term is five years.\n\n\t\t\tThe 504\/CDC Loan Guaranty Program52\n\nThe 504\/CDC loan guaranty program uses Certified Development Companies (CDCs), which are private, nonprofit corporations established to contribute to economic development within their communities. Each CDC has its own geographic territory. The program provides long-term, fixed-rate loans for major fixed assets such as land, structures, machinery, and equipment. Program loans cannot be used for working capital, inventory, or repaying debt. A commercial lender provides up to 50% of the financing package, which is secured by a senior lien. The CDC's loan of up to 40% is secured by a junior lien. The SBA backs the CDC with a guaranteed debenture. The small business must contribute at least 10% as equity.\nTo participate in the program, small businesses cannot exceed $15 million in tangible net worth and cannot have average net income of more than $5 million for two full fiscal years before the date of application. Also, CDCs must intend to create or retain one job for every $75,000 of the debenture ($120,000 for small manufacturers) or meet an alternative job creation standard if they meet any one of 15 community or public policy goals.\nIn FY2018, the SBA approved 5,874 504\/CDC loans totaling nearly $4.8 billion. \n Table 4 summarizes the 504\/CDC loan guaranty program's key features.\n\n\t\t\tInternational Trade and Export Promotion Programs55\n\nAlthough any of SBA's loan guaranty programs can be used by firms looking to begin exporting or expanding their current exporting operations, the SBA has three loan programs that specifically focus on trade and export promotion:\n1. Export Express loan program provides working capital or fixed asset financing for firms that will begin or expand exporting. It offers a 90% guaranty on loans of $350,000 or less and a 75% guaranty on loans of $350,001 to $500,000. 2. Export Working Capital loan program provides financing to support export orders or the export transaction cycle, from purchase order to final payment. It offers a 90% guaranty of loans up to $5 million. 3. International Trade loan program provides long-term financing to support firms that are expanding because of growing export sales or have been adversely affected by imports and need to modernize to meet foreign competition. It offers a 90% guaranty on loans up to $5 million.\nIn many ways, the SBA's trade and export promotion loan programs share similar characteristics with other SBA loan guaranty programs. For example, the Export Express program resembles the SBAExpress program. The SBAExpress program shares several characteristics with the standard 7(a) loan guarantee program except that the SBAExpress program has an expedited approval process, a lower maximum loan amount, and a smaller percentage of the loan guaranteed. Similarly, the Export Express program shares several of the characteristics of the standard International Trade loan program, such as an expedited approval process in exchange for a lower maximum loan amount ($500,000 compared with $5 million) and a lower percentage of guaranty.\nIn addition, the SBA administers grants through the State Trade Expansion Program (STEP), which are awarded to states to execute export programs that assist small business concerns (such as a trade show exhibition, training workshops, or a foreign trade mission). Initially, the STEP program was authorized for three years and appropriated $30 million annually in FY2011 and FY2012. Congress approved $8 million in appropriations for STEP in FY2014, $17.4 million in FY2015, and $18 million annually since FY2016. \n\n\t\t\tThe Microloan Program58\n\nThe Microloan program provides direct loans to qualified nonprofit intermediary Microloan lenders that, in turn, provide \"microloans\" of up to $50,000 to small businesses and nonprofit child care centers. Microloan lenders also provide marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, by P.L. 105-135 , the Small Business Reauthorization Act of 1997. Although the program is open to all small businesses, it targets new and early stage businesses in underserved markets, including borrowers with little to no credit history, low-income borrowers, and women and minority entrepreneurs in both rural and urban areas who generally do not qualify for conventional loans or other, larger SBA guaranteed loans. \nIn FY2018, 5,459 small businesses received a Microloan, totaling $76.8 million. The average Microloan was $14,071 and the average interest rate was 7.6%.\n Table 5 summarizes the Microloan program's key features.\n\n\tContracting Programs61\n\nSeveral SBA programs assist small businesses in obtaining and performing federal contracts and subcontracts. These include various prime contracting programs; subcontracting programs; and other assistance (e.g., contracting technical training assistance, the federal goaling program, federal Offices of Small and Disadvantaged Business Utilization, and the Surety Bond Guarantee program).\n\n\t\tPrime Contracting Programs\n\nSeveral contracting programs allow small businesses to compete only with similar firms for government contracts or receive sole-source awards in circumstances in which such awards could not be made to other firms. These programs, which give small businesses a chance to win government contracts without having to compete against larger and more experienced companies, include the following: \n8(a) Program. The 8(a) Minority Small Business and Capital Ownership Development Program (named for the section of the Small Business Act from which it derives its authority) is for businesses owned by persons who are socially and economically disadvantaged. In addition, an individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. A firm certified by the SBA as an 8(a) firm is eligible for set-aside and sole-source contracts. The SBA also provides technical assistance and training to 8(a) firms. Firms may participate in the 8(a) Program for no more than nine years. In FY2017, the federal government awarded $27.2 billion to 8(a) firms. About $16.4 billion of that amount was awarded with an 8(a) preference ($8 billion through an 8(a) set-aside and $8.4 billion through an 8(a) sole-source award). About $4.8 billion was awarded to an 8(a) firm in open competition with other firms. The remaining $6 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, women-owned small businesses, and service-disabled veteran-owned small businesses). Historically Underutilized Business Zone Program. This program assists small businesses located in Historically Underutilized Business Zones (HUBZones) through set-asides, sole-s ource awards, and price evaluation preferences in full and open competitions. The determination of whether an area is a HUBZone is based upon criteria specified in 13 C.F.R. Section 126.103. To be certified as a HUBZone small business, at least 35% of the small business's employees must generally reside in a HUBZone. In FY2017, the federal government awarded $7.53 billion to HUBZone-certified small businesses. About $1.90 billion of that amount was awarded with a HUBZone preference ($1.49 billion through a HUBZone set-aside, $65.3 million through a HUBZone sole-source award, and $346.9 million through a HUBZone price-evaluation preference). About $1.53 billion was awarded to HUBZone-certified small businesses in open competition with other firms. The remaining $4.10 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses). Service-Disabled Veteran-Owned Small Business Program. This program assists service-disabled veteran-owned small businesses through set-asides and sole-source awards. For purposes of this program, veterans and service-related disabilities are defined as they are under the statutes governing veterans affairs. In FY2017, the federal government awarded $18.2 billion to service-disabled veteran-owned small businesses. About $6.8 billion of that amount was awarded through a service-disabled veteran-owned small business set aside award. About $4.3 billion of that amount was awarded to a service-disabled veteran-owned small business in open competition with other firms. The remaining $7.1 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and women-owned small businesses). Women-Owned Small Business Program. Under this program, contracts may be set aside for economically disadvantaged women-owned small businesses in industries in which women are underrepresented and women-owned small businesses in industries in which women are substantially underrepresented. Also, federal agencies may award sole-source contracts to women-owned small businesses so long as the award can be made at a fair and reasonable price, and the anticipated value of the contract is below $4 million ($6.5 million for manufacturing contracts). In FY2017, the federal government awarded $21.3 billion to women owned small businesses. About $648.9 million of that amount was awarded with a women owned small business preference ($580.5 million through a women owned small business set-aside and $68.4 million through a women owned small business sole-source award). About $7.0 billion of that amount was awarded to a women owned small business in open competition with other firms. The remaining $13.7 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for HUBZone firms, 8(a) firms, and service-disabled veteran-owned small businesses). Other small businesses. Agencies may also set aside contracts or make sole-source awards to small businesses not participating in any other program under certain conditions.\n\n\t\tSubcontracting Programs for Small Disadvantaged Businesses\n\nOther federal programs promote subcontracting with small disadvantaged businesses (SDBs). SDBs include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. Individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. \nFederal agencies must negotiate \"subcontracting plans\" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs \"have an equitable opportunity to compete for subcontracts.\" Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract or give contractors \"monetary incentives\" to subcontract with SDBs. \nAs of March 25, 2019, the SBA's Dynamic Small Business Search database included 2,338 SBA-certified SDBs and 122,281 self-certified SDBs.\n\n\t\tThe 7(j) Management and Technical Assistance Program\n\nThe SBA's 7(j) Management and Technical Assistance program provides \"a wide variety of management and technical assistance to eligible individuals or concerns to meet their specific needs, including: (a) counseling and training in the areas of financing, management, accounting, bookkeeping, marketing, and operation of small business concerns; and (b) the identification and development of new business opportunities.\" Eligible individuals and businesses include \"8(a) certified firms, small disadvantaged businesses, businesses operating in areas of high unemployment, or low income or firms owned by low income individuals.\" \nIn FY2018, the 7(j) Management and Technical Assistance program assisted 6,483 small businesses.\n\n\t\tSurety Bond Guarantee Program75\n\nThe SBA's Surety Bond Guarantee program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. The program guarantees individual contracts of up to $6.5 million and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary. The SBA's guarantee ranges from not to exceed 80% to not to exceed 90% of the surety's loss if a default occurs. In FY2018, the SBA guaranteed 10,800 bid and final surety bonds with a total contract value of nearly $6.5 billion.\nA surety bond is a three-party instrument between a surety (someone who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. The surety bond reduces the risk associated with contracting.\nSurety bonds are viewed as a means to encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and are considered to be at greater risk of failing to comply with the contract's terms and conditions.\n\n\t\tGoaling Program\n\nSince 1978, federal agency heads have been required to establish federal procurement contracting goals, in consultation with the SBA, \"that realistically reflect the potential of small business concerns\" to participate in federal procurement. Each agency is required, at the conclusion of each fiscal year, to report its progress in meeting these goals to the SBA.\nIn 1988, Congress authorized the President to annually establish government-wide minimum participation goals for procurement contracts awarded to small businesses and small businesses owned and controlled by socially and economically disadvantaged individuals. Congress required the government-wide minimum participation goal for small businesses to be \"not less than 20% of the total value of all prime contract awards for each fiscal year\" and \"not less than 5% of the total value of all prime contract and subcontract awards for each fiscal year\" for small businesses owned and controlled by socially and economically disadvantaged individuals.\nEach federal agency was also directed to \"have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals to participate in the performance of contracts let by such agency.\" The SBA was required to report to the President annually on the attainment of these goals and to include this information in an annual report to Congress. The SBA negotiates the goals with each federal agency and establishes a \"small business eligible\" baseline for evaluating the agency's performance.\nThe small business eligible baseline excludes certain contracts that the SBA has determined do not realistically reflect the potential for small business participation in federal procurement (such as those awarded to mandatory and directed sources), contracts funded predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the Federal Procurement Data System (such as contracts valued below $10,000 and government procurement card purchases). These exclusions typically account for 18% to 20% of all federal prime contracts each year.\nThe SBA then evaluates the agencies' performance against their negotiated goals annually, using data from the Federal Procurement Data System\u2014Next Generation, managed by the U.S. General Services Administration, to generate the small business eligible baseline. This information is compiled into the official Small Business Goaling Report, which the SBA releases annually.\nOver the years, federal government-wide procurement contracting goals have been established for small businesses generally ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988, and P.L. 105-135 , the HUBZone Act of 1997\u2014Title VI of the Small Business Reauthorization Act of 1997), small businesses owned and controlled by socially and economically disadvantaged individuals ( P.L. 100-656 , the Business Opportunity Development Reform Act of 1988), women ( P.L. 103-355 , the Federal Acquisition Streamlining Act of 1994), small businesses located within a HUBZone ( P.L. 105-135 , the HUBZone Act of 1997\u2014Title VI of the Small Business Reauthorization Act of 1997), and small businesses owned and controlled by a service disabled veteran ( P.L. 106-50 , the Veterans Entrepreneurship and Small Business Development Act of 1999). \nThe current federal small business contracting goals are\nat least 23% of the total value of all small business eligible prime contract awards to small businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to small disadvantaged businesses for each fiscal year, 5% of the total value of all small business eligible prime contract awards and subcontract awards to women-owned small businesses, 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses, and 3% of the total value of all small business eligible prime contract awards and subcontract awards to service-disabled veteran-owned small businesses.\nAlthough there are no punitive consequences for not meeting the small business procurement goals, the SBA's Small Business Goaling Report is distributed widely, receives media attention, and serves to heighten public awareness of the issue of small business contracting. For example, agency performance as reported in the SBA's Small Business Goaling Report is often cited by Members during their questioning of federal agency witnesses during congressional hearings.\nAs shown in Table 6 , the FY201 7 Small Business Goaling Report , using data in the Federal Procurement Data System, indicates that federal agencies met the federal contracting goal for small businesses generally, small disadvantaged businesses, and service-disabled veteran-owned small businesses in FY2017. \nFederal agencies awarded 23.88% of the value of their small business eligible contracts ($442.5 billion) to small businesses ($105.7 billion), 9.10% to small disadvantaged businesses ($40.2 billion), 4.71% to women-owned small businesses ($20.8 billion), 1.65% to HUBZone small businesses ($7.3 billion), and 4.05% to service-disabled veteran-owned small businesses ($17.9 billion). \nThe percentage of total reported federal contracts (without exclusions) awarded to those small businesses in FY2017 is also provided in the table for comparative purposes. \n\n\t\tOffice of Small and Disadvantaged Business Utilization\n\nGovernment agencies with procurement authority have an Office of Small and Disadvantaged Business Utilization (OSDBU) to advocate within the agency for small businesses, as well as assist small businesses in their dealings with federal agencies (e.g., obtaining payment).\n\n\tRegional and District Offices\n\nAs mentioned previously, the SBA provides funding to third parties, such as SBDCs, to provide management and training services to small business owners and aspiring entrepreneurs. The SBA also provides management, training, and outreach services to small business owners and aspiring entrepreneurs through its 68 district offices. These offices are overseen by the SBA Office of Field Operations and 10 regional offices.\nSBA district offices conduct more than 20,000 outreach events annually with stakeholders and resource partners that include \"lender training, government contracting, marketing events in emerging areas, and events targeted to high-growth entrepreneurial markets, such as exporting.\" SBA district offices focus \"on core SBA programs concerning contracting, capital, technical assistance, and exporting.\" They also perform annual program eligibility and compliance reviews on 100% of the 8(a) business development firms in the SBA's portfolio and each year conduct on-site examinations of about 10% of all HUBZone certified firms (529 in FY2018) to validate compliance with the HUBZone program's geographic requirement for principal offices.\n\n\tOffice of Inspector General91\n\nThe Office of Inspector General's (OIG's) mission is \"to improve SBA management and effectiveness, and to detect and deter fraud in the Agency's programs.\" It serves as \"an independent and objective oversight office created within the SBA by the Inspector General Act of 1978 [P.L. 95-452], as amended.\" The Inspector General, who is nominated by the President and confirmed by the Senate, directs the office. The Inspector General Act provides the OIG with the following responsibilities:\n\"promote economy, efficiency, and effectiveness in the management of SBA programs and supporting operations; conduct and supervise audits, investigations, and reviews relating to the SBA's programs and support operations; detect and prevent fraud, waste and abuse; review existing and proposed legislation and regulations and make appropriate recommendations; maintain effective working relationships with other Federal, State and local governmental agencies, and nongovernmental entities, regarding the mandated duties of the Inspector General; keep the SBA Administrator and Congress informed of serious problems and recommend corrective actions and implementation measures; comply with the audit standards of the Comptroller General; avoid duplication of Government Accountability Office (GAO) activities; and report violations of Federal criminal law to the Attorney General.\"\n\n\tCapital Investment Programs\n\nThe SBA has several programs to improve small business access to capital markets, including the Small Business Investment Company program, the New Market Venture Capital Program (now inactive), two special high technology contracting programs (the Small Business Innovative Research and Small Business Technology Transfer programs), and the growth accelerators initiative.\n\n\t\tThe Small Business Investment Company Program95\n\nThe Small Business Investment Company (SBIC) program enhances small business access to venture capital by stimulating and supplementing \"the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.\" \nThe SBA works with 305 privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation). \nSBICs provide equity capital to small businesses in various ways, including by\npurchasing small business equity securities (e.g., stock, stock options, warrants, limited partnership interests, membership interests in a limited liability company, or joint venture interests); making loans to small businesses, either independently or in cooperation with other private or public lenders, that have a maturity of no more than 20 years; purchasing debt securities from small businesses, which may be convertible into, or have rights to purchase, equity in the small business; and subject to limitations, providing small businesses a guarantee of their monetary obligations to creditors not associated with the SBIC.\nThe SBIC program currently has invested or committed about $30.1 billion in small businesses, with the SBA's share of capital at risk about $14.3 billion. In FY2018, the SBA committed to guarantee $2.52 billion in SBIC small business investments. SBICs invested another $2.98 billion from private capital for a total of $5.50 billion in financing for 1,151 small businesses.\n\n\t\tNew Market Venture Capital Program103\n\nThe now inactive New Market Venture Capital (NMVC) program encourages equity investments in small businesses in low-income areas that meet specific statistical criteria established by regulation. The program operates through public-private partnerships between the SBA and newly formed NMVC investment companies and existing Specialized Small Business Investment Companies (SSBICs) that operate under the Small Business Investment Company program.\nThe NMVC program's objective is to serve the unmet equity needs of local entrepreneurs in low-income areas by providing developmental venture capital investments and technical assistance, helping to create quality employment opportunities for low-income area residents, and building wealth within those areas.\nThe SBA's role is essentially the same as with the SBIC program. The SBA selects participants for the NMVC program, provides funding for their investments and operational assistance activities, and regulates their operations to ensure public policy objectives are being met. The SBA requires the companies to provide regular performance reports and have annual financial examinations by the SBA. \nThe NMVC program was appropriated $21.952 million in FY2001 to support up to $150 million in SBA-guaranteed debentures and $30 million to fund operational assistance grants for FY2001 through FY2006. The funds were provided in a lump sum in FY2001 and were to remain available until expended. In 2003, the unobligated balances of $10.5 million for the NMVC debenture subsidies and $13.75 million for operational assistance grants were rescinded. The program continued to operate, with the number and amount of financing declining as the program's initial investments expired and NMVC companies increasingly engaged only in additional follow-on financings with the small businesses in their portfolios. The NMVC program's active unpaid principal balance (which is composed of the SBA guaranteed portion and the unguaranteed portion of the NMVC companies' active unpaid principal balance) peaked at $698 million in FY2008, and then fell each year thereafter until reaching $0 in FY2018.\n\n\t\tSmall Business Innovation Research Program104\n\nThe Small Business Innovation Research (SBIR) program is designed to increase the participation of small, high technology firms in federal research and development (R&D) endeavors, provide additional opportunities for the involvement of minority and disadvantaged individuals in the R&D process, and result in the expanded commercialization of the results of federally funded R&D. Current law requires that every federal department with an R&D budget of $100 million or more establish and operate a SBIR program. Currently, 11 federal agencies participate in the SBIR program. A set percentage of that agency's applicable extramural R&D budget\u2014originally set at not less than 0.2% in FY1983 and currently not less than 3.2%\u2014is to be used to support mission-related work in small businesses.\nAgency SBIR efforts involve a three-phase process. During Phase I, awards of up to $163,952 for six months are made to evaluate a concept's scientific or technical merit and feasibility. The project must be of interest to and coincide with the mission of the supporting organization. Projects that demonstrate potential after the initial endeavor may compete for Phase II awards of up to $1.09 million, lasting one to two years. Phase II awards are for the performance of the principal R&D by the small business. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. Federal dollars may be used if the government perceives that the final technology or technique will meet public needs.\nEight departments and three other federal agencies currently have SBIR programs, including the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). Each agency's SBIR activity reflects that organization's management style. Individual departments select R&D interests, administer program operations, and control financial support. Funding can be disbursed in the form of contracts, grants, or cooperative agreements. Separate agency solicitations are issued at established times.\nThe SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their SBIR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities.\n\n\t\tSmall Business Technology Transfer Program\n\nThe Small Business Technology Transfer program (STTR) provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in a nonprofit research organization and meet the mission requirements of the federal funding agency. Up to $163,952 in Phase I financing is available for approximately one year to fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. Phase II awards of up to $1.09 million may be made for two years, during which time the developer performs R&D work and begins to consider commercial potential. Agencies may issue an award exceeding these award guidelines by no more than 50%. Only Phase I award winners are considered for Phase II. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. The small business must find funding in the private sector or other non-STTR federal agency.\nThe STTR program is funded by a set-aside, initially set at not less than 0.05% in FY1994 and now at not less than 0.45%, of the extramural R&D budget of departments that spend more than $1 billion per year on this effort. The Departments of Energy, Defense, and Health and Human Services participate in the STTR program, as do NASA and NSF.\nThe SBA is responsible for establishing the broad policy and guidelines under which individual departments operate their STTR programs. The SBA monitors and reports to Congress on the conduct of the separate departmental activities.\n\n\t\tGrowth Accelerator Initiative\n\nThe SBA describes growth accelerators as \"organizations that help entrepreneurs start and scale their businesses.\" Growth accelerators are typically run by experienced entrepreneurs and help small businesses access seed capital and mentors. The SBA claims that growth accelerators \"help accelerate a startup company's path towards success with targeted advice on revenue growth, job, and sourcing outside funding.\" \nThe SBA's Growth Accelerator Initiative began in FY2014 when Congress recommended in its appropriations report that the initiative be provided $2.5 million. Congress subsequently recommended that it receive $4 million in FY2015, $1 million in FY2016, FY2017, and FY2018, and $2 million in FY2019. The Growth Accelerator Initiative provides $50,000 matching grants each year to universities and private sector accelerators \"to support the development of accelerators and their support of startups in parts of the country where there are fewer conventional sources of access to capital (i.e., venture capital and other investors).\"\n\n\tOffice of Advocacy115\n\nThe SBA's Office of Advocacy is \"an independent voice for small business within the federal government.\" The Chief Counsel for Advocacy, who is nominated by the President and confirmed by the Senate, directs the office. The Office of Advocacy's mission is to \"encourage policies that support the development and growth of American small businesses\" by \nintervening early in federal agencies' regulatory development process on proposals that affect small businesses and providing Regulatory Flexibility Act compliance training to federal agency policymakers and regulatory development officials; producing research to inform policymakers and other stakeholders on the impact of federal regulatory burdens on small businesses, to document the vital role of small businesses in the economy, and to explore and explain the wide variety of issues of concern to the small business community; and fostering a two-way communication between federal agencies and the small business community.\n\n\tExecutive Direction Programs\n\nThe SBA's executive direction programs consist of the National Women's Business Council, the Office of Ombudsman, and Faith-Based Initiatives.\n\n\t\tThe National Women's Business Council\n\nThe National Women's Business Council is a bipartisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the SBA on economic issues of importance to women business owners. The council's mission \"is to promote bold initiatives, policies, and programs designed to support women's business enterprises at all stages of development in the public and private sector marketplaces\u2014from start-up to success to significance.\"\n\n\t\tOffice of Ombudsman119\n\nThe National Ombudsman's mission \"is to assist small businesses when they experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or investigations, excessive fines, penalties, threats, retaliation or other unfair enforcement action by a federal agency.\" The Office of Ombudsman works with federal agencies that have regulatory authority over small businesses to provide a means for entrepreneurs to comment about enforcement activities and encourage agencies to address those concerns promptly. It also receives comments from small businesses about unfair federal compliance or enforcement activities and refers those comments to the Inspector General of the affected agency in appropriate circumstances. In addition, the National Ombudsman files an annual report with Congress and affected federal agencies that rates federal agencies based on substantiated comments received from small business owners. Affected agencies are provided an opportunity to comment on the draft version of the annual report to Congress before it is submitted.\n\n\t\tFaith-Based Initiatives\n\nThe SBA sponsors several faith-based initiatives For example, the SBA, in cooperation with the National Association of Government Guaranteed Lenders (NAGGL), created the Business Smart Toolkit, \"a ready-to-use workshop toolkit that equips faith-based and community organizations to help new and aspiring entrepreneurs launch and build businesses that are credit ready.\"\n\n\tLegislative Activity\n\nDuring the 111 th Congress\nP.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA) provided the SBA an additional $730 million in temporary funding, including $375 million to subsidize fees for the SBA's 7(a) and 504\/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification was exhausted. P.L. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses (about $4.0 billion was issued) and a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs. The act also provided the SBA an additional $697.5 million; including $510 million to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. \nDuring the 112 th Congress, the SBA's statutory authorization expired (on July 31, 2011). Since then, the SBA has been operating under authority provided by annual appropriations acts. Prior to July 31, 2011, the SBA's authorization had been temporarily extended 15 times since 2006.\nP.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, increased the SBA's surety bond limit from $2 million to $6.5 million (and up to $10 million if a federal contracting officer certifies that such a guarantee is necessary); required the SBA to oversee and establish standards for most federal mentor-prot\u00e9g\u00e9 programs and establish a mentor-prot\u00e9g\u00e9 program for all small business concerns; required the SBA's Chief Counsel for Advocacy to enter into a contract with an appropriate entity to conduct an independent assessment of the small business procurement goals, including an assessment of which contracts should be subject to the goals; and addressed the SBA's recent practice of combining size standards within industrial groups as a means to reduce the complexity of its size standards by requiring the SBA to make available a justification when establishing or approving a size standard that the size standard is appropriate for each individual industry classification.\nDuring the 113 th Congress, P.L. 113-76 , the Consolidated Appropriations Act, 2014, increased the SBA's SBIC program's annual authorization amount to $4 billion from $3 billion. \nDuring the 114 th Congress\nP.L. 114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the SBA's administrative decision to waive the SBAExpress loan program's one time, up-front loan guaranty fee for veterans (and their spouse). The act also increased the 7(a) loan program's FY2015 authorization limit from $18.75 billion to $23.5 billion (later increased to $26.5 billion). P.L. 114-88 , the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE After Disaster Act of 2015), includes several provisions designed to assist individuals and small businesses affected by Hurricane Sandy in 2012, and, among other things, authorizes the SBA to provide up to two years of additional financial assistance, on a competitive basis, to SBDCs, WBCs, SCORE, or any proposed consortium of such individuals or entities to assist small businesses located in a presidentially declared major disaster area; authorizes SBDCs to provide assistance to small businesses outside the SBDC's state, without regard to geographical proximity to the SBDC, if the small business is in a presidentially declared major disaster area; and temporarily increases, for three years, the minimum disaster loan amount for which the SBA may require collateral, from $14,000 to $25,000 (or, as under existing law, any higher amount the SBA determines appropriate in the event of a disaster). P.L. 114-92 , the National Defense Authorization Act for Fiscal Year 2016, includes a provision that expands the definition of a Base Realignment and Closure Act (BRAC) military base closure area under the HUBZone program to include the lands within the external boundaries of the closed base and the census tract or nonmetropolitan county in which the lands of the closed base are wholly contained, intersect it, or are contiguous to it. This change is designed to make it easier for businesses located in those areas to meet the HUBZone program's requirement that at least 35% of its employees reside in a HUBZone area. The act also extends BRAC base closure area HUBZone eligibility from five years to not less than eight years, provides HUBZone eligibility to qualified disaster areas, and adds Native Hawaiian Organizations to the list of HUBZone eligible small business concerns. Starting one year from enactment (effective November 25, 2016), the act also adds requirements concerning the pledge of assets by individual sureties participating in the SBA's Surety Bond Guarantee Program and increases the guaranty rate from not less than 70% to not less than 90% for preferred sureties participating in that program. P.L. 114-113 , the Consolidated Appropriations Act, 2016, expands the projects eligible for refinancing under the 504\/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504\/CDC program as a whole do not have credit subsidy costs, generally limits refinancing under this provision to no more than 50% of the dollars loaned under the 504\/CDC program during the previous fiscal year, and increases the SBIC program's family of funds limit (the amount of outstanding leverage allowed for two or more SBIC licenses under common control) to $350 million from $225 million. The act also provided the 7(a) loan program a FY2016 authorization limit of $26.5 billion. P.L. 114-125 , the Trade Facilitation and Trade Enforcement Act of 2015, renamed the \"State Trade and Export Promotion\" grant initiative to the \"State Trade Expansion Program.\" P.L. 114-125 also reformed some of the program's procedures and provided $30 million in annual authorization for STEP grants from FY2016 through FY2020. In terms of program administration, P.L. 114-125 allows the SBA's Associate Administrator (AA) for International Trade to give priority to STEP proposals from states that have a relatively small share of small businesses that export or would assist rural, women-owned, and socially and economically disadvantaged small businesses and small business concerns. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, authorizes the SBA to establish different size standards for various types of agricultural enterprises (previously statutorily set at not more than $750,000 in annual receipts), standardizes definitions used by the SBA and the Department of Veterans Affairs concerning service-disabled veteran owned small businesses, requires the SBA to track companies that outgrow or no longer qualify for SBA assistance due to the receipt of a federal contract or being purchased by another entity after an initial federal contract is awarded, and, among other provisions, clarifies the duties of the Offices of Small and Disadvantaged Utilization within federal agencies. \nDuring the 115 th Congress\nP.L. 115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27.5 billion in FY2017 from $26.5 billion in FY2016. P.L. 115-56 , the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, provided the SBA an additional $450 million for disaster assistance. P.L. 115-123 , the Bipartisan Budget Act of 2018, provided the SBA an additional $1.652 billion for disaster assistance and $7.0 million to the SBA's OIG for disaster assistance oversight. P.L. 115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29.0 billion in FY2018. The act also relaxed requirements on Microloan intermediaries that prohibited them from spending more than 25% of their technical assistance grant funds on prospective borrowers and more than 25% of those grant funds on contracts with third parties to provide that technical assistance by increasing those percentages to 50%. P.L. 115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit. The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year. P.L. 115-232 , the John S. McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H.R. 5236 , the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives. The act clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership. The act also directs the SBA to create outreach programs and an interagency working group to promote lending to ESOPs and cooperatives.\nDuring the 116 th Congress\nP.L. 116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30.0 billion in FY2019.\n\n\tAppropriations127\n\nThe SBA's received an appropriation of $887.604 million for FY2015, $871.042 million for FY2016, $1.337 billion for FY2017, $2.360 billion for FY2018, and $715.370 million for FY2019. \nAs shown in Table 8 , the SBA's FY2019 appropriation of $715.37 million includes\n$267.50 million for salaries and expenses, $247.70 million for entrepreneurial development and noncredit programs, $155.15 million for business loan administration, $4.0 million for business loan credit subsidies (for the Microloan program), $21.9 million for Office of Inspector General, $9.12 million for the Office of Advocacy, and $10.0 million for disaster assistance.","output":"The Small Business Administration (SBA) administers several types of programs to support small businesses, including loan guaranty and venture capital programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion.\nCongressional interest in the SBA's loan, venture capital, training, and contracting programs has increased in recent years, primarily because small businesses are viewed as a means to stimulate economic activity and create jobs. Many Members of Congress also regularly receive constituent inquiries about the SBA's programs.\nThis report provides an overview of the SBA's programs, including\nentrepreneurial development programs (including Small Business Development Centers, Women's Business Centers, SCORE, and Microloan Technical Assistance); disaster assistance; capital access programs (including the 7(a) loan guaranty program, the 504\/Certified Development Company loan guaranty program, the Microloan program, International Trade and Export Promotion programs, and lender oversight); contracting programs (including the 8(a) Minority Small Business and Capital Ownership Development Program, the Historically Underutilized Business Zones [HUBZones] program, the Service-Disabled Veteran-Owned Small Business Program, the Women-Owned Small Business [WOSB] Federal Contract Program, and the Surety Bond Guarantee Program); SBA regional and district offices; the Office of Inspector General; the Office of Advocacy; and capital investment programs (including the Small Business Investment Company program, the New Markets Venture Capital program, the Small Business Innovation Research [SBIR] program, the Small Business Technology Transfer program [STTR], and growth accelerators).\nThe report also discusses recent programmatic changes resulting from the enactment of legislation (such as P.L. 111-5, the American Recovery and Reinvestment Act of 2009, P.L. 111-240, the Small Business Jobs Act of 2010, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, P.L. 114-88, the Recovery Improvements for Small Entities After Disaster Act of 2015 [RISE After Disaster Act of 2015], P.L. 115-123, the Bipartisan Budget Act of 2018, and P.L. 115-189, the Small Business 7(a) Lending Oversight Reform Act of 2018).\nIn addition, it provides an overview of the SBA's budget and references other CRS reports that examine these programs in greater detail."}
{"id":"crs_R43389","pid":"crs_R43389_0","input":"\tFederal Debt Policy and the Debt Limit\n\nThe Constitution grants Congress the power to borrow money on the credit of the United States\u2014one part of its power of the purs e\u2014and thus mandates that Congress exercise control over federal debt. Control of debt policy provides Congress with one means of expressing views on appropriate fiscal policies. \nBefore 1917 Congress typically controlled individual issues of debt. In September 1917, while raising funds for the United States' entry into World War I, Congress also imposed an aggregate limit on federal debt in addition to individual issuance limits. Over time, Congress granted Treasury Secretaries more leeway in debt management. In 1939, Congress agreed to impose an aggregate limit that gave the U.S. Treasury authority to manage the structure of federal debt.\nThe statutory debt limit applies to almost all federal debt. The limit applies to federal debt held by the public (that is, debt held outside the federal government itself) and to federal debt held by the government's own accounts. Federal trust funds, such as Social Security, Medicare, Transportation, and Civil Service Retirement accounts, hold most of this internally held debt. For most federal trust funds, net inflows by law must be invested in special federal government securities. When holdings of those trust funds increase, federal debt subject to limit will therefore increase as well. The government's on-budget fiscal balance, which excludes the net surplus or deficit of the U.S. Postal Service and the Social Security program, does not directly affect debt held in government accounts.\nThe change in debt held by the public is mostly determined by the government's surpluses or deficits. The net expansion of the federal government's balance sheet through loan programs also increases the government's borrowing requirements. Under federal budgetary rules, however, only the net subsidy cost of those loans is included in the calculation of deficits. \n\n\t\tCurrent Situation\n\nThe most recent suspension of the debt limit lapsed after March 1, 2019. The limit was then reset at $21.988 trillion, a level that accommodates federal obligations incurred during the suspension period. On March 4, 2019, the first business day after the debt limit suspension had lapsed, U.S. Treasury Secretary Steven Mnuchin invoked extraordinary authorities. Those extraordinary measures (described below in more detail), along with cash balances and incoming revenues, can be used to meet federal obligations in coming months. \nIn anticipation of the lapse of the debt limit suspension, the U.S. Treasury had announced it would stop issuing state and local government securities (SLGs) on March 1, 2019. SLGs are used by state and local governments as one way of complying with IRS anti-arbitrage rules. Issuance of SLGs is expected to resume once the current debt limit episode is resolved.\nCBO estimates that Treasury could meet federal obligations until just before or just after October 1, 2019. One estimate suggested those resources would suffice to cover federal payments until August, if not later. Another estimate of an informed Treasury market observer suggests federal payments could be made until \"just before Labor Day,\" albeit while noting substantial uncertainties. The current size of federal deficits, which are now higher than those in previous years, or economic uncertainty could affect that timing. Changes in the federal tax system and Internal Revenue Service (IRS) operations could also add uncertainties to projections of Treasury cash flows.\nIn late 2017 and early 2018 the debt limit issue was tied to consideration of funding measures for FY2018. On September 8, 2017, enactment of a continuing resolution (Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017; P.L. 115-56 ) suspended the debt limit through December 8, 2018. Once that suspension lapsed, extraordinary measures were used to meet federal obligations. The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), enacted on February 9, 2018, included a provision (Section 30301) that suspended the debt limit through March 1, 2019. A section near the end of this report summarizes recent debt limit activity in more detail. \nIn January 2019, the House adopted Rule XXVIII that when the House approves a budget resolution, a measure to suspend the debt limit for the remainder of the fiscal year would be automatically engrossed and transmitted to the Senate.\n\n\t\tDebt Limit Suspensions\n\nIn recent years, Congress has chosen to suspend the debt limit for a set amount of time instead of raising the debt limit by a fixed dollar amount. When a suspension ends, the debt limit is reestablished at a level that accommodates federal spending during the suspension period. The U.S. Treasury is thus left with minimal headroom under the debt limit after a suspension ends, leaving only a cash balance similar to that when the suspension began. Therefore, the Treasury Secretary typically invokes a set of extraordinary measures, which are described below. \n\n\t\tExtraordinary Measures and Debt Issuance Suspension Periods\n\nCongress has authorized the Treasury Secretary to invoke a \"debt issuance suspension period,\" which triggers the availability of extraordinary measures, which are special strategies to handle cash and debt management. Actions taken in the past include suspending sales of nonmarketable debt, postponing or downsizing marketable debt auctions, and withholding receipts that would be transferred to certain government trust funds. In particular, extraordinary strategies include suspending investments in Civil Service Retirement and Disability Fund (CSRDF) and the G-Fund of the Federal Employees' Retirement System (FERS), as well as redeeming a limited amount of CSRDF securities. The Treasury Secretary is also mandated to make those funds whole after the resolution of a debt limit episode. \n\n\t\tTiming Uncertainties\n\nThe amount of time that extraordinary measures allow the U.S. Treasury to extend its borrowing capacity depends on the pace of deficit spending, the timing of cash receipts and outlays, and other technical factors. Tax deadlines and processing dates for some federal disbursements are scheduled, but amounts of collections and outlays depend on decisions and actions of private entities and other federal agencies, which are more difficult to predict. The effects of recent tax changes ( P.L. 115-97 ) and the possibility that further changes could occur in the 116 th Congress could also affect revenue projections. Treasury cash flow projections are therefore subject to uncertainty, which complicates attempts to estimate how long extraordinary measures would enable the federal government to meet its financial obligations. \nEstimates calculated by others of when Treasury would reach the debt limit and how long extraordinary measures would extend federal borrowing capacity have typically been close to Treasury's estimates. The U.S. Treasury Inspector General reported in 2012 that \"the margin of error in these estimates at a 98 percent confidence level is plus or minus $18 billion for one week into the future and plus or minus $30 billion for two weeks into the future.\"\nAn impending debt ceiling constraint presents more than one deadline. A first deadline is the exhaustion of borrowing capacity. The U.S. Treasury, however, could continue to meet obligations using available cash balances. As cash balances run down, however, other complications could emerge and Treasury's cash resources could fall below levels deemed prudent by outside advisors well before extraordinary measures were exhausted. Low cash balances could complicate federal debt management and Treasury auctions. The Government Accountability Office (GAO) has also noted that debt limit episodes generate severe strains for Treasury staff, especially when its room for maneuver is severely restricted. Finally, if the U.S. Treasury were to run out of cash, the Treasury Secretary would face difficult choices in how to comply simultaneously with the debt limit and the mandate to pay federal obligations in a timely fashion.\nSevere financial dislocation could result if the U.S. Treasury were unable to make timely payments. For example, repo lending arrangements, which rely heavily on Treasury securities for collateral, could become more expensive or could be disrupted. \"Repo\" is short for repurchase agreement, which provides a common means of secured lending among financial institutions. Repo lending rates rose sharply in early August 2011 during the 2011 debt limit episode, but fell to previous levels once that episode was resolved. \nThe Federal Reserve Open Market Committee indicated in an October 16, 2013, discussion that \"in the event of delayed payments on Treasury securities,\" discount window and other operations would proceed \"under the usual terms.\" That statement has been taken to imply that the Federal Reserve would be \"prepared to backstop the Treasury market in the event of a political deadlock.\" In addition, the Federal Reserve Bank of New York issued a description of contingency plans in December 2013 in the event of Treasury payment delays, but warned that such measures \"only modestly reduce, not eliminate, the operational difficulties posed by a delayed payment on Treasury debt. Indeed, even with these limited contingency practices, a temporary delayed payment on Treasury debt could cause significant damage to, and undermine confidence in, the markets for Treasury securities and other assets.\"\n\n\t\tRecent Increases in the Debt Limit\n\n Table 1 presents debt limit changes over the past two decades. The debt limit was modified six times from 1993 through 1997. Two of those modifications were enacted to prevent the debt limit restriction from delaying payment of Social Security benefits in March 1996 before a broader increase in the debt was passed at the end of that month. \nAfter 1997, debt limit increases were unnecessary due to the appearance of federal surpluses that ran from FY1998 through FY2001. Since FY2002 the federal government has run persistent deficits, which have been ascribed to major tax cuts enacted in 2001 and 2003 and higher spending. Those deficits required a series of increases in the debt limit.\nStarting with passage of the BCA in August 2011, Congress has employed measures that have led to debt limit increases that occur some time after a law is enacted. Dates in the first column of Table 1 in general refer to dates of enactment, which do not match dates when debt limit increases have occurred. For instance, the debt limit was suspended when P.L. 113-83 was enacted on February 12, 2014, and was reestablished on March 16, 2015, when that suspension lapsed. One result of suspending the debt limit, as has been the practice in recent years, is that no fixed number appears in legislation and that a new debt limit level is set only when the suspension lapses.\n\n\tThe 2011 Debt Limit Episode\n\nThe 2011 debt limit episode attracted far more attention than other recent debt limit episodes. In mid-2011 several credit ratings agencies and investment banks expressed concerns about the consequences to the financial system and the economy if the U.S. Treasury were unable to fund federal obligations. Many economists and financial institutions stated that if the market associated Treasury securities with default risks, the effects on global capital markets could be significant.\nDebate during the 2011 debt limit episode reflected a growing concern with the fiscal sustainability of the federal government. While projections issued in 2011 indicated that federal deficits would shrink over the next half decade, deficits later in the decade were expected to rise. Without major changes in federal policies, the amount of federal debt would increase substantially. CBO has repeatedly warned that the current trajectory of federal borrowing is unsustainable and could lead to slower economic growth in the long run as debt rises as a percentage of GDP. Unless federal policies change, Congress would repeatedly face demands to raise the debt limit to accommodate the growing federal debt in order to provide the government with the means to meet its financial obligations.\nThe next section provides a brief chronology of events from the 2011 debt limit episode.\n\n\t\tThe 2011 Debt Ceiling Episode Begins\n\nOn May 16, 2011, U.S. Treasury Secretary Timothy Geithner announced that the federal debt had reached its statutory limit and declared a debt issuance suspension period, which would allow certain extraordinary measures to extend Treasury's borrowing capacity until about August 2, 2011. Had the U.S. Treasury exhausted its borrowing authority, it could have used cash balances to meet obligations for some period of time.\nOver the course of the 2011 debt limit episode Treasury estimates of when the debt limit would begin to bind and how long extraordinary measures would suffice to meet federal obligations shifted. For instance, in April 2011 the U.S. Treasury had projected that its borrowing capacity, even using extraordinary measures, would be exhausted by about July 8, 2011. The Treasury Secretary, in a letter to Congress dated May 2, 2011, had indicated that he would declare a debt issuance suspension period on May 16, unless Congress acted beforehand, which would allow certain extraordinary measures to extend Treasury's borrowing capacity until early August 2011. On July 1, 2011, the U.S. Treasury confirmed its view that its borrowing authority would be exhausted on August 2, the date cited in Treasury Secretary Geithner's May 16, 2011, letter that invoked the debt issuance suspension period.\n\n\t\t\tProposed Solutions in the Spring of 2011\n\nA bill ( H.R. 1954 ) to raise the debt limit to $16,700 billion was introduced on May 24 and was defeated in a May 31, 2011, House vote of 97 to 318. The House passed the Cut, Cap, and Balance Act of 2011 ( H.R. 2560 ; 234-190 vote) on July 19, 2011. The measure would have increased the statutory limit on federal debt from $14,294 billion to $16,700 billion once a proposal for a constitutional amendment requiring a balanced federal budget was transmitted to the states. On July 22, the Senate tabled the bill on a 51-46 vote.\nSome commentators in early 2011 suggested that cutting federal spending could slow the growth in federal debt enough to avoid an increase in the debt limit. The scale of required spending reductions, as of the middle of FY2011, would have been large. For example, at the start of the third quarter of FY2011 on April 1, 2011, federal debt was within $95 billion of its limit. According to CBO baseline estimates issued at the time, the expected deficit for the remainder of FY2011 would be about $570 billion. Reaching the end of FY2011 on September 30, 2011, without an increase in the debt limit or the use of extraordinary measures would have thus required a spending reduction of at least $570 billion, or about 85% of discretionary spending for the rest of that fiscal year.\nSome have suggested that the Fourteenth Amendment (Section 4), which states that \"(t)he validity of the public debt of the United States ... shall not be questioned,\" could provide the President with authority to ignore the statutory debt limit. President Obama rejected such claims, as did most legal analysts. \n\n\t\tThe Budget Control Act of 2011\n\nOn July 25, 2011, the Budget Control Act of 2011 was introduced in different forms by both House Speaker Boehner (House Substitute Amendment to S. 627 ) and Majority Leader Reid ( S.Amdt. 581 to S. 1323 ). Subsequently, on August 2, 2011, President Obama signed into law a substantially revised compromise measure (Budget Control Act, BCA; P.L. 112-25 ), following House approval by a vote of 269-161 on August 1, 2011, and Senate approval by a vote of 74-26 on August 2, 2011. This measure included numerous provisions aimed at deficit reduction, and would allow a series of increases in the debt limit of up to $2,400 billion ($2.4 trillion) subject to certain conditions. These provisions eliminated the need for further increases in the debt limit until early 2013. \nIn particular, the BCA included major provisions that\nimposed discretionary spending caps, enforced by automatic spending reductions, referred to as a \"sequester\"; established a Joint Select Committee on Deficit Reduction, whose recommendations would be eligible for expedited consideration; required a vote on a joint resolution on a proposed constitutional amendment to mandate a balanced federal budget; and instituted a mechanism allowing for the President and Treasury Secretary to raise the debt ceiling, subject to congressional disapproval. \n\n\t\t\tDebt Limit Increases Under the BCA\n\nThe legislation provides a three-step procedure by which the debt limit can be increased. First, the debt limit was raised by $400 billion, to $14,694 billion on August 2, 2011, following a certification of the President that the debt was within $100 billion of its legal limit. \nA second increase of $500 billion occurred on September 22, 2011, which was also triggered by the President's certification of August 2. The second increase, scheduled for 50 days after that certification, was subject to a joint resolution of disapproval. Because such a resolution could be vetoed, blocking a debt limit increase would be challenging. The Senate rejected a disapproval measure ( S.J.Res. 25 ) on September 8, 2011, on a 45-52 vote. The House passed a disapproval measure ( H.J.Res. 77 ) on a 232-186 vote, although the Senate declined to act on that measure. The resulting increase brought the debt limit to $15,194 billion.\nIn late December 2011, the debt limit came within $100 billion of its statutory limit, which triggered a provision allowing the President to issue a certification that would lead to a third increase of $1,200 billion. By design, that increase matched budget reductions slated to be made through sequestration and related mechanisms over the FY2013-FY2021 period. That increase was also subject to a joint resolution of disapproval. The President reportedly delayed that request to allow Congress to consider a disapproval measure. On January 18, 2012, the House passed such a measure ( H.J.Res. 98 ) on a 239-176 vote. The Senate declined to take up a companion measure ( S.J.Res. 34 ) and on January 26, 2012, voted down a motion to proceed (44-52) on the House-passed measure ( H.J.Res. 98 ), thus clearing the way for the increase, resulting in a debt limit of $16,394 billion.\nThe third increase could also have been triggered in two other ways. A debt limit increase of $1,500 billion would have been permitted if the states had received a balanced budget amendment for ratification. A measure ( H.J.Res. 2 ) to accomplish that, however, failed to reach the constitutionally mandated two-thirds threshold in the House in a 261\u2013165 vote held on November 18, 2011. The debt limit could also have been increased by between $1,200 billion and $1,500 billion had recommendations from the Joint Select Committee on Deficit Reduction, popularly known as the Super Committee, been reported to and passed by each chamber. If those recommendations had been estimated to achieve an amount between $1,200 billion and $1,500 billion, the debt limit increase would be matched to that figure. The Joint Select Committee, however, was unable to agree on a set of recommendations.\n\n\tThe Debt Limit in 2013\n\n\t\tDebt Limit Reached at End of December 2012\n\nOn December 26, 2012, the U.S. Treasury stated that the debt would reach its limit on December 31 and that the Treasury Secretary would declare a debt issuance suspension period to authorize extraordinary measures (noted above, described below) that could be used to meet federal payments for approximately two months. As predicted, federal debt did reach its limit on December 31, when large biannual interest payments, in the form of Treasury securities, were made to certain trust funds. \nThe U.S. Treasury stressed that these extraordinary measures would be exhausted more quickly than in recent debt limit episodes for various technical reasons. A January 14, 2013, letter from Treasury Secretary Geithner also estimated that extraordinary measures would be exhausted sometime between mid-February or early March 2013. CBO had previously estimated that federal debt would reach its limit near the end of December 2012, and that the extraordinary measures could be used to fund government activities until mid-February or early March 2013. During the 112 th Congress, Speaker John Boehner had stated that a future debt limit increase should be linked to spending cuts of at least the same magnitude, a position that reflects the structure of the Budget Control Act. \n\n\t\tSuspension of the Debt Limit Until May 19, 2013\n\nHouse Republicans decided on January 18, 2013, to propose a three-month suspension of the debt limit tied to a provision that would delay Members' salaries in the event that their chamber of Congress had not agreed to a budget resolution. H.R. 325 , according to its sponsor, would allow Treasury to pay bills coming due before May 18, 2013. A new debt limit would then be set on May 19. The measure would also cause salaries of Members of Congress to be held in escrow \"(i)f by April 15, 2013, a House of Congress had not agreed to\" a budget resolution. Such a provision, however, could raise constitutional issues under the Twenty-Seventh Amendment. \nOn January 23, 2013, the House passed H.R. 325 , which suspended the debt limit until May 19, 2013, on a 285-144 vote. The Senate passed the measure on January 31 on a 64-34 vote; it was then signed into law ( P.L. 113-3 ) on February 4.\n\n\t\t\tReplenishing the U.S. Treasury's Extraordinary Measures\n\nOnce H.R. 325 was signed into law on February 4, the U.S. Treasury replenished funds that had been used to meet federal payments, thus resetting its ability to use extraordinary measures. As of February 1, 2013, the U.S. Treasury had used about $31 billion in extraordinary measures. Statutory language that grants the Treasury Secretary the authority to declare a \"debt issuance suspension period\" (DISP), which permits certain extraordinary measures, also requires that \"the Secretary of the Treasury shall immediately issue\" amounts to replenish those funds once a debt issuance suspension period (DISP) is over. A DISP extends through \"any period for which the Secretary of the Treasury determines for purposes of this subsection that the issuance of obligations of the United States may not be made without exceeding the public debt limit.\" \nShortly after the declaration of a new debt issuance suspension period in February 2013, Jacob Lew was confirmed as Treasury Secretary, replacing Timothy Geithner.\n\n\t\t\tDebt Limit Reset and Return of Extraordinary Measures in May 2013\n\nOnce the debt limit suspension lapsed after May 18, 2013, the U.S. Treasury reset the debt limit at $16,699 billion, or $305 billion above the previous statutory limit. On May 20, 2013, the first business day after the expiration of the suspension, debt subject to limit was just $25 million below the limit.\nSome Members, as noted above, stated that H.R. 325 ( P.L. 113-3 ) was intended to prevent the U.S. Treasury from accumulating cash balances. The U.S. Treasury's operating cash balances at the start of May 20, 2013 ($34 billion), were well below balances ($60 billion) at the close of February 4, 2013, when H.R. 325 was enacted. Some experienced analysts had stated that the exact method by which the debt limit would be computed according to the provisions of P.L. 113-3 was not fully clear. The U.S. Treasury has not provided details of how it computed the debt limit after the suspension lapsed.\nTreasury Secretary Jacob Lew notified Congress on May 20, 2013, that he had declared a new debt issuance suspension period (DISP), triggering authorities that allow the Treasury Secretary to use extraordinary measures to meet federal obligations until August 2. On August 2, 2013, Secretary Lew notified Congress that the DISP would be extended to October 11, 2013. In those notifications, as well in other communications, Secretary Lew urged Congress to raise the debt limit in a \"timely fashion.\" \n\n\t\tDebt Limit Forecasts in 2013\n\nHow long the U.S. Treasury could have continued to pay federal obligations absent an increase in the debt limit depended on economic conditions, which affect tax receipts and spending on some automatic stabilizer programs, and the pace of federal spending. Stronger federal revenue collections and a slower pace of federal outlays in 2013 reduced the FY2013 deficit compared to previous years. CBO estimates for July 2013 put the total federal deficit at $606 billion in FY2013, well below the FY2012 deficit of $1,087 billion, implying a slower overall pace of borrowing. Special dividends from mortgage giants Fannie Mae and Freddie Mac also extended the U.S. Treasury's ability to meet federal obligations.\nIn May 2013, the investment bank Goldman Sachs projected that, with the addition of the Fannie Mae dividend and an estimated postsuspension $16.70 trillion limit, federal borrowing capacity would be exhausted in early October. \nEstimates of Treasury cash flows are subject to substantial uncertainty. The U.S. Treasury Inspector General reported in 2012 that \"the margin of error in these estimates at a 98 percent confidence level is plus or minus $18 billion for one week into the future and plus or minus $30 billion for two weeks into the future.\"\n\n\t\t\tFannie Mae and Freddie Mac Dividend Payments to the U.S. Treasury\n\nIn September 2008, Fannie Mae and Freddie Mac entered voluntary conservatorship. As part of their separate conservatorship agreements, Treasury agreed to support Fannie Mae and Freddie Mac in return for senior preferred stock that would pay dividends. Losses for Fannie Mae and Freddie Mac while in conservatorship have totaled $123 billion, although each has been profitable since the start of 2012. For a profitable firm, some past losses can offset future tax liabilities and would be recognized on its balance sheet as a \"deferred tax asset\" under standard accounting practices. Fannie Mae and Freddie Mac wrote down the value of their tax assets because their return to profitability was viewed as unlikely. \nThe return of Fannie Mae and Freddie Mac to profitability opened the possibility for a reversal of those writedowns. On May 9, 2013, Fannie Mae announced that it would reverse the writedown of its deferred tax assets. The Treasury agreements, as amended, set the dividend payments to a sweep (i.e., an automatic transfer at the end of a quarter) of Fannie Mae's and Freddie Mac's net worth. Thus a reversal of that writedown of the deferred tax assets triggered a payment of about $60 billion from Fannie Mae to the U.S. Treasury on June 28, 2013. The U.S. Treasury received $66.3 billion from Fannie Mae and Freddie Mac on that date. Fannie Mae stated that it would pay an additional $10.2 billion in September 2013. On August 7, 2013, Freddie Mac announced that it had not yet decided to write down its deferred tax assets of $28.6 billion.\n\n\t\t\tTreasury Secretary Lew's Message to Congress in 2013\n\nIn May 2013, Secretary Lew had notified Congress that he expects the U.S. Treasury will be able to meet federal obligations until at least Labor Day. Some private estimates suggest that the U.S. Treasury, with the assistance of extraordinary measures, would probably be able to meet federal obligations until mid-October or November 2013. By comparison, in 2011, Treasury Secretary Geithner invoked authority to use extraordinary measures on May 16, 2011, which helped fund payments until the debt ceiling was raised on August 2, 2011.\nOn August 26, 2013, Treasury Secretary Lew notified congressional leaders that the government would exhaust its ability to borrow in mid-October according to U.S. Treasury projections. At that point, the U.S. Treasury would have only an estimated $50 billion in cash to meet federal obligations. With that cash and incoming receipts, the U.S. Treasury would be able to meet obligations for some weeks after mid-October according to independent analysts, although projecting when cash balances would be exhausted is difficult. \nOn September 25, 2013, Secretary Lew sent another letter to Congress with updated forecasts of the U.S. Treasury's fiscal situation. According to those forecasts, the U.S. Treasury would exhaust its borrowing capacity no later than October 17. At that point, the U.S. Treasury would have about $30 billion in cash balances on hand to meet federal obligations. At the close of business on October 8, 2013, the U.S. Treasury had an operating cash balance of $35 billion.\nOn October 3, 2013, the U.S. Treasury issued a brief outlining potential macroeconomic effects of the prospect that the federal government would be unable to pay its obligations in a timely fashion. The brief provided data on how various measures of economic confidence, asset prices, and market volatility responded to the debt limit episode in the summer of 2011.\n\n\t\t\tWhen Might the Debt Limit Have Been Binding?\n\nIn the absence of a debt limit increase, the cash balances on hand when the U.S. Treasury's borrowing capacity ran out would then dwindle. At the close of business on October 11, 2013, the U.S. Treasury's cash balance was $35 billion. Those low cash balances, however, could raise two complications even before that point. \nFirst, low cash balances could have complicated federal debt management and Treasury auctions in late October or early November. Yields for Treasury bills maturing after the October 17 date mentioned in Secretary Lew's September 25 letter have increased relative to other yields on other Treasury securities. This appeared to signal reluctance among some investors to hold Treasury securities that might be affected by debt limit complications.\nSecond, repo lending, which relies heavily on Treasury securities for collateral, could become more expensive or could be disrupted. Repo lending rates rose sharply in early August 2011 during the 2011 debt limit episode, but fell to previous levels once that episode was resolved.\n\n\t\t\tMarket Reaction to the Impending Exhaustion of Treasury's Borrowing Capacity in October 2013\n\nIn the past, some financial markets have reacted to impending debt limit deadlines, signaling concerns about the federal government's ability to meet obligations in a timely manner. In early October 2013, the U.S. Treasury issued a brief that outlined how various measures of economic confidence, asset prices, and market volatility responded to the debt limit episode in the summer of 2011, and the prospect that the federal government might not have been able to pay its obligations in a timely fashion.\nSome investors expressed reluctance to hold Treasury securities that might be affected by debt limit complications. Fidelity Investments, J.P. Morgan Investment Management Inc., and certain other funds stated in October 2013 that they had sold holdings of Treasury securities scheduled to mature or to have coupon payments between October 16 and November 6, 2013.\nIn October 2013, yields for Treasury bills maturing in the weeks after October 17\u2014when the U.S. Treasury's borrowing capacity was projected to be exhausted\u2014rose sharply relative to yields on Treasury securities maturing in 2014. Figure 1 shows secondary market yields on Treasury bills set to mature after the projected date when the Treasury's borrowing capacity would be exhausted. The horizontal axis shows days before the end of the DISP, and the vertical scale shows basis points (bps). For instance, the yield for the Treasury bill maturing October 24, 2013, rose from close to zero to 46 bps on October 15, 2013. Those yields are about 10 times larger than for similar bills that mature in calendar year 2014. A four-week Treasury bill auctioned on October 8, 2013, sold with a yield of 35 bps. By contrast, a four-week bill sold on September 4, 2013, sold with a yield of 2 bps. After enactment of a debt limit measure ( H.R. 2775 ; P.L. 113-46 ) on October 16, 2013, however, those yields returned to their previous levels.\n\n\t\t\tDebt Limit Issues in 2013\n\nCongressional consideration of federal debt policy raised several policy issues that were explored in hearings and in broader policy discussions.\n\n\t\t\t\tHearings in 2013\n\nOn January 22, 2013, the House Ways and Means Committee held hearings on the history of the debt limit and how past Congresses and Presidents have negotiated changes in the debt limit. On April 10, 2013, the House Ways and Means Subcommittee on Oversight held hearings on federal debt and fiscal management when the debt limit binds. The Joint Economic Committee held hearings on the economic costs of uncertainty linked to the debt limit on September 18, 2013.\nOn October 10, 2013, the Senate Finance Committee held hearings on the debt limit and heard testimony from Treasury Secretary Jacob Lew. On the same morning, the Senate Banking Committee held hearings on the effects of a possible federal default on financial stability and economic growth, and heard testimony from heads of financial industry trade associations.\n\n\t\t\t\tDebt Prioritization and H.R. 807\n\nOn April 30, 2013, the House Ways and Means Committee reported H.R. 807 , which would grant the Treasury Secretary the authority to borrow to fund principal and interest payments on debt held by the public and the Social Security trust funds if the debt limit were reached. The Treasury Secretary would also have had to submit weekly reports to Congress after that authority were exercised. On May 9, 2013, the House passed and amended version of H.R. 807 . The House also passed a version of H.J.Res. 59 that incorporated the text of H.R. 807 on September 20. On September 27, the Senate passed an amended version of the measure that did not contain provisions from H.R. 807 . The Obama Administration indicated that it would veto H.R. 807 or H.J.Res. 59 containing similar provisions, were either to be approved by Congress. The October 2013 debt limit measure ( H.R. 2775 ; P.L. 113-46 ) contained no payment prioritization provisions.\nH.R. 807 would have affected one aspect of the U.S. Treasury's financial management of the Social Security program, but would not alter other aspects. If the debt limit were reached, the U.S. Treasury could still face constraints that could raise challenges in financial management. The U.S. Treasury is responsible for (1) making Social Security beneficiary payments; (2) reinvesting Social Security payroll taxes and retirement contributions in special Treasury securities held by the Social Security trust fund; and (3) paying interest to the Social Security trust funds, in the form of special Treasury securities, at the end of June and December. Those special Treasury securities, either funded via Social Security payroll receipts or biannual interest payments, are subject to the debt limit. Thus, sufficient headroom under the debt limit is needed to issue those special Treasury securities. If the debt limit were reached and extraordinary measures were exhausted, the Treasury Secretary's legal requirement to reinvest Social Security receipts by issuing special Treasury securities could at times be difficult to reconcile with his legal requirement not to exceed the statutory debt limit.\n\n\t\tResolution of the Debt Limit Issue in October 2013\n\nOn September 25, Treasury Secretary Lew notified Congress that the government would exhaust its borrowing capacity around October 17 according to updated estimates. At that point, the U.S. Treasury would have had a projected cash balance of only $30 billion to meet federal obligations. \nOn October 16, 2013, Congress passed a continuing resolution (Continuing Appropriations Act, 2014; H.R. 2775 ; P.L. 113-46 ) that included a provision to allow a suspension of the debt limit. That measure passed the Senate on an 81-18 vote. The House then passed the measure on a 285-144 vote. The President signed the bill ( P.L. 113-46 ) early the next morning. The measure suspended the debt limit until February 8, 2014, once the President certified that the U.S. Treasury would be unable to meet existing commitments without issuing debt. The President sent congressional leaders a certification on October 17, 2013, to trigger a suspension of the debt limit through February 7, 2014.\nThat suspension, however, was subject to a congressional resolution of disapproval. If a resolution of disapproval had been enacted, the debt limit suspension would end on that date. Specific expedited procedures in each chamber governed the consideration of the resolution of disapproval. The resolution, if passed, was subject to veto. A resolution of disapproval ( H.J.Res. 99 ) was passed in the House on October 20, 2013, on a 222-191 vote. A similar measure, S.J.Res. 26 , was not approved by the Senate, so the debt limit increase was not blocked.\nThe debt limit suspension ended on February 7, and a limit was set to reflect the amount of debt necessary to fund government operations before the end of the suspension. The U.S. Treasury was precluded in P.L. 113-46 from accumulating excess cash reserves that might have allowed an extension of extraordinary measures.\nThe debt limit provisions enacted in October 2013 resemble provisions enacted in 2011 and earlier in 2013. For example, the Budget Control Act of 2011 ( P.L. 112-25 ) also provided for a congressional resolution of disapproval of a debt limit increase. The suspension of the debt limit in H.R. 2775 resembles the suspension enacted in February 2013 ( H.R. 325 ; P.L. 113-3 ).\n\n\t\tOther Proposals Regarding the Debt Limit in October 2013\n\nPassage of the Continuing Appropriations Act, 2014 was preceded by other proposals to modify the debt limit. On October 8, 2013, Senate Majority Leader Reid introduced S. 1569 , a measure intended to ensure complete and timely payment of federal obligations. The measure would have extended the suspension of the debt limit enacted in February 2013 ( P.L. 113-3 ). On October 15, 2013, an announcement of a hearing on a proposal to amend the Senate amendment to H.J.Res. 59 appeared on the House Rules Committee website. That hearing, according to a subsequent announcement, was postponed that evening. The measure would extend the debt limit through February 15, 2014, and restrict the Treasury Secretary's ability to employ extraordinary measures through April 15, 2014. The measure would also extend discretionary funding at \"sequester levels\" through December 15, 2013.\n\n\tThe Debt Limit in 2014\n\nThe resolution of the debt limit episode and the ending of the federal shutdown in October 2013 set up a subsequent episode in early 2014.\n\n\t\tDebt Limit Forecasts in Late 2013 and 2014\n\nIn late November 2013, CBO issued an analysis of Treasury cash flows and available extraordinary measures. Treasury, according to those estimates, might exhaust its ability to meet federal obligations in March. Because Treasury cash flows can be highly uncertain during tax refund season, CBO stated that that date could arrive as soon as February 2014 or as late as early June.\nGoldman Sachs had estimated that Treasury would probably exhaust its headroom\u2014the sum of projected cash balances and remaining borrowing authority under the debt limit\u2014in mid to late March, but might in fortuitous circumstances be able to meet its obligations until June. While Goldman Sachs and other independent forecasters noted that that the U.S. Treasury might possibly avoid running out of headroom in late March or early April, waiting until mid-March to address the debt limit could have raised serious risks for the U.S. government's financial situation.\n\n\t\tTreasury Secretary Lew Notifies Congress in Early 2014\n\nAs the end of the debt limit suspension neared, the U.S. Treasury continued to warn Congress of the consequences on not raising the debt limit. While the Treasury could again employ extraordinary measures after the suspension ended after February 7, 2014, its ability to continue meeting federal obligations would be limited by large outflows of cash resulting from individual income tax refunds. In December 2013, the U.S. Treasury had notified congressional leaders that according to its estimates, extraordinary measures would extend its borrowing authority \"only until late February or early March 2014.\" On January 22, 2014, Secretary Lew called for an increase in the debt limit before the end of debt limit suspension on February 7, 2014, or the end of February. In the first week of February 2014, Secretary Lew stated that the U.S. Treasury could not be certain that extraordinary measures would last beyond February 27, 2014.\n\n\t\tDebt Limit Suspension Lapses in February 2014\n\nOn February 7, 2014, the debt limit suspension ended and the U.S. Treasury reset the debt limit to $17,212 billion. On the same day, the U.S. Treasury also suspended sales of State and Local Government Series (SLGS), the first of its extraordinary measures. On February 10, Secretary Lew notified Congress that he had declared a debt issuance suspension period (DISP) that authorizes use of other extraordinary measures. In particular, during a DISP the Treasury Secretary is authorized to suspend investments in the Civil Service and Retirement and Disability Fund and the G Fund of the Federal Employees' Retirement System. The DISP was scheduled to last until February 27.\n\n\t\tDebt Limit Again Suspended Until March 2015\n\nFollowing the lapse of the debt limit suspension, Congress moved quickly to address the debt limit issue. On February 10, 2014, the House Rules Committee posted an amended version of S. 540 that would suspend the debt limit through March 15, 2015. The debt limit would be raised the following day by an amount tied to the amount of borrowing required by federal obligations during the suspension period. The U.S. Treasury would also be prohibited from creating a cash reserve above that level. The measure also would have reversed a 1% reduction in the cost-of-living adjustment for certain working-age military retirees that had been included in the Bipartisan Budget Act of 2013 (BBA; P.L. 113-67 ). In addition, sequestration of nonexempt mandatory spending would be extended from FY2023 to FY2024. CBO issued a cost estimate of the measure on February 11, 2014.\nOn February 11, 2014, the House voted 221-201 to suspend the debt limit ( S. 540 ) through March 15, 2015. The amended measure included restrictions on Treasury debt management in the version reported by the Rules Committee, but omitted provisions to reverse reductions in cost-of-living adjustments to working-age military retiree pensions and an extension of nondefense mandatory sequestration. The Senate voted to concur in the House amendment the following day on a 55-43 vote. The President signed the measure ( P.L. 113-83 ) on February 15, 2014. Unlike previous measures that suspended the debt limit, a presidential certification was not required. A separate measure was also signed into law on the same day ( P.L. 113-82 ) to reverse reductions in cost-of-living adjustments to working-age military retiree pensions for those who entered the military before the beginning of 2014. \n\n\tThe Debt Limit in 2015\n\nThe debt limit, which had been suspended through March 15, 2015, was reestablished the following day at $18,113 billion. The debt limit was raised, in essence, by the sum of payments made during the suspension period to meet federal obligations. \n\n\t\tTreasury's Extraordinary Measures in 2015\n\nTreasury Secretary Lew sent congressional leaders a letter on March 6, 2015, stating that Treasury would suspend issuance of State and Local Government Series (SLGS) bonds on March 13, 2015, the last business day during the current debt limit suspension. SLGS are used by state and local governments to manage certain intergovernmental funds in a way that complies with federal tax laws. \nOnce the most recent debt limit suspension lapsed, Treasury Secretary Lew declared a Debt Issuance Suspension Period (DISP) on March 16, 2015, which empowered him to use extraordinary measures to meet federal fiscal obligations until July 30, 2015. On July 30, 2015, Treasury Secretary Lew sent congressional leaders a letter to invoke extraordinary powers again until the end of October. Secretary Lew indicated in a separate letter, sent the previous day, that those extraordinary measures would enable the U.S. Treasury to meet federal financial obligations \"for at least a brief additional period of time\" after the end of October. Secretary Lew sent another letter on September 10, 2015, that reiterated those points.\n\n\t\tCash Management Changes\n\nIn May 2015, the U.S. Treasury changed its cash management policy to adopt recommendations of the Treasury Borrowing Advisory Committee and an internal review. The new policy is intended to ensure that the U.S. Treasury could continue to meet federal obligations even if its market access were disrupted for a week or so. Treasury Secretary Lew noted that an event of the scale such as \"Hurricane Sandy, September 11, or a potential cyber-attack disruption\" might cause a lapse in market access. The new cash management policy does not affect the date when the debt limit might constrain the U.S. Treasury's ability to meet federal obligations.\n\n\t\tU.S. Treasury's Headroom Under the Debt Limit\n\nThe U.S. Treasury's headroom under the debt limit consists of remaining amounts of funds available for extraordinary measures and available cash reserves. When federal receipts exceed federal outlays, that headroom expands, except for those receipts or outlays that are linked to intragovernmental accounts such as Social Security. The headroom gained by those receipts is exactly offset because Treasury must issue special securities to the appropriate intragovernmental trust fund, and those securities are subject to the debt limit. Conversely, when outlays are funded by such intragovernmental accounts, the increase in Treasury's headroom due to redemption of special securities is offset by Treasury's need to provide funding for that redemption either by drawing down cash balances or additional borrowing.\n\n\t\t\tHow Long Would Have Extraordinary Measures Lasted in 2015?\n\nOn October 15, 2015, Secretary Lew stated that extraordinary measures would have been exhausted \"no later than\" November 3, 2015, although a relatively small cash reserve\u2014projected at less than $30 billion\u2014would be on hand. Secretary Lew had previously stated that extraordinary measures would be exhausted about November 5, 2015.\nIndependent forecasts of when extraordinary measures would be exhausted were close to the date estimated by the U.S. Treasury. One private forecast estimated Treasury's headroom under the debt limit at $38 billion on November 5, 2015. CBO, according to an October 14, 2015, report, projected that \"Treasury will begin running a very low cash balance in early November, and the extraordinary measures will be exhausted and the cash balance entirely depleted sometime during the first half of November.\" Figure 2 shows one recent independent estimate of Treasury's headroom that shows Treasury's available resources falling below $50 billion after the first few days of November 2015.\n\n\t\t\tWhy Did the Estimated Date of Treasury's Exhaustion of Borrowing Capacity Move Up?\n\nPrevious independent estimates of when Treasury's borrowing capacity would be exhausted suggested that leaving the debt limit at its present level would suffice until the end of November or even early December. For example, CBO's August 2015 projections had put the estimated date of exhaustion somewhere between mid-November and early December 2015.\nLower than expected tax receipts during the fall of 2015 and higher than expected federal trust fund investments pushed the date back from what outside forecasters had expected earlier in the year. For example, net issuance of Government Account Series securities\u2014which includes special Treasury securities held by federal trust funds\u2014was about $10 billion higher on the first day of FY2016 as compared to the first day of FY2015. On October 9, 2015, the U.S. Treasury issued a summary of debt balances that provided a more detailed view of its headroom under the debt limit. According to that summary, Treasury had used $355 billion of its available $369 billion in extraordinary measures as of October 7, 2015, leaving $14 billion to meet forthcoming obligations.\nSecretary Lew noted in previous correspondence with Congress that projections of Treasury's ability to meet federal obligations were subject to significant uncertainty due to the variability of federal tax collections and expenditure patterns. While the U.S. Treasury's payment calendar, tax due dates, and securities auction schedule are generally regular and predictable, the amounts paid or received on a given day can fluctuate substantially.\n\n\t\tBipartisan Budget Act of 2015 and the Resolution of the 2015 Debt Limit Episode\n\nLate on the night of October 26, 2015, text of the Bipartisan Budget Agreement of 2015 was issued. The proposal included a provision to suspend the debt limit until March 15, 2017. The debt limit would then come back into effect on the following day at a level reflecting the payment of federal obligations incurred during the suspension period. As with previous debt limit suspensions, the measure prohibits the U.S. Treasury from creating a cash reserve beyond amounts necessary to meet federal obligations during the suspension period. The Bipartisan Budget Act of 2015 would also increase statutory caps on discretionary spending for FY2016 and FY2017, along with measures aimed at offsetting those increases.\nOn October 27, 2015, the House Rules Committee provided a summary of its provisions and put forth an amendment aimed at addressing certain scoring issues. The following day, the House concurred with a modified version of the Senate amendments to H.R. 1314 on a 266-167 vote. The Senate concurred with that version on October 30, 2015, on a 64-35 vote, sending the measure to the President, who signed it ( P.L. 114-74 ) on November 2, 2015. Enactment of the measure thus resolved the 2015 debt limit episode by suspending the debt limit until March 15, 2017. \n\n\t\tOther Developments in 2015 and 2016\n\nOn September 10, 2015, the House Ways and Means Committee reported H.R. 692 , which would grant the Treasury Secretary the authority to borrow to fund principal and interest payments on debt held by the public. The measure resembles H.R. 807 , which was considered in 2013 and is discussed above. The House passed H.R. 692 on October 21, 2015, by a 235-194 vote.\nThe House Ways and Means Committee also reported H.R. 3442 on the same date, which would require the Treasury Secretary to appear before the House Committee on Ways and Means and the Senate Committee on Finance during a debt limit episode and to submit a report on the federal debt. \nThe U.S. Treasury submitted two reports to Congress on extraordinary measures used during the 2015 debt limit episode. The first described actions affecting the G Fund and the second described actions taken affecting the Civil Service Retirement and Disability Fund.\nIn May 2015, Treasury officials announced a policy shift to maintain a larger cash balance\u2014not less than approximately $150 billion in normal circumstances\u2014that would suffice to meet federal obligations in the event of a week-long disruption of access to capital markets. During a November 2, 2016, meeting between Treasury officials and a panel of financiers, concerns were raised that the interaction of debt limit constraints in 2017 with changes in the structure of money market funds (MMFs) that have increased demand for Treasury bills could risk disruption of short-term funding markets.\n\n\tDevelopments in 2017 and 2018\n\nOn March 7, 2017, CBO issued estimates that extraordinary measures could suffice to meet federal obligations until sometime in the fall of 2017. Such estimates are subject to substantial uncertainty due to changes in economic conditions, federal revenue flows, changes in the amounts and timing of federal payments, and other factors. On March 8, 2017, Treasury Secretary Mnuchin notified Congress that he would invoke authorities to use extraordinary measures after March 15, 2017, to ensure continued payment of federal obligations. On March 16, 2017, Secretary Mnuchin notified congressional leaders that he had indeed exercised those authorities. The debt limit on that date was reset at $19,809 billion. \n\n\t\tAdministration Officials Urge Congress to Act\n\nIn testimony before Congress on May 24, 2017, Administration officials urged Congress to raise the debt limit before its summer recess. Office of Management and Budget (OMB) Director Mick Mulvaney stated that the federal receipts were coming in more slowly than projected, which could imply that Treasury's capacity to meet federal obligations could be exhausted sooner than previously projected. A Goldman Sachs analysis found, however, that some major categories of tax receipts had shown stronger growth. \nOn July 28, 2017, Treasury Secretary Mnuchin sent a letter to Congress stating that extraordinary measures would be used until September 29, 2017. Secretary Mnuchin's letter did not state that Treasury's cash reserves or borrowing capacity would be exhausted on that date, but he did describe the need for legislative action by that date as \"critical.\" Others had estimated that the U.S. Treasury would likely be able to meet federal obligations until sometime in early October 2017. Treasury cash balances and borrowing capacity in mid-September, however, were projected to fall well below levels the U.S. Treasury has considered prudent to maintain operations in the face of significant adverse events.\n\n\t\tDebt Limit Again Suspended in September 2017\n\nOn September 3, 2017, Secretary Mnuchin argued that a debt limit measure should be tied to legislation responding to Hurricane Harvey, which caused extensive damage in southeast Texas. On September 6, 2017, outlines of an agreement on the debt limit and a continuing resolution were announced between President Trump and congressional leaders. The following day, the Senate, by an 80-17 vote, passed an amended version of H.R. 601 , which included an amendment ( S.Amdt. 808 ) to suspend the debt limit and provide funding for government operations through December 8, 2017, as well as supplemental appropriations for disaster relief. On September 8, 2017, the House agreed on a 316-90 vote to the amended measure, which the President signed the same day (Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017; P.L. 115-56 ). \nTreasury Secretary Mnuchin invoked authorities to use extraordinary measures once that debt limit suspension lapsed after December 8, 2017. He extended those authorities on January 30, 2018, through the end of February and urged congressional leaders to act on the debt limit before that time. Secretary Mnuchin did not indicate that the U.S. Treasury would exhaust its borrowing capacity or cash reserves by that date. CBO estimates and independent analysts had suggested that those extraordinary measures would have lasted until sometime in early March. In July 2018, Secretary Mnuchin issued a report to Congress detailing its use of extraordinary measures.\n\n\t\tDebt Limit Suspension Reset on March 2, 2019\n\nOn February 9, 2018, enactment of the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ) resolved the debt limit issue until 2019. BBA 2018 employed a legislative vehicle, H.R. 1892 , which had passed in both the House and Senate in different forms in 2017. On February 9, 2018, differences in the amended measure were resolved by a vote of 71 to 28 in the Senate and a vote of 240 to 186 in the House. BBA 2018 also increased statutory caps on discretionary spending, extended funding of the government until March 23, 2018 (Section 20101), and funded certain disaster assistance programs, among other provisions.\nSection 30301 of BBA 2018 suspended the debt limit through March 1, 2019, as noted above. The limit was reset on March 2, 2019, at $21.988 trillion, a level that accommodates federal obligations during the suspension period. On the following Monday\u2014March 4, 2019\u2014Treasury Secretary Steven Mnuchin invoked extraordinary authorities by declaring a debt issuance suspension period, during which the U.S. Treasury will then use its cash balances, incoming revenues, and extraordinary measures to meet federal obligations. CBO estimated that Treasury would have financial resources to meet federal obligations until just before or just after October 1, 2019. Some private forecasts have estimated Treasury's resources would be exhausted around August 2019.","output":"The Constitution grants Congress the power to borrow money on the credit of the United States\u2014one part of its power of the purse\u2014and thus mandates that Congress exercise control over federal debt. Control of debt policy has at times provided Congress with a means of raising concerns regarding fiscal policies. Debates over federal fiscal policy have been especially animated in the past decade, in part because of the accumulation of federal debt in the wake of the 2007-2008 financial crisis and subsequent recession. Rising debt levels, along with continued differences in views of fiscal policy, led to a series of contentious debt limit episodes in recent years.\nThe most recent suspension of the debt limit lapsed after March 1, 2019. The limit was then reset at $21.988 trillion, a level that accommodates federal obligations incurred during the suspension period. U.S. Treasury Secretary Steven Mnuchin invoked extraordinary authorities on March 4, 2019. CBO estimates that Treasury could meet federal obligations until just before or just after October 1, 2019. One private estimate suggests Treasury could cover federal payments until mid-August, if not later. Such estimates are subject to considerable uncertainty.\nThe 2011 debt limit episode was resolved on August 2, 2011, when President Obama signed the Budget Control Act of 2011 (BCA; S. 365; P.L. 112-25). The BCA included provisions aimed at deficit reduction and allowing the debt limit to rise in three stages, the latter two subject to congressional disapproval. Once the BCA was enacted, a presidential certification triggered a $400 billion increase. A second certification led to a $500 billion increase on September 22, 2011, and a third, $1,200 billion increase took place on January 28, 2012.\nFederal debt again reached its limit on December 31, 2012. Extraordinary measures were again used to allow payment of government obligations until February 4, 2013, when H.R. 325, which suspended the debt limit until May 19, 2013, was signed into law (P.L. 113-3), which reset extraordinary measures. On October 16, 2013, enactment of a continuing resolution (H.R. 2775; P.L. 113-46) resolved a funding lapse and suspended the debt limit through February 7, 2014. On February 15, 2014, a measure to suspend the debt limit (S. 540; P.L. 113-83) through March 15, 2015, was enacted. On November 2, 2015, the Bipartisan Budget Act of 2015 (BBA2015; H.R. 1314; P.L. 114-74) was enacted, which suspended the debt limit through March 15, 2017, and relaxed some discretionary spending limits.\nOn March 16, 2017, the debt limit was reset at $19,809 billion, and Treasury Secretary Mnuchin notified Congress that he had invoked authorities to use extraordinary measures. On September 6, 2017, an agreement on the debt limit and a continuing resolution was announced between President Trump and congressional leaders. Two days later a measure (P.L. 115-56) was enacted to implement that agreement, which included a suspension of the debt limit through December 8, 2017. Once that suspension lapsed\u2014with a new debt limit set at $20,456 billion\u2014Treasury Secretary Mnuchin invoked authorities to employ extraordinary measures, which estimates had suggested would last until early March. The debt limit issue was addressed when the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) was enacted on February 9, 2018. Section 30301 of the BBA 2018 suspended the debt limit through March 1, 2019.\nTotal federal debt increases when the government sells debt to the public to finance budget deficits, which adds to debt held by the public, or when the federal government issues debt to certain government accounts, such as the Social Security, Medicare, and Transportation trust funds, in exchange for their reported surpluses\u2014which adds to debt held by government accounts; or when new federal loans outpace loan repayments. The sum of debt held by the public and debt held by government accounts is the total federal debt. Surpluses reduce debt held by the public, while deficits raise it."}
{"id":"gao_GAO-19-115","pid":"gao_GAO-19-115_0","input":"\tBackground\n\n\t\tFederal and State Roles in Addressing SNAP Fraud\n\nThe goal of SNAP, formerly known as the federal Food Stamp Program,  is to help low-income individuals and households obtain a more nutritious  diet by supplementing their income with benefits to purchase allowed food  items. The federal government pays the full cost of the benefits and  shares the responsibility and costs of administering the program with the  states. The overarching rules governing SNAP are set at the federal level.  Accordingly, FNS is responsible for promulgating program regulations  and ensuring that state officials administer the program in compliance  with program rules. FNS officials in seven regional offices assist  headquarters officials in this oversight work. FNS also determines which  retailers are eligible to accept SNAP benefits for food purchases and  investigates and resolves cases of retailer fraud. The states, or in some  cases counties, administer the program by determining whether  households meet the program\u2019s eligibility requirements, calculating  monthly benefits for qualified households, and issuing benefits to  participants on an electronic benefit transfer (EBT) card. States are also  responsible for investigating possible violations by benefit recipients and  pursuing and acting on those violations that are deemed intentional.\n\n\t\tTypes of SNAP Fraud and State Anti-Fraud Mitigation Strategies\n\nIntentional program violations include acts of fraud, which involve  obtaining something of value through willful misrepresentation. Eligibility  fraud involves individuals making false or misleading statements in order  to obtain benefits, including statements about household composition,  household expenses, and income. Failing to report changes to household  circumstances that may affect benefits can also result in eligibility fraud  under certain circumstances. When recipients are certified for SNAP,  state agencies assign them to a reporting system for notifying the state of  certain changes.  These changes include when they have a change of  address, both in-state or out-of-state. Some systems require recipients to  report within a certain period of time of the change occurring, often within  10 days.  Other reporting systems\u2013 including simplified reporting \u2013 require  recipients to submit reports periodically.  Households subject to reporting  on a periodic basis must generally submit reports not less often than once  every 6 months.   One type of eligibility fraud is dual participation, in  which a recipient receives benefits in more than one state in the same  month.\nAnother type of SNAP fraud is trafficking, in which benefits are  exchanged for cash or non-food goods and services. Trafficking may  occur when recipients collaborate with retailers who pay cash for SNAP  benefits. For example, a retailer might allow a recipient to charge $100 on  his or her EBT card and then pay the recipient $50 instead of providing  food. Trafficking also occurs when a recipient exchanges an EBT card  and the corresponding Personal Identification Number (PIN) for cash or  non-food goods or services (e.g., rent or transportation) from another  individual.\nAccording to a September 2012 USDA Office of Inspector General (OIG)  report, the magnitude of program abuse due to recipient fraud is unknown  because states do not have uniform ways of compiling such data. OIG  recommended that FNS determine the feasibility of creating a uniform  methodology for states to calculate their recipient fraud rate. In 2014,  FNS responded that it would be infeasible to implement the  recommendation as it would require legislative authority mandating  significant state investment of time and resources in investigating,  prosecuting, and reporting fraud beyond current requirements.\nStates must adhere to various federal requirements for detecting SNAP  recipient fraud, conducting investigations, and providing due process prior  to disqualifying recipients from participating in the program. The  household is responsible for repaying ill-gotten or misused benefits.  States may generally retain 35 percent of the fraudulent benefits they  recover, and the rest are returned to the federal government.\n\n\t\tData Analytics\n\nThe use of data analytics enables the discovery and communication of  meaningful patterns in data so that states can determine which potential  SNAP fraud cases to review in detail. States have access to various types  of data in their case management systems, including recipient-provided  information and benefits data collected throughout the SNAP eligibility  determination process. Other information sources available to states  include transaction data collected by EBT processors, data from previous  fraud investigations, and third-party data from other government agencies  or commercial vendors (see fig. 1).\nData-analytics activities can include a variety of techniques to prevent  and detect fraud, including data matching and data mining. Data matching  is the large scale comparison of records and files to detect errors or  incorrect information. It can be used to verify information provided by  recipients or detect unreported changes. Data mining is the use of  automated computer algorithms to detect otherwise hidden patterns,  correlations, or anomalies within large data sets indicative of potential  fraud, thus assisting programs in recovering these dollars (see fig. 2).\nFederal laws and regulations require states to conduct certain data  matches when an application for benefits is submitted and other times to  verify an individual\u2019s reported employment and immigration status, as well  as to ensure the information provided is not for an individual who is  incarcerated, deceased, or disqualified from the program (see table 1).\nGAO\u2019s Fraud Risk Framework identifies the following leading practices to  help managers effectively use data to mitigate the likelihood and impact  of fraud (see table 2).\nWhile these leading practices can help managers design and implement  effective data-analytic tools and techniques to prevent and detect  potential fraud, as discussed in the Fraud Risk Framework, these  techniques alone may not be sufficient to ensure that ineligible individuals  do not fraudulently enroll in a program or receive benefits. As a result,  managers may need to combine data-analytics activities with additional  controls as part of their efforts to combat fraud, in a strategic, risk-based  manner.\n\n\tSNAP Transaction Data from Selected States Show Relatively Few Households with Out- of-State Purchases Indicating Potential Fraud\n\n\t\tOut-of-State Purchases Are Allowed by SNAP Rules and Their Dollar Value Represents a Small Percentage of Purchases\n\nA relatively large number of SNAP households made purchases outside  their home state, as allowed under the SNAP statute, but the total dollar  value of out-of-state purchases was small compared to SNAP purchases  overall, according to our analysis of FNS SNAP transaction data. We  identified approximately 5.5 million households that made out-of-state  SNAP purchases in fiscal year 2017. In comparison, FNS reported that  the monthly average number of SNAP households was approximately 21  million in fiscal year 2017. Out-of-state purchases made up approximately  3 percent of all SNAP benefits in fiscal year 2017, with a total dollar value  of about $2 billion (see fig. 3).\nOut-of-state purchases may occur for different reasons, one of which may  be because a recipient lives on or near a state border, and regularly  shops across the state line. For example, District of Columbia recipients  spent about half of their SNAP benefits out of state in fiscal year 2017. All  District of Columbia residents are in close proximity to both Maryland and  Virginia, which are no more than approximately 7 miles from any point in  the District. In general, about a third (34 percent) of households  nationwide with out-of-state purchases spent $50 or less on those  purchases in fiscal year 2017. See Appendix II for a detailed listing of out- of-state purchases by state. Out-of-state purchases may also indicate  potential program violations, including eligibility fraud or trafficking.  However, because out-of-state purchases are permitted, analysis of  additional household and transaction information is generally needed to  identify potential fraud, as discussed below.\nOf out-of-state transactions, purchases in a state that did not border the  recipient\u2019s home state (non-border state) made up approximately 1  percent of all SNAP benefits in fiscal year 2017, as shown in figure 3  above. There were 2.2 million SNAP households that made at least one  purchase in a non-border state in fiscal year 2017, and the percent of  SNAP benefits spent in a non-border state in that year ranged between  approximately 0.6 percent and 1.9 percent. In fiscal year 2017, states  whose SNAP recipients spent the highest percentage of their SNAP  benefits in non-border states included Colorado, Hawaii, Montana, North  Dakota, and Rhode Island.\n\n\t\tSNAP Purchases in Non- Border States Raise Questions of Residency for a Relatively Small Percentage of Households in Selected States\n\nOverall, we found that for fiscal year 2017, less than 0.5 percent of  households in our three selected states spent all their SNAP benefits for  the entire fiscal year in a non-border state (see table 3). Use of benefits  in stores that are a long distance from a recipient\u2019s residence for  extended periods of time, such as purchases exclusively in non-border  states over multiple months, could be an indicator of program violations,  including eligibility fraud. The total value of SNAP transactions by  households in our three selected states that made all purchases in non- border states in fiscal year 2017 was approximately $1.9 million. These  purchases represent about 0.1 percent of all SNAP benefits for fiscal year  2017 in the three selected states.\nWhen SNAP benefits are used in a non-border state over an extended  period of time, this could indicate possible intentional program violations  such as an unreported move and other household changes that could  impact eligibility. SNAP officials we interviewed said that in some cases a  recipient may delay reporting a move if they are enrolled in SNAP in a  state with a lower barrier to entry to the program. At the same time, the  rules around reporting a move and residency may make it difficult to  determine when a recipient has violated program rules. Recipients are not  required to immediately report a move in some cases due to simplified  reporting rules that allow a recipient to report household changes only  periodically, generally every 6 months. Also, officials we interviewed in  the three selected states told us that there are no set time limits for a  SNAP recipient to reside in a new state before the former state revokes  the recipient\u2019s residency. For example, a recipient may be out of state for  an extended period of time for personal reasons, such as helping a  relative, but still intend to reside in the state where they are enrolled in  SNAP. In that case, according to state officials, the recipient would not  necessarily need to report a move and may not be violating program  rules.\nIn addition to the program violations related to an unreported move, use  of SNAP benefits in a non-border state over extended periods of time  could bring into question whether a recipient is also enrolled in SNAP in  another state (i.e., dual participation). Also, it may indicate changes in the  household that could impact eligibility, including questions about whether  a recipient is earning unreported income in the state where they are using  their benefits. While state SNAP agencies stated that they conduct data  matching meant to detect dual participation and unreported income,  states also noted challenges with these matches. State agencies told us  that they use the PARIS system to detect possible dual participation, and  both NDNH and the Work Number to identify recipient income.  However, challenges officials cited in using these systems included lags  in the data provided, and additional work required to confirm data. The  use of data analytics to review recipient transaction data may help states  identify suspicious household activity more easily than with data matching  alone given the challenges associated with these systems. In addition,  data analytics may be another tool to help states identify suspicious  activities in a timely manner. Given the possibility for eligibility fraud or  other program violations, we plan to refer the households that our data  analysis identified as spending all benefits in a non-border state to their  respective state SNAP agencies for further investigation.\n\n\t\tSelected Households\u2019 Out- of-State and In-State SNAP Purchases Had Similar Levels of Potential Trafficking\n\nBased on our analysis of fiscal year 2017 transaction data in the three  selected states, we found that SNAP households without out-of-state  purchases were generally just as likely to have made the types of  purchases that may indicate trafficking of benefits as households with out- of-state purchases. Overall, we found that approximately 2 percent of all  households in the three selected states, including both households that  shopped out-of-state and those that shopped in state only, had a high  number of purchases potentially indicative of SNAP trafficking. However,  for two selected states, there was little to no difference in the percentage  of households with this activity when we compared households that only  shopped in their home state and households that shopped out-of-state.  For one state, a greater percentage of households that shopped out-of- state had purchases indicative of SNAP trafficking, but households in this  state also had different shopping patterns in general, as discussed below.  In addition, for households that shopped out-of-state, few of the  transactions we flagged as indicators of potential trafficking occurred  outside the home state. Although we found that rates of trafficking  indicators were generally similar between households that shopped out- of-state and those that only shopped in their state of residence, the  analysis of transaction data for other factors may allow states to identify  households at risk of trafficking and make them a higher priority for  investigation. Our prior work reported on the benefits of SNAP transaction  data analysis for this purpose.\nSpecifically, we found that for North Dakota and Washington, households  that made one or more purchases out of state had similar rates of  purchases flagged for potential trafficking compared to households that  shopped only in their home state. This held true both for households that  only shopped in border states, as well as for households that shopped in  non-border states (see table 4). For example, 1.4 percent of Washington  SNAP households that only shopped in their home state had purchases  resulting in 20 or more trafficking flags in fiscal year 2017, and 1.8  percent of Washington households that also shopped in border states had  20 or more trafficking flags. For Washington households that also  shopped in non-border states, 1.5 percent made purchases resulting in  20 or more flags.\nOur analysis of District of Columbia households identified higher rates of  potential trafficking indicators for households that shopped out-of-state,  compared to the other two selected states. Specifically, 1.4 percent of  District of Columbia SNAP households that only shopped in their home  state had purchases resulting in 20 or more trafficking flags in fiscal year  2017, and 5.7 percent of households that also shopped in border states  had 20 or more trafficking flags. For District of Columbia households that  also shopped in non-border states, 8 percent made purchases resulting in  20 or more flags. However, the difference in rates for District of Columbia  trafficking indicators may reflect the different shopping patterns of its  households when compared to other states. As stated previously, District  of Columbia households made about half of their SNAP purchases out-of- state, which is a significantly higher amount compared to any other state.  And all District of Columbia households are in close proximity to the  bordering states of Maryland and Virginia, approximately 7 miles or less.  Also, a small percentage of District of Columbia households shopped only  in their home state in fiscal year 2017\u2014approximately 7 percent of all  households reviewed. In comparison, approximately 62 percent of North  Dakota households, and 76 percent of Washington households made all  purchases in their home state.\nFor the households in North Dakota and Washington that shopped out-of- state in fiscal year 2017, we found that most transactions indicating  potential trafficking occurred in the recipient\u2019s home state rather than out- of-state (see fig. 4). District of Columbia households were the exception  and most transactions indicating potential trafficking occurred in the  recipient\u2019s home state or in a border state. However, the pattern of  trafficking flags also aligns with where District of Columbia SNAP  recipients tend to shop, given that approximately half of their SNAP  purchases were made in border states in fiscal year 2017.\nWhile we identified households in selected states with out-of-state  purchases that indicated potential trafficking, identifying such households  required additional data analysis of factors beyond purchase location.  Analysis of additional data elements may allow states to better identify  potential trafficking requiring investigation. We found out-of-state  purchase information alone is of limited benefit to identify SNAP  households that may be engaged in trafficking.\n\n\tSome Selected States Reported Using Data Analytics Beyond Required Data Matching and Cited Advantages As Well As Organizational and Resource Challenges\n\n\t\tSelected States Reported Doing Required Data Matching, and Some Reported Conducting Additional Data Analytics\n\nOfficials we interviewed in all seven of the states we selected for review  of use of data analytics reported conducting federally required data  matching to verify information provided by households when they initially  apply or recertify for SNAP benefits. Federal law and regulations require  states to conduct certain data matches when determining SNAP eligibility,  including matches that provide information on people who may be  incarcerated, deceased, or disqualified from receiving SNAP benefits due  to intentional program violations. The five databases that state SNAP  agencies are required to conduct matches against when determining  SNAP eligibility are the Department of Health and Human Services\u2019  (HHS) National Directory of New Hires, the Social Security  Administration\u2019s (SSA) Prisoner Verification System, SSA\u2019s Death Master  File, U.S. Citizenship and Immigration Services\u2019 Systematic Alien  Verification for Entitlements and FNS\u2019s Electronic Disqualified Recipient  System (eDRS). As we previously reported, state SNAP agencies use  data matching to obtain information about households\u2019 income, verify  information provided by households, or identify potential discrepancies.  Specifically, agencies are required to verify household data electronically  by matching their data with specific government sources and have the  option to match against additional data sources.\nIn addition to the required data matching, officials we interviewed in all  seven selected states also reported conducting other data matching with  a range of internal and external data sources. These matches used  information from federal, state, and commercial data sources on earned  income from employment or self-employment or unearned income from  other government benefit programs. According to state officials, these  sources included Unemployment Insurance information from state  workforce agencies, the PARIS file from HHS, and The Work Number, a  commercial verification service. Other sources that could be used include  Old-Age, Survivors, and Disability Insurance income information and  Supplemental Security Income information from multiple data matches  with the SSA. In addition to verifying applicants\u2019 initial eligibility, data  matching can identify changes in key information that could affect  continued eligibility.\nBeyond data matching, officials in all seven selected states said that they  had access to EBT reports notifying them of suspicious transactions,  although the type and frequency of use of these reports varied. For  example, while some state officials said that they manually generated  reports on an ad hoc basis, other state officials said that they had  automated reports that they received and reviewed on a weekly or  monthly basis. As we previously reported, automating data analytics tests  can allow agencies to monitor large amounts of data more efficiently than  with manual tests. Furthermore, officials in all seven selected states  reported that they had examined out-of-state transactions to some extent.  Some states had access to out-of-state reports as part of their suite of  EBT reports but did not review them often, while other states  automatically received alerts if households consistently used benefits out  of state over a certain extended period of time, such as 70 or 90 days.  For example, officials from Massachusetts told us that they flag certain  transactions to help ensure recipients comply with the state\u2019s residency  requirements for eligibility. Specifically, after a client spends their benefits  out of state for 70 days or more, the state agency will send a letter asking  the client to prove they are still a Massachusetts resident. Officials  generally reported that tracking out-of-state transactions was most useful  for finding potential dual participation\u2014a household receiving benefits in  two or more states.\nOfficials we interviewed in five of seven selected states reported  conducting further, more sophisticated data analytics involving data  mining\u2014the active and recurring monitoring of EBT transactions using  algorithms to detect and flag transactions that indicate potential recipient  fraud, often on a real-time or near real-time basis. For example, officials  told us that these states\u2014the District of Columbia, Massachusetts,  Mississippi, Washington, and Wisconsin\u2014examined a range of indicators  of potential recipient fraud. Some of the five selected states automated  their data mining to monitor data for potential fraud indicators on a  continuous, real-time basis.\nIn addition to data mining, some of these five states reported using other  more advanced data analytics techniques, including mapping analysis  and a form of predictive analysis to identify SNAP purchases that could  indicate trafficking. For example, officials in the District of Columbia  reported using location mapping to identify households that spent their  benefits long distances from home. Officials we interviewed in Wisconsin  reported developing an automated check intended to flag particular types  of case characteristics indicative of potential fraud. According to the  Wisconsin officials, if a particular case is flagged, a caseworker must  follow up and provide extra scrutiny before the case can move forward in  the eligibility process. As we previously reported, certain types of  predictive data analytics can increase the effectiveness of anti-fraud  programs by identifying particular types of potentially fraudulent  behavior.\n\n\t\tSelected States That Reported Conducting Additional Data Analytics Also Employed More Leading Practices and Cited Advantages in Using Data Analytics\n\nOfficials we interviewed in the five selected states that reported  conducting additional data analytics\u2014the District of Columbia,  Massachusetts, Mississippi, Washington, and Wisconsin\u2014 employed  more of GAO\u2019s leading practices for data analytics than the two states  that used data matching alone\u2014New Mexico and North Dakota.\nOrganizational and leadership support. The five states with more  sophisticated data analytics techniques all reported to us that they  had organizational and leadership support for those activities. GAO\u2019s  leading practices state that to be effective, data-analytics initiatives  need support across the program and, in particular, from program  managers. Officials in these states cited support from executive and  legislative state leadership for the use of data analytics to combat  SNAP recipient fraud. For example, officials in Wisconsin reported  that the governor\u2019s office worked to centralize the agency\u2019s data- analytics activities and support infrastructure to improve business  processes. Officials in Mississippi told us that the state\u2019s executive  leadership fully supports the use of data to combat SNAP recipient  fraud and that the state legislature in 2017 passed a law to assist in  the identification of waste, fraud, and abuse.\nPursue external data. These states also reported to us that they  were able to obtain external data necessary for their data analytics  activities. For example, officials in Mississippi told us that they  interface with an array of data sources, including the National  Accuracy Clearinghouse, the state Department of Employment  Security, and the state Department of Education, among others.  GAO\u2019s leading practices state that using data from other federal  agencies or third-party sources can help managers identify potential  instances of fraud. As we mentioned previously, the states that  reported conducting additional matching beyond that required by  federal law and regulation also reported using an array of federal,  state, and third-party sources for these data matches.\nConsider program rules or previously encountered schemes.\nThese five states also reported that they considered program rules  and known or previously encountered fraud schemes to help design  their data analytics practices, another of GAO\u2019s leading practices for  data analytics. These leading practices note that by using information  on previously encountered fraud schemes or known fraud risks,  managers can identify signs of fraud (i.e., red flags) that may exist  within their data. For example, two states reported that they change  their data analytics techniques in response to changing patterns of  fraud.\nAll five selected states that reported conducting additional data analytics  practices beyond data matching cited a number of associated  advantages, including increased efficiency and effectiveness of their anti- fraud efforts.\nAutomating fraud detection. All five states reported that data  analytics provided the advantage of automating the detection of  potentially fraudulent activity. For example, officials in Mississippi  noted that a new investigation management system implemented in  their state would use algorithms to detect potential fraud and  automatically generate flags, whereas in the past they had to examine  transactions manually.\nFinancial savings. Four states reported that data analytics had the  advantage of financial savings through the collection of overpayments  and the closure of cases. For example, officials in Washington said  that its data matching activities saved millions of dollars through the  closure of cases. Officials in Mississippi reported that its overpayment  collections increased $2 million since moving to a new investigation  management system a few years ago that incorporates more data  analytics techniques.\nPrioritizing and enhancing investigations. Four states reported that  data analytics helped them prioritize and enhance fraud  investigations. For example, officials in Washington said that they had  a system in place that used an algorithm to rank each fraud referral  based on a number of factors and moved higher-risk referrals to the  top of the list of investigations. Officials in Wisconsin said that they  combined eligibility, transaction, and retailer data and analyzed it to  produce a prioritized list of individuals who appeared most likely to  have trafficked at a specific retailer, allowing them to focus their  investigative resources on cases most likely to be fraud.\nPreventing fraud. Finally, two states reported that data analytics had  the advantage of improving the return on investment of anti-fraud  activities through the prevention of fraud before it occurs. For  example, officials in Wisconsin estimated that data analytics has  helped them prevent a large proportion of fraud before it occurs,  thereby improving the cost-benefit of their anti-fraud practices.  Officials in Mississippi noted that data analytics can be an effective  deterrent.\n\n\t\tSelected States Reported Organizational and Resource Challenges in Effectively Using Data Analytics\n\nOfficials we interviewed in all seven selected states reported a range of  organizational and resource challenges that either prevented them from  using more advanced data analytics techniques or made their current  data analytics practices difficult to implement.\nQuantifying benefits of data analytics. Officials we interviewed in  two states said it was challenging to quantify the benefits of data  analytics, therefore resulting in a lack of sound evidence for  supporting the utility of this type of work. For example, officials in  Washington reported that it was difficult to conduct a cost-benefit  analysis of data analytics because of the challenge of quantifying how  often fraud is prevented before it occurs. Officials in Wisconsin  reported that it attempted to measure future savings from fraud  prevention but that there is no guidance for how to determine these  savings.\nObtaining organizational support. Officials in two states reported  that it was challenging to obtain sufficient organizational support for  conducting data analytics. For example, officials in North Dakota  reported that they could not say how much support exists in the state  government to pursue additional resources for data analytics. Those  in the District of Columbia noted that it is sometimes difficult to  convince certain employees of the need for data analytics to detect  fraud.\nAppearing to criminalize legitimate use. Officials in three states  said that a challenge to using more advanced data analytics was that  it could appear to profile recipients or make it appear to the general  public and to policy-makers that certain legitimate uses of SNAP  benefits, such as using benefits out-of-state, were not allowed. For  example, Washington tracked the number of replacement EBT cards  as a possible indicator of fraud, but officials said that there were many  cases in which the client had legitimate reasons for needing a high  number of replacement cards, such as mental health issues or  homelessness. Washington officials further noted the challenge of  using demographic data in a predictive model, reporting that it puts  them at risk of profiling even though it can be helpful. For example,  when they examined recipients with high balances on their EBT cards,  demographic information provided an explanation. In particular,  elderly individuals were being frugal with their benefits.\nDealing with changing patterns of fraud. Officials we interviewed in  three states said that a challenge to using data analytics was dealing  with changing patterns of fraud. They said that the characteristics of  transactions that may indicate potential fraud are constantly changing  as fraudulent actors change their tactics in response to state  enforcement. For example, officials in Mississippi said that recipients  committing fraud might change from high-dollar to low-dollar  transactions, in which case the state would need to adjust its  monitoring accordingly.\nObtaining necessary data. Officials we interviewed also reported  challenges with obtaining data needed to conduct data analytics.  Officials in three states said that simplified reporting presents a  challenge to using data analytics to detect potential recipient fraud.  Specifically, simplified reporting made it challenging to use certain  information as potentially indicative of fraud because recipients are  not required to report certain changes\u2014for example, a move out of  state\u2014until it is time for them to recertify for benefits. In addition,  officials in three states reported a challenge in verifying necessary  data in order for them to be considered reliable for use. For example,  Massachusetts reported that one of the biggest challenges of  developing investigative leads through data analytics is that not all  data are considered equally reliable. For SNAP, FNS guidance  defines some data matches as \u201cverified upon receipt\u201d if the match is  with a primary or original source of the data (such as information on a  government benefit provided by the administering agency, such as  SSA). Eligibility workers can use this information without taking  additional steps to verify that the data are accurate, according to FNS  guidance. In contrast, data from a secondary source, defined in the  guidance as not being verified upon receipt, require additional  verification before the state agency can take action on an eligibility  determination.\nHigh costs and resource demands. Officials in six selected states  cited the high costs and resource demands of using advanced data  analytics techniques. For example, officials we interviewed in North  Dakota, which conducted only data matching, said that they lacked  the funding and staff resources to use more advanced techniques.  Officials we interviewed in New Mexico noted that they lacked the  staff resources to use data analytics. Officials from North Dakota said  that they had the option to procure a data analytics tool, but said that  the costs were prohibitively high. Officials in Wisconsin, which was  employing more data analytics, said that they were not able to  purchase access to a third-party data source using SNAP funding  alone, and that they had to seek funding from another federal program  in order to afford these efforts.\n\n\tFNS Supported Certain States in Adopting Leading Practices for Data Analytics, but Assistance and Information Sharing Has Been Limited\n\n\t\tFNS Helped Some States Adopt Certain Leading Practices for Data Analytics\n\nFNS provided individualized assistance and training to several states  across the country to build their capacity for data analytics on SNAP,  consistent with several of GAO\u2019s leading practices. FNS provided  assistance through grants, pilot projects, and training at conferences. The  pilot projects also informed FNS\u2019s early efforts to help states improve their  fraud prevention, detection, and investigation processes using data  analytics. Specifically, in recent years, FNS\u2019s assistance to states has  aligned with 4 of the 10 leading practices for data analytics identified by  GAO in its Fraud Risk Framework.\n\n\t\t\tEnsure Employees Have Sufficient Knowledge, Skills, and Training\n\nIn fiscal years 2014 through 2017, FNS conducted a 10-state pilot project  to identify and test promising practices in state fraud prevention and  detection. As part of the project, each participating state received training  and technical assistance in the use of data analytics, in addition to a  review of its business processes. For example, officials from Utah, who  participated in the pilot, said that FNS provided training to them on mining  social media data. The officials added that the timing of the training was excellent because the state was beginning to build its capability for data  analytics on its own. They said that their data analytics team has  incorporated what they learned during the pilot and use various data  analytic techniques every month. As a result, according to officials, the  state\u2019s overpayment collections increased.\nIn fiscal years 2014 and 2015, FNS awarded nine Recipient Trafficking  Prevention Grants and five Recipient Integrity Information Technology  Grants to a total of 13 states, some of which funded training and staff to  perform SNAP data analytics. For example, in fiscal year 2014,  Kentucky received a grant to purchase and receive training on an analytic  tool with the ability to analyze data and capture posts coming from  various social media sites. In fiscal year 2015, Alaska received a grant  that included 3 months of training related to the installation of the state\u2019s  new fraud case management system that, among other things, would  provide real-time data and automate manual processes to detect fraud  and track cases. According to Alaska\u2019s grant application, this would allow  the state to devote more time to investigations, prosecutions,  recoupment, and analysis and increase the number of completed  investigations.\nState officials we interviewed said that they also gained data analytics  knowledge and skills from other states at conference workshops. For  example, officials from North Dakota told us that they attended a  conference presentation in which officials from another state discussed a  performance measure that is designed to assess the savings associated  with detecting SNAP fraud.\n\n\t\t\tCombine Data Across Programs Within the Agency\n\nFNS has provided grant funding and training to some states to help them  combine data from different databases within the state to facilitate SNAP  data analytics. For example, FNS\u2019s fiscal year 2015 information  technology grants helped five states develop centralized data systems  and consolidate data from multiple outdated systems. Nevada received a  grant to fund the acquisition of a new data system that, according to its  grant application, would combine the state\u2019s data on known SNAP fraud  cases with transaction data and third-party data sets. The data on known  fraud cases would be used to continuously refine data analyses to identify  similar anomalies and patterns in the transaction data. Maine used its  grant to acquire a new investigation case management system that  consolidates data from multiple systems in a centralized repository.  Similarly, New Jersey received a grant to acquire new computer systems  that, according to its grant application, will integrate SNAP case  management system data with data from several of the state\u2019s data  systems, allowing investigators to perform analyses in real time. In  addition to the grants, in fiscal year 2016, FNS sponsored a 5-day course  on fraud detection that demonstrated how states could combine eligibility  data with transaction and other data to identify potential fraud. Officials  from six states participated.\n\n\t\t\tPursue Access to External Data and Conduct Data Matching\n\nFNS has provided grants to assist some states in accessing and using  external sources for data matching. For example, in fiscal year 2014, FNS  provided recipient trafficking prevention grants to three states\u2014Florida,  Nevada, and Ohio\u2014to update the systems that they use to match their  SNAP recipients and those that have been disqualified in the state with  FNS\u2019s national database of disqualified recipients. According to FNS,  each grantee state planned to use the funds to link its system with FNS\u2019s  database through the web rather than using a \u201cbatch\u201d processing system,  which will allow them to match data on applicants at the time of  application or recertification rather than at specific intervals after eligibility  is determined. Florida officials mentioned in the related grant proposal  that using the state\u2019s current batch processing system meant that other  states did not have real-time access to information about the state\u2019s  disqualified recipients, thereby potentially increasing the chance of an  ineligible individual receiving benefits.\nIn addition, FNS  administered a grant on behalf of OMB, which funded a  pilot program for five southeastern states to develop the National  Accuracy Clearinghouse (NAC), a data sharing system that allows  participating states to identify applicants who are receiving benefits in the  partnering states in near-real time. According to one state official, a  primary benefit of the NAC is that it enables each participating state to  match data on individual beneficiaries across five states without having to  connect to five different states\u2019 computer systems. One member of the  NAC consortium from Florida said that the ability to match in near-real  time is helpful because the data available in the PARIS system is older  and would only identify individuals potentially receiving benefits in multiple  states months after they have occurred, rather than at the time of  application. As we have previously reported, data on benefit receipts is  updated quarterly in PARIS.\n\n\t\t\tConduct Data Mining\n\nFNS has funded pilot projects, training, and grants to assist some states  in developing their capacity for data mining to identify potential fraud.  FNS\u2019s 10-state pilot to test advanced data analytics techniques included  the use of data mining, among other data analytic techniques. One of the  techniques involved mining recipient transaction data for households that  had shopped at disqualified retailers to develop a prioritized list of  retailers and recipients to investigate. According to state officials we  interviewed in Wisconsin, the technique automated a time and labor  intensive process that state analysts had previously performed manually.  The pilot project also used other data mining techniques to develop  profiles of recipients who commit fraud. For instance, in Utah, the data  analysis showed that they are more likely to have multiple replacement  EBT cards and make more purchases from small stores than other  recipients. At the end of the pilot, FNS sponsored a training course that  included detailed instruction on data mining.\nAlthough past efforts by FNS have been limited to some states and  encouraged some leading practices, more recently, in May 2018, FNS  released a SNAP Fraud Framework that provides more comprehensive  guidance to help states adopt all of GAO\u2019s 10 leading practices for data  analytics. Specifically, FNS\u2019s SNAP Fraud Framework provides a  collection of examples, promising practices, and procedures to help state  agencies with the prevention and detection of SNAP fraud that  encompass all 10 data analytics leading practices from GAO\u2019s Fraud Risk  Framework. (For a comparison of the practices in the two frameworks,  see appendix III.) According to FNS officials, the SNAP Fraud Framework  is meant to take a holistic, integrated approach to fraud, including data  analytics, but they recognize that states differ in their readiness to adopt  analytics. The framework\u2019s data analytics section provides a range of  approaches, examples, case studies, and methods that allow all states to  begin embedding analytics into their processes. FNS officials reported  that they began conducting outreach to state officials about the  framework in the summer of 2018. FNS officials said that they are also  considering using grant funds to assist states with the implementation of  components of the framework. Furthermore, FNS officials said that some  of the potential technical assistance may include showing states how to  develop their own analytic tools.\nFNS has also developed a maturity assessment to evaluate each state\u2019s  capacity to implement the various components of the fraud framework. It  includes a state\u2019s use of data analytics for fraud detection and  investigations, and its learning and development opportunities for  stakeholders who use the results of data analytics, such as investigators,  hearing officials, and court officials. According to FNS officials, FNS\u2019s  regional offices will conduct maturity assessments as part of management  reviews by the end of fiscal year 2018.\n\n\t\tFNS\u2019s Assistance on Developing Data Analytics Capabilities Has Reached a Limited Number of States\n\nAlthough FNS has assisted some states in developing their data analytic  capabilities, the methods it has used to do so were meant to reach only a  limited number of states. Specifically, much of FNS\u2019s direct assistance to  states came in the form of pilot projects, competitive grants, or  conferences. According to officials, FNS is in the early stages of  promoting states\u2019 use of data analytics for SNAP fraud prevention and  detection, and its efforts have focused on assessing the current capacity  of states to use data analytics and determining analytic practices that are  effective. Furthermore, FNS\u2019s efforts generally had specific end dates and  did not provide ongoing assistance to reach a broader group of states and  provide them with the knowledge and tools to develop and maintain their  data analytics efforts. (See table 5 for more information on the reach of  FNS\u2019s direct assistance efforts.)\nAlthough FNS provided some training on using data analytics, it was not  conducted on a recurring basis, and state officials we interviewed  expressed concerns about their access to information on successful data  analytics approaches. Officials we interviewed in five of our seven  selected states said that they attended FNS conferences that provided  training in data analytics and participated in regional discussions on the  topic; however, these events were provided occasionally and limited to  states within the region. State officials said that participating in  conferences in which they could learn from other states\u2019 experiences was  particularly helpful, and they wanted more opportunities to do so. State  officials also told us that it would be beneficial if FNS took a more active  role in disseminating states\u2019 successful practices, particularly with regard  to data analytics. Further communications about data analytics would be  consistent with federal internal control standards that call for agencies to  communicate necessary quality information to external parties in order to  achieve the agency\u2019s objectives. Federal agencies can support external  parties, such as state agencies, in achieving the federal agency\u2019s  objectives by sharing information on effective practices used by the  program or other external parties.\nFurthermore, officials we interviewed in selected states most frequently  cited high costs and resource demands as a challenge to using advanced  data analytics techniques. Although FNS has provided some financial  support to state efforts, officials in two states that we reviewed told us that  they were not always able to sustain efforts beyond the life of the FNS  pilot or grant. For example, officials we interviewed from Wisconsin said  that FNS\u2019s contractor for the 10-state pilot, in an effort separate from the  contract, developed a tool that identified SNAP purchases made from  disqualified SNAP retailers. Although the state officials found the tool to  be highly efficient because it could sift through large amounts of data, the  tool was only available to the state for a fee, which they said it could not  afford. Similarly, officials from Washington told us that as part of a  recipient trafficking prevention grant, the state was able to hire two  investigators to detect potential SNAP fraud that may be occurring via  social media. However, according to state officials, the state was unable  to maintain the effort after the grant ended.\nIn our prior work on establishing data analytic programs to address fraud,  we noted that one way to handle resource challenges is to identify  opportunities that leverage a program\u2019s existing capabilities. In  September 2016, GAO convened a forum of data-analysis experts to  discuss considerations for entities establishing and refining data analytics  programs, during which the costs of such programs were raised.  Panelists, which included officials from FNS, noted that in developing a  data analytics program, an entity should consider ways of leveraging  resources throughout the entity. For example, panelists suggested that an  entity could improve its data analytics group by combining a data  warehouse from one department with existing statistical software from  another and incorporating it with its current fraud-prevention system. The  forum also suggested that a data analytics group should look across the  agency to find staff that may have an interest or experience in working  with data. Panelists noted that such efforts may be improved by seeking  staff from a diverse set of positions and perspectives, including auditors,  evaluators, investigators, and attorneys.\nSimilarly, some state officials we interviewed shared creative ways to  leverage existing resources. For example, officials from Florida and  Wisconsin stated that they were able to leverage recovered funds from  other programs to purchase access to a commercial database that  matches eligibility data for individuals across related programs. In  Mississippi, officials said that they used SNAP transaction data to identify  individuals living out of state and then determine whether those  individuals were ineligible for both SNAP and other assistance programs.  By combining data and analyses across two programs, the state officials  said that they were able to close more cases and significantly increase  cost savings.\nHowever, other state officials noted that leveraging resources, especially  data, poses challenges that states will need to learn how to resolve.  Specifically, some states reported facing problems sharing data across  different systems and with restrictions on sharing sensitive personal  information. For example, officials representing four states from the  American Association of SNAP Directors (AASD) told us that, for states to  leverage data, SNAP states\u2019 data systems need to be integrated across  states. However, in their view, the cost of integration may exceed the  benefits from integrating the data. In addition, state officials said that in  order to leverage personal data, some states as well as programs in the  same state will need to reach agreements that define how data will be  extracted and used while protecting privacy. For example, a Wisconsin  official told us that its data analytics group has difficulty acquiring data  across programs within the state because of confidentiality and privacy  rules as well as the difficulty of reaching data-sharing agreements with  other programs.\nMoving forward, FNS\u2019s SNAP Fraud Framework, combined with its  maturity assessment, will form the core of FNS\u2019s efforts to assist states  with data analytics in a broad-based, systematic manner. According to  FNS officials, the agency will be conducting outreach to states about the  fraud framework and assessing both states\u2019 capacities in data analytics  and barriers to gaining the necessary knowledge and tools for developing  and maintaining those efforts.\n\n\tConclusions\n\nTo ensure that SNAP funds are used for the purposes for which they  were intended, both the federal government and state agencies should  have appropriate controls for detecting and addressing fraud. The use of  data analytics, such as mapping and predictive analysis, may help SNAP  agencies increase program integrity and improve administrative  efficiency. Data mining and data matching techniques can help identify  potential SNAP fraud, and predictive models can help identify  characteristics of SNAP traffickers. Our use of analytics on SNAP out-of- state transaction data from three selected states identified only slight  differences between those households who shopped out of state and  those who did not, suggesting that analyses of other data elements that  have been shown to be indicative of potential trafficking may allow states  to better identify potential trafficking and, thereby, better target resources.\nAlthough FNS has efforts underway to promote the use of data analytics  to improve SNAP fraud detection through its fraud framework and  maturity assessment, officials in our selected states cited challenges with  accessing and maintaining needed resources such as staff, technology,  and tools. While these challenges may limit states\u2019 ability to implement  data analytics, some of our selected states have successfully overcome  such challenges to implement or enhance data analytics programs. For  example, two states described leveraging recovered funds and  reinvesting them to combat fraud. Another state leveraged transaction  data across two programs, resulting in financial savings and enhanced  collections, which could be reinvested to combat fraud. As FNS conducts  outreach to help states implement its fraud framework and uses its  maturity assessment to assess states\u2019 anti-fraud capabilities, it has an  opportunity to regularly assist states with adopting advanced data analytic  techniques. Based on the experiences described by state officials, finding  ways that states can leverage existing resources to improve their data  analytic capabilities may be an important part of any solution. In its role as  the federal oversight agency, FNS is in a position to collect and widely  disseminate information about those states that have built support for  data analytics and leveraged existing resources to implement or expand  their data analytics programs to states seeking such examples. With  wider dissemination of these examples of state successes, all state SNAP  agencies could be better positioned to enhance their own efforts to  identify and address SNAP fraud.\n\n\tRecommendation for Executive Action\n\nBuilding on ongoing efforts, the Administrator of FNS should develop and  implement additional methods to widely distribute information to state  agencies on an ongoing basis about successful efforts to adopt data  analytics and strategies to leverage existing data, technology, and staff  resources to enhance data analytics. (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to the U.S. Department of Agriculture  for comment. In oral comments on September 14, 2018, FNS officials  from SNAP\u2019s Program Accountability and Administration Division and the  Deputy Associate Administrator for SNAP agreed with our  recommendation. They noted that they have been moving in the general  direction of this recommendation and would build on current efforts to  address it but noted that state readiness and technical capabilities are  limiting factors in the adoption of data analytics. FNS also provided  technical comments, which were incorporated into the report as  appropriate.\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 Agriculture, the FNS Administrator, and  other relevant parties. In addition, the report will be available at no charge  on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  us at (202) 512-7215 or LarinK@gao.gov or (202) 512-6722 or  BagdoyanS@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff that made key contributions to the report are listed in appendix  IV.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThe objectives of this report were to review the following: (1) the extent to  which SNAP households in selected states are making out-of-state  purchases that may indicate potential recipient fraud; (2) the extent to  which selected states are using data analytics\u2014including those applied to  out-of-state transactions\u2014to find potential SNAP recipient fraud, and  what advantages and challenges, if any, have they experienced doing so,  and (3) how FNS has assisted states in implementing leading practices  for data analytics for fraud detection. To address these objectives, we  primarily focused on federal and state SNAP recipient anti-fraud work  since the beginning of fiscal year 2015\u2014the period which follows our  August 2014 report on SNAP recipient fraud. We reviewed relevant  federal laws, regulations, program guidance, and reports, and we  interviewed FNS officials in headquarters and all seven regional offices to  address all three objectives and obtained relevant documentation.\nTo assess the extent that SNAP households in selected states made out- of-state purchases that may indicate potential recipient fraud, we  analyzed all out-of-state purchase data nationwide and we analyzed  transaction data for SNAP households in the District of Columbia and two  states\u2013North Dakota and Washington. We selected these states as they  were among the top states for out-of-state spending in a non-border state  in fiscal years 2015 and 2016, the two most recent years\u2019 of SNAP data  available when we started this review. We obtained SNAP transaction  data from FNS for all participating households in the three selected  states, and analyzed fiscal year 2017 data for households that spent all  their benefits in a non-border state in that year. We also analyzed fiscal  year 2017 data for all households in these three states for purchases that  may indicate trafficking, based on common suspicious transaction types.  We tested the transaction data for ten different suspicious transaction  types that have been used by FNS and state SNAP officials to identify  potential trafficking. While the transactions we flagged for potential  trafficking in our three selected states are generally deemed potential  indicators of fraud by SNAP officials, there could also be legitimate  reasons for these purchases and they do not prove trafficking. For that  reason, our analysis focused on households with a greater frequency of  questionable purchases in fiscal year 2017 indicating potential  trafficking\u2014specifically purchases that resulted in 20 or more trafficking  flags. We assessed the reliability of SNAP transaction data used in  analyses through review of related documentation, interviews with  knowledgeable officials, and electronic testing of the data, and found  them to be sufficiently reliable for our purposes.\nTo determine how selected state agencies are using data analytics to  identify potential SNAP recipient fraud, we interviewed officials from  seven state SNAP agencies about their efforts. We obtained related  documentation when available. We selected the District of Columbia,  Massachusetts, Mississippi, New Mexico, North Dakota, Washington, and  Wisconsin to reflect a range of experiences based on the percentage of  non-border state transactions, receipt of related technical assistance,  geographic region, and FNS\u2019s reports on their capacity to conduct data  analysis. We interviewed state SNAP agency officials who oversee anti- fraud practices in each of our seven selected states. During each  interview, we collected information on each state\u2019s data analytics  activities and whether they have implemented leading practices for data  analytics from GAO\u2019s Fraud Risk Framework. We also discussed the  advantages and challenges of using data analytics. While information  from these seven state SNAP agencies is non-generalizable, it provided  illustrative examples of agencies\u2019 efforts to use data analytics.\nTo determine the degree to which FNS has assisted states in developing  the use of data analytics, we reviewed grant documentation FNS awarded  to states to help prevent recipient trafficking or improve technology used  to improve program integrity. We also reviewed the terms of work for a  contract FNS awarded to a private consulting firm to conduct a pilot  project with 10 states during fiscal years 2014-2017, as well as reports  delivered by the contractor detailing the results of the work. In addition,  we reviewed a guide to data analytics that FNS developed for a 5-day  training session in August 2016, as well as the data analytics \u201cmaturity  assessment\u201d questionnaire that is intended for FNS regions to use to  assess the capacity of the states. We also obtained and reviewed FNS\u2019s  SNAP Fraud Framework and Supplementary Materials that was released  in May 2018. After developing an inventory of how FNS has assisted  states in assessing and developing its data analytic capacity, we  analyzed FNS\u2019s actions with respect to GAO\u2019s set of leading practices for  data analytics from GAO\u2019s Fraud Risk Framework and GAO\u2019s standards  for internal control. We also analyzed FNS\u2019s SNAP Fraud Framework to  assess the degree to which it addressed GAO\u2019s leading practices on how  to use data analytics to detect, prevent, and investigate SNAP fraud.  Unless specified, we reviewed only data analytic activities that occurred  since the beginning of fiscal year 2015, which marks the end of our  previous analysis of FNS\u2019 anti-fraud activities concerning the SNAP  program. To obtain FNS\u2019 views, we interviewed SNAP program officials at  both headquarters and at each of SNAP\u2019s seven regional offices. To  obtain a broader perspective on the use of data analytics across states,  we interviewed officials representing the American Association of SNAP  Directors (AASD) and the United Council on Welfare Fraud (UCOWF).  AASD representatives included officials from the SNAP anti-fraud units  for California, New York, Tennessee, and Texas. UCOWF  representatives included officials from Florida, Louisiana, and Utah. In  addition, we interviewed the Deputy Executive Director of American  Public Human Services Association, AASD\u2019s parent organization, and  officials representing USDA\u2019s Office of Inspector General.\nWe conducted this performance audit from May 2017 through October  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence we obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.\n\nAppendix II: Out-of-state SNAP Spending By State, Fiscal Year 2017\n\nIn fiscal year 2017, the share of SNAP benefits spent out of state varied  by state from approximately 1 percent to 13 percent, with most out-of- state purchases made in a border state. States whose SNAP recipients  had the highest percent of out-of-state purchases included Delaware,  District of Columbia, Idaho, Nebraska, New Mexico, Rhode Island, South  Dakota, Tennessee, Vermont, and West Virginia. All of these states made  at least 5 percent of total purchases out of state. The states with the  lowest percent of out-of-state spending by SNAP recipients included  Alaska, California, Florida, Hawaii, Michigan, and Texas (see fig. 5).  Detailed information on out-of-state spending by SNAP recipients, by  state, is also provided in table 6 below.\n\nAppendix III: Leading Practices for Data Analytics and FNS\u2019s 2018 SNAP Fraud Framework Comparison\n\nIn May 2018, FNS released a fraud framework that provides guidance to  help states adopt all of GAO\u2019s leading practices for data analytics. The  table below compares guidance in FNS\u2019s SNAP Fraud Framework to the  leading practices in GAO\u2019s Fraud Risk Framework.\n\nAppendix IV: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contacts named above, the following staff members  made key contributions to this report: Danielle Giese and Philip Reiff,  Assistant Directors; Celina Davidson and Lara Laufer, Analysts-in- Charge; Camille A. Keith; Kelly Snow; and Daren Sweeney. Also  contributing to this report were Susan Aschoff, James Bennett, Alexander  Galuten, James Murphy, Almeta Spencer, and Shana Wallace.","output":"Why GAO Did This Study\n\nThe federal government provided $64 billion in SNAP benefits in fiscal year 2017 to help approximately 42 million low-income individuals purchase food. SNAP is administered by FNS in partnership with states. To help reduce the risk of improper receipt or use of SNAP benefits, states use data analytics, including data matching and data mining, to identify patterns or trends indicative of potential fraud in SNAP purchases. Based on concerns about potential SNAP benefit trafficking across state lines, GAO was asked to review out-of-state transactions and states' efforts to combat such fraud.\nThis report examines (1) the extent to which SNAP households in selected states made out-of-state purchases that may indicate potential fraud, (2) the advantages and challenges selected states have experienced in using data analytics to identify potential fraud, and (3) how FNS has assisted states in implementing leading practices for data analytics. GAO analyzed fiscal year 2017 data on SNAP purchases for North Dakota, Washington, and the District of Columbia, which had large percentages of non-border out-of-state purchases and interviewed FNS officials and officials in these states as well as in Massachusetts, Mississippi, New Mexico, and Wisconsin about their use of data analytics compared with leading practices.\n\nWhat GAO Found\n\nSupplemental Nutrition Assistance Program (SNAP) recipients are allowed to spend their benefits outside their state of residence, and GAO's analysis of fiscal year 2017 SNAP data in three selected states found that overall about 2 percent of households made purchases, both in state and out-of-state, potentially indicative of trafficking\u2014the prohibited exchange of benefits for cash or nonfood goods or services. Also, GAO found little difference in potential trafficking behaviors between households that made one or more purchases out-of-state and those that shopped only in their home state.\nOfficials in all seven states GAO reviewed said they conducted data matching. Officials in five of these states stated that they use more sophisticated data analytics including data mining to help identify potential fraud (see figure). These officials cited advantages to using more sophisticated analytics to automate fraud detection and prioritize cases, allowing them to focus investigative resources on cases most likely to involve fraud. For example, officials in Mississippi reported that overpayment collections increased $2 million since the state incorporated more data techniques into its fraud detection efforts. However, officials in all seven selected states cited factors such as high cost, resource demands, data limitations and organizational support as challenges that affect their ability to use or maintain more advanced data-analytics techniques.\nThe U. S. Department of Agriculture's Food and Nutrition Service (FNS) has helped some states adopt certain leading practices for data analytics, but its current outreach is limited. FNS has provided assistance to some states through pilot projects, grants, and training, but, beyond a recently issued guide, FNS has done little to disseminate information more broadly about successful efforts to adopt data analytics. FNS officials said they are in the early stages of promoting data analytics for SNAP fraud prevention and detection, and their efforts have focused on assessing the current capability of states to use data analytics and determining analytic practices that are effective. State officials GAO interviewed said that training provided was helpful but expressed concern about their access to information on successful data analytic approaches. Disseminating information to states on successful strategies could help states address challenges.\n\nWhat GAO Recommends\n\nGAO recommends that FNS more widely disseminate information to states about successful strategies used by states to adopt data analytics. FNS agreed with this recommendation."}
{"id":"crs_R43783","pid":"crs_R43783_0","input":"\tIntroduction and Background\n\nThe federal child nutrition programs provide assistance to schools and other institutions in the form of cash, commodity food, and administrative support (such as technical assistance and administrative funding) based on the provision of meals and snacks to children. In general, these programs were created (and amended over time) to both improve children's nutrition and provide support to the agriculture economy. \nToday, the child nutrition programs refer primarily to the following meal, snack, and milk reimbursement programs (these and other acronyms are listed in Appendix A ):\nNational School Lunch Program (NSLP) (Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)); School Breakfast Program (SBP) (Child Nutrition Act, Section 4 (42 U.S.C. 1773)); Child and Adult Care Food Program (CACFP) (Richard B. Russell National School Lunch Act, Section 17 (42 U.S.C. 1766)); Summer Food Service Program (SFSP) (Richard B. Russell National School Lunch Act, Section 13 (42 U.S.C. 1761)); and Special Milk Program (SMP) (Child Nutrition Act, Section 3 (42 U.S.C. 1772)). \nThe programs provide financial support and\/or foods to the institutions that prepare meals and snacks served outside of the home (unlike other food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) where benefits are used to purchase food for home consumption). Though exact eligibility rules and pricing vary by program, in general the amount of federal reimbursement is greater for meals served to qualifying low-income individuals or at qualifying institutions, although most programs provide some subsidy for all food served. Participating children receive subsidized meals and snacks, which may be free or at reduced price. Forthcoming sections discuss how program-specific eligibility rules and funding operate. \nThis report describes how each program operates under current law, focusing on eligibility rules, participation, and funding. This introductory section describes some of the background and principles that generally apply to all of the programs; subsequent sections go into further detail on the workings of each. \nUnless stated otherwise, participation and funding data come from USDA-FNS's \"Keydata Reports.\" \n\n\t\tAuthorization and Reauthorization\n\nThe child nutrition programs are most often dated back to the 1946 enactment of the National School Lunch Act, which created the National School Lunch Program, albeit in a different form than it operates today. Most of the child nutrition programs do not date back to 1946; they were added and amended in the decades to follow as policymakers expanded child nutrition programs' institutional settings and meals provided: \nThe Special Milk Program was created in 1954, regularly extended, and made permanent in 1970. The School Breakfast Program was piloted in 1966, regularly extended, and eventually made permanent in 1975. A program for child care settings and summer programs was piloted in 1968, with separate programs authorized in 1975 and then made permanent in 1978. These are now the Child and Adult Care Food Program and Summer Food Service Program. The Fresh Fruit and Vegetable Program began as a pilot in 2002, was made permanent in 2004, and was expanded nationwide in 2008.\nThe programs are now authorized under three major federal statutes: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and the Workforce Committee; and, to a limited extent (relating to commodity food assistance and Section 32 issues), the House Agriculture Committee. \nCongress periodically reviews and reauthorizes expiring authorities under these laws. The child nutrition programs were most recently reauthorized in 2010 through the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ); some of the authorities created or extended in that law expired on September 30, 2015. WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children) is also typically reauthorized with the child nutrition programs. WIC is not one of the child nutrition programs and is not discussed in this report. \nThe 114 th Congress began but did not complete a 2016 child nutrition reauthorization (see CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview ). There was no significant legislative activity with regard to reauthorization in the 115 th Congress.\n\n\t\tProgram Administration: Federal, State, and Local\n\nThe U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) administers the programs at the federal level. The programs are operated by a wide variety of local public and private providers and the degree of direct state involvement differs by program and state. At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to millions of children (e.g., there were 30.0 million in the National School Lunch Program, the largest of the programs, in FY2017), through some 100,000 public and private schools and residential child care institutions, nearly 170,000 child care centers and family day care homes, and just over 50,000 summer program sites.\nAll programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa). \n\n\t\tFunding Overview\n\nThis section summarizes the nature and extent to which the programs' funding is mandatory and discretionary, including a discussion of appropriated entitlement status. Table 3 lists child nutrition program and related expenditures.\n\n\t\t\tOpen-Ended, Appropriated Entitlement Funding\n\nMost spending for child nutrition programs is provided in annual appropriations acts to fulfill the legal financial obligation established by the authorizing laws. That is, the level of spending for such programs, referred to as appropriated mandatory spending, is not controlled through the annual appropriations process, but instead is derived from the benefit and eligibility criteria specified in the authorizing laws. The appropriated mandatory funding is treated as mandatory spending. Further, if Congress does not appropriate the funds necessary to fund the program, eligible entities may have legal recourse. Congress typically considers the Administration's forecast for program needs in its appropriations decisions. For the majority of funding discussed in this report, the formula that controls the funding is not capped and fluctuates based on the reimbursement rates and the number of meals\/snacks served in the programs. \n\n\t\t\t\tCash Reimbursements and Commodity Foods\n\nIn the meal service programs, such as the National School Lunch Program, School Breakfast Program, summer programs, and assistance for child care centers and day care homes, federal aid is provided in the form of statutorily set subsidies (reimbursements) paid for each meal\/snack served that meets federal nutrition guidelines. Although all (including full-price) meals\/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal\/snack subsidy rates are indexed annually (each July) for inflation, as are the income eligibility thresholds for free and reduced-price meals\/snacks. Subsequent sections discuss how a specific program's eligibility and reimbursements work. \nMost subsidies are cash payments to schools or other providers, but a smaller portion of aid is provided in the form of USDA-purchased commodity foods . Laws for three child nutrition programs (NSLP, CACFP, and SFSP) require the provision of commodity foods (or in some cases allow cash in lieu of commodity foods). \nMeal and snack service entails nonfood costs. Federal child nutrition per-meal\/snack subsidies may be used to cover local providers' administrative and operating costs. However, the separate direct federal payments for administrative\/operating costs (\"State Administrative Expenses,\" discussed in the \" Related Programs, Initiatives, and Support\u00a0Activities \" section) are limited. \n\n\t\t\tOther Federal Funding\n\nIn addition to the open-ended, appropriated entitlement funds summarized above, the child nutrition programs' funding also includes certain other mandatory funding and a limited amount of discretionary funding. Some of the activities discussed in \" Related Programs, Initiatives, and Support\u00a0Activities ,\" such as Team Nutrition, are provided for with discretionary funding.\nAside from the annually appropriated funding, the child nutrition programs are also supported by certain permanent appropriations and transfers. Notably, funding for the Fresh Fruit and Vegetable Program is funded by a transfer from USDA's Section 32 program, a permanent appropriation of 30% of the previous year's customs receipts. \n\n\t\t\tState, Local, and Participant Funds\n\nFederal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers. States and localities help cover program costs, as do children's families by paying charges for nonfree or reduced-price meals\/snacks. There is a nonfederal cost-sharing requirement for the school meals programs (discussed below), and some states supplement school funding through additional state per-meal reimbursements or other prescribed financing arrangements. \n\n\t\tChild Nutrition Programs at a Glance\n\nSubsequent sections of this report delve into the details of how each of the child nutrition programs support the service of meals and snacks in institutional settings; first, it is useful to take a broader perspective of primary program elements. Table 1 is a top-level look at the different programs that displays distinguishing characteristics (what meals are provided, in what settings, to what ages) and recent program spending.\n\n\t\tLinks to Resources\n\nOther relevant CRS reports in this area include\nCRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking the Next Child Nutrition Reauthorization: An Overview CRS Report R44588, Agriculture and Related Agencies: FY2017 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program\nOther relevant resources include \nUSDA-FNS's website, https:\/\/www.fns.usda.gov\/school-meals\/child-nutrition-programs USDA-FNS's Healthy, Hunger-Free Kids Act page, http:\/\/www.fns.usda.gov\/school-meals\/healthy-hunger-free-kids-act The FNS page of the Federal Register , https:\/\/www.federalregister.gov\/agencies\/food-and-nutrition-service\n\n\tSchool Meals Programs\n\nThis section discusses the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). Principles and concepts common to both programs are discussed first; subsections then discuss features and data unique to the NSLP and SBP, respectively.\n\n\t\tGeneral Characteristics\n\nThe federal school meals programs provide federal support in the form of cash assistance and USDA commodity foods; both are provided according to statutory formulas based on the number of reimbursable meals served in schools. The subsidized meals are served by both public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced-price meals to eligible low-income children. Both cash and commodity support to participating schools are calculated based on the number and price of meals served (e.g., lunch or breakfast, free or full price), but once the aid is received by the school it is used to support the overall school meal service budget, as determined by the school. This report focuses on the federal reimbursements and funding, but it should be noted that some states have provided state financing through additional state-specific funding.\nFederal law does not require schools to participate in the school meals programs. However, some states have mandated that schools provide lunch and\/or breakfast, and some of these states require that their schools do so through NSLP and\/or SBP. The program is open to public and private schools. \nA reimbursable meal requires compliance with federal school nutrition standards, which have changed throughout the history of the program based on nutritional science and children's nutritional needs. Food items not served as a complete meal meeting nutrition standards (e.g., a la carte offerings) are not reimbursable meals, and therefore are not eligible for federal per-meal, per-snack reimbursements. Following rulemaking to implement provisions in the Healthy, Hunger-Free Kids Act of 2010 ( P.L. 111-296 ), USDA updated the nutrition standards for reimbursable meals in January 2012 (see \" Nutrition Standards \" for more information). Schools serving meals that meet the updated nutrition standards are eligible for an increased reimbursement of 6 cents per lunch. \nUSDA-FNS administers the school meals programs federally, and state agencies (typically state departments of education) oversee and transmit reimbursements through agreements with school food authorities (SFAs) (typically local educational agencies (LEAs); usually these are school districts). Figure 1 provides an overview of the roles and relationships between these levels of government.\nThere is a cost-sharing requirement for the programs, which amounts to a contribution of approximately $200 million from the states. There also are states that choose to supplement federal reimbursements with their own state reimbursements. \n\n\t\tSchool Meals Eligibility Rules\n\nThe school meals programs and related funding do not serve only low-income children. All students can receive a meal at a NSLP- or SBP-participating school, but how much the child pays for the meal and\/or how much of a federal reimbursement the state receives will depend largely on whether the child qualifies for a \"free,\" \"reduced-price,\" or \"paid\" (i.e., advertised price) meal. Both NSLP and SBP use the same household income eligibility criteria and categorical eligibility rules. States and schools receive the largest reimbursements for free meals, smaller reimbursements for reduced-price meals, and the smallest (but still some federal financial support) for the full-price meals.\nThere are three pathways through which a child can become certified to receive a free or reduced-price meal:\n1. Household income eligibility for free and reduced-price meals (information typically collected via household application), 2. Categorical (or automatic) eligibility for free meals (information collected via household application or a direct certification process), and 3. School-wide free meals under the Community Eligibility Provision (CEP) , an option for eligible schools that is based on the share of students identified as eligible for free meals.\nEach of these pathways is discussed in more detail below.\n\n\t\t\tIncome Eligibility\n\nThe income eligibility thresholds (shown in Table 2 ) are based on multipliers of the federal poverty guidelines. As the poverty guidelines are updated every year, so are the eligibility thresholds for NSLP and SBP. \nFree Meals: Children receive free meals if they have household income at or below 130% of the federal poverty guidelines; these meals receive the highest subsidy rate. (Reimbursements are approximately $3.30 per lunch served, less for breakfast.) Reduced-Price Meals: Children may receive reduced-price meals (charges of no more than 40 cents for a lunch or 30 cents for a breakfast) if their household income is above 130% and less than or equal to 185% of the federal poverty guidelines; these meals receive a subsidy rate that is 40 cents (NSLP) or 30 cents (SBP) below the free meal rate. (Reimbursements are approximately $2.90 per lunch served.) Paid Meals: A comparatively small per-meal reimbursement is provided for full-price or paid meals served to children whose families do not apply for assistance or whose family income does not qualify them for free or reduced-price meals. The paid meal price is set by the school but must comply with federal regulations. (Reimbursements are approximately 30 cents per lunch served.)\nThe above reimbursement rates are approximate; exact current-year federal reimbursement rates for NSLP and SBP are listed in Table B -1 and Table B -3 , respectively. \nHouseholds complete paper or online applications that collect relevant income and household size data, so that the school district can determine if children in the household are eligible for free meals, reduced-price meals, or neither.\nThough these income guidelines primarily influence funding and administration of NSLP and SBP, they also affect the eligibility rules for the SFSP, CACFP, and SMP (described further in subsequent sections).\n\n\t\t\tCategorical Eligibility\n\nIn addition to the eligibility thresholds listed above, the school meals programs also convey eligibility for free meals based on household participation in certain other need-tested programs or children's specified vulnerabilities (e.g., foster children). Per Section 12 of the National School Lunch Act, \"a child shall be considered automatically eligible for a free lunch and breakfast ... without further application or eligibility determination, if the child is\"\nin a household receiving benefits through SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations) benefits; or TANF (Temporary Assistance for Needy Families) cash assistance; enrolled in Head Start; in foster care; a migrant; a runaway; or homeless.\nFor meals served to students certified in the above categories, the state\/school receive a reimbursement at the free meal amount and children receive a free meal. (See Table B -1 and Table B -3 for school year 2018-2019 rates.)\nSome school districts collect information for these categorical eligibility rules via paper application. Others conduct a process called direct certification \u2014a proactive process where government agencies typically cross-check their program rolls and certify a household's children for free school meals without the household having to complete a school meals application. \nPrior to 2004, states had the option to conduct direct certification of SNAP (then, the Food Stamp Program), TANF, and FDPIR participants. In the 2004 child nutrition reauthorization ( P.L. 108-265 ), states were required under federal law to conduct direct certification for SNAP participants, with nationwide implementation taking effect in school year 2008-2009. Conducting direct certification for TANF and FDPIR remains at the state's discretion.\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made further policy changes to expand direct certification (discussed further in the next section). One of those changes was the initiation of a demonstration project to look at expanding categorical eligibility and direct certification to some Medicaid households. The law also funded performance incentive grants for high-performing states and authorized correcting action planning for low-performing states in direct certification activities. \nUnder SNAP direct certification rules generally, schools enter into agreements with SNAP agencies to certify children in SNAP households as eligible for free school meals without requiring a separate application from the family. Direct certification systems match student enrollment lists against SNAP agency records, eliminating the need for action by the child's parents or guardians. Direct certification allows schools to make use of SNAP's more in-depth eligibility certification process; this can reduce errors that may occur in school lunch application eligibility procedures that are otherwise used. From a program access perspective, direct certification also reduces the number of applications a household must complete.\n Figure 2 , created by GAO and published in a May 2014 report, provides an overview of how school districts certify students for free and reduced-price meals under the income-based and category-based rules, via applications and direct certification. A USDA-FNS study of school year 2014-2015 estimates that 11.1 million students receiving free meals were directly certified\u201468% of all categorically eligible students receiving free meals.\n\n\t\t\tCommunity Eligibility Provision (CEP)\n\nHHFKA also authorized the school meals Community Eligibility Provision (CEP), an option in NSLP and SBP law that allows eligible schools and school districts to offer free meals to all enrolled students based on the percentage of their students who are identified as automatically eligible from nonhousehold application sources (primarily direct certification through other programs). \nBased on the statutory parameters, USDA-FNS piloted CEP in various states over three school years and it expanded nationwide in school year 2014-2015. Eligible LEAs have until June 30 of each year to notify USDA-FNS if they will participate in CEP. According to a database maintained by the Food Research and Action Center, just over 20,700 schools in more than 3,500 school districts (LEAs) participated in CEP in SY2016-2017, an increase of approximately 2,500 schools compared to SY2015-2016.\nFor a school (or school district, or group of schools within a district) to provide free meals to all children\nthe school(s) must be eligible for CEP based on the share (40% or greater) of enrolled children that can be identified as categorically (or automatically) eligible for free meals, and the school must opt-in to CEP. \nThough CEP schools serve free meals to all students, they are not reimbursed at the \"free meal\" rate for every meal. Instead, the law provides a funding formula: the percentage of students identified as automatically eligible (the \"identified student percentage\" or ISP) is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free meal rate, with the remainder reimbursed at the far lower paid meal rate. For example, if a CEP school identifies that 40% of students are eligible for free meals, then 64% of the meals served will be reimbursed at the free meal rate and 36% at the paid meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free meal reimbursement for all meals served.\nSome of the considerations that may impact a school's decision to participate in CEP include whether the new funding formula would be beneficial for their school meal budget; an interest in reducing paperwork for families and schools; and an interest in providing more free meals, including meals to students who have not participated in the program before.\n\n\t\tNutrition Standards\n\n\t\t\tSchool Meals\n\nThe Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) set in motion changes to the nutrition standards for school meals, requiring USDA to update the standards within a certain timeframe. The law required that the revised standards be based on recommendations from the Institute of Medicine (IOM) (now the Health and Medicine Division) at the National Academy of Sciences. The law also provided increased federal subsidies (6 cents per lunch) for schools meeting the new requirements and funding for technical assistance related to implementation. \nUSDA published the final regulations in January 2012. The final rule sought to align school meal patterns with the 2010 Dietary Guidelines for Americans, and, generally consistent with IOM's recommendations, increased the amount of fruits, vegetables, whole grains, and low-fat or fat-free milk in school meals. The regulations also included calorie maximums and sodium limits to phase in over time, among other requirements. \nThe nutrition standards largely took effect in SY2012-2013 for lunches and in SY2013-2014 for breakfasts. A few other requirements were scheduled to phase in over multiple school years. Some schools experienced difficulty implementing the new guidelines, and Congress and USDA have made changes to the 2012 final rule's whole grain, sodium, and milk requirements. For SY2019-2020 and onwards, schools are operating under a final rule published December 12, 2018.\n\n\t\t\tCompetitive Foods\n\nThe HHFKA also gave USDA the authority to regulate other foods in the school nutrition environment. Sometimes called \"competitive foods,\" these include foods and drinks sold in a la carte lines, vending machines, snack bars and concession stands, and fundraisers. \nRelying on recommendations made by a 2007 IOM report, USDA-FNS promulgated a proposed rule and then an interim final rule in June 2013, which went into effect for SY2014-2015. The interim final rule created nutrition guidelines for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published on July 29, 2016, maintained the interim final rules with minor modifications. Under the final standards, these foods must meet whole-grain requirements; have certain primary ingredients; and meet calorie, sodium, and fat limits, among other requirements. Schools are limited to a list of no- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). \nThere are no limits on fundraisers selling foods that meet the interim final rule's guidelines. Fundraisers outside of the school day are not subject to the guidelines. HHFKA and the interim final rule provide states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards.\nThe rule does not limit foods brought from home, only foods sold at school during the school day. The federal standards are minimum standards; states and school districts are permitted to issue more stringent policies. \n\n\t\tNational School Lunch Program (NSLP)\n\nIn FY2017, NSLP subsidized 4.9 billion lunches to children in close to 96,000 schools and 3,200 residential child care institutions (RCCIs). Average daily participation was 30.0 million students (58% of children enrolled in participating schools and RCCIs). Of the participating students, 66.7% (20.0 million) received free lunches and 6.5% (2.0 million) received reduced-price lunches. The remainder were served full-price meals, though schools still receive a reimbursement for these meals. Figure 3 shows FY2017 participation data.\nFY2017 federal school lunch costs totaled approximately $13.6 billion (see Table 3 for the various components of this total). The vast majority of this funding is for per-meal reimbursements for free and reduced-price lunches.\nThe HHFKA also provided an additional 6-cent per-lunch reimbursement to schools that provide meals that meet the updated nutritional guidelines requirements. This bonus is not provided for breakfast, but funds may be used to support schools' breakfast programs. NSLP lunch reimbursement rates are listed in Table B -1 .\nIn addition to federal cash subsidies, schools participating in NSLP receive USDA-acquired commodity food s . Schools are entitled to a specific, inflation-indexed value of USDA commodity foods for each lunch they serve. Also, schools may receive donations of bonus commodities acquired by USDA in support of the farm economy. In FY2017, the value of federal commodity food aid to schools totaled nearly $1.4 billion. The per-meal rate for commodity food assistance is included in Table B-4 .\nWhile the vast majority of NSLP funding is for lunches served during the school day, NSLP may also be used to support snack service during the school year and to serve meals during the summer. These features are discussed in subsequent sections, \" Summer Meals \" and \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\" Reimbursement rates for snacks are listed in Table B -2 .\n\n\t\tSchool Breakfast Program (SBP)\n\nThe School Breakfast Program (SBP) provides per-meal cash subsidies for breakfasts served in schools. Participating schools receive subsidies based on their status as a severe need or nonsevere need institution. Schools can qualify as a severe need school if 40% or more of their lunches are served free or at reduced prices. See Table B -3 for SBP reimbursement rates.\n Figure 4 displays SBP participation data for FY2017. In that year, SBP subsidized over 2.4 billion breakfasts in over 88,000 schools and nearly 3,200 RCCIs. Average daily participation was 14.7 million children (30.1% of the students enrolled in participating schools and RCCIs). The majority of meals served through SBP are free or reduced-price. Of the participating students, 79.1% (11.6 million) received free meals and 5.7% (835,000) purchased reduced-price meals. Federal school breakfast costs for the fiscal year totaled approximately $4.3 billion (see Table 3 for the various components of this total).\nSignificantly fewer schools and students participate in SBP than in NSLP. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal and eat before school starts. Some schools offer (and anti-hunger groups have encouraged) models of breakfast service that can result in greater SBP participation, such as Breakfast in the Classroom, where meals are delivered in the classroom; \"grab and go\" carts, where students receive a bagged breakfast that they bring to class, or serving breakfast later in the day in middle and high schools. \nUnlike NSLP, commodity food assistance is not a formal part of SBP funding; however, commodities provided through NSLP may be used for school breakfasts as well.\n\n\tOther Child Nutrition Programs\n\nIn addition to the school meals programs discussed above, other federal child nutrition programs provide federal subsidies and commodity food assistance for schools and other institutions that offer meals and snacks to children in early childhood, summer, and after-school settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit child care centers, (3) family\/group day care homes, and (4) nongovernmental institutions\/organizations that offer outside-of-school programs for children. (Although this report focuses on the programs that serve children, one child nutrition program (CACFP) also serves day care centers for chronically impaired adults and elderly persons under the same general per-meal\/snack subsidy terms.) The programs in the sections to follow serve comparatively fewer children and spend comparatively fewer federal funds than the school meal programs. \n\n\t\tChild and Adult Care Food Program (CACFP)\n\nCACFP subsidizes meals and snacks served in early childhood, day care, and after-school settings. CACFP provides subsidies for meals and snacks served at participating nonresidential child care centers, family day care homes, and (to a lesser extent) adult day care centers. The program also provides assistance for meals served at after-school programs. CACFP reimbursements are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, children with disabilities of any age, and, in the case of adult care centers, chronically impaired and elderly adults. Children in early childhood settings are the overwhelming majority of those served by the program. \nCACFP provides federal reimbursements for breakfasts, lunches, suppers, and snacks served in participating centers (facilities or institutions) or day care homes (private homes). The eligibility and funding rules for CACFP meals and snacks depend first on whether the participating institution is a center or a day care home (the next two sections discuss the rules specific to centers and day care homes). According to FY2017 CACFP data, child care centers have an average daily attendance of about 56 children per center, day care homes have an average daily attendance of approximately 7 children per home, and adult day care centers typically care for an average of 48 chronically ill or elderly adults per center. \nProviders must demonstrate that they comply with government-established standards for other child care programs. Like in school meals, federal assistance is made up overwhelmingly of cash reimbursements calculated based on the number of meals\/snacks served and federal per-meal\/snack reimbursements rates, but a far smaller share of federal aid (4.3% in FY2017) is in the form of federal USDA commodity foods (or cash in lieu of foods). Federal CACFP reimbursements flow to individual providers either directly from the administering state agency (this is the case with many child\/adult care centers able to handle their own CACFP administrative functions) or through \"sponsors\" who oversee and provide administrative support for a number of local providers (this is the case with some child\/adult care centers and with all day care homes). \nIn FY2017, total CACFP spending was over $3.5 billion, including cash reimbursement, commodity food assistance, and costs for sponsor audits. (See Table 3 for a further breakdown of CACFP costs.) This total also includes the after-school meals and snacks provided through CACFP's \"at-risk after-school\" pathway; this aspect of the program is discussed later in \" After-School Meals and Snacks: CACFP,\u00a0NSLP Options .\"\n\n\t\t\tCACFP Nutrition Standards\n\nAs with school foods, the HHFKA required USDA to update CACFP's meal patterns. USDA's final rule revised the meal patterns for both meals served in child care centers and day care homes, as well as preschool meals served through the NSLP and SBP, effective October 1, 2017. For infants (under 12 months of age), the new meal patterns eliminated juice, supported breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older, the new meal patterns increased whole grains, fruits and vegetables, and low-fat and fat-free milk; limited sugar in cereals and yogurts; and prohibited frying, among other requirements. \n\n\t\t\tCACFP at Centers\n\n\t\t\t\tParticipation\n\nChild care centers in CACFP can be (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet certain requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2017, over 65,000 child care centers with an average daily attendance of over 3.6 million children participated in CACFP. Over 2,700 adult care centers served nearly 132,000 adults through CACFP. \n\n\t\t\t\tEligibility and Administration\n\nParticipating centers may receive daily reimbursements for up to either two meals and one snack or one meal and two snacks for each participant, so long as the meals and snacks meet federal nutrition standards. \nThe eligibility rules for CACFP centers largely track those of NSLP: children in households at or below 130% of the current poverty line qualify for free meals\/snacks while those between 130% and 185% of poverty qualify for reduced-price meals\/snacks (see Table 2 ). In addition, participation in the same categorical eligibility programs as NSLP as well as foster child status convey eligibility for free meals in CACFP. Like school meals, eligibility is determined through paper applications or direct certification processes.\nLike school meals, all meals and snacks served in the centers are federally subsidized to some degree, even those that are paid. Different reimbursement amounts are provided for breakfasts, lunches\/suppers, and snacks, and reimbursement rates are set in law and indexed for inflation annually. The largest subsidies are paid for meals and snacks served to participants with family income below 130% of the federal poverty income guidelines (the income limit for free school meals), and the smallest to those who have not met a means test. See Table B -5 for current CACFP center reimbursement rates. \nUnlike school meals, CACFP institutions are less likely to collect per-meal payments. Although federal assistance for day care centers differentiates by household income, centers have discretion on their pricing of meals. Centers may adjust their regular fees (tuition) to account for federal payments, but CACFP itself does not regulate these fees. In addition, centers can charge families separately for meals\/snacks, so long as there are no charges for children meeting free-meal\/snack income tests and limited charges for those meeting reduced-price income tests.\nIndependent centers are those without sponsors handling administrative responsibilities. These centers must pay for administrative costs associated with CACFP out of nonfederal funds or a portion of their meal subsidy payments. For centers with sponsors, the sponsors may retain a proportion of the meal reimbursement payments they receive on behalf of their centers to cover such costs. \n\n\t\t\tCACFP for Day Care Homes\n\n\t\t\t\tParticipation\n\nCACFP-supported day care homes serve a smaller number of children than CACFP-supported centers , both in terms of the total number of children served and the average number of children per facility. Roughly 17% of children in CACFP (approximately 757,000 in FY2017 average daily attendance) are served through day care homes. In FY2017, approximately 103,000 homes (with just over 700 sponsors) received CACFP support.\n\n\t\t\t\tEligibility and Reimbursement\n\nAs with centers, payments to day care homes are provided for up to either two meals and one snack or one meal and two snacks a day for each child. Unlike centers, day care homes must participate under the auspices of a public or, more often, private nonprofit sponsor that typically has 100 or more homes under its supervision. CACFP day care home sponsors receive monthly administrative payments based on the number of homes for which they are responsible. \nFederal reimbursements for family day care homes differ by the home's status as \"Tier I\" or \"Tier II.\" Unlike centers, day care homes receive cash reimbursements (but not commodity foods) that generally are not based on the child participants' household income. Instead, there are two distinct, annually indexed reimbursement rates that are based on area or operator eligibility criteria\nTier I homes are located in low-income areas (defined as areas in which at least 50% of school-age and enrolled children qualify for free or reduced-price meals) or operated by low-income providers whose household income meets the free or reduced-price income standards. They receive higher subsidies for each meal\/snack they serve. Tier II (lower) rates are by default those for homes that do not qualify for Tier I rates; however, Tier II providers may seek the higher Tier I subsidy rates for individual low-income children for whom financial information is collected and verified. (See Table B-6 for current Tier I and Tier II reimbursement rates.)\nAdditionally, HHFKA introduced a number of additional ways (as compared to prior law) by which family day care homes can qualify as low-income and get Tier I rates for the entire home or for individual children. \nAs with centers, there is no requirement that meals\/snacks specifically identified as free or reduced-price be offered; however, unlike centers, federal rules prohibit any separate meal charges. \n\n\t\tSummer Meals\n\nCurrent law SFSP and the NSLP\/SBP Seamless Summer Option provide meals in congregate settings nationwide; the related Summer Electronic Benefits Transfer (SEBTC or Summer EBT) demonstration project is an alternative to congregate settings. \n\n\t\t\tSummer Food Service Program (SFSP)\n\nSFSP supports meals for children during the summer months. The program provides assistance to local public institutions and private nonprofit service institutions running summer youth\/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash reimbursements for each meal or snack served; however, federally donated commodity foods are also offered. Participating service institutions are often entities that provide ongoing year-round service to the community including schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. \nSimilar to the CACFP model, sponsors are institutions that manage the food preparation, financial, and administrative responsibilities of SFSP. Sites are the places where food is served and eaten. At times, a sponsor may also be a site. State agencies authorize sponsors, monitor and inspect sponsors and sites, and implement USDA policy. Unlike CACFP, sponsors are required for an institution's participation in SFSP as a site.\n\n\t\t\t\tParticipation\n\nIn FY2017, nearly 5,500 sponsors with 50,000 food service sites participated in the SFSP and served an average of approximately 2.7 million children daily (according to July data). \nParticipation of sites and children in SFSP has increased in recent years. Program costs for FY2017 totaled over $485 million, including cash assistance, commodity foods, administrative cost assistance, and health inspection costs.\n\n\t\t\t\tEligibility and Administration\n\nThere are several options for eligibility and meal\/snack service for SFSP sponsors (and their sites)\nOpen sites provide summer food to all children in the community. These sites are certified based on area eligibility measures, where 50% or more of area children have family income that would make them eligible for free or reduced-price school meals (see Table 2 ). Closed or Enrolled sites provide summer meals\/snacks free to all children enrolled at the site. The eligibility test for these sites is that 50% or more of the children enrolled in the sponsor's program must be eligible for free or reduced-price school meals based on household income. Closed\/enrolled sites may also become eligible based on area eligibility measures noted above. Summer camps (that are not enrolled sites) receive subsidies only for those children with household eligibility for free or reduced-price school meals. Other programs specified in law , such as the National Youth Sports Program and centers for homeless or migrant children. \nSummer sponsors get operating cost (food, storage, labor) subsidies for all meals\/snacks they serve\u2014up to one meal and one snack, or two meals per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. See Table B -7 for current SFSP reimbursement rates. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor.\n\n\t\t\tSchool Meals' Seamless Summer Option64\n\nAlthough SFSP is the child nutrition program most associated with providing meals during summer months, it is not the only program option for providing these meals and snacks. The Seamless Summer Option, run through NSLP or SBP programs, is also a means through which food can be provided to students during summer months. Much like SFSP, Seamless Summer operates in summer sites (summer camps, sports programs, churches, private nonprofit organizations, etc.) and for a similar duration of time. Unlike SFSP, schools are the only eligible sponsors , although schools may operate the program at other sites. Reimbursement rates for Seamless Summer meals are the same as current NSLP\/SBP rates. \n\n\t\t\tSummer EBT for Children Demonstration\n\nBeginning in summer 2011 and (as of the date of this report) each summer since, USDA-FNS has operated Summer Electronic Benefit Transfer for Children (SEBTC or \"Summer EBT\") demonstration projects in a limited number of states and Indian Tribal Organizations (ITOs). These Summer EBT projects provide electronic food benefits over summer months to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided, through a WIC or SNAP EBT card model. In the demonstration projects, these benefits were provided as a supplement to the Summer Food Service Program (SFSP) meals available in congregate settings.\nSummer EBT and other alternatives to congregate meals through SFSP were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of alternatives were tested and evaluated, findings from Summer EBT were among the most promising, and Congress provided subsequent funding. Summer EBT evaluations showed significant impacts on reducing child food insecurity and improving nutritional intake. \u00a0Summer EBT was funded by P.L. 111-80 in the summers from 2011 to 2014. Projects have continued to operate and were annually funded by FY2015-FY2018 appropriations; most recently, the FY2018 appropriations law ( P.L. 115-141 ) provided $28 million. According to USDA-FNS, in summer 2016 Summer EBT served over 209,000 children in nine states and two tribal nations\u2014an increase from the 11,400 children served when the demonstration began in summer 2011. \n\n\t\tSpecial Milk Program (SMP)\n\nSchools (and institutions like summer camps and child care facilities) that are not already participating in the other child nutrition programs can participate in the Special Milk Program. Schools may also administer SMP for their part-day sessions for kindergartners or pre-kindergartners.\nUnder SMP, participating institutions provide milk to children for free and\/or at a subsidized paid price, depending on how the enrolled institution opts to administer the program (see Table B -8 for current Special Milk reimbursement rates for each of these options)\nAn institution that only sells milk will receive the same per-half pint federal reimbursement for each milk sold (approximately 20 cents). An institution that sells milk and provides free milk to eligible children (income eligibility is the same as free school meals, see Table 2 ), receives a reimbursement for the milk sold (approximately 20 cents) and a higher reimbursement for the free milks. An institution that does not sell milk provides milk free to all children and receives the same reimbursement for all milk (approximately 20 cents). This option is sometimes called nonpricing.\nIn FY2017, over 41 million half-pints were subsidized, 9.5% of which were served free. Federal expenditures for this program were approximately $8.3 million in FY2017. \n\n\t\tFresh Fruit and Vegetable Program (FFVP)\n\nStates receive formula grants through the Fresh Fruit and Vegetable Program, under which state-selected schools receive funds to purchase and distribute fresh fruit and vegetable snacks to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population. States select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per-student grant amounts (between $50 and $75). \nFunding is set by law at $150 million for school year 2011-2012 and inflation-indexed for every year after. In FY2017, states used approximately $184 million in FFVP funds. FFVP is funded by a mandatory transfer of funds from USDA's Section 32 program\u2014a permanent appropriation of 30% of the previous year's customs receipts. This transfer is required by FFVP's authorizing laws (Section 19 of the Richard B. Russell National School Lunch Act and Section 4304 of P.L. 110-246 ). Up until FY2018's law, annual appropriations laws delayed a portion of the funds to the next fiscal year.\nAfter a pilot period, the Child Nutrition and WIC Reauthorization Act of 2004 ( P.L. 108-265 ) permanently authorized and funded FFVP for a limited number of states and Indian reservations. In recent years, FFVP has been amended by omnibus farm bill laws rather than through child nutrition reauthorizations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding, specifically providing funds through Section 32, and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to this program but did include, and fund at $5 million in FY2014, a pilot project that requires USDA to test offering frozen, dried, and canned fruits and vegetables and publish an evaluation of the pilot. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in SY2014-2015 and the evaluation was published in 2017. Other proposals to expand fruits and vegetables offered in FFVP have been introduced in both the 114 th and 115 th Congress.\n\n\tOther Topics\n\n\t\tAfter-School Meals and Snacks: CACFP, NSLP Options\n\nTwo of the child nutrition programs discussed in previous sections, the National School Lunch Program (NSLP) and Child and Adult Care Food Program (CACFP), provide federal support for snacks and meals served during after-school programs. \nNSLP provides reimbursements for after-school snacks; however, this option is open only to schools that already participate in NSLP. These schools may operate after-school snack-only programs during the school year, and can do so in two ways: (1) if low-income area eligibility criteria are met, provide free snacks in lower-income areas; or (2) if area eligibility criteria are not met, offer free, reduced-price, or fully paid-for snacks, based on household income eligibility (like lunches in NSLP). The vast majority of snacks provided through this program are through the first option. Through this program, approximately 206 million snacks were served in FY2017 (a daily average of nearly 1.3 million). This compares with nearly 4.9 billion lunches served (a daily average of 27.8 million).\nCACFP provides assistance for after-school food in two ways. First, centers and homes that participate in CACFP and provide after-school care may participate in traditional CACFP (the eligibility and administration described earlier). Second, centers in areas where at least half the children in the community are eligible for free or reduced-price school meals can opt to participate in the CACFP At-Risk Afterschool program, which provides free snacks and suppers. Expansion of the At-Risk After-School meals program was a major policy change included in HHFKA. Prior to the law, 13 states were permitted to offer CACFP At-Risk After-School meals (instead of just a snack); the law allowed all CACFP state agencies to offer such meals. In FY2017, the At-Risk Afterschool program served a total of approximately 242.6 million free meals and snacks to a daily average of more than 1.7 million children. \n\n\t\tRelated Programs, Initiatives, and Support Activities\n\nFederal child nutrition laws authorize and program funding supports a range of additional programs, initiatives, and activities. \nThrough State Administrative Expenses funding, states are entitled to federal grants to help cover administrative and oversight\/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 2% of child nutrition reimbursements. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for CACFP, commodity distribution, and Administrative Review efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit, and appropriated funding is available to states for two years. State Administrative Expense spending in FY2017 totaled approximately $279 million.\nTeam Nutrition is a USDA-FNS program that includes a variety of school meals initiatives around nutrition education and the nutritional content of the foods children eat in schools. This includes Team Nutrition Training Grants, which provide funding to state agencies for training and technical assistance, such as help implementing USDA's nutrition requirements and the Dietary Guidelines for Americans. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge (HUSSC), which originated in the 2004 reauthorization of the Child Nutrition Act. HUSSC was a voluntary certification initiative designed to recognize schools that have created a healthy school environment through the promotion of nutrition and physical activity. \nFarm-to-school programs broadly refer to \"efforts that bring regionally and locally produced foods into school cafeterias,\" with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education to school districts and farmers. HHFKA amended existing child nutrition programs to establish mandatory funding of $5 million per year for competitive farm-to-school grants that support schools and nonprofit entities in establishing farm-to-school programs that improve a school's access to locally produced foods. The FY2018 appropriations law provided an additional $5 million in discretionary funding to remain available until expended. Grants may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, developing partnerships, and implementing farm-to-school programs. USDA's Office of Community Food Systems provides additional resources on farm-to-school issues. \nThrough an Administrative Review process (formerly referred to as Coordinated Review Effort (CRE)), USDA-FNS, in cooperation with state agencies, conducts periodic on-site NSLP school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. State agencies are required to conduct administrative reviews of all school food authorities (SFAs) that operate the NSLP under their jurisdiction at least once during a three-year review cycle. Federal Administrative Review expenditures were approximately $9.9 million in FY2017. \nUSDA-FNS and state agencies conduct many other child nutrition program support activities for which dedicated funding is provided. Among other examples, there is the Institute of Child Nutrition (ICN), which provides technical assistance, instruction, and materials related to nutrition and food service management; it receives $5 million a year in mandatory funding appropriated in statute. ICN is located at the University of Mississippi. USDA-FNS provides training on food safety education. Funding is also provided for USDA-FNS to conduct studies, provide training and technical assistance, and oversee payment accuracy. \nAppendix A. Acronyms Used in This Report \nAppendix B. Per-meal or Per-snack Reimbursement Rates for Child Nutrition Programs\nThis appendix lists the specific reimbursement rates discussed in the earlier sections of the report. Reimbursement rates are adjusted for inflation for each school or calendar year according to terms laid out in the programs' authorizing laws. Each year, the new rates are announced in the Federal Register .","output":"The \"child nutrition programs\" refer to the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) programs that provide food for children in school or institutional settings. The best known programs, which serve the largest number of children, are the school meals programs: the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). The child nutrition programs also include the Child and Adult Care Food Program (CACFP), which provides meals and snacks in day care and after school settings; the Summer Food Service Program (SFSP), which provides food during the summer months; the Special Milk Program (SMP), which supports milk for schools that do not participate in NSLP or SBP; and the Fresh Fruit and Vegetable Program (FFVP), which funds fruit and vegetable snacks in select elementary schools.\nFunding: The vast majority of the child nutrition programs account is considered mandatory spending, with trace amounts of discretionary funding for certain related activities. Referred to as open-ended, \"appropriated entitlements,\" funding is provided through the annual appropriations process; however, the level of spending is controlled by benefit and eligibility criteria in federal law and dependent on the resulting levels of participation. Federal cash funding (in the form of per-meal reimbursements) and USDA commodity food support is guaranteed to schools and other providers based on the number of meals or snacks served and participant category (e.g., free meals for poor children get higher subsidies).\nParticipation: The child nutrition programs serve children of varying ages and in different institutional settings. The NSLP and SBP have the broadest reach, serving qualifying children of all ages in school settings. Other child nutrition programs serve more-narrow populations. CACFP, for example, provides meals and snacks to children in early childhood and after-school settings among other venues. Programs generally provide some subsidy for all food served but a larger federal reimbursement for food served to children from low-income households.\nAdministration: Responsibility for child nutrition programs is divided between the federal government, states, and localities. The state agency and type of local provider differs by program. In the NSLP and SBP, schools and school districts (\"school food authorities\") administer the program. Meanwhile, SFSP (and sometimes CACFP) uses a model in which sponsor organizations handle administrative responsibilities for a number of sites that serve meals.\nReauthorization: The underlying laws covering the child nutrition programs were last reauthorized in the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296, enacted December 13, 2010). This law made significant changes to child nutrition programs, including increasing federal financing for school lunches, expanding access to community eligibility and direct certification options for schools, and expanding eligibility options for home child care providers. The law also required an update to school meal nutrition guidelines as well as new guidelines for food served outside the meal programs (e.g., snacks sold in vending machines and cafeteria a la carte lines).\nCurrent Issues: The 114th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant legislative activity with regard to reauthorization in the 115th Congress. However, the vast majority of operations and activities continue with funding provided by appropriations laws. Current issues in the child nutrition programs are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues."}
{"id":"gao_GAO-18-473","pid":"gao_GAO-18-473_0","input":"\tBackground\n\nThis section provides an overview of the (1) San Francisco Bay Delta  watershed, (2) multiple water demands in the watershed, (3) selected  laws and agreements related to restoration efforts in the watershed, and  (4) funding for restoration efforts in the watershed.\n\n\t\tSan Francisco Bay Delta Watershed\n\nThe San Francisco Bay Delta watershed is a single, complex ecosystem  covering more than 75,000 square miles, almost entirely in California. It  includes a diversity of fresh, brackish, and salt water ecosystems.  Figure 1 shows the watershed and its three major geographic areas and  their subregions.\nThe watershed\u2019s three major geographic areas contain unique, yet  inherently interconnected environmental and cultural features and face  similar water quality and other threats:\nSan Francisco Bay and its local watershed (Bay). The San  Francisco Bay is the large body of mostly salt water through which the  local watershed, as well as the entire Bay Delta watershed, drains into  the Pacific Ocean. According to U.S. Census data, more than 7  million people live in the nine-county Bay area containing the local  watershed\u2014an area with one of the nation\u2019s densest populations.  Large cities, such as San Jose, San Francisco, and Oakland; their  suburbs, including Silicon Valley; and numerous other cities occupy  much of the land surrounding the Bay. Since the California Gold Rush  in the mid-1800s, most of the Bay\u2019s historical wetlands have been  filled for development or converted to farmland or industrial salt  ponds, and the loss of these natural features has removed important  barriers for flood and erosion control. Because of its urban setting  and location at the downstream end of the watershed, the Bay\u2019s water  quality faces threats from numerous sources of pollution, including  sewage, trash, urban and industrial runoff (e.g., metals, solvents, and  inorganic chemicals), and runoff from agriculture and past mining  activities upstream (e.g., nutrients, pesticides, and metals).\nSacramento-San Joaquin Delta (Delta). The Sacramento-San  Joaquin Delta comprises roughly 1,000 square miles where the fresh  waters of the Sacramento and San Joaquin Rivers converge south of  the city of Sacramento before flowing into the San Francisco Bay  through a network of more than 50 islands. It is a largely rural area  that is also home to more than 500,000 people living mostly on its  suburban periphery, and its communities and farmland are protected  from flooding by approximately 1,100 miles of levees. During the  California Gold Rush, settlers diked the Delta\u2019s channels and  waterways and began building levees to create dry land, resulting in  the loss of nearly all of the original wetlands in the area. As a result,  the Delta has been converted from an historic plain of seasonally  flooded brackish and freshwater wetlands to a mosaic of channelized  waterways surrounding its islands. According to reports, many of  these islands have subsequently subsided up to 25 feet below sea  level due largely to the use of groundwater and farming, which can  cause the islands\u2019 rich peat soil to oxidize and erode. The Delta is a  major outdoor recreation destination for activities such as fishing and  boating. Its key water quality threats include agricultural, urban, and  past mining runoff. In addition, the complex system of water supply  infrastructure projects built throughout the watershed diverts fresh  water from the Delta to other parts of the state, changing the saltwater  content of much of the area\u2019s wetlands and marshes.\nUpper watershed. The upper watershed is the vast area where the  watershed\u2019s rivers, streams, and tributaries originate at the crest of  the Sierra Nevada and other mountain ranges and then travel  hundreds of miles through California\u2019s Central Valley, the nation\u2019s  most productive agricultural area, according to USDA. The upper  watershed includes three subregions: the Sacramento River  watershed in northern California, through which water generally flows  south; the San Joaquin River watershed in central California, through  which water generally flows west and then north; and the Tulare Lake  Basin in southern California, through which water no longer drains  naturally. About 5 million people live throughout the area in a mix of  rural and urban communities, including large inland cities, such as  Fresno and Sacramento. In the upper watershed, the Sierra Nevada  snowpack serves as temporary storage for roughly one-third to one- half of California\u2019s water, depending on the year. Most of the major  rivers hold reservoirs to capture and store the snowmelt for longer- term use. As a result of mining, agriculture, and water infrastructure  development, the area\u2019s historic water flows have been highly  modified, the Central Valley\u2019s historic grasslands and flood plains  have been converted to managed wetlands and are often threatened  by land subsidence, and runoff from agriculture and past mining  activities are dominant threats to water quality in low-lying areas. In  the mountains and foothills, forest fires can threaten water quality,  mostly by causing erosion that increases sediment in streams.\nThe Bay and Delta together form the San Francisco Bay\/Sacramento-San  Joaquin Delta Estuary, often referred to as the Bay Delta, one of the  largest estuaries in North America. The Bay Delta is the ecosystem  created by the mixing of salt water from the Pacific Ocean and fresh  water from the Sacramento and San Joaquin Rivers and their tributaries.  It provides habitat for about 750 species of plants and animals, including  more than 130 species of fish. It also contains more than 700,000 acres  of farmland, and millions of users access it each year for recreational  activities, such as hunting, boating, and fishing. In contrast to the  managed wetlands of the upper watershed, the Bay Delta wetlands are  tidal areas\u2014brackish wetland influenced by the push and pull of ocean  tides. Even with the tidal influence, the saltwater content of the Bay Delta  is also heavily influenced by the amount of fresh water available, much of  which is diverted by water supply infrastructure projects and can vary due  to multiple water demands.\n\n\t\tMultiple Water Demands in the Watershed\n\nBecause of the watershed\u2019s economic, environmental, and cultural  importance, it has been the subject of political and legal battles over  multiple water demands for decades. Beginning in the 1930s, federal and  then state water projects\u2014two complex networks of dams, pumps,  reservoirs, canals, and other facilities\u2014have diverted water from the  Sacramento and San Joaquin Rivers to agricultural, industrial, and urban  consumers in the Bay area and southern parts of California. The federal  Central Valley Project primarily diverts water for agricultural use, and the  California State Water Project, which was developed in the 1960s,  primarily diverts water for drinking and industrial use. Hundreds of water  contractors, such as the Westlands Water District and the Metropolitan  Water District of Southern California, purchase water from these projects,  which can divert about 20 to 70 percent of the natural water flowing into  the Bay Delta, depending on legal limits and seasonal levels of  precipitation.\nOther water demands include habitat needs for threatened and  endangered species such as the Delta smelt (a fish) and various salmon  species. In particular, federal agencies have developed instream flow  requirements for these species of fish that require water to be released  from dams upstream to help maintain adequate water quality and  temperature for the fish. As a result, most of the water in the watershed is  managed by federal, state, and local water projects for use by private and  investor-owned water agencies and districts and their customers, as well  as for fish and habitat purposes. Any proposed changes to this  complicated water allocation system\u2014which accounts for California\u2019s  largest supply of fresh water\u2014often raise concerns among water users  about losing water, receiving reduced priority for water supplies, or  obtaining water of poor quality. For example, according to one study, the  state of California has allocated more water rights than what could be  available naturally. Other concerns involve the system\u2019s infrastructure\u2014 the system depends largely on a complex network of aging levees, many  of which were first built in the mid-1800s\u2014and the possible effects on  water supply and quality. Specifically, earthquakes, floods, subsidence, or  sea level rise could cause these levees to fail and put the state\u2019s fresh  water supply at risk from saltwater contamination. As a result of these and  other concerns, many stakeholders in the watershed have been, and  continue to be, involved in legal actions over multiple water demands.\n\n\t\tSelected Laws and Agreements Related to Restoration Efforts in the Watershed\n\nConstruction and operation of the Central Valley Project and the State  Water Project has fundamentally altered the physical environment of the  Bay, Delta, and parts of the upper watershed, where nearly every  tributary has been dammed to create reservoirs to supply these water  projects. By the late 1980s, species decline and water quality problems  became so critical in the Bay Delta that stakeholders raised concerns that  the continued operation of these projects might be conflicting with federal  and state water quality and endangered species laws (discussed  below).\nIn 1992, the Central Valley Project Improvement Act amended the Central  Valley Project authorizations, which previously focused primarily on  certain uses such as irrigation and power generation. The act specifies,  among other things, a number of actions for the purposes of protecting,  restoring, and enhancing fish, wildlife, and associated habitats in the  Central Valley and Trinity River basins in California. The act\u2019s stated  purposes include, among other things, to achieve a reasonable balance  among competing demands for use of Central Valley Project water,  including the requirements of fish and wildlife, agriculture, municipal and  industrial and power contractors. Under the act, Reclamation implements  several programs, including those to restore habitat on Central Valley  rivers and streams, improve diversion facilities to protect certain juvenile  fish, and deliver water supplies for critical wetland habitat supporting  resident and migratory waterfowl and threatened and endangered  species.\nTo address the increasingly complex issues surrounding the Bay Delta,  the federal and California state governments reached an agreement to  create the CALFED Bay-Delta Program (CALFED) in 1995 to restore  ecological health, improve water quality, fortify water management  infrastructure, and increase water supply reliability. From 1995 through  2009, about 20 federal and state agencies collaborated through this  program, issuing a record of decision in 2000 outlining CALFED goals  and programs and implementing federal and state legislation enacted in  the early 2000s. Under the National Environmental Policy Act of 1969,  agencies issue a record of decision at the end of the environmental  impact statement process, which they are required to conduct for major  federal actions that have a significant effect on the environment.\nThe 2000 record of decision established a program with 12 components,  including water quality and ecosystem restoration, to be managed by  state and federal agencies. According to the record of decision,  CALFED\u2019s water quality goal was to provide good water quality for the  millions of Californians who rely on the Delta for all or a part of their  drinking water. CALFED\u2019s goal for ecosystem restoration under the  record of decision was to improve aquatic and terrestrial habitats and  natural processes to support stable, self-sustaining populations of diverse  and valuable plant and animal species through an adaptive management  process. This process includes reevaluating or updating goals, activities,  or performance measures based on the results of ongoing monitoring and  progress assessments. Under the record of decision, the water quality  and ecosystem restoration programs include activities throughout the  Bay, Delta, and upper watershed.\nIn 2002, California enacted the California Bay-Delta Act, which  established the California Bay-Delta Authority to oversee CALFED. In  2004, the Calfed Bay-Delta Authorization Act (CALFED Act), a federal  law, implemented the record of decision, directed federal agencies to  coordinate CALFED activities with California state agencies, and authorized federal agencies to participate in the California Bay-Delta  Authority as nonvoting members for the full duration of the period it  continued to be authorized by state law. CALFED received federal  appropriations to develop and implement ecosystem protection and  restoration projects. Section 105 of the act requires Interior to report  annually on the accomplishments of various program components,  including those related to additional water storage and ecosystem  restoration. Section 106 of the act requires OMB, in coordination with the  governor of California, to report annually on all expenditures since 1998  to achieve the program\u2019s objectives.\nHowever, in 2009, California repealed the California Bay-Delta Act and  abolished the California Bay-Delta Authority, replacing it with the Delta  Reform Act and the Delta Stewardship Council. The 2009 law focused  state efforts more specifically on the Delta, in part by tasking the council  with developing an enforceable Delta Plan for promoting a healthy Delta  ecosystem and a more reliable water supply. According to a report by  the California Legislative Analyst\u2019s Office, the CALFED federal-state  partnership ended due to several challenges, including uncertain  financing, weak governance, and a lack of accountability. Although  California state law was amended in 2009, the federal CALFED Act has  not been significantly amended since its enactment in 2004.\nAs we reported in June 2015, although the CALFED record of decision  remains in effect, the state\u2019s future direction for Bay Delta activities are  likely to be coordinated through the Delta Plan. The Delta Plan was,  under certain conditions, to incorporate a 50-year conservation plan  initiated by the state, in cooperation with Reclamation, in 2006. The 50- year plan proposed restoring approximately 150,000 acres of wetlands,  grasslands, and other areas in and around the Delta over 50 years and  addressing water supply reliability concerns by building two large tunnels  to transport fresh water under the Delta. In 2015, facing uncertainties in  obtaining permits to implement the plan, the state replaced the 50-year  plan with two separate initiatives managed by the California Natural  Resources Agency: (1) California EcoRestore, which aims to begin  restoring at least 30,000 Delta acres over 5 years, and (2) California  WaterFix, which includes building the two tunnels from the 50-year plan.  The ecosystem chapter of the Delta Plan is being amended, and the  amended chapter is anticipated to be complete by early 2019, according  to Delta Stewardship Council officials. While it does not directly  incorporate EcoRestore, the Delta Plan ecosystem amendment currently  under development acknowledges that EcoRestore\u2019s successful  implementation is needed to achieve the restoration objectives in the  Delta Reform Act, according to Delta Stewardship Council officials.\nIn addition to the CALFED Act and the Central Valley Project  Improvement Act, other federal laws, including water quality and  endangered species laws, are relevant to restoration efforts in the  watershed. Some relevant laws include the following:\nThe Clean Water Act. The objective of this act is to restore and  maintain the chemical, physical, and biological integrity of the nation\u2019s  waters. A 1987 amendment to the act created the National Estuary  Program to promote comprehensive planning for, and conservation  and management of, estuaries of national significance. The National  Estuary Program calls for the development of comprehensive  conservation and management plans (CCMP) for these designated  estuaries, including the Bay Delta estuary, which was designated  under the program in 1987. Under the act, EPA also works with  California to regulate water quality. In addition, section 404 of the  Clean Water Act generally prohibits the discharge of dredged or fill  material into waters of the United States without a permit from the  Corps. The Corps administers the permitting responsibilities of the  section 404 program while EPA develops, in conjunction with the  Corps, the substantive environmental criteria that permit applicants  must meet.\nThe Endangered Species Act. This act was enacted to, among other  things, provide a means to conserve the ecosystem upon which  endangered species and threatened species depend and to provide a  program for the conservation of such endangered species and  threatened species. Under the act, species may be listed as  endangered or threatened. Several species in the watershed are  listed as threatened or endangered, including the Delta smelt,  steelhead trout, spring- and winter-run Chinook salmon, Ridgway\u2019s rail  (a bird), salt marsh harvest mouse, red-legged frog, and California  tiger salamander. NOAA\u2019s National Marine Fisheries Service and the  U.S. Fish and Wildlife Service, depending on the species, implement  the act, including by issuing biological opinions regarding the potential  effects of proposed federal actions on endangered and threatened  species.\nThe San Joaquin River Restoration Settlement Act. In conjunction  with the settlement this act implements, it outlines, among other  things, measures to achieve the goals of restoration of the San  Joaquin River and the successful reintroduction of California Central  Valley spring-run Chinook salmon. Under the act, Reclamation is to  coordinate several actions, including the expansion of a segment of  the San Joaquin River to provide habitat for juvenile salmon.\n\n\t\tFunding for Restoration Efforts in the Watershed\n\nAcross the watershed, funding for restoration efforts typically comes from  a variety of federal, state, local, nongovernmental, and private entities.  According to Interior officials, federal funding includes approximately $37  million per year for CALFED overall and additional funding for  implementation of the Central Valley Project Improvement Act, available  for certain projects in the Delta and upper watershed. Also, according to  Interior officials, the U.S. Geological Survey funds research and  monitoring to support water quality management, water operations, and  restoration. Additional federal sources of funding include grant programs  from EPA, NOAA, and the U.S. Fish and Wildlife Service and projects  funded through Reclamation, in addition to funding for water projects that  can include a restoration component. For example, Reclamation has  provided about $37 million annually since fiscal year 2015 for the San  Joaquin River Restoration Program. A number of other federal entities,  including USDA\u2019s Natural Resources Conservation Service, also fund  restoration projects in the watershed. For example, USDA\u2019s Natural  Resources Conservation Service has programs, such as the  Environmental Quality Incentives Program and the Agricultural  Conservation Easement Program, to support farm conservation efforts  throughout the Central Valley.\nFunding from state sources primarily comes from state water and  conservation agencies and is funded through statewide bonds and the  state\u2019s general fund. For example, in 2014, California voters authorized  $7.5 billion in bonds to fund ecosystems and watershed protection and  restoration; water supply infrastructure projects, including surface and  groundwater storage; and drinking water protection across the state,  including the San Francisco Bay Delta watershed. In addition to the bond  funding, in 2016, voters from nine Bay area counties authorized an  annual $12 parcel tax that is expected to raise approximately $500 million  over 20 years for Bay wetlands restoration, as well as other multi-benefit  projects.\nIn the Delta, in addition to federal and state funding for restoration efforts,  according to state officials, funding often comes from water contractors  that pay for major restoration efforts through their obligations under the  State Water Project to address biological opinions issued by federal  regulatory agencies for endangered or threatened species. For  example, water contractors are responsible for funding restoration efforts  under the state\u2019s California EcoRestore initiative, including at least $205  million to restore 8,000 acres of fish habitat and $171 million for 17,000  acres of floodplain improvements. EcoRestore began in 2015, and total  costs for projects are expected to reach at least $300 million in the  initiative\u2019s first 4 years, according to the California Natural Resources  Agency.\nAccording to officials from several federal and nonfederal entities,  including EPA and the San Francisco Estuary Partnership, no official  estimates exist for the expected total future costs to restore the entire  watershed, though some estimates have been developed for limited types  of activities. For example, regarding cost estimates, the San Francisco  Estuary Partnership typically refers to Save the Bay\u2019s 2007 Greening the  Bay report, which estimates that it will cost almost $1.5 billion over 50  years to restore the 36,176 acres of Bay shoreline already set aside for  restoration. Overall, according to related reports, investments on the  order of tens of billions of dollars would likely be necessary to restore the  entire watershed.\n\n\tFederal and Nonfederal Entities Coordinate Comprehensive Restoration Efforts in Specific Geographic Areas, but Federal Entities Do Not Coordinate Across the Watershed\n\nFederal and nonfederal entities, including state agencies and  nongovernmental organizations, carry out and coordinate a wide range of  restoration efforts in the watershed. These entities coordinate  comprehensive restoration efforts in the Bay and Delta primarily through  two coordinating bodies\u2014the San Francisco Estuary Partnership and the  Delta Plan Interagency Implementation Committee, respectively. In the  upper watershed, federal and nonfederal entities do not have a  coordinating body for comprehensive restoration efforts, but they do  coordinate restoration efforts through plans specific to entities, projects,  or restoration topics. In 2009, federal entities first developed an Interim  Federal Action Plan for coordinating federal restoration efforts across the  entire watershed, but not all of the entities are using the plan.\n\n\t\tFederal and Nonfederal Entities Carry Out A Wide Range of Restoration Efforts in the Watershed\n\nFederal and nonfederal entities carry out a wide range of restoration  efforts\u2014i.e., water quality improvement and ecosystem restoration\u2014that  can involve multiple entities, vary in geographic scope, span multiple  years, and are intended to achieve multiple benefits. According to our  review of reports and interviews with officials from federal and nonfederal  entities, water quality improvement efforts include projects intended to  improve the physical, chemical, or biological characteristics of water, and  ecosystem restoration efforts include projects to restore degraded  habitats. According to these interviews, restoration efforts can target a  range of priorities, including conservation, resiliency, mitigation,  monitoring, and enhancement. In addition, these efforts can directly or  indirectly support water quality improvement and ecosystem restoration  goals and objectives, and they can encompass a variety of activities, such  as planning, project selection, project implementation, permitting, funding,  technical assistance, and assessment. Figure 2 shows the locations and  different habitat types for a number of the completed and ongoing  restoration projects implemented by federal and nonfederal entities\u2014 partly under the CCMP, California EcoRestore, and other efforts\u2014in the  Bay Delta Estuary.\nRestoration efforts in the watershed can involve multiple levels of  government, as well as nongovernmental organizations. For example, the  South Bay Salt Pond Restoration Project near San Jose, California\u2014the  largest tidal wetland restoration project on the west coast of the United  States, according to the project\u2019s website\u2014is a joint effort among the U.S.  Fish and Wildlife Service, California Department of Fish and Wildlife, and  the California State Coastal Conservancy, along with local governments,  donors, consultants, and other participants. Similarly, the Hamilton  Wetland Restoration Project near Novato, California, which involves the  restoration of tidal and seasonal wetlands, is a joint effort among the  Corps, California State Coastal Conservancy\u2014the nonfederal sponsor  and landowner\u2014and other federal and nonfederal entities.\nRestoration efforts in the watershed also vary in geographic scope and  can span jurisdictions. The South Bay Salt Pond Restoration Project  includes federal and state land and, according to the project\u2019s website, is  expected to restore more than 15,000 acres of industrial salt ponds to  tidal marsh and other wetland habitats in three counties located along the  shores of the southern part of San Francisco Bay. (See fig. 3.)\nThe Hamilton Wetland Restoration Project comprises state-owned land  and, according to the California State Coastal Conservancy, has the  purpose to restore approximately 2,600 acres to tidal wetland on a former  army airfield and adjacent properties along the San Francisco Bay in an  area 25 miles north of San Francisco. (See fig. 4.)\nIn contrast, other efforts include project areas on farms. For example,  under its Environmental Quality Incentives Program, USDA\u2019s Natural  Resources Conservation Service has focused on providing conservation  planning, among other services, for farm operators and nonindustrial  forestland owners, including tribes. Officials from several federal and  nonfederal entities, including EPA, the San Francisco Estuary  Partnership, the Central Valley Joint Venture, and the California State  Coastal Conservancy, stated that the primary focus of restoration efforts  varied from one geographic area to another. For example, according to  some of these officials, efforts to restore tidal wetlands are prevalent in  the Bay, and efforts to address land subsidence are prevalent in the  Delta. (See fig. 5.)\nRestoration efforts in the watershed can span multiple years. For  example, the South Bay Salt Pond Restoration Project is an ongoing,  multi-phase, 50-year effort that began with the acquisition of former  industrial salt ponds in 2003. Likewise, the Hamilton Wetland Restoration  Project is an ongoing, multi-phase effort that began in 1999. In the upper  watershed, planning began in 2012 for California EcoRestore\u2019s ongoing  Yolo Bypass Salmonid Habitat Restoration and Fish Passage Project,  which aims to increase floodplain habitat for endangered and threatened  fish species in the Sacramento River watershed.\nRestoration efforts in the watershed can also have multiple primary  benefits. For example, the Hamilton Wetland Restoration Project was  designed to reverse years of land subsidence, restore wetlands,  reestablish historic habitat for wildlife and endangered species, and  beneficially reuse dredged sediment. Multiple benefits could also accrue  over time. For instance, according to the California State Coastal  Conservancy, while the Hamilton Wetland Restoration Project currently  provides habitat for migratory water birds and fish, it is expected to  become thickly vegetated with a complex network of tidal channels that  provide habitat for several threatened and endangered species.  Restoration efforts can also provide multiple secondary benefits. For  example, restoring wetlands may provide resilience against sea level rise,  habitat for wildlife, and an area for recreation.\n\n\t\tFederal and Nonfederal Entities Coordinate Comprehensive Restoration Efforts in the Bay and Delta through Coordinating Bodies and Specific Restoration Efforts in the Upper Watershed\n\nFederal and nonfederal entities coordinate comprehensive restoration  efforts in the Bay and Delta through the San Francisco Estuary  Partnership and the Delta Plan Interagency Implementation Committee,  respectively. In the upper watershed, federal and nonfederal entities  coordinate specific restoration efforts through plans specific to entities,  projects, or restoration topics. Specifically:\nBay. In the Bay, federal and nonfederal entities coordinate  comprehensive restoration efforts through the San Francisco Estuary  Partnership. The partnership was established in 1987 and receives  funding from EPA\u2019s National Estuary Program to implement the  CCMP for the San Francisco Estuary (i.e., the Bay Delta). The  partnership\u2019s members include federal, state, and local government  entities; nongovernmental organizations, such as conservation  groups; and a utility commission. The partnership\u2019s members  provided input on developing and revising the CCMP and have  integrated goals into the CCMP from their own topic- or entity-specific  strategic plans. Partnership members also coordinate restoration  efforts guided by the CCMP. For example, the U.S. Fish and Wildlife  Service, U.S. Geological Survey, the California State Coastal  Conservancy, and the California Department of Fish and Wildlife work  to coordinate on managed wetlands and ponds\u2014one of the  restoration efforts outlined in the CCMP. Furthermore, partnership  members may carry out various activities for restoration projects in the  Bay, such as project planning, regulating and permitting (e.g., for  dredging and extracting sediment), on-the-ground project  implementation, and scientific monitoring. Partnership members meet  quarterly and participate in a conference every 2 years to provide  updates on the status of projects, share scientific research, and  present monitoring results.\nDelta. In the Delta, federal and nonfederal entities coordinate  comprehensive restoration efforts through the Delta Plan Interagency  Implementation Committee. This committee was created in 2013 by  the Delta Stewardship Council, the state agency responsible for  overseeing the Delta Plan\u2014the state\u2019s plan for promoting a more  reliable water supply and a healthy ecosystem. The committee is  made up of representatives from 7 federal and 11 state entities and  helps implement the Delta Plan. Members of the committee may  also carry out various activities for restoration projects in the Delta,  such as scientific monitoring, on-the-ground project implementation,  project planning, and regulating and permitting (e.g., for placing  materials such as concrete structures or rocks into the water to  support levees). The committee meets twice a year and participates in  conferences to gather scientific consensus or to share recent  research. Some committee members are also members of the San  Francisco Estuary Partnership and coordinate separately through  initiatives that may have predated the committee and that are specific  to entities, projects, or restoration topics.\nUpper watershed. In the upper watershed, while federal and  nonfederal entities do not have a coordinating body for  comprehensive restoration efforts, they coordinate restoration efforts  through plans specific to entities, projects, or restoration topics. For  example, 20 federal, state, and nongovernmental entities coordinate  through the Central Valley Joint Venture\u2014a partnership with the  mission to conserve migratory bird habitat\u2014and its implementation  plan. Likewise, dozens of federal, state, and local government entities  coordinate to implement the Central Valley Flood Protection Plan, a  plan adopted by California\u2019s Central Valley Flood Protection Board for  managing flood risk. In addition, NOAA, the U.S. Fish and Wildlife  Service, and the California Department of Fish and Wildlife coordinate  on implementing a conservation strategy in parts of the Central  Valley.\n\n\t\tFederal Entities Developed a Plan for Coordinating Federal Restoration Efforts across the Watershed, but Not All of the Entities Are Using the Plan\n\nA federal memorandum of understanding and an Interim Federal Action  Plan outline how federal entities are to coordinate the federal  government\u2019s restoration activities and support state efforts across the  entire watershed. The California Bay-Delta Memorandum of  Understanding among Federal Agencies, signed in September 2009,  established a Federal Bay-Delta Leadership Committee to coordinate  federal efforts related to restoration and water management across the  entire watershed while the state structure was transitioning from the  California Bay-Delta Authority to the Delta Stewardship Council, and the  state therefore was no longer participating in the originally structured  CALFED federal-state partnership. According to the memorandum, this  federal committee was to be led by Interior and CEQ and to meet  regularly. The signatories of the memorandum also agreed to develop a  federal work plan to outline near-term federal actions and begin to identify  and prioritize key longer-term federal actions for restoration efforts and  water management across the watershed. The entities issued an Interim  Federal Action Plan in December 2009.\nThe Interim Federal Action Plan organizes federal actions into four  priorities, including working with state and local authorities on joint project  planning to ensure healthy Bay Delta ecosystems and to improve water  quality. Specifically, the federal entities agreed to build projects to  improve water supply, including through conservation efforts in municipal  areas and on agricultural lands; to fund habitat restoration projects for  threatened and endangered fish across the watershed; and to assess the  effects of pollutants such as mercury and pesticides on water quality.  According to the Interim Federal Action Plan, these priorities cut across  different federal entities\u2019 missions and activities in the watershed. Further,  the Interim Federal Action Plan includes actions aimed at ensuring the  effective and efficient use of federal resources, such as by leveraging  nonfederal resources.\nIn late 2010, the agencies that signed the memorandum provided a status  update on the Interim Federal Action Plan that confirmed the federal  government\u2019s support of state efforts in the watershed. The status  update directs the federal government to review the components of any  proposed restoration plan and understand the costs and benefits such a  plan would have on federal water resources and taxpayers. The  President\u2019s fiscal year 2019 budget, which sets the administration\u2019s top- level priorities and was released in February 2018, reaffirmed the federal  government\u2019s commitment to the Interim Federal Action Plan and stated  that the plan is under the leadership of CEQ, Interior, and the Delta  Stewardship Council. OMB staff stated the Interim Federal Action Plan  provides overall guidance to federal agencies and clarifies that the  agencies should focus their various actions in the watershed on the plan\u2019s  four priorities, including while working with nonfederal entities through  collaborative bodies.\nNonetheless, not all federal entities are using the Interim Federal Action  Plan. Officials from the USDA Natural Resources Conservation Service  told us they use the plan to determine conservation funding levels and  priorities in the watershed. However, a former official who was  responsible for CEQ\u2019s Bay Delta portfolio said that although the plan still  matches the needs of the watershed, agencies had stopped following it in  the past several years because the plan had become less of a priority for  the administration. In addition, EPA and NOAA officials stated they were  not aware of agencies following the plan in the past several years.  According to the plan, its most important aspect is the federal  government\u2019s reaffirmation of its partnership with state and local entities  and its commitment to coordinate actions with them. Yet, of the 31  nonfederal entities responding to our survey questionnaire, 11 indicated  that they were not at all familiar with the Interim Federal Action Plan, and  another 9 indicated that they were slightly familiar with it.\nFurther, according to Interior officials, although restoration efforts  described in the Interim Federal Action Plan have largely remained the  same and its functions and activities are still relevant, the plan is  outdated. In particular, according to these officials, the Interim Federal  Action Plan refers to the state\u2019s 50-year conservation plan, which  California is no longer pursuing. Moreover, according to Interior and EPA  officials, the Federal Bay-Delta Leadership Committee\u2014the coordinating  body for the Interim Federal Action Plan\u2014has not convened since the  Delta Plan was developed in May 2013, even though the memorandum  called for the committee to meet on a regular basis. Instead, according  to Interior officials, the state-led Delta Plan Interagency Implementation  Committee has replaced the federal leadership committee as the  coordinating body for federal efforts in the watershed.\nInterior and EPA officials we interviewed said the federal role outlined in  the Interim Federal Action Plan is no longer relevant because of recent  leadership and strategic changes in the watershed resulting from the  state\u2019s withdrawal from the originally structured CALFED program and  increased focus on the Delta through the Delta Stewardship Council.  According to OMB staff and Interior and Delta Stewardship Council  officials, the Delta Plan Interagency Implementation Committee is the  current approach for coordinating among and between federal and state  entities, and according to Interior officials, federal participation in the  committee is key. The committee, however, focuses specifically on the  Delta, and the Delta Plan generally does not include restoration efforts in  the Bay and the upper watershed. Restoration requires a robust  watershed-wide approach, according to the Interim Federal Action Plan,  because the Bay, Delta, and upper watershed systems are  interconnected. Specifically, according to one respondent to our survey,  actions in the upper watershed affect water quality improvement and  ecosystem restoration success in the Delta and ultimately the Bay. For  example, according to California state officials, carefully timed water  releases from dams in the upper watershed are the only way to control  saltwater content in the Delta, which is critical for agriculture and urban  water supply. Further, a National Research Council report states that  Delta planning cannot be successful if it is not integrated into statewide  planning because the Delta is fed by large upstream watersheds and  water from the Delta is used outside the region, such as in the Bay. In  addition, federal funding supports efforts throughout the watershed.\nWhile the Interim Federal Action Plan is consistent with several of our  leading practices for collaboration, it is not being used by all federal  agencies. As we reported in 2012, key considerations for implementing  interagency collaborative mechanisms include whether participating  agencies have clarified roles and responsibilities, developed ways to  continually update and monitor written agreements on how agencies  coordinate, and identified how leadership will be sustained over the long  term. We have found that agencies that articulate their agreements in  formal documents, such as plans, can strengthen their commitment to  working collaboratively and that transitions and inconsistent leadership  can weaken coordination. A written document can incorporate  agreements reached among participants in any or all of the following  areas: leadership, accountability, roles and responsibilities, and  resources. Although the Interim Federal Action Plan reflects several of  these practices, it is not being used to lead overall federal efforts and has  not been updated to reflect current roles and responsibilities in the  watershed, in particular the transition of coordination from the plan\u2019s  federal leadership committee to the Delta Plan Interagency  Implementation Committee and the state\u2019s increased focus on the Delta.  Further, the Delta Plan Interagency Implementation Committee is not an  interagency coordination mechanism for the federal and state agencies to  communicate complete information for the entire watershed.\nUpdating, including revising or refocusing, the Interim Federal Action Plan  could help federal entities more fully coordinate with and support  nonfederal restoration efforts across the watershed. EPA and Interior  officials stated that coordination among the regions is challenging  because agency missions and activities can be siloed. Officials from the  Delta Stewardship Council told us that without coordinating with federal  entities, they found it difficult to plan resources and work with federal  entities. In addition, 31 of the 48 federal and nonfederal entities that  responded to our survey questionnaire indicated that coordination of  goals for the entire watershed was a very great or great challenge.  Moreover, according to our analysis of questionnaire responses, 29 of 48  federal and nonfederal entities indicated that coordination among partners  at different levels of government was a very great or great challenge. For  example, in narrative responses to our survey questionnaire, one  respondent stated that restoration projects can be delayed because many  federal and nonfederal entities focus narrowly on their own missions  without considering those of other stakeholders. By updating or revising  the plan to outline and reflect entities\u2019 roles and responsibilities in light of  the changes in the state\u2019s role and other relevant developments since  2009, and notifying all participating entities to ensure they are aware of  the plan and their role in it, Interior and CEQ could help clarify the federal  government\u2019s role in supporting restoration efforts in the watershed and  help ensure the effective use of federal resources in these efforts.\n\n\tFederal and Nonfederal Entities Have Developed Measurable Goals and Approaches to Assess Progress for Restoration Efforts in the Watershed\n\nFederal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay and Delta and for specific  restoration efforts in the upper watershed. Federal and nonfederal entities  have also developed approaches to assess progress for restoration  efforts in the Bay and Delta and for some goals in the upper watershed. In  the Bay and Delta, the San Francisco Estuary Partnership uses indicators  to rate the goals as good, fair, or poor, and in 2015, the partnership rated  the overall state of the Delta as in fair to poor condition and the Bay as  healthier.\n\n\t\tFederal and Nonfederal Entities Have Developed Measurable Goals for Comprehensive Restoration Efforts in the Bay and Delta and for Specific Efforts in the Upper Watershed\n\nFederal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay and Delta through the  coordinating bodies for these areas and have developed measurable  goals for specific restoration efforts in the upper watershed. The  coordinating bodies have documented the goals in plans, which often  contain action items aimed at achieving those goals. In addition, all three  of the regions share some similar goals, such as ecosystem restoration,  climate resilience, and water quality.\n\n\t\t\tMeasurable Goals for the Bay\n\nFederal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Bay through the San Francisco  Estuary Partnership. The partnership documented these goals in the  CCMP, which provides a 35-year vision for restoring the estuary. The  most recent CCMP, updated in 2016, contains four long-term goals  related to broad restoration efforts: ecosystem restoration, climate  resilience, water quality and quantity, and governance. Each goal  contains three objectives, which detail desired outcomes that make  progress toward achieving goals. To achieve the goals and objectives,  the plan also identifies 32 actions\u2014each of which can be associated with  multiple goals and objectives\u2014that lay out 112 priority tasks for the next 5  years. Figure 6 shows an example of a priority task and how it relates to  the actions, objectives, and goals. The 2016 CCMP also includes  measurements to track progress for all actions and links the plan\u2019s goals,  objectives, and actions to 33 environmental indicators established by the  partnership.\nFederal and nonfederal entities have developed measurable goals for  comprehensive restoration efforts in the Delta through the Delta  Stewardship Council and documented them in the Delta Plan, first  published in 2013. The Delta Plan contains six goals and establishes  funding principles to support implementation of the Delta Plan as a  whole. Four of the goals\u2014protecting, restoring, and enhancing the Delta  ecosystem; reducing climate-related risks; improving water quality; and  governance\u2014are similar to those of the CCMP. To accomplish all six  goals and meet the funding principles, the Delta Plan sets forth 87  provisions for various entities, such as local, state, and federal agencies.  Fourteen of these provisions are legally enforceable regulatory policies.  The Delta Plan also has 159 performance measures associated with  these goals and provisions. For example, under improving water quality,  the Delta Plan includes a provision related to priority habitat restoration  areas. (See fig. 7.)\nFederal and nonfederal entities developed measurable goals for specific  efforts in the upper watershed and documented these goals in plans  specific to entities, projects, or restoration topics. These plans include  goals similar to those outlined in the CCMP or the Delta Plan\u2014such as  ecosystem restoration, climate resilience, and improved water quality\u2014 and some of the goals have associated performance measures. For  example, several federal and nonfederal entities documented in the  Central Valley Joint Venture Implementation Plan the acreage they would  like to enhance annually for conserving migratory bird habitat\u2014a specific  ecosystem restoration effort. Another group, California\u2019s Central Valley  Flood Protection Board, documented in the state\u2019s Central Valley Flood  Protection Plan that it would like to increase infrastructure performance in  populous areas to result in a more resilient flood management system\u2014 an example of a specific resiliency goal. This goal contains tracking  metrics, including measuring the miles of levees repaired or improved. In  addition, Interior produces metrics and reports for activities under the  Central Valley Project Improvement Act.\n\n\t\tFederal and Nonfederal Entities Have Developed Approaches to Assess and Report Progress toward Some Measurable Goals in the Bay, Delta, and Upper Watershed\n\nFederal and nonfederal entities have developed indicators to assess and  report progress toward some of the measurable goals in the Bay, and  have applied these in the Delta as well. In the Bay, the San Francisco  Bay Regional Water Quality Control Board has implemented regional  monitoring pilot studies since 1989, and in 1992 it established a regional  monitoring program led by a nonprofit science center. In 1991, in addition  to water quality, the science center began reporting on the monitoring and  assessment of ecosystem restoration and resilience in the estuary, such  as changes over time in pollution, dredging, and numbers of endangered  and threatened fish and wildlife. The San Francisco Estuary Partnership  then used the science center\u2019s restoration and resilience assessments to  create the 1993 CCMP goals. At the same time, partly in response to a  recommendation from the CCMP, the science center became the San  Francisco Estuary Institute, a nonprofit scientific organization that  performs monitoring to inform watershed management. The San  Francisco Estuary Partnership began reporting on water quality progress  in 2011. The first of these reports, titled the State of San Francisco Bay,  focused on the Bay.\nIn the Delta, the Delta Stewardship Council in 2013 began working to  coordinate scientific monitoring efforts based on the goals outlined in the  Delta Plan. Scientific monitoring efforts in the Delta include a regional  water quality monitoring program, begun by the Central Valley Regional  Water Quality Control Board in 2015. The monitoring efforts also include  the Interagency Ecological Program, a consortium of state and federal  agencies that have collaborated to monitor and research ecological  conditions in the Delta since the 1970s, including by contributing to the  CALFED science program. Based on the results of these separate  monitoring efforts, the Delta Stewardship Council has a process in place  to periodically update the Delta Plan\u2019s performance measures and goals.\nIn 2015, the San Francisco Estuary Partnership updated its assessment  and report to include both the Bay and the Delta and renamed it State of  the Estuary. The partnership plans to update these reports  approximately every 5 years and include both the Bay and the Delta.  For the 2015 report, more than 100 scientists from entities such as the  San Francisco Estuary Institute, the U.S. Geological Survey, and the  Delta Stewardship Council collaborated to monitor and assess estuary  health against environmental indicators established by the partnership.  The report includes 17 indicators specifically for the Bay, 8 indicators  specifically for the Delta, and 4 estuary-wide indicators (see table 1). The  report rates the status of the indicators\u2014such as the safety of water for  swimming, the safety of fish to eat, and the level of harbor seal  populations\u2014as good, fair, or poor. For example, the State of the  Estuary report assessed the regional extent of tidal marsh in the Bay as  \u201cfair\u201d and \u201cimproving\u201d and the Yolo Floodplain Flows in the Delta as  \u201cpoor;\u201d however, the report did not detail the partnership\u2019s methodology  for delineating between \u201cfair\u201d and \u201cpoor\u201d assessments. On the basis of  its assessment, the partnership rated the Delta and Suisun Bay  ecosystems as being in fair to poor condition and the Bay as healthier.\nIn the upper watershed, progress assessment is tied to entity- and topic- specific plans and is not summarized by any one group or in one report.  For example, California\u2019s Central Valley Flood Protection Board assigns  agencies to keep track of data toward tracking metrics for the goals of the  Central Valley Flood Protection Plan. In another example, the state\u2019s  California EcoRestore initiative provides progress reports on restoration  projects to mitigate damage caused by water conveyance programs.\n\n\tThe Status of All Restoration Efforts across the Watershed and Total Expenditures Is Unknown\n\nInformation on the status of all restoration efforts across the watershed,  including their accomplishments, is unknown because, while the  information is being developed, complete and current information is not  being fully collected or reported. Total expenditures for fiscal years 2007  through 2016 are unknown, in part because federal reports do not include  complete or reliable data for federal and state expenditures in the  watershed.\n\n\t\tInformation on the Status of All Restoration Efforts across the Watershed Is Being Developed but Is Not Complete and Current\n\nInformation on the status of all restoration efforts across the watershed,  including their accomplishments, is unknown because complete and  current information is not being fully collected or reported. At the state  level, the San Francisco Estuary Institute and the Delta Stewardship  Council each maintains a database with information about federal and  nonfederal restoration efforts, including those implemented during fiscal  years 2007 through 2016, but neither database contains data on all  restoration efforts in the watershed. Specifically:\nEcoAltas. The San Francisco Estuary Institute, in cooperation with  the San Francisco Bay Joint Venture, maintains the EcoAtlas  database, which is the more comprehensive of the two databases.  EcoAtlas integrates stream and wetland maps, restoration  information, and monitoring results with land use, transportation, and  other information important to the state\u2019s wetlands. According to  institute officials, the database was originally designed to focus on the  Bay and includes information on nearly every restoration effort in the  Bay. According to these officials, the institute is working to update  EcoAtlas and gather information on all efforts across the watershed.  Officials from several federal and nonfederal entities\u2014including  NOAA, the institute, the San Francisco Bay Joint Venture, and the  Central Valley Joint Venture\u2014told us that the completeness of  EcoAtlas\u2019s data on restoration efforts in the Delta is catching up to  that for the Bay, but a lot of work remains to gather more complete  data in the upper watershed, such as by gathering more complete  project information from entities conducting restoration work there.\nDeltaView. The Delta Stewardship Council\u2019s DeltaView database  collects state and federal data on efforts directly related to  implementing the state\u2019s Delta Plan goals. As a result, DeltaView  does not include information for all restoration efforts in the Delta  since, for example, local government agencies and other nonfederal  entities may also conduct restoration efforts in the Delta. According  to its website, DeltaView is designed to track and report on Delta Plan  progress and help the Delta Plan Interagency Implementation  Committee make more informed decisions about implementing the  Delta Plan. According to council officials, because it is designed to  focus on the Delta, DeltaView does not include efforts in the Bay or  upper watershed unless they directly affect the Delta. Further, while  officials who manage EcoAtlas and DeltaView take steps to check the  completeness of the data, such as using regional administrators to  oversee project completeness for EcoAltas or following up with  agency officials annually for DeltaView, they stated it is difficult to  confirm their completeness because they largely rely on self-reporting  by different federal and nonfederal entities. Council officials stated  that while the information in EcoAtlas is generally more  comprehensive, DeltaView\u2019s information on restoration efforts in the  Delta is more complete than EcoAtlas\u2019s information about the Delta,  and they are working with the institute on ways to merge the two  databases to make more complete information available in a single  database.\nOn the federal level, section 105 of the CALFED Act requires Interior, in  cooperation with the Governor of California, to submit a report annually to  Congress that, among other things, describes the status of  implementation of all CALFED components, such as water quality and  ecosystem restoration across the watershed. Under the act, the report is  to include the progress made in meeting certain goals as well as  accomplishments in achieving certain CALFED objectives during the past  fiscal year. However, according to Interior officials, the department issued  the most recent of these reports in February 2009. Interior officials stated  that the California Bay-Delta Authority used to collect information on all the projects in the watershed and prepare and submit these reports.  However, since the California Bay-Delta Authority was abolished and  replaced by the Delta Stewardship Council, Interior does not obtain this  information from any state entity, although Interior is still required to  submit the report annually to Congress.\nBecause Interior has not issued a report since 2009, when the California  Bay-Delta Authority was abolished, and because other sources of  information on restoration efforts such as EcoAtlas are not yet fully  developed, no complete or current information on the progress of  restoration efforts is available. According to Interior officials, the  requirement to report is outdated and the department does not have  information to report because it stopped obtaining data from the California  Bay-Delta Authority after it was abolished. However, Interior and other  federal agencies continue to work with state agencies on the state\u2019s  current Delta Plan, which replaced the state\u2019s CALFED plans. Also,  according to Interior officials, the department has not reached out to the  state to identify new sources of information, given the change in state  plans or agency structure.\nSection 105 of the CALFED Act requires Interior, in consultation with  California\u2019s governor, to report annually on \u201cthe status of implementation  of all components of the Calfed Bay-Delta Program.\u201d The law goes on to  identify the specific objectives on which Interior is to report, which  include activities that Interior and other federal agencies are currently  carrying out, such as research and wetland restoration. According to  respondents to our survey questionnaire, having such information could  help stakeholders make more informed decisions about these efforts.  Specifically, according to our analysis of responses, 32 of 48 federal and  nonfederal entities indicated that it would be very or extremely important  to have reports on progress of federal and nonfederal entities in  implementing restoration activities. In addition, according to our analysis  of responses, 27 of 48 federal and nonfederal entities indicated that it  would be very or extremely important to have reports on  accomplishments of federal and nonfederal entities in achieving the  objectives of restoration activities. Without attempting to obtain and  report state information as required under section 105 of the CALFED  Act, Interior will not have reasonable assurance that it is providing  Congress, or others, with the information needed to monitor federal and  nonfederal restoration activities.\n\n\t\tTotal Expenditures for All Restoration Efforts in the Watershed Are Unknown in Part Because Federal Reporting is Incomplete\n\nTotal expenditures for all restoration efforts in the watershed for fiscal  years 2007 through 2016 are unknown in part because federal reports do  not include complete or reliable expenditure data, and other tracking  mechanisms are still developing this information. San Francisco Estuary  Institute officials stated that EcoAtlas recently began to include  expenditure data for the on-the-ground costs of implementing restoration  projects, but overall expenditure data on these projects are still  incomplete. In addition, as discussed earlier, EcoAtlas is still in the  process of gathering complete information for efforts in the Delta and  upper watershed. DeltaView includes federal and state expenditure data  for efforts in the Delta; however, according to Delta Stewardship Council  officials, it does not include data for all restoration efforts in the Delta,  such as those funded by nongovernmental organizations. The institute\u2019s  plans to expand EcoAtlas to include expenditures and data on efforts  across the watershed, including by working with the council to merge the  two databases, indicates that entities are taking steps to gather more  complete information. As they continue to do so, more information will be  available to report on expenditures for restoration efforts in the  watershed.\nOne source of information on federal and state expenditures across the  watershed is OMB\u2019s interagency budget crosscut reports for CALFED  activities; however, these reports do not contain complete or accurate  expenditure data. Section 106 of the CALFED Act requires OMB to  submit a financial report annually to Congress, in coordination with the  Governor of California and certified by the Secretary of the Interior, that  includes, among other things, an interagency budget crosscut report.  The report is to display each participating federal agency\u2019s proposed  budget for the upcoming fiscal year to carry out CALFED activities and  identify all expenditures since 1998 by the federal and state governments  to achieve the objectives of CALFED, which, as noted previously, include  water quality and ecosystem restoration components. The report is also  to contain a detailed accounting of all funds received and obligated by all  federal and state agencies responsible for implementing CALFED  activities during the past fiscal year.\nAccording to OMB staff, since California abolished the California Bay- Delta Authority in 2009, the state no longer submits state data for the  crosscut report, so the agency only includes data reported by federal  agencies in the crosscut reports and tables. OMB staff said this is  because the state no longer has an agency organized around reporting  this information. The Delta Stewardship Council has responsibility for the  former state agency\u2019s activities, but given its narrower focus on the Delta,  it is unclear whether the council could submit data to OMB for the entire  watershed. According to OMB staff, OMB has not asked the Delta  Stewardship Council or any other state entities to submit the data they do  have to OMB; however, a council official told us the council would like an  opportunity to work on the crosscut report.\nSurvey responses indicate that the state crosscut data could be helpful to  federal and nonfederal entities. We asked survey respondents to indicate  how important, if at all, they thought reports on all federal or state  expenditures and funding committed to be spent (i.e., obligations) on  restoration activities would be when they carry out activities related to  these responsibilities in the San Francisco Bay Delta watershed.  According to our analysis of survey responses, 24 of 48 federal and  nonfederal entities indicated that it would be very or extremely important  to have reports on both federal and state expenditures. Also, according  to our analysis of survey responses, 27 of 48 federal and nonfederal  entities indicated that it would be very or extremely important to have  reports on federal obligations, and 24 of the 48 entities indicated that it  would be very or extremely important to have reports on state  obligations. Without attempting to obtain and report state information  as required under section 106 of the CALFED Act, OMB will not have  reasonable assurance that it is providing Congress with the information it  needs to monitor federal and nonfederal restoration expenditures.\nIn addition, while there was written guidance for submitting crosscut data  for fiscal years 1998 through 2011, OMB has not updated its written  guidance on reporting data for the CALFED Act since the guidance  expired in 2011 to reflect who should report what data. Instead, according  to OMB staff, it has generally provided oral instruction to agencies on  what data to submit. As a result, we found that federal agencies reported  different types of data for OMB to include in the budget crosscut and that  the budget crosscut was therefore not reliable for the purposes of  reviewing total expenditures. Some federal agencies, including EPA and  the U.S. Geological Survey, note in their crosscut submissions that the  data provided are funding levels or allocations, rather than expenditures.  In addition, Interior reported that it submits obligations, which are also  different than expenditures. As a result, the crosscut reports and tables  may include a mix of federal budget authority, obligations, and  expenditures, depending on the type of data the agencies choose to  submit.\nAccording to OMB staff, while OMB reports federal budget authority data  for the most recent fiscal year in the crosscut report, OMB relies on  agencies to submit data on prior year expenditures for inclusion in the  crosscut. However, the crosscut report itself labels the data reported as  \u201cenacted\u201d dollars\u2014or budget authority\u2014but does not mention  expenditures. Some federal officials said that clearer guidance would be  helpful. For example, USDA officials stated that it would be helpful for  OMB to clarify whether to submit estimated funding allocations or actual  obligations and to provide more specific information about the types of  restoration projects to include because the data USDA currently submits  provide a narrow scope for the agency\u2019s restoration-related work in the  watershed.\nThe lack of updated guidance is inconsistent with federal standards for  internal control, which call for an agency to design control activities to  achieve objectives and manage risks. Such control activities include  clearly documenting internal controls, and the documentation may appear  in management directives, administrative policies, or operating manuals.  Because OMB has not updated its written guidance on reporting data  since the guidance expired in 2011 to clearly communicate what data  agencies should report, its mechanism for tracking data\u2014the crosscut  reports and tables\u2014does not include complete or reliable expenditure  data. As a result, congressional and other federal and nonfederal decision  makers may not have the information they need to determine that  resources are being used efficiently or effectively. For example, in a  September 2017 report, Interior\u2019s Office of Inspector General found that  Reclamation obtained $50 million over 7 years for CALFED-related  purposes using a process that it did not disclose to Congress through  available mechanisms, including OMB\u2019s crosscut reports. According to  the Inspector General\u2019s report, these crosscuts assist the President in  considering the necessary and appropriate level of funding for each of the  agencies in carrying out its responsibilities under CALFED. By directing  its staff to update its written guidance for federal and state agencies on  submitting data for its budget crosscut reports, OMB will have more  reasonable assurance that it is helping those agencies provide current,  complete, and accurate data to help congressional and other decision  makers achieve restoration objectives.\n\n\tFederal and Nonfederal Entities Identified Several Factors, such as Competing Interests, Coordination, and Climate Change, As Key Factors that May Limit Restoration\n\nSeveral factors may limit restoration progress or pose risks to the long- term overall success of such efforts in the San Francisco Bay Delta  watershed, according to our analysis of questionnaire responses from 48  federal and nonfederal entities. These factors reflect characteristics of  watersheds in other parts of the country that we have previously  discussed, including funding constraints and the effects of climate change  (see fig. 8).\nFederal and nonfederal entities also identified up to three factors that  pose the greatest risks to the long-term overall success of water quality  improvement and ecosystem restoration efforts in the San Francisco Bay  Delta watershed. Specifically, based on our analysis of the survey  results, we found that federal and nonfederal entities consistently  identified the following risks:\nCompeting interests of water users, including residential,  commercial, agricultural, and environmental. According to our  analysis of survey responses, this particular risk varies by geographic  area in the watershed. For example, 20 of 25 entities that indicated  they conduct restoration work in the Sacramento River Watershed\u2014 part of the upper watershed region\u2014identified this factor as a greatest  risk. By comparison, 19 of 34 entities that indicated they conduct  restoration work in the Bay identified this factor as a greatest risk. In  its survey responses, one nonfederal entity indicated that the  distribution of water and other natural resources among competing  interests is not clearly defined or not distributed in a method that  satisfies all parties. Therefore, according to this entity, stakeholders  who are not satisfied with natural resources distribution may be  hesitant to invest time and money in conservation practices that  benefit water quality. In another survey response, a federal entity  described competing interests as one of the biggest roadblocks in  planning and implementing water quality improvement and ecosystem  restoration in the Bay Delta region. This entity explained that there is  an extremely limited freshwater supply in the region and interests that  compete for it have resulted in several lawsuits and delays for  restoration projects.\nObtaining sufficient federal funding for water quality  improvement and ecosystem restoration activities. Of the 48  survey respondents, 24 indicated that this factor is one of the greatest  risks to long-term overall success of water quality improvement and  ecosystem restoration efforts. According to one nonfederal entity\u2019s  survey response, funding for ecosystem restoration in the Bay area  traditionally has come from a mix of federal and state sources. For  example, the entity said a local source that will provide nearly $500  million over 20 years recently was established but needs to be  leveraged by significant state and federal dollars to meet the  estimated $1.5 billion needed for restoration in the Bay area. In its  response to our survey, one federal entity stated that federal funding  is extremely limited for restoration activities that are not part of  mitigation efforts. The federal entity also stated that federal funding for  long-term monitoring of restoration success and water quality  improvement is difficult to sustain because these efforts are not eye- catching and do not provide quick results. A nonfederal entity stated  that many state entities rely on federal grants to perform activities that  result in improved water quality and ecosystem restoration.\nPlanning for the effects of climate change. In their survey  responses, 24 of 48 entities indicated that this factor is one of the  greatest risks to long-term overall success of water quality  improvement and ecosystem restoration efforts. One nonfederal entity  said expected reductions in the Sierra Nevada snow pack\u2014the  largest source of water supply for the watershed\u2014will result in  increased demand on limited local water sources. Other respondents  noted a need to consider addressing the effects of climate change at  a high level. For instance, one nonfederal entity said successfully  planning for climate change includes planning and coordinating at the  watershed level, not at the project or jurisdictional level. Another  nonfederal entity said the potential impact of sea level rise is great  and ecosystem restoration solutions will require much more regional  planning and agreement than more traditional engineering solutions.  However, entities also acknowledged the challenges associated with  planning for the effects of climate change with incomplete information.  For example, in its response to our questionnaire, one entity stated it  is difficult to understand the impact on water quality resulting from  conservation practices on working lands, at both the private  landowner level and the watershed level, if the projects have not  incorporated climate change impacts such as flooding and sediment  erosion.\nThe factors identified by federal and nonfederal entities that may limit or  pose a risk to restoration efforts are generally consistent with our prior  work on large-scale ecosystem restoration efforts in other parts of the  country (see Related GAO Products at the end of this report). For  example, we previously reported that similar factors, such as funding  constraints and the effects of climate change, may limit restoration efforts  in the Great Lakes and Chesapeake Bay. Survey responses also  indicate that some of these risks can be interrelated. For example, one  federal entity said that while certain shoreline restoration and levee  stabilization projects could ameliorate the effects of climate change,  finding adequate funding to plan for and implement such projects is  extremely difficult. According to this entity, all the competing interests and  limited freshwater supply in the watershed further exacerbates these  difficulties.\nIn response to our questionnaire, federal and nonfederal entities identified  what they consider to be the most important action that could be taken at  a federal level to help improve restoration efforts in the watershed. For  example, seven entities mentioned actions related to streamlining or  coordinating federal permitting processes. Half of the entities that  responded to our questionnaire also indicated a need for actions related  to federal funding, and four entities indicated a need to use the best  available science to direct restoration efforts.\n\n\tConclusions\n\nThe complex nature of the restoration efforts in the San Francisco Bay  Delta watershed demands a high level of coordination across a large  number of entities and competing interests. The results of federal and  nonfederal entities working together can be seen in parts of the  watershed, such as the Bay, where this work has resulted in the  development of comprehensive regional strategies, sources of funding for  some restoration projects, an expanding regional database, and an  inventory of potential projects.\nIn other parts of the watershed, particularly the Delta, coordination has  wavered. The CALFED Act was enacted in 2004 to implement, at the  federal level, a federal-state partnership for restoring the San Francisco  Bay Delta watershed. When the state of California withdrew from the  originally structured CALFED federal-state partnership in 2009, the effort  to coordinate across the entire watershed transitioned and the focus of  coordination became the Delta Plan, a state-led effort. Key federal  entities, including Interior and CEQ, continue to have interests across the  watershed, such as coordinating or conducting programs and projects  and expending resources. To that end, in 2009 they developed a unifying  vision for the federal government through the Interim Federal Action Plan.  However, as the state continues to change its focus within the watershed,  the Interim Federal Action Plan has become outdated, and not all relevant  federal entities are using it. By updating or revising the plan to outline and  reflect entities\u2019 roles and responsibilities in light of the changes in the  state\u2019s role and other relevant developments since 2009, and by notifying  all participating entities to ensure they are aware of the plan and their role  in it, Interior and CEQ could help clarify the federal government\u2019s role in  supporting restoration efforts in the watershed and help ensure the  effective use of federal resources in these efforts.\nIn addition, since California stopped participating in the originally  structured CALFED partnership, information on projects and expenditures  for restoration and other activities in the watershed have not been  completely reported, or reported at all. Although California abolished the  California Bay-Delta Authority, the requirements for Interior to report on  the status of implementation of all CALFED components, including water  quality and ecosystem restoration efforts, and for OMB to submit a  financial report, including an interagency budget crosscut report, still  exist, and information about related restoration efforts and expenditures  remains unknown. By coordinating with the appropriate state entities to  obtain and report the information available to meet the CALFED Act\u2019s  requirements, Interior and OMB would have more reasonable assurance  that they are providing the information congressional and other decision  makers need to monitor the restoration efforts and associated  expenditures. Further, by directing staff to update OMB\u2019s written guidance  for federal and state agencies on submitting data for its budget crosscut  reports, OMB would have more reasonable assurance that it is helping  those agencies provide current, complete, and accurate data to help  decision makers achieve restoration objectives.\n\n\tRecommendations for Executive Action\n\nWe are making seven recommendations\u2014two each to Interior and CEQ  to address issues with the Interim Federal Action Plan; one each to  Interior and OMB to obtain and report information; and one to OMB to  update its budget crosscut guidance. Specifically:  The Secretary of the Interior should work with the Chair of CEQ to update  or revise the Interim Federal Action Plan for the California Bay-Delta to  outline and reflect entity roles and responsibilities in light of changes in  the state of California\u2019s role and other relevant developments since 2009.  (Recommendation 1)\nThe Secretary of the Interior should notify all participating entities to  ensure they are aware of the Interim Federal Action Plan and their role in  it. (Recommendation 2)\nThe Chair of CEQ should work with the Secretary of the Interior to update  or revise the Interim Federal Action Plan for the California Bay-Delta to  outline and reflect entity roles and responsibilities in light of changes in  the state of California\u2019s role and other relevant developments since 2009.  (Recommendation 3)\nThe Chair of CEQ should notify all participating entities to ensure they are  aware of the Interim Federal Action Plan and their role in it.  (Recommendation 4)\nThe Secretary of the Interior should coordinate with appropriate state  entities to obtain and report the information available to meet the  requirements under section 105 of the CALFED Act. (Recommendation 5)\nThe Director of OMB should coordinate with appropriate state entities to  obtain and report the information available to meet the requirements  under section 106 of the CALFED Act. (Recommendation 6)\nThe Director of OMB should direct staff to update OMB\u2019s written guidance  for federal and state agencies on submitting data for the budget crosscut  reports OMB is required to submit under section 106 of the CALFED Act.  (Recommendation 7)\n\n\tAgency Comments, Third-Party Views, and Our Evaluation\n\nWe provided a draft of this report for review and comment to CEQ, EPA,  OMB, and the Departments of Agriculture, Commerce, Defense, and the  Interior. We also provided the California Delta Stewardship Council a draft  of this report for review and comment. Interior provided written comments  and stated that it partially concurred with our three recommendations to  the department; Interior also provided technical comments, which we  incorporated into the report as appropriate. In an email from CEQ\u2019s  Deputy General Counsel, CEQ provided technical comments, which we  incorporated into the report as appropriate, but the agency neither agreed  nor disagreed with our recommendations to it. In oral comments provided  on August 8, 2018, OMB neither agreed nor disagreed with our two  recommendations to the agency, but OMB staff suggested some  additional language to the recommendations. In addition, USDA and  Commerce provided technical comments, which we incorporated into the  report as appropriate. Defense and EPA informed us that they had no  comments on the draft report. The California Delta Stewardship Council  provided written comments stating that its staff generally agreed with the  \u201csum\u201d of the recommendations in the report. The council also provided  technical comments, which we incorporated into the report as  appropriate.\nIn its written comments, reproduced in appendix IV, Interior stated that  the department appreciated our review of the coordination of watershed  restoration efforts among federal and nonfederal entities and that it  partially concurred with our three recommendations to the department.  Specifically, regarding our first two recommendations to update or revise  the Interim Federal Action Plan and notify all participating entities of their  role in the plan, Interior stated that the department believes revisiting the  Interim Federal Action Plan is not the most efficient course of action  because the state-led Delta Plan Interagency Implementation Committee  now serves as the coordination group. Interior stated that it will continue  to actively participate in the committee, which includes participation and  leadership from federal agencies at the regional and Washington office  levels. However, as we discuss in the report, the committee focuses on  only one region of the watershed (the Delta), and federal agencies fund  and carry out restoration efforts across all three regions of the watershed.  Further, as we discuss in the report, the President\u2019s fiscal year 2019  budget states that federal activities are coordinated through the Interim  Federal Action Plan rather than the state-led committee. Also, Interior\u2019s  letter states that its bureaus are concurrently engaged with the state of  California in multiple activities in the Bay Delta that span their respective  mission areas. This provides further support for the plan to be updated or  revised to include these types of activities. Thus, we continue to believe  that Interior should update or revise the plan to better reflect changes in  the state\u2019s role and other relevant developments since 2009.\nRegarding our third recommendation to Interior that it coordinate with the  state to meet reporting requirements, Interior stated that the California  Delta Stewardship Council compiles and reports on funding information  and progress for federal and state agencies and that Interior could  coordinate with the state on information not reported by the council. As  we discuss in the report, the council\u2019s reporting efforts focus on only the  Delta, although federal funding and efforts span the entire watershed;  therefore, the council\u2019s reporting efforts cannot fully address Interior\u2019s  reporting requirements. In addition, Interior has not reached out to state  entities for this information since 2009, when the state agency from which  Interior had previously obtained state data was abolished. Thus, we  continue to believe that Interior should coordinate with the appropriate  state entities to obtain and report the information available to meet the  CALFED Act\u2019s reporting requirements. We note that Interior said it would  actively participate in the Delta Plan Interagency Implementation  Committee and could seek to coordinate with the state on information not  reported by the Delta Stewardship Council, and we are encouraged that  the department recognizes the need to take these actions.\nIn oral comments regarding our first recommendation to OMB that it  coordinate with the state to meet reporting requirements, OMB staff said it  is unclear whether the Director of OMB has the authority to require or  compel the state or its agencies to provide data to OMB on restoration  and other projects they are carrying out. The staff suggested that we  revise the recommendation to state that the Director of OMB should  \u201cconsider whether there are additional opportunities to\u201d coordinate with  appropriate state entities to obtain and report the available information.  Our recommendation is for OMB to coordinate with appropriate state  entities, not to require or compel them to do so. In addition, as stated in  its written comments (reproduced in appendix V), the California Delta  Stewardship Council\u2014the state agency responsible for the activities of  the abolished California Bay-Delta Authority\u2014would welcome the  opportunity to coordinate with OMB and contribute to the budget crosscut  reports. Furthermore, Section 106 of the CALFED Act requires OMB to  submit a financial report annually to Congress, in coordination with the  Governor of California, that includes an interagency budget crosscut  report. Thus, we believe that the recommendation is worded appropriately  and captures the actions that OMB should take to coordinate with the  appropriate state entities to obtain and report the information available to  meet the CALFED Act's reporting requirements.\nIn oral comments regarding our second recommendation to OMB that it  update its written guidance for federal and state agencies on submitting  data for the budget crosscut reports, OMB staff said that the agency does  not have the expertise to validate or verify the quality of the information  agencies submit and is not confident that the data collected will be  reliable. The staff said that other entities with day-to-day experience with  the programs and data and with the relevant statutory authority may be in  a better position to obtain, report, and verify the quality of restoration  data. The staff suggested that we revise the recommendation to state that  the Director of OMB should \u201cassess whether to\u201d update OMB\u2019s written  guidance for federal and state agencies on submitting data for the budget  crosscut reports. However, OMB\u2019s current approach is resulting in the  reporting of unreliable data. As reported above, OMB has generally  provided oral instruction to agencies since its written guidance expired in  2011; as a result, the crosscut reports and tables may include a mix of  federal budget authority, obligations, and expenditures. Further, Section  106 of the CALFED Act requires, among other things, that OMB identify  all expenditures since 1998 by the federal and state governments to  achieve CALFED objectives. Therefore, we continue to believe that OMB  should update its written guidance to clarify the type of data that agencies  should submit in order to ensure it is reporting the data required by the  CALFED Act. We note that our recommendation does not direct OMB  staff to validate or verify the quality of the information; instead, it states  that OMB should clarify in guidance what data agencies should provide.  In addition, if OMB determines it is appropriate, updated written guidance  could advise agencies to validate and verify the data before submitting it  to OMB.\nIn its written comments, reproduced in appendix V, the California Delta  Stewardship Council made four comments on the themes outlined in the  recommendations of our report and two specific comments on the report\u2019s  description of the Delta. Commenting on the themes outlined in the  recommendations, the council stated that:\nNo entity in California has the sole responsibility or authority for  managing water supply and the Delta ecosystem; instead, authority,  expertise, and resources are spread out among a cadre of federal,  state, and local agencies. The council further said that its Delta Plan  Interagency Implementation Committee plays a vital coordination role  for the 17 state and federal agencies operating in the Delta, that  federal participation is critical to the committee\u2019s success, and that it  encourages federal agencies to continue to attend and actively  participate in the committee.\nThere is a history of coordination in the Bay Delta systems, as  evidenced by events such as the State of the Estuary Conference and  the Bay Delta Science Conference, as well as the CCMP. Given that  the upper watershed currently lacks a collaborative structure such as  the implementation committee, the council said that further exploration  should be done as to how this gap could be filled.\nThe council is not currently in contact with CEQ and OMB and would  welcome the opportunity to coordinate with them should a revised  Interim Federal Action Plan be pursued. The council also stated that,  to the extent possible, such a revised plan should consider and build  on existing planning frameworks such as the Delta Plan and the  CCMP.\nAs stated in the report, the council welcomes the opportunity to  contribute to the CALFED budget crosscut reports.\nIn addition, the council made two specific comments on the report\u2019s  description of the Delta. First, it stated that our report is thorough in  discussing many aspects of the watershed, but it somewhat neglects the  importance of levees, particularly in the Delta. While we provide an  overview of levees in the background section, a more detailed discussion  of these and other water infrastructure facilities is beyond the scope of  this review, which is to examine restoration efforts in the watershed and  does not include detailed examination of issues related to water supply.  Second, the council stated that the report should mention and consider  characteristics associated with the Delta as an evolving place, which  refers to the council\u2019s efforts to consider the interaction between  environmental and social factors\u2014such as cultural values and socio- economic issues\u2014into decision making for the Delta. We believe our  discussion of federal and nonfederal coordination roles within and across  the watershed\u2019s three major regions, including the Delta, appropriately  considers the interaction between environmental and social factors, within  the scope of this review.\nWe are sending copies of this report to the appropriate congressional  committees, the Chair of CEQ; the Secretaries of Agriculture, Commerce,  Defense, and the Interior; the Administrator of EPA; the Director of OMB;  the Executive Officer of the California Delta Stewardship Council; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http:\/\/www.gao.gov.\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 VI.\n\nAppendix I: Selected Federal and Nonfederal Entities with Restoration-Related Roles in the San Francisco Bay Delta Watershed\n\nMany federal and nonfederal entities, including state and local  government agencies and nongovernmental organizations, have roles  related to water quality improvement and ecosystem restoration efforts in  the San Francisco Bay Delta watershed. Different combinations of federal  and nonfederal entities work throughout the watershed and its three major  geographic areas, which are the San Francisco Bay and its local  watershed (Bay), the Sacramento-San Joaquin Delta (Delta), and the  upper watershed, which includes California\u2019s Central Valley and the  western slope of the Sierra Nevada Mountains. See below for a list of  federal and nonfederal entities and a brief description of some of their  restoration-related roles in the watershed. We selected these entities  based on our review of documents provided by, and interviews with,  federal and nonfederal entities.\n\n\tSelected Federal Entities with Restoration-Related Roles in the Watershed\n\nSeveral federal entities have roles related to water quality improvement  and ecosystem restoration efforts in the watershed. All federal agencies  listed are signatories to the 2009 memorandum of understanding, unless  otherwise noted. Federal agencies and some of their restoration-related  roles include the following:\nExecutive Office of the President.\nCouncil on Environmental Quality (CEQ). Under the 2009  memorandum of understanding, CEQ is to work with the Secretary  of the Interior in coordinating the development and implementation  of federal policy and initiatives in Bay-Delta matters and is the co- chair of the Federal Bay-Delta Leadership Committee.\nOffice of Management and Budget (OMB). OMB is not a signatory  to the 2009 memorandum of understanding, but under the Calfed  Bay-Delta Authorization Act (CALFED Act), OMB is required to  annually submit a financial report to Congress, in coordination with  the Governor of California and certified by the Secretary of the  Interior, that includes, among other things, an interagency budget  crosscut report that identifies all expenditures since 1998 by the  federal and state governments to achieve the objectives of the  Calfed Bay-Delta Program (CALFED). CALFED program  components include, among other things, water quality and  ecosystem restoration.\nU.S. Army Corps of Engineers. According to Corps officials, the  Corps plans and implements projects, including ecosystem restoration  projects; participates in regional planning, while using its own return- on-investment analysis for prioritizing projects; and helps the state  water agencies maintain levees. The Corps also issues permits for the  discharge of dredged or fill material under section 404 of the Clean  Water Act.\nU.S. Department of Agriculture (USDA).\nNatural Resources Conservation Service (NRCS). Through  general conservation programs and also its targeted Bay Delta  Initiative, NRCS and its local partners aim to address the critical  water quantity, water quality, and habitat restoration needs of the  Bay Delta region by implementing voluntary conservation  practices on private lands. NRCS provides agricultural producers  technical and financial assistance in the Bay Delta region to  implement conservation practices and establish conservation  easements that improve water quality and quantity and restore  and protect wetland, riparian, and wet meadow habitat.\nU.S. Forest Service. The Pacific Southwest Region of the U.S.\nForest Service manages 20 million acres of National Forest land  in California. National forests supply 50 percent of the water in  California and form the watershed of most major aqueducts and  more than 2,400 reservoirs throughout the state. According to  U.S. Forest Service officials, the agency\u2019s management actions on  National Forest land in California are focused on ecological  restoration, with the goal of retaining and restoring the ecological  resilience, including water quality, of terrestrial and aquatic  ecosystems. According to these officials, this work is often  accomplished using an \u201call lands\u201d approach to restoration, by  coordinating and collaborating across forests and wildlands  regardless of ownership. Ecological restoration management  actions that contribute to water quality include meadow, river, and  riparian restoration to improve watershed function, as well as fuels  reduction activities, such as forest thinning and prescribed fire.  According to these officials, many forest lands have dense fuels  and are highly susceptible to severe wildfire, which causes  increased erosion rates and sedimentation and negatively affects  water quality and delivery.\nU.S. Department of Commerce.\nNational Oceanic and Atmospheric Administration (NOAA). NOAA  implements the Endangered Species Act for certain species.  Under section 7 of the act, federal agencies must ensure that any  action they authorize, fund, or carry out is not likely to jeopardize  the continued existence of any endangered or threatened species  or result in the destruction or adverse modification of its critical  habitat. To fulfill this responsibility, federal agencies must consult  with NOAA\u2019s National Marine Fisheries Service, depending on the  affected species, to assess the potential effects of proposed  actions. Formal consultations between federal agencies and the  National Marine Fisheries Service or U.S. Fish and Wildlife  Service are required where a proposed action could have an  adverse effect on listed species or designated critical habitat;  these consultations conclude with issuance of biological opinions  by the National Marine Fisheries Service or U.S. Fish and Wildlife  Service. NOAA also obtains, manages, and expends funding to  conduct habitat restoration. According to NOAA officials, NOAA\u2019s  Restoration Center has directed federal funds toward restoration  projects in the Bay Delta. In addition, funds from natural resource  damage assessments have been used for habitat restoration in  San Francisco Bay, according to NOAA officials.\nU.S. Department of the Interior. Under the 2009 memorandum of  understanding, Interior is to serve as the lead for developing and  coordinating federal policy and initiatives in Bay-Delta matters and is  the co-chair of the Federal Bay-Delta Leadership Committee. Under  the CALFED Act, Interior is required to annually submit a report to  Congress, in cooperation with the Governor of California, that, among  other things, describes the status of implementation of all CALFED  components, which include water quality and ecosystem restoration  components.\nBureau of Reclamation. Reclamation administers the Central  Valley Project, which has long-term contracts to supply water to  more than 250 contractors in 29 of California\u2019s 58 counties, and  implements a number of actions under the Central Valley Project  Improvement Act. The act was enacted for several purposes,  including to protect, restore, and enhance fish, wildlife, and  associated habitats. Reclamation also implements other actions,  such as those under the San Joaquin River Restoration  Settlement Act.\nU.S. Fish and Wildlife Service. The U.S. Fish and Wildlife Service  implements the Endangered Species Act for certain species.  According to agency officials, the U.S. Fish and Wildlife Service is  also a major landowner, with several National Wildlife Refuges  throughout the watershed where restoration efforts are  implemented. Additionally, according to agency officials, the U.S.  Fish and Wildlife Service provides funding through grant  programs, such as the North American Wetlands Conservation,  National Coastal Wetlands Conservation, and Wildlife and  Sportfish Restoration programs, and provides technical assistance  through efforts, such as the Partner for Fish and Wildlife, Coastal,  and Tribal Wildlife programs.\nU.S. Geological Survey. According to U.S. Geological Survey  officials, the agency\u2019s role in the watershed includes conducting  physical, chemical, and biological monitoring and scientific  investigations to support water and water quality management,  fish and wildlife management, and infrastructure management and  protection. According to officials, the agency also provides policy- neutral technical support to Interior and other federal, state, and  local entities.\nU.S. Environmental Protection Agency (EPA). EPA implements the  Clean Water Act, including management of the National Estuary  Program. According to agency officials, EPA also provides  authorization, financial support, and oversight of the California State  Water Resources Control Board, the partner state agency charged  with implementing Clean Water Act programs in California, and  provides direct funding, technical assistance, and oversight of  programs and projects achieving Clean Water Act goals in the state.\n\n\tSelected State Government Entities with Restoration-Related Roles in the Watershed\n\nSeveral state government entities in California have roles related to water  quality improvement and ecosystem restoration efforts in the watershed.  A list of selected state agencies and information from the agencies  summarizing their restoration-related roles follows:\nCalifornia Delta Stewardship Council. The Delta Stewardship  Council is a planning and science agency, with some regulatory  authority. The council develops and reviews the Delta Plan, the  implementation of which is to further the restoration of the Delta  ecosystem and a reliable water supply. The council also funds  research, synthesizes and communicates scientific information to  decision makers, and coordinates with Delta agencies to promote  science-based adaptive management. In addition, the council  establishes and oversees the Delta Plan Interagency Implementation  Committee, a joint state-federal committee that implements the Delta  Plan.\nCalifornia Natural Resources Agency. The Natural Resources  Agency is a resource management agency, with some regulatory  authority.\nCentral Valley Flood Protection Board. The Central Valley Flood  Protection Board establishes and enforces standards for the  maintenance and operation of the flood control system; develops  and implements the state\u2019s flood protection plan for the Central  Valley; and coordinates activities among the Corps and local flood  control agencies.\nDepartment of Fish and Wildlife. The Department of Fish and  Wildlife plans, collaborates on, enforces, and funds species  management, habitat conservation, and wetlands restoration.  According to agency officials, the department also is a major  owner of land where restoration efforts take place, such as the  Napa-Sonoma Marsh Wildlife Area and Eden Landing Ecological  Reserve, and houses the California Wildlife Conservation Board,  which provides funding for restoration projects.\nDepartment of Water Resources. The Department of Water  Resources administers the California State Water Project,  including sales to water contractors. The department also  implements and funds\u2014through the State Water Project\u2014two fish  habitat restoration projects in response to NOAA and U.S. Fish  and Wildlife Service biological opinions. In addition, the  department develops the California Water Plan, the state\u2019s overall  water resources plan.\nSacramento-San Joaquin Delta Conservancy. The Sacramento- San Joaquin Delta Conservancy plans, collaborates on (with local  communities), implements, and funds projects in the Delta and  Suisun Marsh to protect, improve, and restore habitats and  ecosystems, improve water quality, and support water-related  agricultural sustainability, among other things.\nSan Francisco Bay Conservation and Development Commission.\nThe San Francisco Bay Conservation and Development  Commission plans, collaborates on, and regulates the San  Francisco Bay, Bay shoreline, and Suisun Marsh; it also permits  projects that fill or extract materials from the Bay.\nSierra Nevada Conservancy. The Sierra Nevada Conservancy  plans, collaborates on, implements, and funds projects in parts of  the upper watershed to protect, improve, and restore habitats and  ecosystems, improve water quality, and prepare for climate  change, among other things.\nState Coastal Conservancy. The State Coastal Conservancy  plans, collaborates on, implements, and funds\u2014partly through  voter-approved bonds\u2014projects around the Bay to protect and  improve natural lands, improve water quality and wildlife habitats,  and prepare for climate change, among other things.\nCalifornia Environmental Protection Agency. The California  Environmental Protection Agency is a regulatory agency.\nState Water Resources Control Board. The State Water  Resources Control Board allocates water rights, adjudicates water  rights disputes, develops statewide protection plans, establishes  water quality standards, and guides the nine regional water quality  control boards.\nSan Francisco Bay Regional Water Quality Control Board. One of  nine regional water quality control boards in California, the San  Francisco Bay Regional Water Quality Control Board exercises  rulemaking and regulatory activities for the Bay.\nCentral Valley Regional Water Quality Control Board. One of nine  regional water quality control boards in California, the Central  Valley Regional Water Quality Control Board exercises rulemaking  and regulatory activities for the Central Valley (including the Delta)  of the upper watershed.\n\n\tOther Selected Nonfederal Entities with Restoration- Related Roles in the Watershed\n\nOther nonfederal entities\u2014including local and regional government  agencies, nongovernmental organizations, private businesses, and  private landowners\u2014have roles related to water quality improvement and  ecosystem restoration efforts in the watershed. Other nonfederal entities  and some of their restoration-related roles include the following:\nCentral Valley Joint Venture. The Central Valley Joint Venture is a  cooperative, regional partnership\u2014partially supported through the  U.S. Fish and Wildlife Service and established under the North  American Waterfowl Management Plan\u2014that plans and coordinates  migratory bird and other habitat restoration and conservation in the  Central Valley.\nSan Francisco Estuary Institute. The San Francisco Estuary  Institute is a nonprofit science center that provides data and other  technical tools for assessing the health of the waters, wetlands,  wildlife, and landscapes of the Bay and Delta; manages the EcoAtlas  database of restoration projects; and works closely with the California  State Water Resources Control Board and the San Francisco Estuary  Partnership.\nSan Francisco Estuary Partnership. The San Francisco Estuary  Partnership is a cooperative, regional partnership that develops and  manages the comprehensive conservation and management plan for  the San Francisco Estuary (i.e., the Bay Delta) under EPA\u2019s National  Estuary Program, including coordinating projects and leveraging  funds. The partnership is staffed by the nine-county Association of  Bay Area Governments and housed by the San Francisco Bay  Regional Water Quality Control Board.\nSan Francisco Bay Joint Venture. The San Francisco Bay Joint  Venture is a cooperative, regional partnership\u2014organized through the  U.S. Fish and Wildlife Service and established under the North  American Waterfowl Management Plan\u2014that plans and coordinates  migratory bird and other habitat restoration and conservation in the  Bay.\nOther regional government agencies. Other regional government  agencies have a variety of restoration-related roles, depending on the  entity. In addition to the San Francisco Estuary Partnership, examples  of regional government agencies with restoration roles in the  watershed include the Bay Area Clean Water Agencies, Bay Area  Flood Protection Agencies Association, and California Association of  Resource Conservation Districts.\nNongovernmental organizations. Other nongovernmental  organizations have restoration-related roles in the watershed,  including the Audubon Society, Bay Planning Coalition, Ducks  Unlimited, Nature Conservancy, and Save the Bay.\nLocal governments. Local governments have a variety of  restoration-related roles, depending on the entity. For example,  according to U.S. Fish and Wildlife officials, Marin and San Mateo  Counties are recognized leaders in planning for climate resiliency in  wetland restoration. Also, Alameda County uses sediment excavated  from flood control district channels to build or create wetlands to  provide vital wildlife habitat. In addition, water treatment facilities work  with the California State Water Resources Control Board to help fund  the San Francisco Estuary Institute\u2019s water quality monitoring  program.\nDredging businesses. Dredging businesses work with the California  State Water Resources Control Board to help fund the San Francisco  Estuary Institute\u2019s water quality monitoring program.\nWater contractors. Through obligations under the Central Valley  Project and State Water Project, water contractors help fund certain  restoration projects required under biological opinions by various  regulatory agencies, including NOAA, the U.S. Fish and Wildlife  Service, and the California Department of Fish and Wildlife, according  to state officials.\nPrivate landowners. Some private landowners collaborate on or sell  land for various restoration and conservation projects. Private  landowners include businesses (e.g., technology companies and an  industrial salt pond owner) and farmers in the Bay and farmers and  ranchers throughout the Delta and upper watershed.\n\nAppendix II: Objectives, Scope, and Methodology\n\nIn this report, we examine (1) the extent to which federal and nonfederal  entities coordinate their San Francisco Bay Delta watershed restoration  efforts, (2) the extent to which federal and nonfederal entities have  developed measurable goals and approaches to assess progress for San  Francisco Bay Delta watershed restoration efforts, (3) information on the  status of San Francisco Bay Delta watershed restoration efforts and  related expenditures for fiscal years 2007 through 2016, and (4) key  factors that may limit San Francisco Bay Delta watershed restoration,  according to federal and nonfederal entities.\nTo address all four objectives, we reviewed relevant federal and state  laws and documents. We also interviewed officials from more than 28  federal, state, and other entities we identified through our review of laws  and documents, snowball sampling, and their participation in regional  interagency groups conducting restoration work in the San Francisco Bay  Delta watershed. During these interviews, we asked about, among other  things, restoration plans that coordinate multiple aspects of water quality  improvement and ecosystem restoration efforts on a regional level in the  San Francisco Bay Delta watershed. Officials and representatives we  interviewed identified the Comprehensive Conservation and Management  Plan (CCMP) and the Delta Plan as the overarching regional strategies  for the Bay and Delta, respectively. We considered these strategies  \u201ccomprehensive regional plans\u201d and reviewed them to address our  objectives.\nTo address our objectives, we obtained information from a questionnaire  we sent to all 61 federal, state, and other entities that serve on the boards  or implementation committees of regional interagency groups conducting  restoration work in our geographic scope. These groups were the San  Francisco Bay Joint Venture, San Francisco Estuary Partnership, Delta  Plan Interagency Implementation Committee, and Central Valley Joint  Venture. The survey group includes many of the entities listed above in  appendix I. We also sent this questionnaire to federal agencies that are  signatories of the CALFED record of decision and 4 other relevant  organizations identified through snowball sampling. We initially identified  and distributed our questionnaire to 78 entities. We sent a single  questionnaire to each nonfederal entity (e.g., state agency,  nongovernmental organization, local government agency, etc.) and sent  more than one questionnaire, as appropriate, to federal agencies that  have offices or officials working in different parts of the watershed. We  determined which federal level to survey based on a review of agency  organizational charts and inquiries with agency officials. We considered  each office or federal designee to be a separate federal entity due to the  distinct nature of their work based on geographic region. To ensure we  got survey responses that reflect the opinions of an entity, we included  instructions for survey points of contact to collaborate with colleagues, as  needed, and indicated that we only wanted one survey response from  each entity. After we began our survey effort, we identified 6 entities as  out of scope for a variety of reasons, such as being a subgroup of another  entity we surveyed. Our final population of surveyed entities was 72, of  which 48 responded to our questionnaire, a response rate of 67 percent.\nIn our questionnaire, we collected information on water quality  improvement and ecosystem restoration efforts in the San Francisco Bay  Delta watershed, including, among other things, (1) challenges that may  limit restoration progress; (2) risks to the long-term overall success of  water quality improvement and ecosystem restoration efforts; and (3)  types of reports that entities could consider important when carrying out  responsibilities related to water quality improvement and ecosystem  restoration. To ensure that our survey questions were appropriate and  that respondents could answer them in a reliable and meaningful way, we  conducted survey pre-tests with 5 entities from the study population, had  the questionnaire reviewed by an independent reviewer within GAO, and  revised the questionnaire as appropriate based on the results of these  efforts. The survey questionnaire used for this review is in appendix III.  Our survey field period ran from December 4, 2017, through January 29,  2018. We distributed the questionnaire electronically through email. After  the requested return date passed, we emailed or telephoned respondents  who had not returned the questionnaire and asked them to respond.\nBy January 29, 2018, we received 48 questionnaires. In order to minimize  potential nonresponse bias, we reviewed the key characteristics of  respondents to ensure we received completed questionnaires from each  of our population subgroups. Because this was not a sample  questionnaire, it has no sampling errors. However, the practical difficulties  of conducting any survey may introduce nonsampling errors, such as  difficulties in interpreting a particular question or sources of information  available to respondents, which can introduce unwanted variability into  the survey results. We took steps in developing the questionnaire,  collecting the data, and analyzing them to minimize such nonsampling  error. Survey questionnaires may also be subject to error in entering and  analyzing data. We implemented quality control procedures on our data  entry by verifying the accuracy of the process. We noted any missing,  irregular, or incorrect responses by the respondent and resolved these  responses, as needed, through email correspondence with the relevant  entities.\nTo examine the extent to which federal and nonfederal entities coordinate  their San Francisco Bay Delta watershed restoration efforts, we  interviewed officials from federal, state, and other entities to identify key  regional plans and coordination efforts. We reviewed these plans and  efforts and compared federal coordination efforts against a selection of  our leading practices for collaboration to assess the extent to which  federal entities followed these practices. The selected leading practices  for collaboration include whether participating agencies have clarified  roles and responsibilities, developed ways to continually update and  monitor written agreements on how agencies coordinate, and identified  how leadership will be sustained over the long-term. Our questionnaire  discussed above also surveyed entities to identify coordination-related  challenges, if any.\nTo understand what restoration projects were being carried out, we  obtained information from the San Francisco Estuary Institute\u2019s EcoAtlas  database and the Delta Stewardship Council\u2019s DeltaView database on  restoration projects. We also conducted site visits to a nonprobability  sample of four projects selected to provide illustrative examples of a  variety of restoration activities in different locations in the watershed. We  identified these sites by asking knowledgeable stakeholders about  restoration projects in each region of the watershed that involved a variety  of partners, including federal agencies, that were at various stages of  completion. We then arranged visits that would allow us to observe  projects in each region that illustrated a range of these selection criteria.  We also conducted site visits to water project facilities, including a  reservoir, dam, and pumping station. In addition, we attended the State of  the San Francisco Estuary Conference in Oakland, California, on October  10 and 11, 2017, and observed many presentations and panel  discussions on topics ranging from Delta restoration planning to  pesticides in the estuary, by a wide range of officials from federal and  nonfederal entities conducting restoration efforts across the watershed.\nTo examine the extent to which federal and nonfederal entities have  developed measurable goals and approaches to assess progress for San  Francisco Bay Delta watershed restoration efforts, we reviewed  comprehensive regional plans and related goals and progress reports,  including the technical appendix for the State of the Estuary report. To  do so, we looked for factors such as goals with quantifiable metrics and  targets, as well as indicators used to assess and report progress. We also  interviewed officials from federal, state, and other entities, including  scientific groups, about efforts to develop measurable goals and assess  restoration progress.\nTo examine information on the status of San Francisco Bay Delta  watershed restoration efforts and related expenditures for fiscal years  2007 through 2016, we obtained and analyzed available data\u2014collected  from the EcoAtlas and DeltaView databases\u2014that included information  about projects, expenditures, and cost estimates for this period. This  period covers the time before and after the state withdrew from the  CALFED federal-state partnership, as originally structured, and includes  the last full fiscal year for which the most recent data were available at the  time of our review. We assessed the reliability of these data by  interviewing knowledgeable officials and reviewing database  documentation and determined that they were not reliable for purposes of  identifying all restoration projects across the entire watershed and for  reporting related expenditure data. We also reviewed federal and state  reports on budget requests and authority for that period and interviewed  officials from federal, state, and other entities about available sources of  data on projects, expenditures, and cost estimates.\nWe also obtained and reviewed OMB\u2019s Bay Delta budget crosscuts,  which include financial information for San Francisco Bay Delta  watershed restoration efforts reported by federal and state agencies, for  fiscal years 2007 through 2019. We assessed the reliability of the data in  the federal budget crosscut reports and tables by interviewing federal  agency officials about what data they provided for the reports and tables  and analyzing the data provided in the crosscut reports. We determined  that the data were reliable only to report examples of the magnitude of  funding for individual agencies. We determined that these data were not  reliable to aggregate funding levels across programs and agencies or to  compare funding levels of the various agencies, as we discuss in this  report. We then compared OMB\u2019s written guidance on submitting data for  the crosscut reports with federal standards for internal control to assess  the extent to which federal agencies followed the standard for design of  control activities.\nTo determine key factors that may limit San Francisco Bay Delta  watershed restoration, according to federal and nonfederal entities, we  sent the survey questionnaire described above to federal, state, and other  entities to obtain views on (1) challenges that may limit restoration  progress and (2) risks to the long-term overall success of water quality  improvement and ecosystem restoration efforts. We also interviewed  officials from federal, state, and other entities about factors that may limit  restoration progress, as well as reviewed progress reports and studies  exploring these factors.\nWe conducted this performance audit from April 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix III: Summary Results of GAO Survey Questionnaire of Federal and Nonfederal Entities\n\n\tWe distributed this survey questionnaire to 72 federal and nonfederal entities that work in the San Francisco Bay Delta watershed. In this survey, we collected information on water quality improvement and ecosystem restoration efforts in the San Francisco Bay Delta watershed, including, among other things, (1) challenges that may limit restoration progress; (2) risks to the long-term overall success of water quality improvement and ecosystem restoration efforts; and (3) types of reports that entities could consider important when carrying out responsibilities related to water quality improvement and ecosystem restoration. The following copy of this survey questionnaire includes summary information for the responses provided by federal and nonfederal entities. It does not include information for narrative responses.\n\nAppendix V: Comments from the California Delta Stewardship Council\n\nAppendix VI: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, Janet Frisch (Assistant  Director), Susan Iott (Assistant Director), Chad M. Gorman (Analyst-in- Charge), Chuck Bausell, Stephen Betsock, Mark Braza, Marissa Dondoe,  Ellen Fried, Carol Henn, Karen Howard, Richard Johnson, Gwen Kirby,  Ben Licht, John Mingus, Tricia Moye, Rebecca Parkhurst, Sara Sullivan,  Sarah Veale, Michelle R. Wong, Elizabeth Wood, and Edith Yuh made  key contributions to this report.\n\nRelated GAO Products\n\nGreat Lakes Restoration Initiative: Improved Data Collection and  Reporting Would Enhance Oversight. GAO-15-526. Washington, DC: July  21, 2015.\nBureau of Reclamation: Financial Information for Three California Water  Programs. GAO-15-468R. Washington, DC: June 4, 2015.\nGreat Lakes Restoration Initiative: Further Actions Would Result in More  Useful Assessments and Help Address Factors That Limit Progress.  GAO-13-797. Washington, DC: September 27, 2013.\nChesapeake Bay: Restoration Effort Needs Common Federal and State  Goals and Assessment Approach. GAO-11-802. Washington, DC:  September 15, 2011.\nRecent Actions by the Chesapeake Bay Program Are Positive Steps  Toward More Effectively Guiding the Restoration Effort, but Additional  Steps Are Needed. GAO-08-1131R. Washington, DC: August 28, 2008.\nCoastal Wetlands: Lessons Learned from Past Efforts in Louisiana Could  Help Guide Future Restoration and Protection. GAO-08-130. Washington,  DC: December 14, 2007.\nSouth Florida Ecosystem: Restoration Is Moving Forward but Is Facing  Significant Delays, Implementation Challenges, and Rising Costs.  GAO-07-520. Washington, DC: May 31, 2007.\nChesapeake Bay Program: Improved Strategies Are Needed to Better  Assess, Report, and Manage Restoration Progress. GAO-06-96.  Washington, DC: October 28, 2005.\nGreat Lakes: Organizational Leadership and Restoration Goals Need to  Be Better Defined for Monitoring Restoration Progress. GAO-04-1024.  Washington, DC: September 28, 2004.\nWatershed Management: Better Coordination of Data Collection Efforts  Needed to Support Key Decisions. GAO-04-382. Washington, DC: June  7, 2004.\nGreat Lakes: An Overall Strategy and Indicators for Measuring Progress  Are Needed to Better Achieve Restoration Goals. GAO-03-515.  Washington, DC: April 30, 2003.","output":"Why GAO Did This Study\n\nThe San Francisco Bay Delta watershed\u2014which drains a vast area of California from the Sierra Nevada Mountains to the Pacific Ocean\u2014supplies drinking water for 25 million people and provides irrigation for about half the nation's fruit and vegetable production. Decades of development and agriculture have led to large reductions in water quality and supply, natural flood protection, and habitats across the watershed's three major regions: the Bay, the Delta, and the upper watershed. Federal entities have been working with nonfederal entities for decades to protect and restore the watershed. GAO was asked to review restoration efforts in the watershed.\nThis report examines, among other objectives, (1) the extent to which federal and nonfederal entities coordinate watershed restoration efforts and (2) information on the status of these efforts and related expenditures for fiscal years 2007 through 2016, the most recent data available. GAO reviewed laws; regional databases, plans, and reports; and budget documents. It also surveyed the 72 members of interagency groups (48 responded) and interviewed federal and nonfederal officials.\n\nWhat GAO Found\n\nFederal entities, including the Department of the Interior, and nonfederal entities, such as California state agencies and nonprofits, carry out and coordinate a wide range of restoration efforts in the San Francisco Bay Delta watershed. These efforts have multiple benefits, such as improved water quality and habitat in restored marshland (see fig. below). The entities coordinate comprehensive efforts in the San Francisco Bay area (Bay) and Sacramento-San Joaquin Delta (Delta) through two groups. Federal efforts across the watershed are to be led and coordinated by Interior and the Council on Environmental Quality (CEQ) through a 2009 Interim Federal Action Plan, but not all federal entities are using the plan. Interior officials said the plan is no longer relevant because state and federal roles have changed. For example, they said a state-led committee acts as the coordinating body for federal entities; however, this committee focuses on one region of the watershed, while federal funding supports efforts in all three regions. By updating or revising the Interim Action Plan, Interior and CEQ could help clarify federal roles in supporting restoration efforts in the watershed.\nInformation on the status of all restoration efforts across the watershed, including their accomplishments, is unknown because information is not being fully collected or reported. Also, related expenditures for fiscal years 2007 through 2016 are unknown, in part because federal reports do not include complete or reliable data for restoration efforts in the watershed. The 2004 CALFED Bay-Delta Authorization Act requires Interior and the Office of Management and Budget (OMB) to report annually to Congress on restoration accomplishments and federal and state expenditures in the watershed, respectively. Interior has not issued these reports since 2009, when the state agency from which Interior had obtained the state data was abolished. OMB has issued its reports with federal, but not state, data for the same reason. However, Interior and OMB have not reached out to other state entities for this information. Without obtaining and reporting available information, as required by law, Interior and OMB will not have reasonable assurance that they are providing Congress with the information needed to monitor federal and nonfederal restoration efforts and expenditures.\n\nWhat GAO Recommends\n\nGAO made seven recommendations, including that Interior and CEQ update or revise the Interim Federal Action Plan and that Interior and OMB coordinate with the state to meet the CALFED Act's reporting requirements. Interior partially concurred with the recommendations, and CEQ and OMB neither agreed nor disagreed with them. GAO maintains its recommendations are valid."}