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{"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."}